Lords Sitting of 28 February 1995

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

Speaker of the Commons: Pension
Lord Peyton of Yeovil Lord Peyton of Yeovil asked Her Majesty's Government:
Whether they will refer to the senior salaries review body the level of pensions paid to ex-Speakers of the House of Commons and their widows.
The Lord Privy Seal (Viscount Cranborne): My Lords, the pensions in question are based on the recommendations of the review body to which successive governments have referred the pension arrangements for the great offices of state; namely, the Prime Minister, the Speaker and the Lord Chancellor. The Government's policy is not to alter the basis of a pension after it has been awarded.
Lord Peyton of Yeovil: My Lords, I start by thanking my noble friend and my right honourable friend the Leader of the House of Commons for the courtesy, understanding and sympathy with which they have approached what I know to be a very difficult problem indeed. I hope that my noble friend will agree that the Speakership of the House of Commons is the highest and most important office that Parliament has in its gift. I ask my noble friend to apply his mind to one case, and to one part of that case. When the noble Viscount, Lord Tonypandy, retired from the Chair of the House of Commons after 38 years of membership of the House, he received a modest pension for his years as Speaker. For the preceding 33 years or so, he received nothing beyond the repayment of his own contributions, unindexed, plus interest, net of tax. By any account, that was not generous.
Viscount Cranborne: My Lords, I am extremely grateful to my noble friend for the opening part of what he said. He acknowledged that this is a difficult question at a time when many sectors of society are thought to have pensions which are too exiguous by far. As my noble friend observed, it becomes all the more difficult when it is important that the former holders of the greatest offices of state should not be seen to be treated meanly by an apparently ungrateful country. Therefore, I acknowledge wholly the justice of the sentiments which my noble friend has expressed, in particular because he mentioned the name of one of the most universally liked and respected Speakers of recent times.
In the end, I submit with the greatest respect to the House and to my noble friend that the remedy, if a remedy is deemed to be needed, is in the hands of Parliament, which can decide whether the great offices of state are paid enough so that the pension received is
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adequate. That should be the starting point because, as my noble friend knows, the pension flows directly from the amount of the final salary.
Lord Cledwyn of Penrhos: My Lords, I support the strong case which the noble Lord, Lord Peyton, made in favour of referring the matter to the review body. I see no argument against that. If that is not done, I am bound to say that I am tempted to suggest to the Government that they should privatise the Speakership.
Viscount Cranborne: My Lords, somebody with the parliamentary experience of the noble Lord, Lord Cledwyn, would also be able to advise on whether or not stock options would go with such a privatisation; and, if so, how that could be achieved.
More seriously, quite simply the difficulty is that, very sensibly it seems to me, the matter was referred in 1988 to what is now known as the senior salaries review body with the object of removing these embarrassing questions from regular review. A settlement was struck. That settlement is subject to up-rating according to the record of inflation every April. It is in the nature of those referrals, as your Lordships will be aware, that not only should the mechanism be allowed to work, but that it is extremely difficult, however much one may sympathise with the case in hand, to make them retrospective. The noble Lord advocates an element of retrospection which would cause the Government—and, I suspect, the country at large—considerable difficulties.
Lord Barnett: My Lords, for once the noble Lord, Lord Peyton, has substantially understated the case. The plain fact is that the ex-Speaker to whom he referred would have received a higher pension if he had not drawn the Speaker's pension. He would have been better off without it, in view of his years as an MP and his years of Ministerial service. In those circumstances, do we not find ourselves in an absurd situation? The noble Viscount said that it is up to Parliament. I ask him to give us an assurance about this matter. Why is Parliament not asked—and it will not cost a huge amount of money—whether it wants to be able to help somebody who is now well over 80 years of age, and who is well deserving of rather better treatment than he has been given so far?
Viscount Cranborne: My Lords, the noble Lord will be aware that it is only a matter of a very few weeks before the pension of the noble Viscount to whom he refers, in respect of his service as Speaker, will overtake in monetary terms what the present Speaker of the House of Commons will be entitled to by way of her pension. We must also have regard to that matter. The noble Lord may also be aware that such matters were debated in another place as little time ago as 1991. The opportunity was taken by Parliament to consider the matter, but no adverse comment was made at the time.
Lord Richard: My Lords, if I may say so, this is very much not a party issue; indeed, I believe that it is a matter for Parliament and, as we are looking at it in respect of this place, for the whole House. Having listened to what the noble Lord, Lord Peyton, and my noble friend said, there seems to be a real problem here.

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Somehow or other, I should have thought that the Government ought to be prepared at least to say that they will look again at the matter.
I must tell the noble Viscount the Leader of the House that I do not have such a difficulty with the issue of retrospection—that is, if the result of being retrospective is that one tends to remedy an injustice which took place in the past. On the face of it, and judging by the nods that I seem to be getting from the other side of the House and, no doubt, from those behind me—although I cannot see those behind me—I should have thought that the House as a whole would think that the Government ought to look again at the matter. There is an issue here that ought to be redressed. Can the noble Viscount tell us whether they will do so?
Viscount Cranborne: My Lords, I am sure that the noble Lord carries the whole House with him when he says that this is not a party issue. I believe that I can speak for all my noble and right honourable friends in the Government when I say that we do regard the matter as one which should be treated with the greatest amount of sympathy. The noble Lord will no doubt also be aware that the salaries and pensions of Speakers have, hitherto, been treated in conjunction with the salaries and pensions of—dare I say so in front of my noble and learned friend? —Lord Chancellors and Prime Ministers. If we were to re-examine the matter again, I am sure that the noble Lord would want to ensure that those pensions were examined in the same context. The noble Lord will be aware that there is much political baggage which could accompany such an inquiry.
Lord Allen of Abbeydale: My Lords, Members of the Cross-Benches do not have a collective voice; but a number of us do not regard the present position as being very satisfactory. We very much hope that the Government will think again and that they include in their reconsideration the possibility of legislation limited solely to the office of Speaker. I imagine that such legislation would not be highly controversial. If that were to be considered, could it be borne in mind that the annuity paid to my noble friend Lady Hylton-Foster was fixed by an Act of Parliament passed for that specific purpose at the very modest rate of one-third of the rather modest pension which her husband would have received? I should like to add my voice to those asking the Government to have another look at the matter.
Viscount Cranborne: My Lords, I can do no more than assure your Lordships that I shall make all my colleagues aware of the very strong feelings of sympathy that have been expressed in the House—feelings of sympathy with which I wholly agree. However, the noble Lord, Lord Allen, will be aware that any form of legislation of the kind he proposes could, with legitimacy, unless the parliamentary draftsman works more than his usual magic, also raise questions affecting pre-1973 war widows, a class of people with whom I have great sympathy; war disability pensioners; those whose pensions have been affected during periods of pay restraint; and, indeed, those affected by pay policy since 1984. They are all good causes in
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themselves. The Government have to consider how such matters can be treated as exceptions and attract the sympathy which we would all like such issues to attract.
Noble Lords: Next Question!
Lord Peyton of Yeovil: My Lords, I thank my noble friend for all his answers. However, would he not agree that for the message to go out to the people of this country that holders of an office such as that of Speaker of the House of Commons are to be treated in an ungenerous and even a mean fashion would be very damaging for the future? I hope that we can take the matter further at a later stage.
Viscount Cranborne: My Lords, my noble friend will be aware—and I believe that I am right in saying this—that in the 19th century a Cabinet Minister was paid £5,000. That enabled Lord Palmerston to maintain what is now the In and Out Club in great state, without any call on other resources. My noble friend may feel that we live in a regrettably more egalitarian age. As I said, it is up to Parliament to decide whether the dignities of such great offices of state should be upheld in the way that my noble friend would like. I should tell my noble friend that I personally have considerable sympathy for what he has said.

West Highland Sleeper Service
2.50 p.m.
Lord Pearson of Rannoch: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so I should declare an interest in that my home is near a station on the West Highland line. I should also apologise to your Lordships for a mistake in the drafting of the Question as it appears on the Order Paper. It appears that the West Highland sleeper service is to be withdrawn from 28th April and not from 28th May.
The Question was as follows:
Whether, as suggested by the rail franchising director, the West Highland sleeper service requires an annual subsidy of £3 million, and if so whether the social and economic consequences of his decision to close this service from 28th April 1995 have been considered.
The Parliamentary Under-Secretary of State, Department of Transport (Viscount Goschen): My Lords, the annual subsidy for the West Highland sleeper service is £6.6 million including infrastructure costs using a 1994–95 price base. Any decision concerning the service prior to franchising would be a commercial matter for BR. In determining the passenger service requirement for the ScotRail franchise, the franchising director will be consulting the Scottish regional councils and the Rail Users' Consultative Committee for Scotland. He will take into account all relevant representations about the consequences of the withdrawal of the service.
Lord Pearson of Rannoch: My Lords, I thank my noble friend for that reply which I fear may be regarded

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as coming more from the pages of Alice in Wonderland than any brief which should have been put in front of him. Unless full and formal consultation about the future of this service takes place, as promised by my honourable friend Sir Hector Monro in the Scottish Grand Committee on 8th February, and until the railway establishment can be forced to reveal the occupancy figures for each month of the year, I am afraid that my stricture to my noble friend must stand. Can he say whether the Government's pledge is to be fulfilled and can he now confirm that the annual loading figure is at least 16,000 passengers? If so, does he agree with the Written Answer in another place of 20th February indicating annual costs of between £2.9 million and £8.7 million depending on whether infrastructure costs are included? Finally, does he agree that as the trains which take the sleepers will be going anyway, a full marginal costing of the service is required, and without that no savings at all are to be caused?
Viscount Goschen: My Lords, I do not agree with much of what my noble friend says. He asks about occupancy figures. The average occupancy figure for the Fort William sleeper is some 60 per cent. in summer—that is, about 36 people—and about 50 per cent. in the winter, which is only about some 18 people per train. The Government have committed themselves to consultation and the franchising director will consult with the bodies I mentioned. There is absolutely no doubt that that will go ahead.
Lord Clinton-Davis: My Lords, I wish to ask the Minister more about the process of consultation. Is it not a fact that the franchising director had already committed himself in a press release before Christmas to the withdrawal of the services by simply withdrawing subsidy? He has stated subsequently that he will consult on a timetable which no longer includes the services because they have been withdrawn in advance. What is the value of consultation under those circumstances?
Viscount Goschen: My Lords, the noble Lord is not correct. The franchising director has made a preliminary announcement. No final decision has been made; none will be made until after the consultation has been completed.
Lord Clinton-Davis: My Lords, why does the franchising director make a preliminary decision when he has to base his views on consultation? Would it not be better to listen to the views of the tourist authorities and other relevant bodies before making this prima facie declaration?
Viscount Goschen: My Lords, the objective behind the early statement of the franchising director was to end the great amount of speculation that has surrounded other sleeper services which the franchising director has indicated he is minded to safeguard.
Lady Saltoun of Abernethy: My Lords, will the Government, while this consultation takes place, bear in mind that the area served by the West Highland sleeper is nowhere near an airport and that busy people, with a
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day's work to do following a journey, need a night's sleep? Is the Minister aware that busy people live in that part of the world and that they are not all tourists?
Viscount Goschen: My Lords, there may be a number of busy people but few of them use the sleeper service. The numbers are extremely small. They are down, as I said, to around an average of 18 per train in the winter. However, I can assure the noble Lady that those types of concerns will no doubt be made in the representations to the franchising director.
Lord Renton: My Lords, is my noble friend aware that the services would be better used if they were better advertised and that often too many sleeper coaches are put on to a train when one or two would be enough? Will he also bear in mind that the regulator has a duty to watch consumer interests? What is to happen when there is a conflict of his opinion with that of the other person?
Viscount Goschen: My Lords, I think the franchising director is the name my noble friend is searching for. The point is that the levels of occupancy of these services are extremely low. It is easy to see from the figures that the subsidy required—a total figure of some £450 per passenger per journey—is enormous. The numbers of people who use the services is tiny and the money involved could well be used on more socially necessary services.
Noble Lords: Next question!
Viscount Cranborne: My Lords, I regret to say that the House has been the victim of my long-windedness for which I apologise. We have two more Questions. The House may wish to continue with this one but I suggest that perhaps we should give others a chance.

Veal Calves: Protection
2.56 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
What progress has been made in persuading relevant member states of the European Union that veal crates should no longer be used in the rearing of calves exported from the United Kingdom.
The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe): My Lords, it would not add to the sum of animal welfare to require calves exported from the UK to receive different treatment from calves from other member states. The Minister of Agriculture, Fisheries and Food has been pressing hard for the abolition of the close confinement veal crate system across the Community and, with the support of many other member states, has secured the advancement to this year of the review of the current EU rules. My honourable friend the Parliamentary

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Secretary has had encouraging reactions to her programme of visits to EU capitals to enlist support for a Community-wide ban.
Lord Campbell of Croy: My Lords, I am grateful to my noble friend for his reply. While my right honourable friend the Minister for Agriculture clearly made determined efforts last week to improve travelling conditions for farm animals, is there any early prospect of an agreement being reached among the countries concerned aimed at freeing calves from their close confinement during the weeks and months which they spend abroad?
Earl Howe: My Lords, I am grateful to my noble friend for what he said. The Government take these issues very seriously indeed. Negotiations in Brussels have certainly not been easy but if we are to secure real welfare benefits progress is essential at Community level. As I said, my honourable friend Mrs. Browning has been undertaking a number of meetings in other EU capitals to set out the basis for our objections to the close confinement veal crate system. Reactions to her visits have been most encouraging. Meetings of the scientific experts, which constitute the first step in the Commission's review of the current EU rules on the welfare of calves, have already begun. My right honourable friend the Minister asked about progress with the review at the Agriculture Council last week and I am pleased to say that in response the Commission confirmed that the results will be made available to the Council as soon as possible this year.
Lord Airedale: My Lords, is it not quite cruel enough to confine a calf in a crate for the whole of its life? Is it not even more cruel to give it freedom to roam on an English farm and then send it abroad to be confined in a crate for the rest of its life, having known freedom?
Earl Howe: My Lords, I think the noble Lord is suggesting that the UK should implement some kind of unilateral ban. I suggest to him that that idea is not a route which we should take up. The legal advice available to Ministers indicates that a unilateral ban on live exports, whether a blanket ban or indeed a selective ban relating only to calves, could not be reconciled with Community law; nor would it be feasible to make a unilateral ban stick. If we really want to improve animal welfare across the Community we need Community-wide legislation.
Lord Carter: My Lords, is the Minister aware that the furore over veal crates has managed to entangle three quite separate problems? The first is the problem for British dairy farmers of disposing of half a million calves each year; the second is the humane transport of live animals of all species; and the third is this detestable business of the use of veal crates which mainly occurs in France and Holland. Does the Minister agree that
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each of these problems needs to be dealt with separately? I must say that so far the Government have not had much success in dealing with any of them.
Earl Howe: My Lords, to pick up one of the points which the noble Lord made, our estimate is that of about 1.2 million male dairy calves born each year the majority—perhaps three-quarters of a million—are used for beef production.
I endorse the overall sentiment expressed by the noble Lord. There are three distinct issues, on all of which the Government are energetically engaged. But in everything we do we must bear in mind not only the welfare of farm animals in the UK, which is very important, but also the welfare of animals across the Community as a whole. That is why the UK is playing a leading part in bringing pressure to bear on the Commission and other member states.
Lord Pearson of Rannoch: My Lords, when my noble friend says that this country is not free to go its own way in this matter because of Community law, is he in fact confessing that once again we are the victim of the qualified majority vote?
Earl Howe: My Lords, my noble friend is always quick to advance arguments for subsidiarity. Subsidiarity does not mean that there is never a case for Community law. It is a question of actions being taken at the most appropriate level. The best interests of animals are not served by different rules in different member states.
Lord Bruce of Donington: My Lords, the noble Earl gives the House the impression that he wants to do something, notably the right thing, but European law prevents him. Why does he not go right into the heart of Europe and do exactly what other member states do? When it suits them they break European law and, indeed, they make their own laws. Why should we not follow their example?
Earl Howe: My Lords, because by acting unilaterally we would lose the leverage that we are building up in the Community negotiations, quite apart from the legal considerations I mentioned. We would also risk handing the whole trade to other countries, some outside the Community, with less stringent rules on welfare than our own. That would benefit neither farmers nor the cause of animal welfare.
Lord Gray: My Lords—
Noble Lords: Next Question!
Viscount Cranborne: My Lords, we are very short of time. If my noble friend will allow, we should move on to the next Question.

TECs: Funding
3.2 p.m.
Lord Rochester Lord Rochester asked Her Majesty's Government:
Whether they consider that training and enterprise councils are funded adequately.
Lord Inglewood: My Lords, yes. The Government provide sufficient resources to training and enterprise councils annually to enable them to undertake the tasks they have contracted to deliver. In 1994–95 the Employment Department is providing £1.7 billion for training and vocational education programmes managed by TECs.
Lord Rochester: My Lords, is the noble Lord aware of the statement reported to have been made last month to the Employment Select Committee in another place by the director of the TECs national council that funding levels for the training for work programme, which is the main measure for the long-term adult unemployed, were inadequate to allow TECs to provide significant amounts of necessary higher level skills? Would not the country benefit much more from substantially increased investment in TECs than from what appears to be a 20 per cent. cut in their funding announced in last November's Budget?
Lord Inglewood: My Lords, it is important to be clear about exactly what is happening. It is the case that there will be a reduction in the number of places on the training for work programme, which is targeted at those who have been out of work for more than six months. Over the past 12 months there has been a drop of more than 400,000 in the number of unemployed, of whom just over 250,000 were long-term unemployed. We believe that against that background alone there is a case for looking at the matter. At the same time my right honourable friend the Secretary of State has set a tight target to increase the effectiveness of the training for work programme in getting people back to work.
We must also be aware that this is not the only programme which is managed by TECs. We are bringing in a variety of new measures, many of them associated with the competitiveness White Paper. If one compares the amount of money which TECs will be able to spend next year with what they are likely to spend this year, TECs will spend £19 million more next year. In other words, the level of expenditure they will be able to incur is the same.
Lord Gisborough: My Lords, is it not true that in future there will be an outcome payment system whereby trainers will be paid in relation to the success of their trainees in gaining qualifications? If that is so, will it not mean that trainers will adopt a selection process in order that people will pass and they will be paid, and therefore the people most in need of training and most unlikely to have qualifications will miss out?
Lord Inglewood: My Lords, the change in the funding of the training for work programme described by my noble friend is correct. That change was asked for by the TECs themselves. It has led to a considerable increase in the effectiveness of those TECs where there have been pilot studies. We believe that it will assist in creating jobs.
Baroness Seear: My Lords, does the noble Lord not realise that that system is bound to be extremely harmful to people with special needs? In the early days of the YTS there were special needs premiums. It is now
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increasingly difficult to obtain money for the training of people who need it desperately if they are ever to earn a living at all. Does the noble Lord agree that they will be a great charge on the community if they do not receive training?
Lord Inglewood: My Lords, the noble Baroness is absolutely right about the problems of those with special needs. It is for that reason that my right honourable friend the Secretary of State has agreed with the TECs that there should be extra money for people in that position.
Baroness Turner of Camden: My Lords, does the Minister recollect that on 6th February last I asked him a Question about South Thames TEC? Is he yet in a position to reassure the House about the position of the small training organisations awaiting payment and in which staff could well face redundancy unless funding is provided? Can he yet assure the House that the appropriate funds are being provided and that everything is in order?
Secondly, would it not be a good idea for local authorities to be directly represented on TECs, not merely as local authorities but as major employers in their own areas?
Lord Inglewood: My Lords, concerning the South Thames TEC I have nothing to add to what I explained to the House on the previous occasion to which the noble Baroness referred. So far as I know, no provider has gone bust by virtue of what has happened in the South Thames TEC.
Turning to the noble Baroness's question about the membership of the boards of TECs, currently they include about 700 directors from the private sector and 300 community leaders. In relation to the wider community interest, we believe that the presence of community leaders fulfils the function which the noble Baroness, Lady Turner, sees for local authorities.

Business of the House: Debate, 1st March
3.7 p.m.
Viscount Cranborne: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the debate on the Motion in the name of the Lord Eatwell set down for 1st March shall be limited to five hours.—(Viscount Cranborne.)
On Question, Motion agreed to.

Business
Lord Inglewood: My Lords, at a convenient moment after half-past three my noble friend Lord Goschen will, with the leave of the House, repeat a Statement to be made in another place on the Government's response to the Donaldson Report.

Crown Agents Bill [H.L.]
3.8 p.m.
The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, I beg to move that this Bill be now read a second time. Today your Lordships are asked to agree another major step forward in the long history of the Crown Agents. Their business has greatly changed over the decades. It is now time to transform their legal and financial structure in response to those changing needs while retaining for their UK and international clients the essential characteristics and qualities for which they are rightly renowned worldwide.
Crown Agents were first appointed in 1833 as Crown Servants, acting under prerogative, for the procurement of goods and services for colonial administrations. They undertook this task on behalf of the Secretary of State for the Colonies for more than a century. In 1954 their full name was changed from Crown Agents for the Colonies to Crown Agents for Oversea Governments and Administration, as they are still called. In 1979 the present legislation was enacted. For the first time Crown Agents were given legal status as a public corporation, responsible to the Minister for Overseas Development and the Secretary of State for Foreign and Commonwealth Affairs. The Secretary of State appoints the chairman and board and has certain powers of direction over the work of the Crown Agents. The Act took care, however, to protect the traditional confidential nature of their relationship with their principals.
Crown Agents are now one of the world's largest international public sector purchasing organisations. They provide procurement, management and technical services to around 150 clients, serving 130 countries. They employ about 600 permanent staff plus 250 overseas and contract staff. Their clients include other bilateral aid donors such as Japan and the Netherlands and multilateral agencies, in particular the World Bank, the European Union and the United Nations. I shall say more about their work later.
In the 1990s it is no longer necessary, or indeed appropriate, for the Crown Agents to remain within the public sector. The present Act is increasingly outdated and no longer provides the right framework. Sixteen years ago Crown Agents provided the bulk of their services under funding provided through the British aid programme even though they served many other public sector clients around the world. Today Crown Agents obtain over 70 per cent. of their work from non-UK principals. The change in the pattern of British bilateral aid has also meant that ODA has less need of Crown Agents' traditional procurement services than in the past, although their use for humanitarian aid delivery has expanded enormously in recent years.
I announced in August 1993 that, subject to certain conditions, the Government would bring forward proposals which would allow the Crown Agents to be transferred to a suitably formed foundation. In his annual report for that year, laid before Parliament last
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summer, the chairman of Crown Agents, David Probert, recorded the board's welcome in principle for that decision. The present Bill will provide the powers to implement it.
The Bill before your Lordships' House provides for the transfer of the Crown Agents' business from the present statutory corporation to a successor company under the Companies Act, wholly owned by the Crown and therefore still in the public sector. The Bill gives the Secretary of State, with the consent of the Treasury, the power to dispose of the successor company to a new owner.
The Government intend to exercise these powers in order to secure the objective I set out in my letter of 13th August 1993 to the chairman of the Foreign Affairs Committee in another place; that is, to transfer the business to a new and independent foundation. This is the point at which Crown Agents will leave the public sector. I recognise that, although the terms of this further transfer are not specifically addressed in the Bill, your Lordships will have a considerable interest in it. I shall say something about the process now, and, as the Bill progresses, I shall explain more. The Government are presently considering proposals from the board of Crown Agents for the structure of the foundation. We shall also need, once Parliament has agreed the arrangements set out in the Bill, to settle the terms of the transfer to the operating company. Those discussions will need to involve members of the foundation once it has been established. With those reservations, let me explain what we envisage, and why this interesting and unusual route has been chosen.
We envisage that the foundation will be established as a company limited by guarantee. Its memorandum and articles will be tightly drawn to reflect, and to build on, the social, ethical and developmental principles on which Crown Agents' business is based. These are set out in detail at the front of Crown Agents annual report. The foundation will be the sole shareholder in the new company. The company will operate the Crown Agents' business along normal commercial lines. It will not distribute dividends but will use any profits from the Crown Agents' business in pursuit of its overall objectives. Foundation members will wish to consider registration as a charity, or other possibilities open to companies limited by guarantee. The Government too will wish to be assured that the future structure will be fully satisfactory. We are taking expert advice on the implications of each of the options.
Members of the foundation will not receive dividends and will not be appointed by Ministers. Some of them may serve on the board. In order to help ensure continuity of experience the existing members of Crown Agents' board would be among the founder members of the foundation. In addition Crown Agents are in touch with a number of potential founder members drawn from a range of institutions including finance and trading companies, professional and trade organisations, charities and other development aid bodies. Additional new members would be nominated and selected by existing members in accordance with the foundation's articles of association. Also, for a restricted period, extending probably for up to five years, we intend that

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the Secretary of State should have limited reserve powers. These would not permit the Secretary of State to have any role in the management of the foundation, still less of the operating company; but they would enable him to ensure that no changes could be made to its fundamental purpose. The intention behind the proposal is that we recognise the unusual nature of the foundation route. We want to ensure that it settles down successfully. We also want to provide full assurances to the international clients of Crown Agents that the foundation will maintain a continuity of principles and purpose with those of the existing corporation.
Although ownership will change, the Government have taken care in preparing the Bill to allow for fair treatment for Crown Agents' staff. I understand from Crown Agents that they have no plans for redundancies as a result of the proposed change of status. We anticipate that the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 1981 will apply. The Crown Agents' pension funds are held in trust. The funds are a matter for the trustees and Crown Agents. I understand that Crown Agents have no plans to alter their present pensions arrangements. The security of trust-based schemes will be further protected by the provisions of the Pensions Bill currently being considered by your Lordships' House. We do not envisage any change in the assets and liabilities of the funds when the business transfers.
The trust's current assets are more than sufficient to meet current and future pension requirements. The Crown Agents' business projections show no need to make a pensions contribution during the current funding period. This contributions holiday has substantial value for the business and will be taken fully into account in our decision to ensure value for money for the taxpayer in the transfer.
I now want to say something more about the financial implications of the proposals. We are also concerned to ensure that a viable business is passed to the new owner, the foundation. It is a business which will continue to make a substantial contribution to the success of the British bilateral aid programme as well as serving Britain's wider commercial objectives. As the annual report and accounts show, Crown Agents are a modestly profitable business. Since incorporation in 1979 they have not received any subsidy by way of new cash payments from the Government. The value of the business lies mainly in the quality of its staff and the good will attaching to its reputation. Physical assets are modest. However, because we think so well of them, we are doing all we can to make sure that no one has any doubt about the real assets that they have, which are as I described, their quality, and their quality product for all who buy from them. We are taking independent advice, but I should warn that there is little prospect of substantial receipts for government from the transfer of this business. The Bill, however, requires the Crown Agents' outstanding debt of £2 million to the National Loans Fund to be repaid.
The Bill is designed to allow the Crown Agents to fulfil all existing and new contractual obligations exactly as if they had remained a statutory corporation. It is clearly of considerable importance to the Crown
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Agents and to their clients to know that that is the case. During the process of transfer, it is the Government's intention, and that of the Crown Agents, that there will be no difference in the quality and range of services that they currently enjoy and that thereafter the programme of internal restructuring and investment which Crown Agents have in hand will allow for further steady improvements. The confidential nature of client dealings with the Crown Agents will also continue to be fully respected and will be further protected by the articles of association of the new company.
I expect ODA's long-established client-supplier relationship with Crown Agents to continue. They provide valuable procurement, legal, financial and technical services to ODA at a competitive price. In common with their other international clients we will continue to benefit from the high ethical standards Crown Agents uphold in managing their business activities.
Noble Lords will notice that the Bill also contains provisions for the future of the Crown Agents Holding and Realisation Board (CAHRB). This is a separate legal entity created under the 1979 Act to manage and wind up the assets and liabilities of the business previously undertaken by the unincorporated Crown Agents on their own account. At present it shares the same board as the public corporation. While the bulk of its work is complete, we envisage that there will still be some residual duties to be undertaken for some time. The Bill makes provisions for separate arrangements for CAHRB in future. I shall say more on this in due course.
I recognise that many of your Lordships have had contact with the work of Crown Agents in one part of the world or another. But your Lordships may not be aware of their extensive range of activity. Over the past year, I am proud that 11 employees of Crown Agents have received honours for delivering British and other emergency aid in Rwanda and the former Yugoslavia. Many more lives would have been lost had Crown Agents not been there, alongside our own ODA staff, to do the work.
Most of Crown Agents' business is less dramatic than that. It ranges from advising the national state bank of Kazakhstan on a 200 million dollar programme of procurement financed by the World Bank, one of many similar contracts in the former Soviet Union since the Know-How fund first introduced them to Moscow in 1991, to the totally different pursuit of providing philatelic services through their stamp bureau to nearly one-quarter of the world's postal administrations. The group includes an assets management arm regulated by IMRO and a financial services company which has applied for supervision, once the Bill is passed, by the Bank of England. A wholly-owned subsidiary, Resource, is helping the standards organisations of over 30 newly industrialised countries to establish standards for product testing and inspection—an essential basis for lowering technical barriers to trade. But the heart of the business is, and is likely to remain, the provision of procurement services to Crown Agents' clients in the public and private sectors, both in the UK and around

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the world. In delivering those services Crown Agents' commitment to their present high ethical standards will remain unchanged.
The purpose of the Bill is to enable the Crown Agents to have a strong and stable structure within which to carry forward their business into the 21st century on a viable and sustainable basis. I commend the Bill to the House and trust that your Lordships will be content to give it a Second Reading. I beg to move.
Moved, That the Bill be now read a second time.—(Baroness Chalker of Wallasey.)
3.24 p.m.
Lord Judd: My Lords, there is a real responsibility on all of us to act as trustees of our national assets. It is in that spirit that we on this side of the House wish to consider the proposals before us today. We share with the Minister a recognition of the valuable work of the Crown Agents—I thought she described it splendidly in her speech. We fully understand the arguments that have been made for removing the constraints on their ability to take the kind of commercial opportunities which would further strengthen their business. We are not, however, convinced by the means which the noble Baroness has put forward to meet that objective. We are certainly not satisfied with the form of the legislation which has been presented today.
Let me begin with the arguments for change and some of the areas of agreement. The Crown Agents were, until 15 years ago, servants as well as agents of the Crown, directly accountable to Ministers for what they had to do. At one period, as the House will be aware, some of what was done turned out to be most unfortunate and unwise. Those of us who were in office when that became evident had to move speedily to call them to account. We then determined, in the light of that, to establish a new statutory basis for the Crown Agents to improve both their accountability and efficiency.
The current legislation covering the Crown Agents was drafted by Labour Ministers and implemented, interestingly, by a Conservative Government. The Minister and I agree, I think, that the 1979 Act met the needs of the time. It established the Crown Agents as a public sector corporation and set up a legislative and regulatory framework that was designed to guard against a repetition of the unfortunate events which had prompted that reform.
The Minister and I also certainly agree that the framework established in the 1979 Act is in need of review. The Crown Agents themselves, as the Minister described, have greatly diversified their interests and sources of business. The ODA remains a major client, accounting for about 30 per cent. of the business done. But, as the Minister told us, in the course of the past 15 years the Crown Agents have steadily increased the range and scale of business done on behalf of other agencies and other governments. We on this side of the House would certainly not wish to inhibit their ability to continue on that course.
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Indeed, it is precisely because of the value we put on the work of the Crown Agents that we have serious reservations about the form and content of the Bill. The agency provide important services to clients around the world and contribute to the development objectives of many of the world's poorer countries and to the work of aid donors. We do not wish that role to be jeopardised, any more than we wish to see their capacity to generate business needlessly constrained.
Essentially, what we seek is the provision of greater commercial freedom for the Crown Agents, while at the same time maintaining their active involvement in promoting development by, for example, providing impartial advice and services which allow their clients to make the best use possible of available resources. Here again, it is clear that the Minister and we share common objectives.
Where I fear we part company is on the means for achieving those ends. The Minister appears to take the view that greater commercial freedom can be achieved only by removing the Crown Agents from the public sector. It is, of course, an argument that we have heard before. The President of the Board of Trade took a similar view in the case of the Post Office. Now, having failed to win the argument for privatisation, he obstinately continues to refuse such freedom within the public sector—a slavish and dogmatic commitment to ideological nonsense at the expense of common sense and the national interest, if ever I saw one!
Of course, the case of the Crown Agents is not exactly the same as that of the Royal Mail, any more than the objectives of the Minister for Overseas Development are the same as those of the President of the Board of Trade. In both cases, however, we must remember that we are considering the responsible disposal of the nation's assets. What would be totally unforgivable in either Government or Opposition would be to decide the future of the Crown Agents for party political reasons alone. I am, therefore, sorry to have to remind noble Lords that sources close to the Conservative Party have suggested that that may be just what is going on.
On 12th November last year, just before the Queen's Speech, Arthur Leathley in The Times claimed that plans for privatisation had been shelved by the Cabinet earlier in the year. He described revival of those plans as "a surprising U-turn", which followed the failure of plans to privatise the Post Office. George Jones had made the same connection in the Daily Telegraph of the previous day, saying that,
"a scheme to privatise the Crown Agents has been revived by the Government after the collapse of the plans to sell the Royal Mail".
These stories were no doubt inspired by government spin-doctors seeking to cover their retreat on the Post Office by producing the Crown Agents as a fig leaf. Here, after all, was a substitute sacrificial lamb to assuage the doctrinaire demands of the high priest of the Conservative Right. The disturbing notion that this privatisation is merely to compensate for dropping others that proved too difficult will be dispelled only if the Minister can show beyond reasonable doubt that privatisation is the best route for the Crown Agents to take. With the greatest possible respect, this she has so

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far failed to do. I suspect that that is because neither her considerable intellect nor her enviable heart are really in the exercise at all.
I recognise that the Crown Agents, like the Royal Mail, are a public sector corporation, and it is because of that that the Government argue that they are consequently subject to similar constraints on their freedom to borrow and to engage in joint enterprises with private sector partners.
Such constraints are not an inevitable consequence of public ownership. They are the result of the application of government policy dressed up as Treasury rules. They are, in other words, constraints which are deliberately imposed by the Government. There is no reason that I know why the Government should not change those rules.
Crown Agents are also constrained from providing services to private sector clients. Since the 1979 Act was passed, many enterprises that were once in public ownership in developing countries and in Eastern Europe have passed into private hands. Some of those privatisations may have been wise and some may have been foolish. But in this context it is absolutely right and proper that Parliament should consider whether Crown Agents should be free to provide services to privatised enterprises which still contribute to developmental objectives.
The same is true of the constraints which prevent the Crown Agents from seeking business in the domestic market in this country, not least in the realm of public services and utilities. That constraint also derives from the 1979 Act, and again it is a legitimate matter to bring before Parliament at this time.
Again, the case for removing constraints is not in itself a case for privatising the Crown Agents. The constraints in the 1979 Act can be modified or removed simply by amending that Act. A Crown Agents Bill might well have been brought before this House for just that purpose; but it was not. Instead of sensibly modifying the existing legislative framework, the Government extravagantly propose to sweep it entirely away.
It is our firm conviction that the Crown Agents could be given greater commercial freedom within the public sector if only the Government had the will to make that happen. Privatisation is not the only possible course. And that is not our view alone. After the review of their status to which the Minister referred had been announced by her to the House in December 1992, Mr. David Probert, Chairman of the Crown Agents, said in his 1993 annual report:
"The Board of the Crown Agents, after consulting with its advisers, Price Waterhouse and S G Warburg & Co, recommended to the Minister for Overseas Development, Baroness Chalker of Wallasey, that the interests of clients, aid programmes and employees would be well served if the organisation were to remain as part of the UK public sector, but with greater freedom of operation than its 1979 Act of Parliament permits".
That was their preferred option. It is also ours.
The Crown Agents, like the Royal Mail, operate successfully at no cost to the taxpayer, providing the useful and valuable services as a public sector enterprise that the Minister described. They manage very
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considerable funds for organisations such as the United Nations, the European Commission and the World Bank, but also on behalf of the Government of this country and the governments of many other countries. There is no obvious reason why they should not remain in the public sector. Indeed, for this kind of operation, it is surely the proper place for them to be. As the extraordinary financial happenings of the past few days have once more illustrated, there is much to be said for the highest traditions of accountable public service. I repeat: the constraints that exist under the present legislation and Treasury rules can be amended by the Government if they so choose. And such amendments would attract widespread support, certainly from this side of the House.
It is fair to note that the chairman of the Crown Agents also expressed a second preference. He suggested that if the agency could not remain in the public sector, the best alternative would be to transfer the business and assets of the Crown Agents,
"to a specially formed Foundation, the profits of which would not be distributed but retained for the development of the organisation and its services to clients".
That is the course of which the Minister spoke today. She has made plain that she herself wishes to establish a foundation governed by social and developmental objectives as sole owners of the business operation, which would be run on commercial lines but which would hand over its surplus to the foundation. Such a foundation might operate as a company limited by guarantee.
The option of charitable status has also been raised by the Minister—although the constraint that prevents a charity from trading must raise questions about how the relationship between a charitable foundation and a business venture operating under its authority should be effectively regulated; how the hard-nosed businessmen whom we know the Government will want in the business operation will be meaningfully accountable to their trustees with wider social responsibilities; and how the potential conflicts between some—not all—trading opportunities and development priorities will be resolved.
I have no doubt that less desirable options than a foundation have been considered within government. Arguments were doubtless made that a trade sale of Crown Agents might yield a profitable financial consideration for the Treasury; that the agency would then be expected to earn a profit; and that as a result it would—if I may use the kind of language beloved of the ideological wing of the present Government—
"be exposed to the full rigours of the competitive, free market environment".
It seems that, so far, such arguments have been rejected, at least by the Minister. And if that proves to be a final victory over the wilder voices within her own party, then the Minister will have earned considerable credit. If Crown Agents were to be sold off to the highest bidder and were to become the marketing arm of a multinational conglomerate, they would certainly lose much of their current reputation for impartiality in advising clients. Important aid donors such as the Japanese Government could not be expected to continue

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to bring their business to Britain under such circumstances. No doubt it was in fact the concern of precisely such clients which proved vital in helping the Minister to resist those who would prefer to sell the Crown Agents on the open market.
The Minister would, I think, agree with me that the value of the Crown Agents goes far beyond the fixed assets that they possess and any trading surplus that they might make. A procurement agency which sets high standards in global markets, and which generates international business for private sector British companies worth tens of millions of pounds a year, is of immense value to this country. It is an asset in itself because of that; and no Minister committed to British export efforts or to the general good name of this country would wish to jeopardise the Crown Agents in order to pursue an ideological commitment to free market forces. By the same token, we must not allow all that the title "Crown Agents" has come to represent to be threatened by the prospect that that title could at some future date be passed on without any accountability. But that is what the Bill as drafted would make possible.
We believe the Minister when she insists that she wishes to pursue the foundation strategy. But I am sure she will agree that, unfortunately, the Bill before the House today is not a Bill to establish such a foundation. In the Minister's own words when she wrote to me and to other noble Lords last week:
"The Bill provides enabling powers for the Secretary of State to vest the Corporation's assets, rights and liabilities in a Government-owned share company. This company will be transferred to a new owner. The present statutory corporation will be dissolved once its remaining functions have been satisfactorily discharged".
That is all there is in this Bill. The Minister's letter goes on to detail the foundation proposal, but only as "the Government's preferred option". I am certain that it is the Minister's preferred option, but I think we are entitled to ask for a clear indication in the proposed legislation itself that the Government will indeed follow that course.
Preferred options come and go, just as Ministers come and go. It is a fact of political life. Because we have a Minister at the ODA who believes in social purpose and developmental objectives, we cannot take for granted that those priorities will continue to guide government policy. Recent sad experiences with the aid and trade provision have underlined the dangers. We should think long and hard before we consent to enabling legislation that gives the Government a free hand to do whatever they wish. Legislation by intent is not a good principle.
Another Minister for Overseas Development may have another preferred option. Another department of state may press in due course for another type of successor company. We know, for example, that the Treasury takes a close interest in such matters. We can anticipate that in reality Treasury Ministers will insist that it must be the hard-nosed business men who make all the real commercial decisions and that wider considerations should not get in the way.
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There is nothing—nothing—in this Bill to guarantee that the new owners of the Crown Agents will be a foundation such as the Minister described. There is no mention of developmental objectives, social purposes or a non-profit company limited by guarantee. There is nothing in the Bill to ensure that another Minister will not be able to change course and sell Crown Agents to the highest bidder.
Parliament is entitled to such guarantees. If the approval of this House is sought for the concept of a foundation, we must have as part of the Bill, at least in its schedules, the memorandum and articles of association under which it would operate. The Minister may take the view that there are legal reasons why that cannot be done. If so, she should explain to the House the legal advice that she has received, as others, frankly, may take a different view.
If the constitution of the eventual successor company does not appear in the Bill, I hope that the Minister will accept that Parliament must be entitled to consider this matter again before Crown Agents pass out of public ownership. Indeed, we on this side believe that as a minimum the Bill needs to be so amended that the Secretary of State may not act upon it until the detailed provisions for the new foundation have been subject to affirmative resolution of both Houses of Parliament.
There is also no mention in the Bill of those who should, as the Minister herself tellingly said today, take much of the credit for the successes of the Crown Agents: those who have been employed by them. Their loyalty, courage and service should be recognised. Those are qualities which will be indispensable to future success. The 1979 Act devoted a significant part of its first schedule to the employment and pension rights of Crown Agents' staff. By contrast, there is no mention whatsoever of those in the Bill before us today. I believe that that is a serious and grave omission. Again, I believe that detailed provisions for the rights of employees and pensioners of the Crown Agents should at least be subject to affirmative resolution before any change is carried into force.
My concern here is not only that existing staff should be given assurances about their terms and conditions under new ownership and about their right to trade union representation. I am also concerned that there should be no ambiguity at all about the future of the pension funds accumulated by contributions from Crown Agents and their staff. Parliament is entitled to know a good deal more about the plans for initial capitalisation of the successor company. Staff and pensioners of the Crown Agents are entitled to guarantees, not just well meaning assurances, that their pension funds will be protected.
In seeking to protect the benefits that the Crown Agents have brought to the developing world, it is surely right to protect the well-being of those who, as the Minister herself so powerfully described today, have served them so faithfully and well in the past. The Crown Agents have become a credit to this country. With greater commercial freedom in the public sector, they could be set fair to achieve a substantial trading surplus on a regular basis. Let us not go down the road indicated by this inadequate Bill until we can be certain

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of the final destination and until we can be quite sure that the direction that we are being invited to take is convincingly, in every sense, the right one for the Crown Agents, their clients and their beneficiaries, for development and for all their dedicated staff.
3.45 p.m.
Lord Redesdale: My Lords, I believe that the reason the Crown Agents were mentioned in the gracious Speech was because this Government failed to bring the Post Office privatisation to this House. Perhaps on that point I share the cynical beliefs of the noble Lord, Lord Judd. It is ironic that the economic freedoms that are given as one of the main reasons for the Bill are denied to the Post Office. However, I digress.
The Bill aims to move the Crown Agents to the private sector. Indeed—if the words of the Foreign Secretary as reported in the Daily Telegraph are to be accepted—he said:
"The Crown Agents are buyers and sellers for the Government overseas. But the aid budget is falling. They do a lot of foreign business and need to be free of public sector constraints. It is privatising in order to preserve".
That is perhaps a pessimistic view of the future of the Crown Agents.
The move to the private sector will be advantageous for the Crown Agents in as much as they are to be given greater financial independence than under the 1979 Act of Parliament. The Minister, in his reply to the gracious Speech, implied that they would receive that freedom. Considering that the vast amount of work that the Crown Agents undertake is for clients other than the ODA—ndeed, only 27 per cent. of their income is generated from the United Kingdom—the removal of constraints might not only preserve their position but allow them to expand their activities.
The Crown Agents have been involved in much excellent work in recent years, including organising aid convoys to Bosnia, as the Minister mentioned, providing technical assistance to sub-Saharan Africa and promoting institutional development and capacity building in the developing world. The Crown Agents' work has shifted with the rapid new developments in aid policies and they have had to adapt to falling ODA budgets by changing the way that public funds are generated. They now play an important and growing role in promoting private sector enterprises and developing trade. Such work suggests that the value of the Crown Agents can hardly be in doubt. However, the future of the Crown Agents through this Bill is not clear.
I realise that the Minister said that the Crown Agents will become a foundation, with any profits being reinvested in the activities of the successor to the Crown Agents—a foundation that, under Clause 7, may well be called the Crown Agents. One effect of the Bill is that the Crown Agents will be required to repay what is left of their commencing capital debt. Although the Crown Agents have been squeezed of resources through falling aid budgets and have not received any subsidy from the Government since their incorporation, they are being asked to repay capital debts of some £2 million. With
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capital and reserves amounting to no more than £15 million, that represents a sizeable chunk of the assets available to the successor company.
The Bill indicates that the repayment of that money to the Consolidated Loan Fund will be directed by the Secretary of State. He may also determine full repayments of the principal or interest on such deemed debt to be paid into the Consolidated Fund. Considering that at present the £2 million is being repaid over the long term at low interest rates, will the Minister indicate the terms and conditions of the repayments set out in the Bill?
The House may in fact regard the Bill as a skeleton Bill. It is a crude enabling piece of legislation which allows the Secretary of State to form a foundation in any form that he thinks fit. Although the Minister has indicated that a foundation is to be set up, there is no mention at all of such a body in the Bill. It is questionable even whether the notion of a foundation is a suitable means of transferring the Crown Agents, given that they are limited by guarantee. Nor is there any mention of pensions for staff. The Crown Agents employ some 800 people. What security are they offered in the Bill as a result of this transfer?
The Government insist that the transfer of ownership is appropriate in view of the Crown Agents' international character. But where in the Bill is the guarantee that an independent foundation will be formed of representatives of the different sectors with which it deals and will not become a quango?
The Bill seeks to change primary legislation by secondary legislation. It is not a privatisation because it only places the Crown Agents into a body that has yet to be appointed by the Secretary of State. All further changes to the Crown Agents will be covered by subordinate legislation as set out in Clause 1. I hope that the Minister will consider redrafting Clause 1 to make clear the exact status of the successor company of the Crown Agents. Perhaps the word "foundation" could be added to the Bill.

Donaldson Report: Sea Pollution
3.50 p.m.
Viscount Goschen: My Lords, with the leave of the
House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Transport. The Statement is as follows:
"With permission, Madam Speaker, I should like to made a Statement on the Government's response to the report of Lord Donaldson's inquiry into the prevention of pollution from merchant shipping. The response is published today. Copies have been placed in the Library of the House and are available in the Vote Office.
"When Lord Donaldson's report, Safer Ships, Cleaner Seas, was published in May 1994, it was welcomed both within the United Kingdom and internationally. I am pleased to have this opportunity to echo my predecessor in thanking Lord Donaldson and his team for the depth and quality of their report.

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The Government have already accepted its broad thrust. I now go further. The Government accept 86 of the 103 recommendations. Most of the others are still being considered. We were unable to accept only four recommendations where we decided that the action proposed was inappropriate. Our response clearly demonstrates that the Government are serious both about ship safety and pollution prevention, and serious about implementing the Donaldson Report.
"It is essential that those operating substandard shipping in United Kingdom waters should be clearly identifiable. I am pleased to say that our initiative in publishing monthly lists of such ships detained in United Kingdom ports has been well received by responsible shipowners. The message is clear: substandard ships will be detained and information about detentions will be published.
"The Government support the report's emphasis on port state control and have acted to ensure that the recommendations on improved targeting of substandard ships are considered by the EC and the Paris Memorandum of Understanding.
"We undertook to consider recommendations on providing emergency towing capability. I expect a final report in June from the Coastguard Agency on the feasibility, costs and benefits of the inquiry's proposals. I also announced last December that we had accepted the Donaldson recommendation that two tugs should be stationed in the Dover Strait and the Minches to provide emergency cover this winter. These tugs are now in place. This trial will also provide operational experience for the agency's final report.
"With all-party support, the merchant Shipping (Salvage and Pollution) Act 1994 is now law. This has allowed us to ratify two international conventions, one on salvage and the other on increased compensation for oil pollution. We are encouraging other states to do likewise.
"At a national level the Act extends the principle of strict liability for oil pollution in United Kingdom waters to cover spills of persistent oil from ships other than oil tankers. The problem now is to ensure that the owners of ships whose bunkers cause damage are able to pay. We are pressing internationally for the extension of compulsory liability insurance and are considering the scope for unilateral action.
"We do not want ships to be able to continue to operate anonymously off our coasts. We have been vigorous, therefore, in seeking international agreement on the mandatory fitting of transponders and we will maintain this pressure at the IMO. Pending agreement on transponders we also intend to act on Lord Donaldson's recommendation that ships should have recognition marks that are clearly visible, by presenting proposals to the next meeting of IMO's Maritime Safety Committee.
"Since last July the Marine Safety Agency has been carrying out a programme of inspections of foreign fish factory ships—Klondikers—working off the UK. Substandard Klondikers found in port have been
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detained and vessels at anchor have been told that deficiencies must be put right. However, the problems and the risks remain.
"The Scottish Office has brought forward proposals to improve fisheries management by limiting the number of fish transhipment licences issued to Klondikers and by introducing an advance notice period for licence applications from May this year. We are considering a number of options for further action, under merchant shipping powers, such as preventing loading or unloading and requiring vessels to leave our waters. These should help to ensure that Klondikers meet agreed safety standards and carry adequate insurance. We will issue a consultation paper shortly with proposals for possible legislative action, including the extension of our powers of inspection and detention to ships in United Kingdom waters not on innocent or transit passage.
"The report recommended that a statutory obligation should be placed on ports to provide adequate and convenient waste reception facilities which should be free at the point of use. Before deciding on the form of legislation we need to establish the scale of the problem. Those with responsibility for ports should be consulted on specific proposals. Research is already being conducted to address these issues. Results will be available soon and we expect to consult interested parties shortly thereafter. As part of our initiative against pollution from ships we will also bring forward regulations defining our exclusive economic zone which will extend our jurisdiction over pollution from ships up to 200 miles from our shores. We are considering how best to enhance surveillance and enforcement of this extended area.
"The inquiry also made recommendations on responsibility for clean-up operations in harbour areas and on the coast. We will consult interested parties on these recommendations and on possible courses of action.
"We are determined to continue working towards the elimination of poor operational practices on ships. In line with Lord Donaldson's recommendations we are strongly supporting the IMO revision of the Standards of Training, Certification and Watchkeeping Convention which should be completed in June. We also fully endorse the IMO's International Safety Management Code and are encouraging its widespread use on United Kingdom ships in advance of its mandatory introduction in 1998.
"The shipping industry has expressed concern about Lord Donaldson's recommendation that shipowners should pay into two funds for port state control inspections and the United Kingdom's standing counter-pollution capacity. We have long supported the "user pays" and "polluter pays" principles and are keen to explore new options for funding. These need to be consistent with a competitive, as well as a safe fleet. We are clear that there may be problems in seeking to establish United Kingdom funds without first seeking regional agreement. We will work to develop funding

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proposals and to securing agreement on them with our regional partners. But it would not be right to close the door forever on a unilateral approach if regional agreement cannot be secured. We intend to consult on possible regional and unilateral approaches.
"Madam Speaker, in the time available I have highlighted the key elements of our response to the major issues raised by the Donaldson Report. We have accepted and acted upon many more recommendations, as outlined in our detailed response, and we will continue to take forward initiatives to implement the remaining recommendations. Lord Donaldson's report has set the agenda; we intend to follow it. My department's marine safety and coastguard agencies will play a key role in this process. Like all sensible people, we want a safe and pollution free marine environment".
My Lords, that concludes the Statement.
3.58 p.m.
Lord Clinton-Davis: My Lords, I thank the Minister on behalf of my colleagues for repeating the Statement in this House. I share his view that the Donaldson Report is a remarkable report of great scholarship. It assimilated a great deal of evidence and all that clearly has major national and international maritime and environmental implications.
We shall clearly need time to absorb the Government's conclusions in this document, which was issued this afternoon. I confess that I have not had time to read it all. It is evident that today's Statement should not be seen as a substitute for a full debate on the Donaldson Report. The conclusions reached by the report and the Government's responses deserve that.
I can only focus this afternoon on what I consider to be the priority areas for action, many of which were underlined by the Government and we support them as far as they go. In particular, I welcome the greater transparency regarding accident information, which is of critical importance. The Donaldson recommendations were effectively split into two areas—those recommendations regarding deterrents and the detection of wrongdoing and those recommendations requiring the dissemination of information to ships' masters concerning the planning of a voyage. Perhaps I can deal first with the role of the port state, which was given some emphasis by the Minister's Statement.
What specific action are the Government taking to include the Donaldson recommendations in the draft European Union directive on port state control, to get them incorporated into the Paris Memorandum of Understanding and to highlight these issues at the North Sea conference in June? How will the Government, through the IMO, seek to enlarge the scope of their own powers under port state control? Have they any plans to increase the number of surveyors required to undertake the necessary investigations in port; and if so, what training provision do they have in mind? Or is it that they propose to continue with the delegation of powers to classification societies which they intimated in the recent debate on shipping and also in their deregulation proposals? How does that stand alongside the view, as
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expressed in the final paragraph of the Statement, that the department's marine safety and coastguard agencies will pay a key role in these processes? Is it not a fact that the Government have plans to reduce the Marine Safety Agency by 14.8 per cent., the Marine Accident Investigation Branch by 7.4 per cent. and the Coastguard Agency by 6.4 per cent.? Why should that proceed when the Government are now saying that they have it in mind that people who use these facilities and polluters who have to pay for clearing up their pollution will have to pay towards the inspection of their ships?
I welcome what the Minister said about Klondikers, but is he not aware that recommendation 77(f) of the report states that the Government should,
"declare straight away that from a specified date, well before next Winter [1994–95], the Fisheries Departments will not consider any application for a transhipment licence unless the Master concerned produces evidence that his vessel is adequately insured and reaches minimum safety standards. Any licences issued under existing rules before that date should not run beyond that date".
Why have the Government prevaricated on that recommendation? The are now seriously in arrears.
On the question of emergency towing, the Minister said that there are now two tugs in place. Is it not a fact that the tugs are flag of convenience vessels, crewed by non-English speaking Croatians? Is that a satisfactory way of proceeding on a matter where a common language is a rather important issue, as underlined by the report?
I turn from that issue to the marine environment in high risk areas. The report highlights the need for greater willingness on the part of the coastal state to intervene to protect areas especially vulnerable to the risk of exceptional damage through concentration of shipping or marine environmental damage. What initiatives do the Government propose as a matter of urgency to take in the IMO and at EU level in that regard? Is it not desirable, too, to rationalise the burgeoning use of special areas in some way, as not to do so could cause confusion?
I welcome the Government's undertaking in relation to the exclusive economic zone. That is absolutely right. But can the Minister state what options are being considered to enhance surveillance and the enforcement of the extended area? The Statement is very vague on that matter.
Many years ago, in 1977—I raised this point in our recent debate on shipping—the Labour Government introduced into the International Maritime Organisation the idea, which was adopted, of a marine safety corps, the idea being that developed shipping companies would help developing countries to establish more effective flag state control, which goes to the heart of this issue. That idea, which was supported for two or three years by the developed shipping nations, seems to have fallen into desuetude. Do not the Government agree that it would be quite a good idea to return to that concept as a way of effectively dealing with some of the lacunae of flag state control?
Regrettably, too many ship owners involved in the international business of shipping are prepared to cut corners and take chances with safety and damage to the environment. I believe that it would be appropriate if

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the Government were to respond to those activities by disregarding their own deregulation proposals which place their protestations about safety, which have been made clearly today, in jeopardy.
Lord Ezra: My Lords, I join the noble Viscount, Lord Goschen, and the noble Lord, Lord Clinton-Davis, in paying tribute to the Donaldson Report. It is a most thorough and exhaustive but readable report on this subject and needs to be taken very seriously indeed. I am glad that the Government's response has been positive and detailed.
The report gave rise to a debate on 25th January which was initiated by my noble friend Lord Perry of Walton. Many of the points in the report were highlighted then. The noble and learned Lord, Lord Donaldson, took part in the debate. As the report indicates, the UK merchant shipping fleet now, regrettably, represents only 1.35 per cent. of the world total. That is an appalling figure when one considers our great maritime past. I was shaken when I read that statistic. However, the smallness of the size of our merchant fleet does not mean that we do not have to take this problem seriously as the UK is one of the major port and coastal states in terms of shipping calling at and passing by our ports. It is for that reason that the report has been prepared and the recommendations made.
As the noble Lord, Lord Clinton-Davis, said, shipping is now becoming more and more competitive. Ship owners are tending to cut costs in order to maintain margins. Therefore, it is more important than ever that a proper regulatory system for inspection should be introduced. The first responsibility is obviously with the flag state. However, we know how deficient that system is and therefore, quite rightly, the report and the Government in their response have emphasised the need for port state control. There is a graphic phrase in the report which I shall quote and then I shall ask the noble Viscount whether that is the way in which the Government are proceeding in this connection. The report states in paragraph 10:
"At present the inspections constitute the maritime equivalent of roadside checks of heavy goods vehicles … The essence of our proposals is that these inspections should take on more the character of the Ministry of Transport (MOT) Test enforced for vehicles registered in the United Kingdom".
In the light of that comment, is the noble Viscount satisfied that the steps now being taken will achieve the objective mentioned in the report?
This is not only a national but an international issue. So the question arises, as the noble Lord, Lord Clinton-Davis, has properly mentioned, as to what we are doing with our partners in the European Union and at the International Maritime Organisation. They are no doubt fully familiar with the report. Will they also ensure that it is acted upon by the individual countries of the Union and by the other signatories of the Paris Memorandum of Understanding?
The noble Lord, Lord Clinton-Davis, referred to marine environmental high risk areas. That is one of the recommendations which the Government said they
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would have to consider. In view of the importance of the issue I should like to express the hope that that consideration will be quickly completed.
Finally, I come to funding. Quite obviously, these improved methods of inspection have to be paid for. The proposal is that they should be paid for by the shipping industry. But that raises the question of finding a regional solution which the Government are exploring. Can the noble Viscount explain to us how that is going to be undertaken and what hopes he has of achieving a regional solution?
Viscount Goschen: My Lords, I believe that the report of the noble and learned Lord, Lord Donaldson, has been widely welcomed. I also believe that the Government's response today will be similarly widely welcomed because it basically accepts the broad thrust of the report. It also accepts the vast majority of the noble and learned Lord's recommendations, only four being rejected. I welcome also the attitude of the parties opposite in congratulating the noble and learned Lord, Lord Donaldson, on the work that he has done.
A number of detailed points were raised by the noble Lord, Lord Clinton-Davis. Perhaps I may begin with those points made about the Coastguard Agency and the Marine Safety Agency. These agencies are at the very core of our policies on safety of life at sea around our coasts and also on the prevention of marine pollution.
Efficiency exercises have been carried out, but it is important for me to emphasise to the House today that safety is our paramount concern. It will not be compromised. The Coastguard Agency has been asked to achieve realistic economies without affecting its operational effectiveness or diminishing safety levels. It is important to note that about £3 million has been allocated to the agency to allow implementation of the recommendations following the Donaldson Report. Similarly, the Marine Safety Agency has a reputation for quality. I believe that the two enforce our port state control regime. It is absolutely vital that the agency has the credibility which it has at the moment. Again, reorganisation and efficiency gains have been required from the MSA. Provision has been made for that.
The noble Lord, Lord Clinton-Davis, talked about the provision of tugs. The report suggests that interim arrangements should be put in place, and that we have done. We have sought to provide interim cover which will act as a trial exercise. A great deal has been said both in the press and by the noble Lord today about the nationality of the tugs. It is important to give a little background about that situation. The two tugs chartered by the agency are controlled by the United Kingdom-based company, United Towing, which is a leading member of the International Salvage Union.
Although foreign flagged and crewed, the ships meet the necessary safety and operational standards. They provide an emergency towing response capability at reasonable cost to the taxpayer. We were looking for ships that would be able to do the job properly and these vessels had been operating very successfully in the North Sea. In the incidents to which they have responded they have shown that they represent an extremely effective and efficient response capability.

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This is a trial and we shall be analysing the data which results. We shall see what action needs to be taken on a more permanent basis.
Port state control was the theme of the questions put to me by noble Lords opposite. Taken together, the noble and learned Lord's recommendations on that subject suggested radical alteration to the way in which port state control is currently undertaken. We indicated that we would present the recommendations to our port state control partners, and that we have done. We have put great emphasis behind the noble and learned Lord's recommendations concerning the targeting of ships. It is absolutely vital that the correct ships are targeted so that limited resources can be concentrated on those ships which we believe present the greatest risk. We are pursuing that with our partners in port state control. I believe that the pressure we shall apply will bring them round to our way of thinking on targeting.
It is also worth re-emphasising the policy of dentention which we have pursued and publication of the names of the ships which we have detained. At the onset of that policy there was some concern that that would not be a fair way of going about the business. However, I believe that the policy has been welcomed. Sub-standard ships need to be publicised so that everybody knows what ships have failed to attain the, required standard.
The noble Lord, Lord Clinton-Davis, referred to Klondikers. We all accept that this is an intolerable situation particularly for those who live in the Shetland Islands. The situation there is that there are a great many ships, many of which are unsatisfactory, concentrated in a small area. The accidents and losses which have taken place show the risks that are being posed by these vessels. However, at the moment our powers to take action are limited. One of the Government's papers will consider a significant extension of our current powers as we seek to close the gaps which the Klondikers have demonstrated exist. Our programme of inspection of Klondikers will continue and we shall detain sub-standard ships if they are in port. The Scottish Office has produced a consultation document aimed at limiting the number of Klondiker licences issued on fisheries grounds. The Department of Transport's consultation paper will examine alternative means of ensuring that Klondikers and other ships operating in our waters conform to agreed safety standards.
In looking at the issue of Klondikers it is important to realise that they are very important to the economy of the region. The fishermen welcome them as a market for their catches. But we have to ensure that the right number of Klondikers are there. Some of them have seen no fish over their sides at all during the season. There are crews which have not been paid or there are not insufficient bunkers on board. There is a wide range of problems. It is not the case that we can just snap our fingers and solve the problem. We take it very seriously and that is why we are consulting in two different ways.
As regards funding, we are committed to the principle that the user should pay. It is because of the possible competitive disadvantage to our ports and shipping industry that we are initially seeking a European approach to user charging. Our proposed consultation
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paper on funding will advance possible regional approaches. The paper will also consider the scope for unilateral action and the possibility of early legislation in order to seek enabling powers to allow charging.
I hope that that response covers the bulk of the questions which were put to me by noble Lords opposite. If I have missed any I shall certainly write to noble Lords.

Crown Agents Bill [H.L.]
4.18 p.m.
Second Reading debate resumed.
Baroness Elles: My Lords, I thank my noble friend the Minister for having introduced so ably the Second Reading of the Bill. It is technical and complex, but I believe my noble friend was able to set out the main provisions for the legal, financial and commercial future of the Crown Agents.
I thought the spirited visual imagery of the noble Lord, Lord Judd, and his description of the Bill as a fig leaf somewhat exaggerated. It is no fig leaf; it is a very important Bill which sets out the future of a very important part of our activities in this country. It was also extraordinary to hear what I might call the "Pavlovian" link in the reactions of the noble Lords, Lord Judd and Lord Redesdale, for whom the mere word "privatisation" brought together in their minds the Post Office and the Crown Agents. I can only assume that my noble friend's reference to the philately service of the Crown Agents induced that thought in their minds because clearly there is no other link. I wonder whether the Benches opposite sometimes forget British Airways, British Telecom and a whole raft of successful privatisations since 1979 which have been working so successfully for the benefit of the people of this country.
I return to the Bill. The Crown Agents have a very large list of clients which my noble friend listed, including leading European and international organisations. With the effects of the Bill that will be extended to include the private sector. As the ODA's contribution to the work of the Crown Agents now stands at about 27 per cent., which I believe was referred to by the noble Lord, Lord Redesdale, there will be greater opportunities for increasing their commercial opportunities. The list of countries is already impressive. It ranges throughout the world—from Albania to Zimbabwe. The Crown Agents undertake a wide range of services throughout the world. It is truly impressive.
I believe that it will be accepted on all sides that the 1979 Act is out of date and needs to be changed. The noble Lord, Lord Judd, accepted that it is no longer relevant although he did not accept the need for a new Bill. Nevertheless, the noble Lord must accept that the present situation is intolerable for a company such as the Crown Agents which has to act throughout the world. Information given by the Crown Agents shows that the Crown Agents Act 1979 is littered with references to restrictions on their activities and to the fact that they have to get consent from Ministers for some activities.

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I understand that something like 102 consents have been required for the Crown Agents to be able to carry out certain financial obligations.
We must accept that this is an era of rapid change in world trading patterns. One need think only of the finalising of the Uruguay Round and the establishment of the World Trading Organisation to realise that there has been an extraordinary change in world trading patterns in recent years. Surely it is the duty of the Government to see that the Crown Agents are in a position to benefit from those changes and to improve their commercial activities.
As has been said, this is an enabling Bill, transferring the Crown Agents to a company. As my noble friend explained, not only are the Crown Agents to be transferred to a company, but, as I understand it, we shall get further details during the passage of the Bill of the later transfer of the company to a foundation. I understand from what my noble friend said that it is a guarantee by the Government that there will be a foundation. As far as I am concerned, it is irrelevant whether or not that is written into the Bill because I take my noble friend's words as coming from the Government and as an undertaking from the Government that that will happen. Frankly, I believe that the suspicions expressed from the Opposition Front Benches are unjustified. I know that the noble Lord, Lord Judd, has the greatest respect for my noble friend Lady Chalker. I think that we can rest assured that, whatever else happens, there will be a foundation. As I understand it, the foundation will act as a guarantee to the Crown Agents' clients that their objectives remain tied to a—I quote from the objectives stated by the Crown Agents themselves—
"social purpose and developmental character".
I also understand that there is a possibility, but no more, of the foundation acquiring charitable status. It may be thought convenient—indeed, in my view it would be more convenient—if the foundation were able to become the equivalent of an association of a type that is found on the continent. I was advised that I should not say that because anything European is probably suspect nowadays. I refer nevertheless to an association such as exists in Belgium where the profits go back into the foundation and are used in accordance with its constitution. That might be a suitable framework for the foundation rather than restricting it under the Charities Act and obliging it to work under the provisions which govern charitable status.
There will no doubt be an opportunity to discuss some of those points in further detail during the later stages of the Bill. But at least we can see possibilities opening up for the Crown Agents which should lead to greater activity in the private sector and an ability to meet the changing needs especially of developing countries which demand and need a service which is both reliable and committed to the highest standards. Surely those who are in favour of helping developing countries, who have seen the very high standards of integrity to which
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the Crown Agents work, could wish for no better future than that proposed under the Bill. I am pleased to tell my noble friend that I support the Bill with great pleasure.
4.23 p.m.
The Viscount of Oxfuird: My Lords, I too would like to thank my noble friend Lady Chalker for the manner in which she presented the Bill's Second Reading to the House.
This Second Reading debate enables me to contribute to a subject involving an institution with which I can record some 30 years of association—an association that can fairly be described as from the grass roots level. Almost all of my professional life has been concerned with the marketing of British-manufactured engineering products abroad. This has brought me into close contact with the Crown Agents' multifaceted activities in almost every corner of the globe. I have perceived, and have often been assisted by, a highly professional organisation, but one that has always kept its feet very firmly on the ground.
I am aware that there are a number of noble Lords more versed than I am in matters of the law who are speaking this afternoon, so I intend to say nothing at all about the legal framework that supports this enabling Bill. I should like to concentrate entirely on the practical consequences of what is proposed.
It is extremely important to realise that over the years the Crown Agents have built up a wealth of experience and have developed a strong rapport with a wide portfolio of clients. They have earned the confidence of officials, Ministers and governments—most importantly, governments—all over the world and it is vital that we do not just take that for granted.
Supplying goods overseas, particularly capital goods, is not a short-term experience. The initial supply is only the start of a long-term relationship. After the initial sale comes aftersales support: operator training, spare parts supply, maintenance training, expert back-up and technology updates. In fact, over a period of time this ongoing connection often becomes a long-term and enduring relationship.
Many years ago I was involved in a major container handling project in India. This project was the ab initio venture by the Indian authorities into setting up a full containerisation facility within their ports, and a World Bank loan was in place to support the tender. The validity of the tender was 180 days—six months—with the usual performance and bid bond demands. Based on the specification, the supply should have been completed within 18 months, but due to the lack of experience of the new technology within the purchaser's organisation, the eventual supply was not completed for nearly six years.
If Crown Agents had been involved, their experience would have ensured that the original deadlines would have been met and the containerisation systems would have been operational four-and-a-half years earlier, with consequent massive cost savings. It is in that aftersales area—in the area of providing long-term logistical back-up and support for their clients—that the Crown Agents are so strong.

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I see it as very much the intention of this Bill to preserve all that is best of the long-term relationships that the Crown Agents have spent years in establishing—which might be described as the Crown Agent's public service ethos, while promoting the freedom to respond to the rapidly changing needs of their overseas clients.
The roots of the Crown Agents stretch back to our Imperial past—a past with which I, for one, have no problems. In the recent past, however, much has quite rightly changed and the enterprise has adapted to becoming a trading entity with a much broader brief, operating in many trading areas, including Europe, the United States, Japan, Africa, South Africa and South-East Asia.
There is nothing wrong with that, I would submit, for two very sound reasons. The first is the concept of trading. Some long-dead Corsican once called us a nation of shopkeepers. I prefer to think of us as a nation of traders—of international or global traders.
In 1901, the Duke of York, who was later to become King George V, said on 5th December in a speech at the Guildhall:
"I venture to allude to the impression which seemed generally to prevail among our brethren across the seas, that the Old Country must wake up if she intends to maintain her old position of pre-eminence in her Colonial trade against foreign competitors".
Those words were spoken in 1901, less than 11 months after the death of the Queen Empress Victoria. They lead me perfectly into my second point, which is the overriding need to adapt—to change—to new situations. That is the whole point of this Bill.
The Crown Agents have many skills built up over more than a century of trading experience. But to utilise those skills to the full benefit of our nation, it is necessary to adapt them into a restructured and reconstituted organisation—an organisation with more commercial freedom but with all of the essential professional qualities which have sustained it over the years.
In a recent interview with the Daily Telegraph, the Foreign Secretary described the purpose of this Bill as "privatisation to preserve". I would go even further and describe it as privatisation to preserve and enhance.
I have tried to outline briefly why I support the Bill. Perhaps I may spend just a little time explaining why I feel that it has taken account of our experiences with the earlier 1979 Act and learned from them.
Almost inevitably, with hindsight, based upon my commercial experience, there are operational details of the 1979 Act which cause me concern. I am worried that the 1979 Act places too great a restriction on the Crown Agents in providing agency services to the private sector. Ironically, it seems that under the 1979 Act, if an aid programme for which the Crown Agents are procurement agents is available to a private sector end user, they can act for him. If, however, he then builds his business, is satisfied with the services of the Crown Agents and would like to continue employing them as agents using his own money, the Crown Agents must turn down the business unless they have gone through the rather cumbersome process of seeking specific ministerial consent via a statutory instrument of 1990.
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That is just one example. The 1979 Act seems to me to be overburdened with references to obtaining ministerial consent which are not in the spirit of the greater commercial freedom which this Bill seeks to achieve.
Crown Agents operate with a social and developmental purpose but within a commercial framework and an entirely independent commercial board. They receive no subsidy or grant from Her Majesty's Government, who as a client account for less than 30 per cent. of their business. I know that my noble friend the Minister has borne those points in mind when introducing the Bill.
The Minister has explained that foundation members will wish to consider whether they should seek charitable status, or that of a friendly or provident society, or other suitable structure for companies limited by guarantee. That gives a clear signal to Crown Agents' clients and their many friends and supporters about the way the foundation sees their future development. What is most important is that among those clients, supporters and friends are overseas governments. Those governments need comfort and this is the route for their comfort.
As a policy, transferring organisations out of the public sector has proved to be one of the great triumphs of the present Government, and the UK model is now being copied all over the world, even by some seemingly socialist administrations. One lesson that we have learnt is the importance of not saddling the fledgling successor body with an inherited burden of debt imposed by an over-zealous Treasury.
I hope that my noble friend the Minister will bear this point in mind and fight to ensure that the reconstituted Crown Agents, reborn as a result of this Bill, are not born into a state of penury. Overall, this is a very good Bill. I shall be supporting it and I urge your Lordships to do so as well.
4.35 p.m.
Lord Ennals: My Lords, on one issue there has been absolute unanimity from the moment at which the Minister introduced the Bill to the completion of the speech by the noble Viscount, Lord Oxfuird, and in particular, in the speech by the noble Baroness, Lady Elles; namely, we all pay tribute to the work of the Crown Agents. There is a feeling across the House that over the years they have done a magnificent job. I have never been a trader but I had some experience of the Crown Agents when I was a Minister. The question I wish to ask first is why there is an urgency to change what is already good.
As my noble friend Lord Judd said, amendments can be made so that the commercialisation of the Crown Agents can be expanded, but I see no reason to change what is already very good. One of my criticisms of this Government is that when something is going well they always seem to step in and reorganise it. There are examples of that in all sorts of fields—the National Health Service, education and local government finance. They are a meddling government. I do not believe that we need to meddle too much with the role which the Crown Agents have so ably fulfilled. It is in no way

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obvious to me that the services will necessarily be improved by reorganisation, which is the Government's answer to every situation.
Of course I recognise that there is an element of privatisation dogma here. The noble Lord, Lord Redesdale, put his finger on that in his speech. The timing of the announcement was extremely important. It is my impression —I do not claim to be an expert—that over the years the Crown Agents have performed a very valuable service not just for Britain but also for Britain in its relationship with the rest of the world. As the noble Baroness said in her introduction, in 1993 the Crown Agents managed disbursement arrangements for 150 British bilateral aid agreements worldwide with a total value of £1.8 billion. Other major aid donors for whom Crown Agents do international procurement work include the Japanese Government and the European Community, although some people may not like the idea of the provision of that service to the European Community. The Crown Agents have done work for the World Bank and the UN. I agree with those noble Lords who have said that the Japanese business is particularly important, with Crown Agents managing a purchasing programmes for 13 African countries and the Philippines with a total value to date of 720 million dollars.
In some cases the Crown Agents' role is advisory; in others, they provide legal services, logistical services and specification reports. They undertake direct procurement, including specification, tendering, contract purchase, packing, shipping and insurance payments, and institutional development is of growing importance. I am particularly interested in the work which is being done in the former Soviet republic where the Crown Agents provide advice and technical assistance for procurement under a series of contracts and projects funded mainly by the World Bank. They also provide training in public sector finance, banking and privatisation. In Commonwealth countries in Africa, Crown Agents have been involved in public sector procurement reviews for governments obliged to re-examine their priorities as a result of structural adjustment programmes.
Crown Agents are also involved in the delivery of humanitarian assistance. I believe that the breadth of their service is part of what they have to offer our society. Indeed, it is a very impressive story worldwide. Of course, it is not perfect, and I am not saying that just because the Crown Agents were reorganised, as has been said, in April 1979 by the Labour Government. Those arrangements are certainly by no means sacrosanct. However, I believe that they have stood the pressure of time remarkably well. My only connection in that respect is that I was a member of the Cabinet committee which was responsible for making those changes.
Can the Minister tell us whether she and other Ministers feel that the performance of the Crown Agents is so inadequate as to cry out for change? I know that the noble Baroness will not do so; indeed, she has paid them her own tribute. But, at the same time, and having
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paid her tribute, the Minister has brought before us a project which leaves many questions unanswered. It is an enabling provision instead of a substantial provision.
Nevertheless, the Minister told us in December 1992 that the future of the Crown Agents was to be reviewed by Coopers & Lybrand. Has that report been published? If so, I have not seen it. Moreover, if it is available, perhaps the Minister can confirm that there is a copy in the Library or, alternatively, perhaps she will arrange to make copies available. If the report has not been made available, I should like to know why. How much did it cost to prepare and how much did taxpayers pay for that particular piece of advice?
Further, have the Government followed the conclusions of Coopers & Lybrand? Will the Minister confirm that the chosen option was as follows:
"The Board of the Crown Agents, after consulting with its advisers"—
and so on, including consulting the noble Baroness, Lady Chalker of Wallasey, recommended that all interests,
"would be well served if the organisation were to remain as part of the UK public sector, but with greater freedom of operation than its 1979 Act of Parliament permits"?
I believe that that statement sets out exactly what my plea is as to how we should tackle the situation. It does not require a Bill like this to achieve that.
In August 1993 the Minister announced:
"Membership of the Foundation would reflect the international character of Crown Agents' activities and its social purpose and would include representatives from the corporate sector. Crown Agents will maintain their traditional standards of probity and impartiality and will continue their business activities on a fully commercial basis, servicing their capital in the normal way and generating surpluses which will be available to the Foundation to finance its developmental objectives".
If the purpose is to create a foundation, why are not the terms of such a foundation set out in the Bill? Indeed, the foundation does not seem to be referred to at all in the legislation. I hope that the Minister will explain why there has been such a change. What has happened since that time? Is it that the noble Baroness and her ministerial colleagues were not satisfied with the Coopers & Lybrand study? In fact, as is known, the ODA—indeed, the Minister herself—appointed Peat Marwick Corporate Finance to advise on privatisation. It is not clear that work on the form of privatisation had been completed before the Bill was printed. As I said, what has emerged contains no reference to the key parts of the proposals announced as the preferred option by the noble Baroness.
There is no reference to social purpose, developmental objectives, non-distribution of funds, independence from commercial corporations, or even to the establishment of a foundation. The Bill is only enabling legislation which provides for a company nominated by the Secretary of State to take over the property, rights and liabilities of the Crown Agents in the United Kingdom; in other words, it will create another quango.
I should have thought that the lesson had now been learnt, even by this Government, that the proliferation of quangos with powers given to Secretaries of State to appoint chairmen to such bodies must be questioned. Of

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course, we know that the Nolan Committee is now doing so. I have to say—with a twinkle in my eye—that my fear is that the noble Baroness is preparing for her next job and we shall find that she will be appointed as chairman. I hope that she will not be. I want to keep the noble Baroness in this Chamber just as long as she sits on that side of the House. Of course, I should be happy for her to sit on this side, but that is another matter.
I believe that the Bill is unnecessary. However, it is before us and I guess that some legislation will go through. Our job on this side of the House is to try to make it a little more constructive and clearer so that there will be fewer doubts as to whether the reorganisation will produce some of the same unfortunate results of other reorganisations undertaken by the Government of services which have been meeting the needs of the nation well.
4.47 p.m.
Baroness Hooper: My Lords, we are certainly all agreed that the Crown Agents do a good job in an exemplary way and that they are well thought of in world circles. Much has been said about the detail of their work, not least by the noble Lord, Lord Ennals. Anyone in doubt should look at last year's annual report and accounts, which makes very satisfactory reading. In my own experience, I have certainly come across Crown Agents at their work in Central and Eastern Europe and a more highly motivated and effective bunch of people I have yet to find.
I believe that we are also all agreed that, however good an organisation may be at any one time, its activities and manner of acting should be subject to review and should, if necessary, change to meet changing times and needs. In that context, we have been made aware—and my noble friend the Minister gave us illustrations—that the Crown Agents themselves are eager to continue to develop their past success story and that they expect more freedom and independence from government constraints in order to do so. So change has to be expected. Indeed, even the noble Lord, Lord Judd, acknowledged that fact.
In those circumstances, and when considering a changed structure, there are several key words which spring to mind; indeed, we have had much experience of decentralisation in a number of areas during my time in your Lordships' House. The first key word that springs to my mind is consultation —consultation about the arrangements and about the way in which changes will be brought about. In that context, I believe that we can refer back to the announcement made by my noble friend the Minister in August 1993, which gave plenty of time to interested parties to make their concerns and wishes known and which also allowed plenty of time to work through proposals for the present Bill.
Another key word is flexibility. There should be flexibility as regards the way that the change should be brought about. The Bill certainly allows for that—clearly, too greatly, in some people's opinions. The third key word in the area is transparency. I refer to transparency both about the way in which changes are brought about and, indeed, about the appointments that may be made as a consequence. I think that it was
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unnecessary for the noble Lord, Lord Ennals, to imply and insinuate that my noble friend was motivated by self-interest in this respect.
The fourth word that springs to mind is accountability. I should be grateful to hear from my noble friend, when she winds up, what is to be provided in this respect, as we have a proposal for an organisation which will be subject neither to the customary accountability of a public body nor to the accountability of shareholders in the strictly commercial sense. This is an important area.
The fifth word that springs to mind is regulation. Again the Crown Agents have been quite properly subject to strict and effective government controls in the past. I think it is essential that this should be the case in the future also, while bearing in mind that such regulation should if possible be less cumbersome than that of a public corporation.
Complaint has been made during the course of this debate that the Bill does not contain sufficiently detailed provisions and indeed that it is privatisation by the back door. But it seems to me that in the circumstances it is desirable that there should be the greatest flexibility to allow for what will be a unique foundation to be created to carry on the valued work of the Crown Agents.
There is certainly, so far as I can see, no question of a disposal of government assets as the noble Lord, Lord Judd, suggested. Indeed, I shall be very surprised if we do not hear in due course complaints that the Government are not going far enough in what is proposed, and that what should be created is a commercial company which would operate on equal terms with other competitors in the field. However, I understand that this would not be welcome to existing clients, particularly perhaps the Japanese. Therefore the proposals before us, as explained by my noble friend the Minister, seem to me an excellent way forward which will give the Crown Agents greater freedom to develop their business while maintaining their essential characteristics and qualities. As my noble friend said, they will provide a strong and stable structure to enable the Crown Agents to move into the 21st century. I certainly support this Bill.
4.53 p.m.
The Earl of Shrewsbury: My Lords, like many of your Lordships I welcome this Bill this afternoon. Through my work in industry, I have been interested for quite a long while in the work that the Crown Agents do, and I am delighted to support their cause today. As we have heard on many occasions this afternoon—I make no apology for repetition—the Crown Agents have an admirable history. Almost wherever there has been strife in the world, Crown Agents have been involved, making things happen, bringing relief to so many, procuring the goods which are so necessary, giving advice to many foreign governments and acting as the catalyst for many aid programmes. Crown Agents are at the forefront of all these matters and they are indeed the world leaders in their field.
Many other countries have tried to emulate the role taken on by Crown Agents, but, in basic terms—I am extremely proud to say it—we in Britain do the job best.

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It seems to me to be abundantly clear from this afternoon's debate that your Lordships in general fully support the Crown Agents' excellent work. This Bill, which is basically to enable the privatisation of Crown Agents, is just what has been needed and the time is right for the Government to take such action.
Crown Agents need the extra freedoms provided by privatisation to be able to compete in the global marketplace and to compete effectively. Crown Agents procure many goods from British companies only if the price is right and the circumstances are correct and competitive. They deliver a pretty large amount to the UK Exchequer. Indeed I understand that, since 1979, they have paid in interest and capital to the Treasury somewhere in the region of £20 million. The benefits the Crown Agents produce are excellent.
Crown Agents, through their outstanding reputation of integrity, also act as fine ambassadors for this country and its Government. Crown Agents' clients are attracted to them because of the quality of their service, their reliability and their ethical standards. They are of course also attracted by Crown Agents' worldwide coverage and the ability to purchase goods in markets anywhere. Top of the list has to be the transparency and the integrity—that is a phrase which keeps on being repeated—of their operations. Therefore I warmly welcome this Bill. It will give Crown Agents the freedom to build on their past successes, their excellent reputation of integrity, impartiality and probity and their past achievements, which are many.
But perhaps I should add just a word of caution. In order to be effective and efficient world players, I believe that Crown Agents must not under any circumstances be burdened by government with debt, and must have adequate capital resources. I think the figure that has to be repaid to the Government is some £2 million. I believe it would be much better if it were written off by the Government on the basis of goodwill for the Crown Agents in the future. I wonder whether, when she winds up, my noble friend the Minister will be able to give some sort of indication, or perhaps even an assurance to your Lordships, that this will indeed be the case. I warmly welcome this Bill.
4.56 p.m.
Lord Rea: My Lords, as my noble friend Lord Ennals and other noble Lords have said, hardly a single speaker, including those who are critical of this Bill, has had anything but praise and appreciation for the work of the Crown Agents. But it is precisely because it is a valuable national and international asset that we on these Benches are not entirely happy with this Bill. For a relatively small organisation they have a really impressive record. They have an involvement in projects covering 130 countries, as mentioned by the noble Baroness.
The Crown Agents could be described as a typically British institution in the best sense, in that they have quietly and effectively got on with the job without particularly trumpeting their successes. As all noble Lords have said, they have gained international respect and obtained contracts from many national and
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international organisations—for example, the World Bank and the European Union—as has been mentioned, diversifying as the volume of work for ODA has decreased during recent years.
The noble Viscount, Lord Oxfuird, gave us some practical examples of the sort of things that Crown Agents are particularly good at doing and one case where they should have been used but were not and where they would have been extremely useful. The Crown Agents wish to continue to expand and diversify their activities. If this Bill allows that to happen we on these Benches would be entirely happy. But I have to say that, speaking personally, I am old-fashioned enough still to believe that small is beautiful. In this case perhaps one should not so much say small but, rather, medium-sized about an organisation that managed to disburse £1.8 billion for ODA last year.
I hope that the Crown Agents in their new clothes will still be able to supply the cost-effective, individually-tailored and ethically sound services for which they are so well known and respected. My noble friend Lord Judd has pointed out our view, and that of the chairman of the Crown Agents, that this expanded role could have been achieved in the public sector by relaxing certain Treasury and other rules—for example, not having to get permission from the Government for various transactions with the private sector. But that was not to be and we have this Bill in front of us which we hope to improve somewhat in Committee.
Clause 1(1) of the Bill is of course the operative part, allowing the vesting of Crown Agents by order of the Secretary of State in a successor company,
"nominated … by the Secretary of State".
Subsection (4) of that clause states:
"An order … under subsection (1) … may be varied or revoked by a subsequent order at any time before any property, rights or liabilities of the Crown Agents vest in a company by virtue of this section".
In my view that gives the Secretary of State virtual carte blanche to do what he or she wishes with Crown Agents, as my noble friend and the noble Lord, Lord Redesdale, pointed out. For instance, they could be floated on the Stock Exchange, sold directly to a multinational organisation or closed down.
We very much hope that the Government will bring forward by the Committee stage a form of words for the memorandum and articles of association of the final successor company, preferably the independent charitable (or otherwise) foundation which was mentioned so frequently by the noble Baroness.
If for technical or legal reasons that is not possible—and I still do not understand why it should not be possible—then a requirement could be inserted into the Bill that the nature of the final successor company must first be approved by an affirmative resolution of both Houses of Parliament. As it stands, there is no safeguard in the Bill to stop the Secretary of State from selling off Crown Agents to the highest bidder or closing them down.
Finally, I ask the noble Baroness to consider inserting into the Bill a more specific provision than merely a promise to protect the pension fund built up for the staff of Crown Agents over the years. I gather that the

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pension fund has been so well managed—as was mentioned by the noble Baroness—that over the past few years the Crown Agents and their staff have enjoyed a pensions holiday and have not had to make the normal contributions. Such a prosperous fund would be an attractive morsel for predators. As the final successor company is not known, the Bill should include safeguards to protect the pension fund. As the noble Baroness pointed out, that would be in line with the provisions of the Pensions Bill, which increases the role of staff representatives as trustees of pension funds. The reasons behind that are familiar to all of us.
Those are just two of the areas in which we feel the Bill could be improved. It would speed up the Committee stage greatly if the noble Baroness herself were to bring forward amendments along the lines I have suggested.
We on these Benches wish the Crown Agents every success and will do our best to see that they continue to provide the first class services which are so valuable to the developing world. The changes to the Bill that I have suggested are offered in that spirit.
5.3 p.m.
Baroness Chalker of Wallasey: My Lords, this has been a striking Second Reading debate. It is rarely that we hear such all round support for an organisation. I am proud that that body is the Crown Agents. As my noble friend Lord Shrewsbury said, they have had great past successes and achievements. As my noble friend Lady Elles said, we want to build on those past achievements.
I listened to your Lordships' comments with the keenest interest. A few were not totally supportive of the Government's actions. It is clear that the whole House shares a common concern to give Crown Agents the best possible future. I shall give careful thought to all the suggestions that have been made. However, noble Lords will understand if I do not respond immediately to the many and varied ideas that have been put forward. I wish, however, to say a few words in response to specific questions that have been posed.
Ever since 1984 the Government have considered that the Crown Agents' business could be carried out in the private sector. We want to strengthen the Crown Agents' ability to meet the demands and needs of their customers. We also believe it right to end the requirement for the Government to be involved in the details of the business. As my noble friend Lord Oxfuird said, we need to reflect the circumstances of today. The Act to which the noble Lord, Lord Judd, and the noble Lord, Lord Rea, are so attached is too prescriptive and limiting for the 1990s and the future.
Crown Agents cannot carry out own right activities beyond those set out in the Act. We know why that provision was included in the 1979 Act. During the 1970s it was the own right activities which caused a problem. But there must be ways of making sure that the activities that my noble friend Lord Oxfuird mentioned can be carried out without the prescriptive intervention of government on each occasion.
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The other prescriptive and limiting aspect of the current Act is that it requires me to consent to what are properly business decisions for Crown Agents. I do not believe that it is right for any Minister to be so involved in the business of Crown Agents, which is essentially one of providing procurement for as many clients as possible in the most cost effective way.
We heard a number of comments from the noble Lords, Lord Judd, Lord Rea, Lord Redesdale, and others about parliamentary approval for the transfer. I recognise the interest in the subject. I have sought to spell out some of the ideas, and I shall provide as much information as possible about our plans as the Bill progresses. But I shall also ensure that full information is provided to Parliament before the transfer is carried out. I am obviously willing to look at what is necessary and how best that should be done.
It is quite usual for legislation on such transfers to be enabling. It is not appropriate to be tied down to the crossing of the last "t" and the dotting of the last "i". I suggest that there is nothing unusual or unprecedented in this Bill. However, the situation is unusual in that we believe that it is right to create a foundation with the specific social and developmental objectives that I outlined in introducing the Bill.
A number of noble Lords on the Benches opposite, particularly the noble Lord, Lord Ennals, asked why we did not retain Crown Agents in the public sector with greater freedom. That is the wrong question to ask. The right question is surely: why should Crown Agents continue to be owned by government? They have always been the agents of what are now independent governments and, increasingly, aid agencies. In my discussions with other governments it has been clear that that is how it should be. Governments of all parties have also been careful not to interfere with the work that Crown Agents do for other independent governments.
There is a real opportunity here for Crown Agents. We should like to be able to stand back from detailed control. We would not be able to do that if we continued to bear the ultimate financial responsibility. Government ownership requires the Government to take an interest. I fear that in terms of the development of Crown Agents' business that has meant not merely that we take an interest—which we willingly do—but, because they have to come to the Minister for consent, that Ministers interfere. That is why I am certain that, although we shall always take a keen interest as a customer of Crown Agents, we do not need to own Crown Agents.
There was some debate about the view of the Crown Agents board. I know that it is clearly printed for all to see in their last annual report that Crown Agents would be happy to remain in the public sector. But we have had a long discussion and their remaining happy to be in the public sector would only be achieved if they had far greater freedom of operation than is possible under the 1979 Act. I can assure your Lordships that in making plans for the foundation we have consulted closely with Crown Agents and shall continue to do so because the foundation will give the Crown Agents the freedom they require to meet the changing needs of their clients.

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The noble Lord, Lord Judd, hinted that government might be considering a trade sale. We have concluded that a trade sale is not appropriate. Crown Agents make a particular contribution to development. That is what we and other international clients of Crown Agents feel is important to maintain; and that is why we have ruled out a trade sale. I can say without fear of contradiction that I believe that the foundation route is the right route, and it is the route down which we shall go.
The noble Lord, Lord Ennals, wanted to know about the Coopers and Lybrand report. In fact, there were two reports. As advice to Ministers they were not published. They will not be published. However, the decision that I took following the report was published in my letter of 13th August 1993 to the chairman of the Foreign Affairs Committee. The Bill enables the Government to implement the decision taken on the basis of those reports.
The noble Lord, Lord Redesdale, and my noble friend Lord Shrewsbury mentioned the debt and the financial structure of the successor company. It is true that the Bill provides for the repayment of the debt of £2 million to the National Loans Fund. The National Loans Fund debt is not being repaid at a low interest rate because it is fixed at 10.875 per cent. But the Bill allows the Secretary of State to determine an appropriate capital structure for the successor company. The Bill contains enabling provisions for deemed debt and for the purchase of securities as appropriate. Our aim is to strike the right balance to ensure the viability of new Crown Agents while obtaining good value for money for the taxpayer, as I said in my opening remarks. I assure my noble friend that we shall take full account of the views of Crown Agents on future viability. We shall look with the greatest of care at their future capital structure. I have noted my noble friend's comments. I certainly cannot promise to write off another £2 million. I note that in 1988 we made a grant of £16 million to redeem most of the outstanding debt plus the premium due to the NLF for early repayment. I rather doubt whether I can do something more now that this is to be transferred. However, I shall examine in detail what my noble friend said.
My noble friend Lady Hooper and a number of your Lordships were interested in the foundation, so allow me to expand on what I said at the beginning. The proposed foundation will be a company limited by guarantee in the private sector. Its memorandum and articles of association commit the company to a clear social and developmental purpose. The foundation may wish to seek registration as a charity, and, as I said earlier, other possibilities will be open to them. We are examining those at present. But the main thing is that the future structure of the foundation must be fully satisfactory before the transfer of the business. That is a matter on which we are working together with Crown Agents.
The foundation will be the sole shareholder of the limited company which will carry on the business of Crown Agents on a commercial basis but maintain those famous traditional standards of transparency and integrity for which Crown Agents are so well known worldwide. Any trading surpluses of the business would
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go to the foundation. Its constitution would ensure that they could not be distributed to foundation members but would be used to support the objectives of the foundation.
The idea is for a two-tier structure which would ensure a clear division of responsibilities and rights. The operating company runs the business. The top company ensures stable ownership committed to maintaining those standards, and it uses the profits in accordance with the objectives.
There will be concerns—we can go into them in detail during the Committee stage of the Bill—about accountability. Perhaps I may say this. With the memorandum and articles of association which are intended for the foundation and without which the foundation would not have the business transferred to it, I do not see any way in which the anxieties expressed by some noble Lords have any basis.
Certainly the Government would intend to be a member of the foundation with power, for a limited time, to ensure that no substantial changes could be made in the objectives of the foundation without prior government agreement. The operating principles of the foundation would mean that the developmental role stipulated by the memorandum and articles would continue. This power would simply be retained by government for a limited period because it would ensure that those objectives were firmly established.
My noble friend Lord Oxfuird raised the question, as did a number of noble Lords, including my noble friend Lady Elles, of charitable status. I am very open minded about the matter. I know that the foundation may wish to seek registration as a charity or, as my noble friend Lady Hooper said, perhaps as a provident institution. Other possibilities may also be open. My only concern in deciding the issue will be to find a future structure which is fully satisfactory in line with the objectives which all have endorsed during the debate.
I was saddened by the comments of the noble Lord, Lord Ennals, when he spoke about the membership of the foundation. About half way through my opening speech I made it clear that members of the foundation will not be appointed by Ministers. When the noble Lord talks about quangos, it shows that he did not hear what I said. I shall take his later remarks about my future as a joke. I hope that that is how he meant them. I hope that any other implication he might have sought to make was not there.
Lord Ennals: My Lords, I am most grateful to the noble Baroness for allowing me to intervene. I hope that Hansard will show, because I said it, that it was with a twinkle in my eye that I said that I think the noble Baroness knows my admiration for her. I followed it with an assurance that my fear was that we might lose her from her present post.
Baroness Chalker of Wallasey: My Lords, I am very happy to continue in my present post. But, as some people say, you cannot go on and on. So we shall have to see what the future holds. I am a mortal being.
The important matter is that the foundation, as Crown Agents will become, should reflect the international character of the Crown Agents' activities and their

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social purpose and provide an enduring basis on which Crown Agents can expand their business. When one has something as good as Crown Agents, as noble Lords have said in the debate, it deserves to be applied to more countries and to more clients. That is why I have made clear that the foundation membership will consist of organisations active in international development to endorse the Crown Agents' purpose and principles. I mentioned the charities, private sector companies, professional trade organisations, other aid organisations and enduring institutions. That will bring together business ability with wide experience of aid and development which will benefit the Crown Agents of the future. But it is obviously too soon to announce names. Before vesting Crown Agents in the foundation, Ministers will wish to be satisfied that the initial members are appropriate. I sincerely hope that the initial members will have the benefit of the experience of many members of the existing Crown Agents board who have done so much to put this public sector company where it is at present—well and truly on the international map as one of the outstanding providers of goods.
Many comments made in the debate cannot be given a specific answer today, but there is one subject I must mention. Pensions were raised by the noble Lords, Lord Judd and Lord Redesdale.
Lord Redesdale: My Lords, I thank the Minister for giving way. She pointed out that Ministers would not appoint the board members. Can she indicate who will appoint the board members?
Baroness Chalker of Wallasey: My Lords, on the transfer to the foundation the board's membership will be decided by those who take shares in the foundation. It is a technical matter which I shall go into in greater detail in Committee. It is too early to give details now. I am determined that all the bodies I mentioned earlier and just now should be properly represented in the foundation, as well as the Crown Agents themselves, in order to carry on the business.
I was about to turn to pensions which the noble Lord, Lord Redesdale, said were not included in the Bill. He will notice that Schedule 1 to the Bill provides for employment rights to transfer unchanged—an important point—and for the continuity of rights in the pension scheme. I sought to explain at the start of the debate what that would mean in practice for the staff. That is also a matter for detailed exchanges in Committee. Above all, however, it is a matter of the continuity of treatment of employment for pensions purposes and the safeguarding of the value of pensions for Crown Agents' staff. I am certain that that can be achieved without difficulty.
I believe that the noble Lord, Lord Judd, mentioned redundancies; if not, I misunderstood him. I mentioned, but let me repeat, that there are no plans for redundancies as a result of the change of status. The Crown Agents have undergone successful major restructuring in recent years and have cut their costs. They have a workforce suitable for their business. The programme is essential for the viability of their business and for the future foundation. They have a good plan to
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implement that; they run a tight business and have never received a subsidy. They know full well that their current and future prosperity depends on satisfying the markets they serve. It is that ability to satisfy their clients at an acceptable margin that has put them so far ahead of all other procurement companies. Through the foundation's status they will be enabled to take advantage of the new opportunities and of the wider breadth of clients in the private sector.
We have had a short but important debate. I am glad that so much that is positive has been said about the Crown Agents. The Bill allows us to put in place a sound and sensible new structure for Crown Agents. It will be appropriate for the continuation of their traditional activities in which they have been engaged for 162 years and which they are keen to develop on behalf of their international clients in the future. I look forward to a constructive discussion on the provisions of the Bill in Committee. I am confident that we will give Crown Agents the new freedoms they require while retaining the high standards for which they are so widely respected. I commend the Bill to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

European Convergence Criteria: Deficit Assessment
5.23 p.m.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Henley)The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Henley) rose to move, That this House approves, for the purposes of Section 5 of the European Communities (Amendment) Act 1993, Her Majesty's Government's assessment as set out in Chapters 4, 5 and 6 of the Financial Statement and Budget Report 1995–96, as updated.
The noble Lord said: My Lords, this is the second annual debate under Section 5 of the European Communities (Amendment) Act 1993. Section 5 is about the provision of information to the Commission on economic matters. It asks the Government to report to Parliament, for its approval, an assessment of the medium-term economic and budgetary position. It also states that this report shall form the basis of any submission to the Council and Commission in pursuit of their responsibilities under Articles 103 and 104C of the Maastricht Treaty. The Financial Statement and Budget Report 1995–96 provides this report.
In order that there should be no confusion, perhaps I might further clarify the wording of the Motion before us today and in particular the meaning of the phrase "as updated". As the House will no doubt recall, following the decision to leave the rate of VAT on domestic fuel and power at 8 per cent., my right honourable friend the Chancellor of the Exchequer introduced a number of further fiscal measures on 8th December last year in order to ensure that government borrowing would continue to decline along the path set out in the November Budget. On 1st February, I announced to the House in a Written Answer that the Government had published a complete set of tables from the FSBR, revised to take account of the effect of these additional

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measures. These revised tables are also to be regarded as part of the report comprising Chapters 4,5 and 6 of the Red Book.
As the House will be aware, Articles 103 and 104C of the Treaty on European Union require the Government to supply information on the United Kingdom's economic and budgetary position in order to facilitate the various multilateral surveillance discussions that take place during the year. In order to comply with the requirements of Article 103(3) of the treaty, which requires member states to,
"forward information to the Commission about important measures taken by them in the field of their economic policy",
the Government will send to the Commission a copy of the FSBR together with the revised tables published on 1st February. Since the introduction of the unified Budget in November 1993 the FSBR now contains a full statement of changes to the Government's tax and spending plans as well as a description of the Government's general approach to the fiscal and monetary policy. As such, it is a document that clearly fulfils the requirements of Article 103(3).
In addition, the Government will also make a return which sets out published data on debt and deficit levels together with projections for 1994–95 and 1995–96 taken from Chapter 4 of the FSBR. That is in order to comply with the obligation that,
"Member States shall report their planned and actual deficits and the levels of their debt promptly and regularly to the Commission",
under the excessive deficit procedure which is set out in Article 104C of the treaty and Council Regulation 3605/93.
The House will therefore recognise that in fulfilling its obligations under the treaty, the Government are not supplying the Commission with unpublished or privileged information. The Government are simply continuing to co-operate in the long-established practice of a free exchange of information and ideas between ourselves and our partners in the Community. The reason that we are here today is not because of the controversial nature of the information required by the Commission, but because the Government remain committed to the undertaking given to this House by my noble and learned friend the Lord Advocate to submit information to the Commission only after parliamentary approval had been secured.
Perhaps I might take a few minutes to remind the House of the key points of the medium-term outlook for the United Kingdom economy, which after all is the subject of this afternoon's debate. Of course, the background to last November's budget decisions was the excellent economic developments witnessed in the United Kingdom in 1994 and the tough decisions of the two 1993 Budgets which set public sector borrowing on a downward path.
One of the most striking developments since our debate last year has been the continuing fall in the number of people registered as unemployed. Since it began to fall in December 1992, unemployment has fallen by over 580,000 and the signs are that it will fall further in the coming months. Such a visible sign of the success of the Government's economic strategy is to be
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welcomed because of the direct effects it has on ordinary people's lives. It will not escape the attention of the noble Lords who took part in the debate last year that these figures are quite at odds with the doom and gloom predictions of the noble Lord, Lord Eatwell, who spoke for the Opposition Front Bench on that occasion.
However, while the unemployment figures are encouraging, the Government remain concerned that the proportion of long-term unemployed—people who have been out of work for more than a year—remains too high. That is why my right honourable friend the Chancellor introduced a package of measures specifically designed to assist that group of people in their efforts to find work. I hope that the noble Lord, Lord Eatwell, will find time in his speech to join me in congratulating my right honourable friend on his determination to tackle this major problem.
In 1994 output grew by some 3.8 per cent. (that is, very nearly 4 per cent.) with a strong export performance being the major contributory factor to this and to the marked improvement in the United Kingdom's balance of payments. In addition, throughout 1994 the Government achieved inflation levels the like of which we have not seen for a generation. Underlying inflation has been below 3 per cent. for 16 months, the longest such period since 1961. The prompt action taken by my right honourable friend the Chancellor in raising interest rates will help to ensure that the recent rises in inflation which reflect the effect of high commodity prices and increases in excise duties announced on 8th December will indeed be only temporary.
Thus, my right honourable friend's priority in framing his November Budget decisions was to ensure that the downward trend in the budget deficit continued, and hence that the recovery will be sustainable—not simply a repeat of the "boom-bust" experiences of the past.
While the faster than expected growth of 1994 has tended to bring down the budget deficit more rapidly than expected this time last year, lower than expected inflation would have tended to increase the deficit had the Government done nothing. Accordingly, the Government made substantial reductions in their cash spending plans to offset the effects of lower prices, leaving those plans broadly unchanged in real terms. As a result, the medium-term outlook for public finances is slightly more favourable than envisaged last year, with a return to budget balance now expected by 1998–99.
The FSBR which the Chancellor presented in November has been thoroughly debated in another place. I hope that the House will agree with me that the said assessment is a prudent and reasonable one and that the Government's economic policies mean that there is every chance of achieving sustained and non-inflationary growth into the medium term. I beg to move.
Moved, That this House approves, for the purposes of Section 5 of the European Communities (Amendment) Act 1993, Her Majesty's Government's assessment as set out in Chapters 4, 5 and 6 of the Financial Statement and Budget Report 1995–96, as updated. — (Lord Henley.)
5.32 p.m.
Lord Eatwell: My Lords, this debate is to consider European convergence criteria—a matter to which the noble Lord, Lord Henley, devoted only a few minutes at the beginning of his speech. I hope that when he comes to sum up he will have something more to say on the topic of the debate.
When we debated a year ago the equivalent report to that which we are considering today considerable displeasure was expressed on all sides of the House—by the noble Lord, Lord Cockfield, from the Government Benches; by the noble Lord, Lord Thomson of Monifieth, from the Liberal Democrat Benches; and by myself from these Benches—that instead of the report that was required by the European Communities (Amendment) Act 1993, Parliament was offered chapters of the Red Book—which is not the same thing at all.
The Red Book contains virtually no information on the social and environmental goals set out in Article 2 of the Maastricht Treaty which Section 5 of the Act calls for. Nor does it contain any information whatsoever on the comparative performance of the UK and other member states as required by Section 4 of the Act, to which Section 5 is clearly linked.
Last year the critics were ready to be indulgent. They accepted that this procedure was being invoked for the first time, and it was just nine months after the passage of the Act. Moreover, they realised that the debate took place just three months after the first consolidated Budget and conceded that the Government might be allowed a certain latitude in substituting the Red Book for the required report on that first occasion.
But it is clear today that we were too indulgent. Instead of responding to our legitimate concerns, the Government have simply, without explanation, totally ignored them. And indeed they have ignored the law of the land from which those concerns derived. I hope that the Minister can give us an assurance this evening that this evasion of government responsibilities will not happen again.
Despite the Government's obvious unwillingness to obey the requirements of the Act, this debate comes at a propitious time. Never before have the convergence requirements of Stage 2 of economic and monetary union been such a hot topic in the saloon bar. But they are now. It is scarcely possible to buy a beer these days without being asked for an opinion on nominal and real convergence, or, more generally, on whether monetary union is a threat to the Royal Family and the Union Jack. I suppose that the Prime Minister, Mr. Clarke and Mr. Portillo deserve some credit for having excited interest in such an important, though admittedly abstruse, problem.
Unfortunately, the Red Book contains only a limited amount of the information which is sought by thinkers in the saloon bar. It deals with only two of the criteria which Article 103 of the treaty states are necessary,
"to ensure closer co-ordination of economic policies and sustained convergence of the economic performances of the Member States";
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namely, it deals with the maximum deficit and debt ratios demanded by Article 104c—and, even then, it deals with those two only in passing and, as I shall illustrate in a moment, imperfectly.
In part, the limited consideration of convergence criteria in this ersatz report is understandable. The Red Book is designed as a budgetary document, attuned to the British financial year and to British accounting standards. As I have complained already, it is not a convergence report and, to the extent that it tries to be one, the job is ill done.
For example, while the Red Book works on financial years, convergence criteria are defined in the treaty in calendar years. So despite the recalculation of the deficit GDP ratio and the government debt GDP ratio in terms recognised by the European system of accounts, the figures presented in the Red Book do not correspond to the convergence criteria that are demanded. That information for 1992 and 1993 only was contained in a CSO press release last week. I suppose that even this Government were too embarrassed to pretend that a press release is a report.
Careful reading between the Red Book lines produces some rather surprising snippets of information. For example, it is revealed that without any explanation whatsoever the Government have changed the fundamental objectives of their fiscal policy. In last year's Red Book, paragraph 2.08 stated that:
"The objective of the Government's fiscal policy is to bring the PSBR back towards balance over the medium term, and in particular to ensure that when the economy is on trend the public sector borrows no more than is required to finance its net capital spending".
This year, in paragraph 2.09 of the Red Book, we read:
"The Government's fiscal objective is to bring the PSBR back to balance over the medium term".
And that is all. There is no mention any more of financing capital spending by the public sector, which was previously a fundamental objective of fiscal policy. Where has it gone? And this is all the more surprising because Article 104c of the treaty requires that in considering the deficit convergence criteria,
"the Commission shall also take into account whether the government deficit exceeds Government investment expenditure".
In other words, the treaty expresses exactly the same concerns as are contained in last year's fiscal policy objective but are not in this year's.
This requires some explanation. Why have the Government changed the declared objective of fiscal policy? Why has the reference to public sector investment been dropped? These are important questions. But I have to admit they are still not the questions which are causing the stir in the saloon bar. What is exercising the public is, to put the matter simply: what is the point of all this; what do the Government believe that the convergence criteria are for?
Up to a few months ago we thought we knew the answer. The convergence criteria, as explained to this House on 24th February last year by the noble Lord, Lord Henley, (at col. 772) are the vital components of Stage 2 of the process which is designed to achieve

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monetary union. That is what the convergence criteria are for. But now we have Mr. Portillo telling us that monetary union would,
"mean giving up the government of the UK. No British government can give up the government of the UK. That's impossible".
The point has been reinforced by the Chief Secretary to the Treasury, who has declared:
"I don't want to see a single currency, period".
That seems clear enough—no single currency. But then why are we bothering with convergence criteria, since monetary union is what convergence criteria are for?
But then along comes the Chancellor of the Exchequer. He tells us that, in effect, Mr. Portillo does not have the faintest idea of what he is talking about and that:
"the idea that [a single currency] is in itself some threat to the nation state is wrong".
Moreover, he says:
"You cannot negotiate an opt-out and then suddenly decide that you did not want to join in any circumstances. That is inconsistent … How could the government that took Maastricht through Parliament say, 'Actually, we never wanted to join anyway'? It would make us look ridiculous".
Those are Mr. Clarke's words, not mine. Accordingly, he says, Britain "will certainly play a constructive part" in the preparations for monetary union. So there we are; the convergence criteria have a point after all. They are part of the constructive preparation for monetary union.
But then, just as the Chancellor has cleared things up, we have the Prime Minister assuming his now traditional role of spreading confusion where once clarity reigned. In his recent address to an organisation—which has for its title an oxymoron; namely, Conservative Way Forward—the Prime Minister first declared:
"We cannot accept that sterling should be part of a single currency in '96 or '97".
That was intriguing. To begin with, nobody has ever proposed that there should be a single currency in 1996, nobody at all. So the first part of the Prime Minister's declaration is, to say the least, a little odd. Whatever did he have in mind? Probably we shall never know.
Turning to the substance of the matter, the Prime Minister went on to tell us that there will be no single currency in 1997 because economic conditions will not be right:
"And, by right economic conditions, the Government does not only mean the Maastricht criteria — Ken Clarke will go into further detail on this".
So let us go back to the Chancellor for further detail. The Chancellor said:
"by the date from which a single currency could first be introduced"—
he realises that it is 1997 and not 1996, as the Prime Minister seems to think—
"only Britain, Germany and Luxembourg seem likely to satisfy the Maastricht criteria".
As to the extra conditions of which the Prime Minister spoke, they include:
"trade balances, the integration of markets, the development of unit labour costs, productivity growth and relative flexibility in labour markets".
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That is clear enough too. Clearly, the Chancellor is talking about real convergence. I am delighted to hear that he has caught up with Labour Party thinking, which was arguing well before the Inter-Governmental Conference at Maastricht that real convergence is a necessary condition for successful monetary union.
But what is unclear is whether the Chancellor and the Prime Minister are saying that the British economy is not ready for monetary union because it has failed in real convergence, productivity growth is too low in Britain or the British trade balance is too weak—or whether they are saying that the economies of the other states which have also achieved nominal convergence are not ready for monetary union because they have not achieved real convergence.
The second position does not seem to be credible. All things considered, it seems obvious that the real economies of Germany and Luxembourg are stronger than Britain's real economy. The only sense that can be made of the Chancellor's argument is that it is the Government's opinion that, although nominal convergence has been achieved, the real state of the British economy is too weak for monetary union. Why cannot they say so clearly? Perhaps the noble Lord will confirm that that is exactly what the Chancellor meant.
That raises a further problem. Granted that a monetary union of just Britain, Luxembourg and Germany would look rather silly in 1997, what of 1998 and 1999? If the convergence criteria, nominal and real, are satisfied by a substantial group of countries which decide to form a monetary union and both nominal and real convergence criteria are satisfied by the UK economy, will Britain join the monetary union? I should be grateful if the noble Lord will answer that straightforward question, although I must say that I do not hold out any great hope of an unambiguous answer.
If the Government would not join when real and nominal convergence had both been achieved, what other criteria would the Government be applying to the choice to stay out? In a debate on convergence criteria surely we should know the actual criteria that the Government have in mind.
It is precisely the lack of clarity that is causing all the confusion and preventing the serious debate which the Chancellor called for in his 9th February speech. We are continually told that decisions can only be made three or four years hence. That is fine. But what are the convergence criteria that the Government are proposing on which that decision should be made? Surely the British people and the British Parliament deserve to know. If the Government are incapable of making clear those criteria through their own confusion and divisions, then no constructive debate can take place. Without a constructive debate, Britain's approach to the 1996 Inter-Governmental Conference will be forged from the dogma, xenophobia and downright irrationality which have had the Prime Minister on the run for the past year or so. That will be a grave disservice to the future of our country and to the future of Europe.
5.46 p.m.
Lord Thomson of Monifieth: My Lords, I shall not delay your Lordships for many minutes. I admire the

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speech that has just been delivered by the noble Lord, Lord Eatwell. But, as he himself confessed, he was an optimist in feeling that there was likely to be any serious reply from the Government in this very curious debate.
As has been said, this is the second annual debate under Section 5 of the 1993 European Communities (Amendment) Act. As the noble Lord, Lord Eatwell, said, it is an opportunity for the Government to treat your Lordships' House more sensibly than they did last year. The Minister who opened the debate signally failed to do so.
The real purpose of the debate is for the Government to make an annual report in relation to the convergence criteria under the Maastricht Treaty. Instead, the Government dodge that important issue. They bury themselves and the House beneath the verbiage of the three general chapters of the Budget Red Book and a bland sentence in Chapter 1. This ought to have been a serious debate, which would respond to the points made by the noble Lord, Lord Eatwell, on the economic aspects of the European Union, instead of which the Government have converted it into a minimalist account of their own Budget proposals.
A year ago the noble Lord, Lord Cockfield, from the Government Benches, with all the authority that he brings to bear on these matters, made the modest and sensible suggestion that there should be a two- or three-page summary of the state of the financial relationships between the United Kingdom and the European Union. The Government simply refuse to do that. It is as though they are still sulking over an amendment to the Maastricht Act which they never wanted in the first place. They try to palm off Parliament with a few pages of the Red Book and a Motion which, to be polite about it, is very ambiguously worded and could literally be taken to imply some approval for the Government's national budgetary policies.
If the Government had been prepared to provide what the noble Lord, Lord Cockfield, sought—a short, clear report on Britain's progress in achieving the Maastricht convergence criteria—it could have been the basis for a useful annual debate on the very important problems of moving toward economic and monetary union. There is a reason why the Government do not remotely attempt to do that. All that could be said in favour of the Minister's speech this evening is that it was just a little fuller and longer than the speech which was made in another place last night when introducing this Motion. The reason, as the noble Lord, Lord Eatwell, set out in detail—and I shall not attempt to repeat it—is because the Government are so deeply divided over these issues that they again and again fail to do their duty to the nation by giving the kind of clear lead that the British people need in terms of Britain's role in the European Union.
We are an insular nation. For special geographical and historical reasons, it is difficult for us to make the imaginative leap to being full members of a European Union. It is the betrayal by this Government of the long-term interests of the British people in terms of the role that they should be playing in leadership in the European Union that is our major complaint. As it is,
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the real debate on these important issues will take place tomorrow in another place on a Motion from the official Opposition and next Wednesday in your Lordships' House, when my noble friend Lord Jenkins of Hillhead will propose a Motion that the Government should take a positive role of leadership in the approach to the Intergovernmental Conference. Rather than waste more time on this rather demeaning non-debate, I am prepared to wait until next Wednesday.
5.51 p.m.
Lord Haskel: My Lords, we are indeed fortunate to have on our Benches such an eminent economist as my noble friend Lord Eatwell. However, it is not economists who keep the economy going, it is the industrial manager who pays the wages at the end of the week, the bank at the end of the month, the shareholders at the end of the year and the Inland Revenue most of the time. What is his or her view of this Motion? In answering that question perhaps I can fill in some of the detail my noble friend Lord Eatwell said had been omitted from the Red Book.
Industrial managers are interested in the practical aspect and their first concern must be the differences within the Government over Europe. That is because those differences are having an impact on the relationships laboriously and patiently built up since 1992, when Europe became a single market. There was a time when business relationships depended mainly on price. With the single market, business has become more competitive and, with competition, additional factors have become more and more important. Those relationships now depend on quality, reliability, co-operation in product development and, most importantly, co-operation in cutting costs and prices.
Many of those relationships are working successfully, and that is one reason why our export performance is better, as the Minister reminded us. However, the conflict over Europe within the Government is casting a shadow over those relationships and creating a feeling of uncertainty. The single market is the bedrock of those arrangements and talk of upsetting it is fatal to long-term alliances. There is no doubt that companies on the Continent are looking to replace their alliances with British firms. I hope the Minister understands that and understands how delicate those arrangements are, how easy they are to destroy and how difficult they are to rebuild. Perhaps the Minister will tell us when all the wrangling will stop.
Thanks to the hard work of building up those relationships, and helped by devaluation when coming out of the ERM, our exports are doing well. Indeed, we should compliment the DTI on the efforts it makes to encourage exports. But we are still heading for a current deficit of approximately £9 billion, the major part of which is in manufactured goods. Managers know that that can only be rectified by investment, training and innovation and good management practices. Sadly, Table 6A.3 shows that the budget for those activities in the DTI is going down after this current year. The spending on export credits is going up. I believe that

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that emphasis is wrong because there is still a lot more work to be done in improving the competitiveness of British industry, and that must come first.
The way the DTI spends its budget and the source of its money is confusing. For example, large sums are spent on grants for inward investment. Indeed, the Government trumpet those investments as an accolade from overseas companies for the Government's policies. It is part of the DTI's programme of spending to encourage that, and quite rightly too. But people in industry know why many companies invest here. They have been bought with large grants, the excellence of British workers and the fact that English is the European language that most business people from Asia can cope with best. Also, much of that inward investment is due to the hard work of many local development companies such as the Northern Development Corporation, which must have one of the best track records in Europe. Incidentally, many of them operate under a Labour administration. However, it is unclear whether the source of the money is the European Union, the DTI or the local authority.
Certainly those grants have helped to bring jobs, new technology, new standards and new ways of working which have been of great advantage to the competitiveness of British industry. But managers know that there is a downside. It is that we are helping those overseas companies to achieve their ambitions and strategy to become global players based on their strong home market. We should not forget that, in doing that, we may be denying valuable assistance to some UK companies which in turn could become global players.
I am not being critical; I am being realistic. The true measure of the success of the investment is the amount by which industry improves its performance. In the past 12 months we in this country have cut our unit labour costs by 1.5 per cent., which is quite a good result. Knowing that noble Lords opposite have an interest in the Social Chapter, I looked up the figure in Germany. In that country, with the help of the Social Chapter, they have over the past 12 months reduced their unit labour costs by 6 per cent.
DTI grants are a complex matter made yet more complicated by the tax regime, and nowhere is that more apparent than in the area of British corporate research and product development. Sadly, some 40 per cent. of that is now conducted abroad—and that after the Lords' Science and Technology Committee warned that the Inland Revenue should be careful not inadvertently to create incentives to place research and product development outside the UK. One of our major engineering companies recently located a product development project in Germany where there is government funding, and that in association with BMW. They also recently purchased a major US engineering company because that company obtains US government funding for product development. No wonder managers are confused.
For managers, the single most important factor in the DTI budget is the encouragement to invest. Investment in the last quarter was disappointing. The most recent figures look a little better, but not much. The DTI must
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spend time, money and effort on encouraging this. Investment in new plant and machinery is critical, and the single most important area for that is information technology.
I wish to make one final point. The collapse of Barings reminds industrial managers how they are controlled by the financial markets. Trading in financial markets, which produces very little, vastly overwhelms the trade in real goods and services. It is said that the total annual production of this country in goods and services is traded in just three days on the financial markets in London. Is that not a case of the tail wagging the dog? The Government see effective regulation as essential in achieving a level playing field. They may see it as a football pitch; the industrial manager sees it as a battlefield full of mines and hidden tank traps.
6 p.m.
Lord Bruce of Donington: My Lords, I have some sympathy with the approach to this debate adopted by the noble Lord, Lord Thomson of Monifieth. It is quite clear that the debates which are to take place in another place tomorrow, and the debate to take place in your Lordships' House on 8th March, will be devoted to questions of considerable principle. They will involve, I hope, an unambiguous declaration as to precisely what the Government's policies are towards the Inter-Governmental Conference in 1996 and what proposals they intend to bring forward.
I propose to confine myself to the somewhat mundane task of dealing with the Motion on the Order Paper. It is unexciting and does not give me even a frisson of either amusement or despair. It merely asks us to approve,
"for the purposes of Section 5 of the European Communities (Amendment) Act 1993, Her Majesty's Government's assessment as set out in Chapters 4, 5 and 6 of the Financial Statement and Budget Report 1995–96, as updated".
We can soon do that. We can look first at the provisions with which we are supposed to comply and the response to them.
Section 5 of the Act reads:
"Before submitting the information required in implementing Article 103(3) of the Treaty establishing the European Community, Her Majesty's Government shall report to Parliament for its approval an assessment of the medium term economic and budgetary position in relation to public investment expenditure and to the social, economic and environmental goals set out in Article 2, which report shall form the basis of any submission to the Council and Commission in pursuit of their responsibilities under Articles 103 and 104c."
Perhaps we should look at Article 2. I am sorry to be a little prosaic but, after all, the documents themselves should be referred to. I refer to an unauthorised copy of the treaty obtainable for £18.91, or 24 ecu. It is not authorised by the Commission but is reputed to be authentic. But the Government do not believe in issuing copies of the Treaty. Article 2 states:
"The Community shall have as its task, by establishing a common market and an economic and monetary union and by implementing the common policies or activities referred to in Articles 3 and 3a, to promote throughout the Community a harmonious and balanced development of economic activities, sustainable and non-inflationary growth respecting the environment, a high degree of convergence of economic performance, a high level of

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employment and of social protection, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States".
My noble friend Lord Eatwell was perfectly correct in what he said. The Government in simply producing Chapters 4, 5 and 6 and appendices, as updated, as an authentic response to the information that is supposed to be given have been perfectly correct. But, of course, the document that has been produced does not contain any of the vital information that is required in the event of any policy of economic cohesion being followed in respect of member states.
The Central Statistical Office produced a news release on 21st February that gives part of the information. It is even more up to date than the Red Book. It gives the cental government financial deficit as a percentage of GDP and central government gross debt at nominal value. This is good information, but I am a little mystified by what follows. It says that the estimates are based upon the European system of integrated accounts (ESA). This is somewhat new to me. The expression is referred to in the protocol which deals with excessive deficits.
Being a curious person in these matters, I tried to find out about the European system of integrated accounts. I have done so because the Commission, on receiving information from various states, including ourselves, as required by the articles concerned, ought to make comparisons among the figures submitted by member states. A European system of integrated accounts will enable the Commission to make that comparison. In the report that it is required to make to the Council of Ministers under the Treaty of Maastricht, it ought to be able to state those figures. I have made a diligent search. There is no record in the Library of the European system of integrated accounts. Nobody has ever heard of it. I made further inquiries of those whose business is closely associated with European affairs and could find not a word about it. There is no book or pamphlet upon it, nor does it appear on any computer.
In the absence of a European system of integrated accounts, to which our submissions are required to conform, I just wonder how the Commission can possibly arrive at any conclusions to forward to the Council of Ministers. The Council of Ministers is entrusted with the task of disciplining member states if they diverge too much from the targets set out in the protocol. It is required to make an appraisal, examine the accounts and ponder over them. It can even issue warnings to member states when they fall short on what the Council thinks they ought to be doing. By qualified majority, the Council can decide whether to admonish a member state and require it to conform to the categories. It can also fine a member state by qualified majority. In the absence of a European system of integrated accounts, how can the Commission be expected to make any valid judgment?
I do not wish to denigrate the abilities of members of the Commission. I have been carefully through the list of the members. Three of them have qualifications that border upon a knowledge of accountancy. Therefore, one will tend to trust them on such matters. I have also examined details of members of the Council. I ask
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myself who really is qualified to assess the reports that the Council receives. Who in the Council of Ministers, within the limited time at their disposal prior to passing round the port and cigars, is able to make some assessment of these matters? I do not speak insultingly. As Mark Anthony would say, they are all honourable men.
All of this paraphernalia of the reports is not for the purpose of our being able to make fundamental judgments of principle, which in another place will be made tomorrow and in your Lordships' House on 8th March. It is for the purpose of leading up to economic and monetary union and disciplining people into various stages of some kind of recognisable cohesion. If we are to have economic cohesion, let us by all means have it; but let us define what we want.
The noble Lord, Lord Eatwell, came very nearly to it. Perhaps on 8th March he will expand on it with even greater precision. But, quite clearly, any assessment that does not deal with the prospect of unemployment is quite worthless. Unless economic cohesion makes some endeavour to eliminate the scourge of waste and misery, and even crime, then social cohesion is not worth looking at. The fact is that in Europe the record so far has not been particularly good—far worse than in Japan and the United States.
The other aspect of our affairs that needs some attention is our adverse balance of payments. I see from correspondence in the press, sometimes under the pen of the Foreign Secretary, that he appears to be satisfied with our balance of payments vis-à-vis in particular the EEC. He mentions record exports. There is one thing the Government never do. They never mention record imports. They have never recognised in the past 10 years that we have a trade deficit in total of some £70 billion, a very large proportion of it in Europe.
The progress towards the elimination over the medium and long-term of our trade deficit is also a matter of some importance. No economic assessment of the country is worth the paper that it is written on unless there is an assessment of investment that actually takes place within the United Kingdom by United Kingdom firms. There is Japanese investment in the United Kingdom and American investment in the United Kingdom. United Kingdom finance houses invest in America and Japan. But there is one place they do not invest in—the United Kingdom. Those are economic factors that have to be taken into account.
I have detained your Lordships for far too long, but I am bound to say that the Government on their own say-so certainly have not complied with the treaty. I have a certain sympathy for them. I am known to be somewhat mildly critical of certain aspects of the treaty, and indeed debated it when it was passed. I may be forgiven perhaps for holding true to my original beliefs that go back a long, long way and do not change because of any tactical political considerations. I hope therefore that your Lordships will forgive me for not going further on to matters of greater controversy. But I look forward to the time, either tomorrow in another place or on Wednesday 8th March in this place, when both parties can make absolutely clear and unequivocal statements as to whether and under what circumstances they are in

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favour of economic and monetary union and a single currency. If they can reply to that without hedging, without any ifs and buts, then the whole of the country will be very satisfied with them.
6.13 p.m.
Lord Henley: My Lords, I should start by apologising both to the noble Lord, Lord Thomson of Monifieth, who felt that the debate was something of a waste of time, and to the noble Lord, Lord Bruce of Donington, who felt that the debate lacked excitement and then proceeded to give us a little excitement over the 13 or 14 minutes of his very interesting speech. I feel that there is some contradiction between their desires, but I hope that he provided some amusement—if our function is to provide amusement—to the noble Lord, Lord Thomson. He certainly raised issues of considerable interest for the House.
As the noble Lord, Lord Bruce, so helpfully pointed out, the Motion asks us to approve the Government's assessment of the medium-term economic and budgetary position for the purposes of Section 5. Section 5 is about the basis of material to be submitted to the Commission under the multilateral surveillance and excessive deficits procedures. The noble Lord, Lord Bruce, said that he required a more exciting Motion. No doubt he will get a more exciting Motion tomorrow week and no doubt the noble Lord will be taking part in the debate. I can only say how sorry I am that it will not be my privilege either to open or to wind up for Her Majesty's Government on that occasion, but I am sure that my noble friend Lady Chalker is greatly looking forward to doing so. I am sure she will welcome the noble Lord's speech.
It follows, therefore, that the Motion is not about the principle of submitting information to the Commission; nor is it about the question of Brussels' sphere of influence, or the rights and wrongs of a single currency—though I shall have a word or two to say about that in due course—and the United Kingdom's participation in such an arrangement. The real subject matter of the Motion before us is the assessment of economic and budgetary prospects set out in the FSBR. That is what I set out to explain in my introductory remarks.
The noble Lord, Lord Eatwell, was somewhat coy about giving quotations from his speech of last year when, as I pointed out in my opening remarks, he made some fairly gloomy and doomy predictions about the level of unemployment, the balance of trade, and so on. We had no mention of that this afternoon and no welcome for the very dramatically improved employment statistics that we have seen over the year or for the various measures introduced by my right honourable friend in the Budget which are designed to reduce long-term unemployment. We heard a great deal about what was being said in the saloon bar. The noble Lord has obviously moved up from the public bar. I dare say that this represents the degree of social mobility that we have seen under the years of Conservative Government. We heard a great deal about oxymorons allegedly uttered by my right honourable friend the
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Prime Minister. We then had what I thought was the best oxymoron of all—when the noble Lord talked about Labour Party thinking.
I should like to address the first and principal point raised by the noble Lord about the Red Book not being a satisfactory vehicle for the Section 5 report and his suggestion that we should produce a separate report. I do not believe there is a need for that. It would simply result in unnecessary duplication. It is the appropriate vehicle for a Section 5 report as it contains all the relevant information. Perhaps I may give one example. The noble Lord mentioned environmental considerations as referred to in Article 2. I can give an assurance that the Government recognise that environmental considerations need to be taken into account when shaping economic policy. Indeed, the Government are committed to using economic instruments to address environmental objectives where they are appropriate. A good example of that is the use of different rates of excise duty applied to leaded and unleaded petrol in successive Budgets. As the noble Lord will know, if I may give another example, the November Budget proposed a new landfill tax.
I should also like to say a few words about convergence—an issue which the noble Lord accused me of ducking in my opening speech; a charge which I would certainly regret. Thanks to the prudent policies of this Government the Budget deficit is now falling rapidly. We expect it to be below 3 per cent. by 1996. Our inflation, our interest rates and our general government debt burden are comfortably within the reference limits set out in the treaty and associated protocols. We have a strong interest in the economic stability and prosperity of our main trading partners. We therefore support policies for convergence on both low inflation and sound public finances.
The noble Lord moved on to ask whether we would give a categoric answer—yes or no—to the question "Shall we join the EMU and, if so, when shall we join it?" The noble Lord knows quite well what the answer is. No one need concern himself with this vital question at the moment. It is one very much for the future and one which in due course Parliament will have an opportunity to consider.
Lord Eatwell: My Lords, I do not want to have the noble Lord waste his own and the House's time by answering a question I did not ask. The question I asked was not whether we would enter a monetary union—I said that leaving that decision to later on was just fine and eminently sensible—but: what are the criteria that will be applied; how will the decision be made; and on what basis will it be made?
Lord Henley: My Lords, if I may say so, the noble Lord's argument is specious nonsense. If one is defining the criteria precisely in the manner which the noble Lord wishes, then there is no need for the opt-out or opt-in negotiated by my right honourable friend the Prime Minister some time ago. Obviously, these matters have to be judged in the context of the time when the decision has to be taken. We do not know in what context we shall be taking that decision. Therefore, to ask the question now would be to ask the wrong question.

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I wish briefly to touch on one or two points raised by other noble Lords. The noble Lords, Lord Haskel and Lord Bruce of Donington, referred to the trade deficit. The noble Lord, Lord Eatwell, referred to it a great deal in his speech last year, but he did not do so this year because he knows full well that the figures have and are improving quite considerably.
Perhaps I may make one or two points. We saw the first current account surplus since the first quarter of 1987 in the third quarter of last year. There was a current account surplus of about £0.8 billion. There was an improvement in both visible and invisible monthly balances. Perhaps I may now look to the future. The CBI monthly survey for February shows that export prospects are particularly encouraging with an expected export orders balance at the highest level ever recorded. Therefore, I hope that both noble Lords will accept that things have improved quite dramatically since last year.
I touch on another point made by the noble Lord, Lord Haskel, when he referred to inward investment. He was quite right to give a number of reasons why we have been so fortunate in receiving such a large share of inward investment from both the United States and Japan. The noble Lord gave a number of reasons for that and I agree with many of them. Particularly, I join with him in paying tribute to the workforce in this country.
I should like to add something which is important, but which the noble Lord did not add. The level of non-wage labour costs in this country is considerably lower than the levels of our European counterparts. That is very much the Government's doing and we have to thank them for that. One of the reasons why Japanese or American firms come here is not only because of the standard of our workforce but also because that workforce, while very often taking home as much as their German or French counterparts, costs the employer considerably less.
The noble Lords, Lord Haskel, and Lord Bruce of Donington, said that there has been insufficient investment. I can assure the noble Lords that since 1980 investment in the UK has been, on average, higher than among our European colleagues. That came after two decades where we were consistently low. Obviously there may be a long way to go, but we are catching up.
I believe that the Government have set out a clear framework for achieving their objectives of sustained growth and higher living standards based on sound public finances and permanently low inflation. It is a strategy which has already yielded significant rewards in 1993–94 in the shape of a strong and broadly-based recovery, falling unemployment and an inflation performance better than this country has seen for a generation. The action taken by my right honourable friend in his Budget reaffirms the Government's commitment to this strategy and sets us on course for sustained growth for many years to come. It is a highly promising outlook and I commend it to the House.
On Question, Motion agreed to.

British Coal Enterprise
6.23 p.m.
Lord Mason of Barnsley Lord Mason of Barnsley rose to ask Her Majesty's Government what plans they have for the future of British Coal Enterprise.
The noble Lord said: My Lords, I believe that it is the will of the whole House and of all the political parties in this House, that there should be a continuation of the activities of British Coal Enterprise. Therefore, this is not a party political issue. The House will remember the interventions made by the noble Lord, Lord Haslam, during the course of the Coal Industry Bill, and the helpful interventions from the right reverend Prelate the Bishop of Sheffield, who sent a note giving his continuing support to British Coal Enterprise. That was backed by a colleague of his, the right reverend Prelate the Bishop of Bristol, who, having worked in the Durham coalfield for some years, said, "I know the value of British Coal Enterprise".
Everyone who is conversant with the positive operations of BCE, especially those who reside in or even frequent coalfield communities, is aware of the splendid efforts they have made in the past 10 years to minimise the hardship in the wake of the pit closures.
Since British Coal Enterprise was established in 1984 it has carried out its mandate with vigour and great success. It was founded to provide practical and effective help to individuals and businesses in coalfield regions in order to stimulate job creation and economic regeneration. This organisation, which operates with the minimum of red tape and working in partnership with other like-minded organisations, has assisted in the creation of over 100,000 jobs in the past 10 years. Within that total, over 50,000 former British Coal mineworkers have been resettled into new employment.
In just 12 months from October 1993 to October 1994, British Coal Enterprise business loans helped to create 4,400 new jobs in 567 companies and over 14,000 miners were resettled under the Job and Career Change Scheme. It has invested more than £40 million in over 1.3 million square feet of workspace accommodation in our coalfield areas. Two-thirds of start-up businesses launched with British Coal Enterprise finance are still trading after five years, which is nearly twice the national average of start-ups. Only recently (last November) BCE launched a new enterprise fund to bridge the gap for coalfield-based companies wanting to expand. That was in response to findings by the Confederation of British Industry which revealed that small and medium-sized companies were falling into an investment trap because they could not tap reliable and accessible funding for expansion. This enterprise fund can now provide packaged finance of up to £1 million for projects that in turn will create permanent new jobs in coalfield areas.
I believe that British Coal Enterprise has proved to be highly successful and especially in cost-effective job creation. The Government, and particularly the Department of Trade and Industry and the Department of Employment, must surely have appreciated all the endeavours of British Coal Enterprise in job creation

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and in retraining programmes. Indeed, British Coal Enterprise is a major ally of these departments in the Government's regional activities. In that grand strategy it has built up a remarkably close co-operative relationship with regional government departments, with local authorities and with British Coal. In addition, it has built a marvellous bridge between British Coal Enterprise and the officials of the European Regional Development Fund—pleasingly, an excellent example of how European finance can be used in the most positive sense to aid our ailing coalfield regions.
So it is evident—and I emphasise this—that the regeneration of our coalfield communities is possible with the continuing aid, enterprise and specialist knowledge of the British Coal Enterprise coalfield teams. It is now a major bulwark in creating new enterprises and jobs. It is now too important and experienced as a national organisation to be kept in suspense about its longer-term future, especially as it has gained the undoubted respect of all those organisations which too are working desperately hard to bring new life and hope to our coalmining areas.
I believe that there will be a need for this drive for regeneration to continue for another 10 years and also at its present level. The drive by British Coal Enterprise in our coalfield communities is to establish more small and medium-sized businesses. A main reason is that collieries were located where the coal was and pit villages grew up around them. The colliery and its ancillary activities were the principal source of employment. Even today, the tradition in mining villages is mainly of working for an employer rather than being a self-employed entrepreneur. It is this particular need to continue to develop the enterprise culture and to assist in the creation of small businesses that distinguishes the high unemployment areas of the coalfields from the high unemployment areas in our large towns and cities.
Therefore, the role of British Coal Enterprise in stimulating economic regeneration by helping fledgeling companies is needed just as much today as when it was created 10 years ago. In this regard, BCE has assisted in the formation and growth of over 100 enterprise agencies in the coalfields, and has worked with and assisted the training and enterprise councils and now the growing networks of Business Links. I am pleased to inform the House that Barnsley was one of the first towns to have a Business Link to complement the activities of our very successful Business and Innovation Centre. Thanks to BCE investment, we now have three centres, in which there are 30 firms producing high-tech and innovative products—high-tech industries sprouting in a dying coalfield area. The TEC network and the Business Links have an enormous job to do in encouraging the growth of small and medium-sized enterprises, and BCE's 10 years of experience can assist them in their endeavours.
British Coal Enterprise's expertise has been recognised internationally. The Overseas Development Agency is making use of the skills that BCE has developed in identifying viable business projects. British Coal Enterprise has been contracted by the ODA to
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appraise bids by British businesses looking to invest in South Africa. British Coal Enterprise is also working on a prestigious project in Poland, looking to replicate BCE's experience in encouraging economic regeneration in two regions of that country.
Of the many suggestions that were made in the course of our debates about the future of British Coal Enterprise during the passage of the Coal Industry Bill, what comes to the fore is the idea of what might be called a "stand alone agency"—perhaps under a sponsorship umbrella provided by the Department of Trade and Industry and the Department of Employment. There is already a very good co-operative working relationship, so why not on a national scale, working with the TECs and Business Links, covering training, job creation and the launching of small businesses? Or could not BCE, which, as we recognise is a subsidiary of the British Coal Corporation, become a company limited by guarantee, perhaps along the lines of the TECs and the Business Links and with directors drawn from the CBI, the British Chambers of Commerce, Business in the Community, local authorities and so on? That type of organisation would attract European money. The European Regional Development Fund's view is that the growth of small and medium enterprises should be vigorously pursued in the attack on regional unemployment. There are many initiatives in support of which Europe would match pound for pound with us.
There is obviously and quite distinctly a future for some years ahead for a British Coal Enterprise-type organisation, but it needs resources and an assurance of some stability. I hope that the Government can announce that they will continue financial support so that the chief executive, Phil Andrew, and his team can continue the excellent work of economic regeneration of the pit villages in all our coalfields.
6.33 p.m.
Lord Ezra: My Lords, I am pleased to follow the noble Lord, Lord Mason of Barnsley, and to support his words of support for British Coal Enterprise. I can think of no one more suited than the noble Lord to have tabled this Unstarred Question. The noble Lord was a miner for many years and represented a mining constituency for many more years. Among other prestigious offices of state, he was Minister of Power at a time when I had much to do with him at the National Coal Board. What the noble Lord says on this issue, as on any connected with the coal industry, has to be taken seriously.
This subject was well aired during our debates on the Coal Industry Bill. The noble Lord referred to the amendment introduced by the right reverend Prelate the Bishop of Sheffield, not only very movingly, but also very effectively. It was my impression from the interventions on that occasion of noble Lords of all parties and the then Minister, the noble Lord, Lord Strathclyde, that there was wholehearted support for the continuance of the work of British Coal Enterprise and an appreciation of what it had achieved.
There are two overriding reasons why the organisation should be maintained for many years ahead. First, there is the work it has achieved in the coalfield areas. As we have been reminded, BCE was

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set up in 1984. Since that date, it has created no fewer than 120,000 job opportunities. That in no way offsets the much greater number of mineworkers who are no longer at work but it goes a long way towards doing so. It is a remarkable achievement. It has been done, as the noble Lord pointed out, in close association with other organisations such as local authorities and TECs. It has been a model of its kind. The noble Lord is right in saying that although the coal industry has now been privatised—let us hope that there will be no further reduction in the now much attenuated coal industry—nonetheless there is much more work to be done in finding work for ex-miners. The noble Lord suggested a continuance period of at least 10 years. I fully concur with that. On those grounds alone, there is a very good reason for continuing BCE's work. It is unfinished work.
However, there are wider grounds for its continuance. British Coal Enterprise has created a new form of initiative for dealing with unemployment. It has created new jobs at a much lower cost than most other initiatives. So far as one can tell, BCE has created new jobs at a cost of something like £2,000 each compared with about £5,000 in other cases. It has done that through a combination of business funding, managed workspace and outplacement. It has made a unique contribution to sustained job creation at a time when unemployment remains one of the major problems facing us.
Thus, what is at issue is not simply continuing with British Coal Enterprise as a means of finding alternative jobs for displaced mineworkers, but, more importantly, for the model it has developed as an all-embracing regeneration vehicle in areas of unemployment. It is a model that is eminently transferable anywhere else in the country. Indeed, as the noble Lord, Lord Mason, pointed out, there has been wide interest overseas—in the countries of eastern Europe, in South Africa and elsewhere.
So it is very proper that we should be asking questions tonight about the future of the organisation. In our debates on the Coal Industry Bill, we were told that BCE would continue for an interim period. We are now coming to the end of a financial year. So what do the Government mean by an interim period? Does that include the next financial year, which is due to begin shortly, or the year after that as well? Perhaps we can have some definition of the phrase. Presumably, in the "interim period"—whatever its length—the present level of funding would be continued.
A more important question is: what about BCE's long-term future? Are the Government now not convinced that it is an organisation which on specific and more general grounds, should be continued? To dispose of it, dismember it, or let it be absorbed elsewhere would be something for which I do not think that any of us could easily forgive the Government. A very successful initiative has been taken. With little effort, the Government could enable it to continue. The noble Lord, Lord Mason, explained how that could be done. It could be converted into a company limited by guarantee, as are TECs and other similar organisations. It could be vested as a capital asset with the value of
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the work space it has created. I believe that that amounts to some £40 million. With that capital backing, it could easily raise the money necessary to continue to run its affairs. That would be £40 million very well employed and preferable to the alternative, which I presume would be disposing of the asset, selling it off or breaking it up and losing the whole initiative.
I hope that the Minister will tell us, first, of what the interim period consists and that the present level of funding will continue throughout that period, and secondly, that the Government have reached firm conclusions about how a magnificent initiative may be continued into the distant future.
6.41 p.m.
Lord Dormand of Easington: My Lords, there will be disagreements during our discussions on this Question but there will be complete agreement on one aspect; that is, everyone acknowledges that British Coal Enterprise has achieved considerable success in meeting its objectives. It is not necessary for me to repeat the figures relating to that success. They have been stated many times in both Houses and we have heard them, very properly, this evening from my noble friend Lord Mason and the noble Lord, Lord Ezra. When I said "everyone", that includes all the Ministers—and I look across the Chamber—who have been associated with the scheme.
In such circumstances, some would ask why there should be any change at all. The Government will say that change is necessary because of the privatisation of the British Coal Corporation. In itself that need not mean that there should be any fundamental change, but I suspect that the Government will make it a reason for a substantial change. I look forward to hearing what the Minister has to say about that aspect.
For the record, I hope that the Minister will confirm that the present arrangements will continue until March 1996, the date on which BCC will cease to exist. That date has been mentioned by Ministers on a number of occasions. If it is correct, will the Minister say whether the normal funding will apply for that period?
I believe that BCE has been successful largely because it is related specifically to the coal industry and coalfield areas. I say that because there is talk now that grants available under BCE may be subsumed under schemes not related especially to coalfield areas. As your Lordships will know, there are many agencies for job creation, agencies established by local authorities, by government departments, by voluntary bodies, by quangos and by others. If the work of BCE is transferred to those bodies, not only will there be a dispersal of the money but there will also be a widening of the objectives, which will inevitably affect the present aims of BCE.
BCE's funding comes principally from British Coal and hence, in effect, from the Government. If there is the kind of change which I have just mentioned, it would be completely unrealistic for the Government to say to any organisation that it supports, "Here is the grant but x pounds must be given to help create jobs in an area where pits have been closed". Whatever form

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the new structure may take, I hope that there will be no reduction in the overall grant. The closure of pits has accelerated in the past two years or so. Not only are thousands more former miners unemployed, but they are younger than ever before. They are men in their 20s, 30s and 40s who have a lifetime's work ahead of them. Older men have been out of the pits for a considerable time.
I recall an ominous response to me from the Minister, the noble Lord, Lord Strathclyde, during the debates on the Coal Industry Bill last year. I asked what would happen to capital receipts. The noble Lord said that he could not resist a smile for two reasons: first, because he did not know the answer to the question; but also,
"because I suspect that the heavy hand of the Treasury will do its work in this respect and it may be difficult to ring-fence or earmark specific receipts for specific areas".
I take that as a fairly strong hint as to what will happen or as to what certainly may happen.
If there are significant changes in the work of BCE, it will be a field day for the Treasury. BCE as we now know it will disappear. I should like to see any change kept to a minimum. Two months ago the Northern Development Company gave evidence to the Trade and Industry Select Committee. I need hardly say that the Northern region has been badly hit by pit closures and still has the highest rate of unemployment on mainland Britain. The Northern Development Company is unique in that it is a body formed by the northern region's local authorities, the northern TUC and the northern CBI. As such, it commands widespread respect in the regions.
In its evidence to the Select Committee it pays tribute to the work done by BCE, and in its summary the first point that it makes is:
"The key issue in regional policy is consistency".
Among other matters, that means that there should be little or no change affecting BCE. I quote again the noble Lord, Lord Strathclyde, during our debates on the Coal Industry Bill, who said:
"the regeneration of the coalfield areas is an avowed objective of government regional policy".
Those two quotations hang very closely together.
We have been told on a number of occasions that the Government are considering very carefully the future of BCE and that discussions are currently taking place. Will the Minister tell us who is being consulted? The views of many people and organisations should be sought if the consultations are to be genuine and effective. Therefore, it is important that the Minister should tell us this evening who is involved in those discussions.
Will the Minister bear in mind that this is not a party issue? I believe that that was one of the first points made by my noble friend Lord Mason. Support for the continuation of BCE crosses all parties and non-party people and organisations. Therefore, it is of the utmost significance that there should be full consultation. Employers, employees, local authorities and others all have their contributions to make to those discussions.
The main purpose of BCE is to assist former miners to find employment, and that includes helping former miners to be placed on suitable training courses. The
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Government constantly remind us of the importance of training and retraining. We heard that again in the Chamber today at Question Time. Therefore, I hope that they will acknowledge that function of BCE and thereby ensure that it will continue to fulfil that objective.
No one is better than the miner at adapting to new work. I believe that that is recognised generally. When I was a Member of another place, nothing gave me more satisfaction than hearing from employers time and time again in the new town situated in my former constituency how well former miners had adapted to their new work. Needless to say, training was crucial in the change and I suspect that the Government have underrated the role which BCE has played in that aspect of the work.
The Minister may know that I frequently raise the problem of long-term unemployment in the House. Any unemployment is terrible: but long-term unemployment is literally disastrous in its effect on families. I was, therefore, deeply concerned to learn of figures produced from a study by the Coalfield Communities Campaign recently which showed that 46 per cent. of redundant miners were still unemployed a year after the October 1992 pit closures.
Further evidence from Sheffield Hallam University shows that unemployment in former mining towns and villages is more than 26 per cent. compared to 15 per cent. nationally, and, indeed, is well over 30 per cent. in some communities. I do not know whether those figures are correct, but they are important. I suspect that they are accurate; but, if not, I should welcome the Minister's comments in his response.
The Government frequently talk about value for money. Let the Minister say tonight that they recognise that BCE has given superb value for money. It is a comparatively small amount of money. In 1993–94 it was a subsidy of £22 million and was given at a time when the Government have received many millions from the sale of the coal industry and when they have much more to come from the sale of British Coal land and other assets.
The Government would have the satisfaction of knowing that mining communities have overwhelming sympathy and support from the people of this country. How vividly we remember the marches and demonstrations by thousands of people, many in areas where people had never even seen a pit, when the President of the Board of Trade announced those massive pit closures.
The Government have in this matter a golden opportunity to express their appreciation of the massive contribution that the miners have made over the years to the economy of the country. I hope that they will grasp that opportunity with both hands.
6.52 p.m.
Lord Varley: My Lords, I should like to support the case put so forcefully by my noble friend Lord Mason of Barnsley for the retention of British Coal Enterprise. In some respects, like other speakers, I am surprised that it is necessary to raise the issue again with the

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Government. One would have thought that it would have been in their best interests to have cleared up the matter many months ago.
As far as I understand it, it is not for want of trying. The Coal Industry Bill was before both Houses of Parliament for many months and, as was mentioned by my noble friend Lord Mason, questions about the future of British Coal Enterprise were posed time and time again. The coal industry is in private hands, the Coal Authority has been set up and British Coal's subsidiary, Coal Products, has been sold to the company management, yet the one organisation established by the industry to help to create jobs and viable enterprises in the devastated former coalfield areas appears—that is, unless the Minister surprises us tonight—to have no future.
My mind goes back to the establishment of British Steel Industries, an organisation that some would say was the model for BCE. British Steel Industries was established when the bulk of the steel industry was in public ownership and was formed to deal with the rundown and modernisation of that industry in the 1970s. I well remember some of the former chairmen of British Steel Industries; for example, Sir Charles Villiers, who brought great flair to the organisation because of his background as an industrialist and a merchant banker.
After the stock market flotation of British Steel, British Steel Industries was continued by the new British Steel Corporation. As far as I know, after many years of successful operation, it still continues. But the imperative for creating jobs and viable businesses in areas where basic industries like steel and coal have been run down rapidly is exactly the same. If it was right to set up British Steel Industries and continue it from the 1970s right through to the present day, why is it necessary to have so much doubt about the future of British Coal Enterprise? I hope that the Minister will comment on how it was possible to continue the job creating agency in one privatised industry but dither so long about whether it is possible to ensure the future of BCE.
The impressive record to date of British Coal Enterprise has been described most fully by my noble friends Lord Mason and Lord Dormand and, indeed, by the noble Lord, Lord Ezra. There is no need for me at this hour to repeat all the facts that have been laid before the House. However, I have some personal experience of the operations of British Coal Enterprise and have seen for myself its activities in Nottinghamshire and Derbyshire. I very much admire BCE's achievements. I am the Chairman of the Chesterfield Area Regeneration Team, which operates under the acronym "Chart '99". It is a job that I undertake on a voluntary basis. Chart '99 is a joint private sector and public sector partnership. BCE is a member of that body and an important component of it. Chart '99 is charged with the task of helping to co-ordinate the economic reconstruction of north-eastern Derbyshire, where all the pits were closed following the announcement of the President of the Board of Trade in October 1992 and the White Paper which followed. Indeed, as a result of government policy, there is no pit left in Derbyshire now.
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However, it is no good harping on about the past; we have to face up to the position which exists at present. We in north-east Derbyshire have been successful in our bid through the single regeneration budget and in getting money from the European Union for flexible business support measures. We have established a company limited by guarantee through which all the monies are put and properly audited—the sort of solution recommended by my noble friends. I want to assure the Minister that we receive tremendous support from the government office in the East Midlands and from Mr. Mark Lanyon, the regional director and his staff.
However, I must say to the Minister that this is not the time to weaken the links in our organisations not only in north-east Derbyshire but elsewhere in the country. If BCE does not have a sound and secure future it will weaken and undermine our efforts and, indeed, all the efforts that are being made to bring about hope in the former coalfield community.
Therefore, in my judgment, British Coal Enterprise has a job to do for many years and deserves a clear and unqualified vote of confidence from the Government. I hope that the Minster will take the opportunity to say firmly and unequivocally that BCE has a very secure future.
6.58 p.m.
Lord Peston: My Lords, I thank my noble friend, Lord Mason of Barnsley, for tabling the Unstarred Question. I also congratulate him on the cogent way that he put the relevant points. Noble Lords are indebted to my noble friend, to the noble Lord, Lord Ezra, and to my noble friends Lord Dormand of Easington and Lord Varley for the points that they raised. They are all experienced in the area. Indeed, two of them were former Secretaries of State, one was the head of what was then the National Coal Board and another the Member of Parliament for Easington, in Durham, which is very much part of the mining world. I am afraid the only ignorant and inexperienced person taking part in the debate is me, but I shall do the best I can.
The main factual points have been made and there is no need for me to go over them again. All I wish to do is to underline some of the points of principle. In particular, I wish to emphasise what my noble friend Lord Varley said. I, too, am puzzled as to why we have to raise this matter. We debated it fully when we were discussing the coal privatisation Bill. An overwhelming case was made then for a continuation of British Coal Enterprise and also for an early decision and a considerable commitment. I find it odd that my noble friend Lord Mason is put to the trouble of having to raise this matter again when this is Government business and the Government ought by now to have made an announcement saying, "Yes, we are going to continue it on this basis and for this period of time".
Enterprises like British Coal Enterprise make perfectly good economic sense. We know there has to be industrial change. We may disagree about some aspects of it but we know if our economy is to be dynamic things have to change. But what is also clear is that we do not want people thrown on the scrap heap. If people have to change, we want them re-employed. If

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one big business—in this case coal—goes into decline, we want other businesses to start up. In this case what we have is a model of its kind. What we are talking about—I again echo the words of my noble friend Lord Varley—is a partnership between private enterprise and public money. I have believed in that almost all my life as an economist. I cannot remember the first time I ever thought about it, but I am certainly talking about 30 years ago. However, when one mentions that now it is called "new Labour"; but I have to say that as far as I am concerned it is very "old Labour" indeed. It is also common sense.
The other point I should like to make on this subject is that we should not be ideological in this respect; we should be pragmatic. We should ask what will be effective. I emphasise how much better it is for us to invest public money in enterprises of this kind—and also to preserve communities rather than to cause them to break up—than to pay out vast amounts of social security benefit. I think my noble friend Lord Dormand of Easington said there would be antipathy from the Treasury, or he felt there was a Treasury angle to this. That puzzles me because the Treasury, certainly in my day, used to consist of fairly sensible people. I should have thought the Treasury would realise that it would be much better—certainly in the long run, but perhaps even in the short run—even in terms of public expenditure to put money into this kind of area rather than all the time just pay out, willy-nilly, social security benefits which are, in the end, nothing more than sticking plaster. They do not solve any problems; they just help people to get along.
The point about British Coal Enterprise is that it actually solves problems. That is well established. It has a proven record of success. We are not talking about something airy-fairy that we have never tried. This is something that we know we can do, and it works. I should add, too, that this kind of thing, as has been mentioned, is regarded as a model abroad. Our colleagues in the Union are learning from it, but it is also the approach that they themselves would use. They would certainly rather create jobs and create enterprise than pay out social security benefits. Again, they do that not on an ideological basis but because it works. I echo the remarks of the noble Lord, Lord Ezra, that this is about as inexpensive a method of job creation as any that we know.
Wearing my economist's hat, I strongly believe that one should always take a hard-headed approach to topics of this kind. I do not believe in pouring out public money solely because the miners are deserving. I am not saying they are not deserving but one can take a hard-headed approach to this. What we need to do is to look at the costs and the benefits to determine whether there is a positive net gain. In this case it is clear. If the costs and benefits are calculated correctly in terms of the jobs created, the communities saved and the savings of social security benefits, I am quite clear that there is a net benefit. I am quite clear, again, that this cannot just be left to the market. The central point is the need for the kind of sophisticated joint approach that we have had up to now.
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I conclude with a simple request. I have to tell the Minister that I was certainly under the impression, both when we did the coal Bill and subsequently, that we were going to get an announcement. I have to say in all honesty—I was responsible for certain aspects of that matter from these Benches—that I would have expected a statement by now. I find it hard to imagine why we have not had one. I cannot think of any benefit to the Government from not making a statement. I can see enormous benefits to the coalfield communities from making a statement. To be perfectly honest, even if it were to be a negative statement I think many of us would rather have that than leave the thing hanging around. I implore the Minister to make an announcement now although I am not convinced that he is about to get up and say, "Yes, I can tell you it will last for 10 years". But the messages he must take back are, first of all, the messages of support. I am sure that if we were dealing with this matter in what is called "prime time" there would be other speakers, all of whom would support what has been said already. The Minister must take back the message that our desire is to have from the Government an early and full statement of support for British Coal Enterprise, support for the funding and support for a considerable period of time.
7.6 p.m.
Lord Inglewood: My Lords, I am grateful to the noble Lord, Lord Mason of Barnsley, for tabling this important Question about the future of British Coal Enterprise which touches on matters about which he has such great knowledge and concern. I am also grateful to the noble Lords who have brought with them their great expertise and experience and contributed to today's worthwhile and wide-ranging debate.
The noble Lord, Lord Peston, modestly claimed that he was not as well informed as some of the other contributors to the debate. But I must begin by putting on record something which is obvious—I am probably the only non-participant in the coal privatisation debates in this House who is taking part in the debate today. As a northerner, and proud of it, I am obviously aware of the problems in the coalfields and of the sterling work that has been done in trying to make things better. Indeed, I did some of my political training in the area where the noble Lord, Lord Dormand, comes from. I do not suppose he voted for me but it would not have made any difference even if he had.
I wish to start by commending, as all other noble Lords have done, the work of British Coal Enterprise. Its efforts are well known and recognised and, as a number of noble Lords have said, not only in this country but also abroad. With the leave of the House, I do not propose to enter a debate about its achievements during the past 10 years other than to emphasise that there can be no doubt about the importance of British Coal Enterprise's contribution to economic regeneration in the coalfield communities and to the generation of work for those affected by the changes which have been taking place there. I must also record satisfaction that it has been perceived as doing such valuable work.

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The Government and British Coal have been exploring the future options for British Coal Enterprise for some considerable time. No final decisions have yet been taken. But obviously in the context of the privatisation of British Coal there is inevitably going to he some change, and we must be clear about that. However, equally, we must take forward the work that has been achieved and use the expertise that has been acquired.
I am grateful to the noble Lord, Lord Peston, for reminding the House that during the passage of the Coal Industry Act 1994 the Government indicated that British Coal Enterprise would be retained in its existing form throughout the transitional and immediate post-privatisation period. We have honoured that commitment and we also said in the summer that we hoped we would come forward with firm proposals by the end of the year. We do not feel we have yet reached that position.
However, as the House is already aware, funding has been agreed for British Coal Enterprise's job placement and training activities until March 1996. This should enable British Coal Enterprise to undertake the bulk of the remaining resettlement work for former British Coal workers. This service gives former miners and other British Coal employees access to a wide range of assistance, including career counselling, interview techniques and advice on retraining, pensions and financial advice. As the noble Lord, Lord Dormand, pointed out, unemployment is a scourge and long-term unemployment is the worst form of that scourge. We are all agreed that the work of British Coal Enterprise has been directed significantly at that particular problem. For the men and women affected by the contraction of the coal industry that work is vital for their future prospects. It is because the Government recognise the importance of that work that they have supplied the necessary funding.
In addition, the Government have now agreed to provide additional funds for BCE's workspace and venture capital activities to allow them to continue, again until the next financial year. That is a course of action which has been recommended by Mr. Neil Clarke, chairman of British Coal. It provides a further period for British Coal to identify future strategies for meeting the real needs of the coalfield communities over the longer term and avoids the risk of premature withdrawal from this important work.
There has been a tendency in our debate to present the future of British Coal Enterprise as a stark choice between, on the one hand, substantial on-going government support for self-standing British Coal Enterprise or, on the other, the break up and run-down of activities. That is an over-simplification of a complex issue. There is a wide range of possibilities which need consideration. These include various forms of partnership with other regeneration bodies at national or local level. Such options need thorough consideration before any firm decisions are taken. A continuation of funding into the next financial year provides an opportunity for this work to be undertaken properly.
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The comments of some noble Lords indicate that it is their view that the Government should accept full responsibility for the continuation of British Coal Enterprise in its present size and form. That option may appear to have some attractions but it is based on a misunderstanding. A significant part of the work of British Coal Enterprise is time limited. It is, of course, difficult to say precisely when the work of resettling and training former British Coal workers will have been completed. However, it is unlikely that there will be a significant amount of that work beyond March 1996. Needless to say, the resettlement skills developed by British Coal Enterprise may be applicable elsewhere. That possibility must be examined. But, inevitably, in a different context the nature of the work would change at least to some extent. Furthermore, job creation techniques, which achieved such success over the last decade, may not be the most appropriate for the next 10 years.
To give one example, British Coal Enterprise has built a substantial amount of managed workspace for businesses willing to operate in the coalfield areas. Demand for such workspace may not remain constant for the next 10 years. Clearly, therefore, we would not want to spend public funds on building further new space for it then to stand empty.
The nature of regeneration policy itself is evolving. We have seen the creation of the single regeneration budget. Does a centrally funded coalfield-wide regeneration body fit well with the current approach to regeneration, with its emphasis on local partnerships and a demarcation between fundholders and service providers? Furthermore, we must ensure that whatever takes place in the future is a responsible use of public money, where that is involved, and represents value to the taxpayer. And let us not forget that overall net assistance to British Coal Enterprise amounts to some £167 million-worth of public money. This all reinforces the need for a full and considered review of all the options before final decisions are taken.
Since the summer, British Coal has commissioned an independent consultant to advise, whose findings were received at the end of last year and have been made available to the Government. We have also discussed the future with British Coal and British Coal Enterprise. In addition, we have received a number of inquiries from the public and private sectors.
With the leave of the House, I should like to conclude this debate with an assurance on the part of Her Majesty's Government that we shall do all we can, as quickly as possible, to reach firm decisions, after consultation with British Coal and British Coal Enterprise itself, on the most suitable future for the enterprise. We shall then also consult more widely. We hope that we shall have identified and implemented the appropriate measures by the end of the next financial year. I hope that that answers the point of the noble Lord, Lord Ezra.
I am sure that the House understands that the Government acknowledge the important role played by British Coal Enterprise over the past decade in assisting regeneration of coalfield areas and helping those affected by the great changes that have taken place

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there. However, as I hope I have made clear, the future is not a simple choice between maintaining British Coal Enterprise as it is or running it down.
We must explore fully the relationship between British Coal Enterprise and other regeneration bodies in both the private and the public sectors. We must examine the scope for constructive partnership between them so that the regeneration work can be taken forward in a concerted, purposeful and cost-effective way.
Lord Dormand of Easington: My Lords, I am grateful to the Minister for allowing me to intervene. Before he concludes his speech, perhaps he can clarify a point which I raised. He mentioned the date of 1996. Will he say whether funding is to continue until March 1996, and whether it will be at the same level as in the past? I may have misunderstood him, but it is important that the matter is clarified.
Lord Inglewood: My Lords, my understanding is that the present funding is to be continued until the end of March 1996.
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We shall ensure that the strategy for the future is consistent with our current approach to regeneration policy in general.
The issues are complex. We must resist the temptation to jump to hasty and ill-founded conclusions. The issue is far too important for that. This evening's debate has been useful in highlighting a number of important points that will be the core issues under consideration as the review continues. I am sure that all noble Lords will agree that it is in the best interests of those in the coalfield communities, the employees of British Coal Enterprise and those who depend on it for their jobs, as well as for the country at large, that we get the answer right. We must not allow our own understandable impatience to prejudice the outcome.

Letchworth Garden City Heritage Foundation Bill
Reported from the Select Committee with amendments, and recommitted to an Unopposed Bill Committee.
House adjourned at sixteen minutes past seven o'clock.