Lords Sitting of 6 June 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 Oxford.

National Lottery and Gambling
Lord Allen of Abbeydale Lord Allen of Abbeydale asked Her Majesty's Government:
Whether they intend to study the extent to which the National Lottery, especially now that scratch cards have been introduced, is likely to give rise to problems of addictive or excessive gambling.
The Parliamentary Under-Secretary of State, Department of National Heritage (Viscount Astor): My Lords, the Government have directed the Director-General of the National Lottery not to license games as part of the National Lottery which he considers will encourage excessive participation.
Lord Allen of Abbeydale: My Lords, I am grateful to the Minister for that reply which falls a little short of answering the points lying behind my Question. Does he accept that the number of appeals to Gamblers Anonymous and the accumulating anecdotal evidence suggest that what was presented as a harmless flutter is causing problems to quite a lot of people? Are not the scratch cards with their characteristic of handing out small instant prizes which are designed simply to encourage the gambler to go on and on proving particularly addictive? These are early days, but has not the time already come to put in hand some well funded research and even possibly to go back to some basic re-thinking before an obsessive gambling culture really gets out of hand?
Viscount Astor: My Lords, I do not believe that there is any danger of what the noble Lord would call an obsessive gambling culture getting out of hand. It is important to remember that the National Lottery is generally considered to be at the softest end of the gambling spectrum. Low stakes, prizes, the odds of winning and the lack of skill are all involved. They will make the lottery and the instant win games less likely to lead to addiction or major losses than other forms of gambling that are available to the public.
Lord Stallard: My Lords, I believe that the noble Lord, Lord Allen, is absolutely right. There is a danger of a culture of addictive gamblers. Scratch cards are already proliferating. There are scratch cards for everything in every shop. There is no age limit for the people who can buy them, which causes a great deal of concern to parents and school teachers. The Minister ought to take the matter more seriously than he seems to have taken the original Question.
Viscount Astor: My Lords, I took the original Question very seriously. The point I was making concerned the National Lottery. Scratch cards have been around for a long time and have been in use for a number
1258
of years. Instant win games and cards were included in Camelot's applications for the licence to run the lottery. They are expected to be the important factor in the achievement of forecast revenue for the National Lottery distribution of funds.
The Lord Bishop of Oxford: My Lords, since there has been a change in government policy so as to promote and encourage gambling, does the Minister agree that the Government have a special responsibility to assess the effect of the new schemes on those addicted to gambling? After all, the Rothschild Committee on Gambling drew particular attention to the needs of that group. Calls to Gamblers Anonymous have apparently increased by about 17 per cent. over the past three months.
Viscount Astor: My Lords, the right reverend Prelate makes an important point. The Director-General of Oflot takes seriously the suggestion that the National Lottery games should not encourage excessive participation. He is actively considering the scope and nature of the research required. I hope that that will answer the right reverend Prelate's point. The Government's policy is that we should not interfere with the liberty of the individual to gamble, but we should take steps to protect the vulnerable.
Lord Avebury: My Lords, the noble Viscount says that he does not believe that the lottery scratch cards are leading to excessive patterns of gambling but he has just admitted that research has not yet been put in hand to show what effect the lottery has had on people's expenditure patterns. Will he instruct those who are investigating the matter to pay particular attention to the expenditure on the National Lottery scratch cards by people who are least able to afford it, such as those living on income support?
Viscount Astor: My Lords, it is early days with the National Lottery and one must not forget that scratch cards were only introduced at the end of March. Our market research at the moment indicates that on average most people spend slightly over £2 a week on the lottery. That is quite a small sum, but obviously it is important that the Director-General of Oflot monitors the situation on a regular basis.
Lord Finsberg: My Lords, does my noble friend agree that most of the arguments we have heard this afternoon are a repetition of the arguments from those who opposed the whole concept of lotteries from the start? Is it not time that they accepted that the will of Parliament is that there should be a National Lottery with the safeguards which my noble friend mentioned?
Viscount Astor: My Lords, my noble friend makes an important point and one with which I thoroughly agree. There is no question but that the National Lottery has been a success. Already, almost £600 million has been raised for good causes, fully vindicating the Government's decision to have a national lottery, and to have a private company run it. The benefits of the lottery are already being seen the length and breadth of this country: 297 projects have now been approved, involving grants of almost £72 million.
Lord Mason of Barnsley: My Lords, is it true that, at the same time, surveys indicate that donations to charities fell by £71 million in the first four months of the lottery

1259
being in operation, and that medical research, especially cancer research, is excluded from lottery donations? Does not that aspect of the matter necessitate an urgent review of the lottery operations?
Viscount Astor: My Lords, medical research is not excluded from the National Lottery. Obviously, a number of factors affect charitable income. Charities stand to gain from 20 per cent. of the net proceeds of the national lottery, which could be as high as £320 million a year. That money will be distributed by the National Lottery Charities Board.
During the passage of the Act we gave the assurance that we would monitor charitable income. We are indeed doing so. The evidence so far is that some charities are doing better and some are doing worse. It is too early to tell. It is important to remember that the National Lottery Charities Board expects as many as 200,000 applications this year. No body is ruled out from applying. The charities board has made it clear that medical research charities can apply for funding. It has also said that it will look in the first instance at applications from people suffering poverty.
Lord Rix: My Lords, is the Minister absolutely accurate when he states that 20 per cent. of the proceeds of the National Lottery goes to charities? Is not the correct figure in the region of 5 per cent., with the rest of the money going to different forms of grant aid, such as the heritage, the arts and so forth? Is not the figure of 20 per cent. a slight exaggeration in regard to charities?
Viscount Astor: My Lords, I was referring to the National Lottery Fund, 20 per cent. of which goes to charities.
Lord Donoughue: My Lords, I was tempted to ask the Minister whether he was aware—as I am sure he is—that this month is the 350th anniversary of the Battle of Naseby, which should remind him that these arguments between the Puritans and the Cavaliers have been going on for some time. My specific question is this: is the Minister aware that this morning Camelot, the operator of the lottery, announced its first year's financial results, which make it clear that over its licence period Camelot will take out upwards of £1.5 billion in profits and expenses? Is he further aware that a leading businessman has said that this kind of take is unacceptable while small lotteries are being squeezed, and has suggested a windfall tax to be distributed to the lotteries? Will the Minister comment on that statement?
Viscount Astor: My Lords, as I have said in this House before, the take over the seven-year period of Camelot's licence will be just over 5 per cent. of turnover. Camelot's bid retained a lower share of turnover for operating costs and profit than that of any other applicant, including Mr. Branson, who made a statement this morning on that issue.
Lord Harris of Greenwich: My Lords, will the Minister indicate, having referred, as he has, to the possibility of research, who will pay for that research? Will it be Camelot or the taxpayer?
Viscount Astor: My Lords, the Government will pay for the research out of the funds that devolve from the National Lottery. So it will be funded neither by Camelot nor by the taxpayer.

Vegetables: Pesticide Residue Limits
2.47 p.m.
The Countess of Mar The Countess of Mar asked Her Majesty's Government:
What measures they are taking to ensure that vegetables produced in the United Kingdom and abroad for consumption in the United Kingdom do not contain pesticides in excess of the maximum residue limits.
The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe): My Lords, the Government operate a substantial annual surveillance programme for pesticide residues in a wide range of foodstuffs, including vegetables. Generally, results are within statutory limits. On the very rare occasions when problems are found, the Government have a range of powers available. We have used these powers where necessary, and will continue to do so.
The Countess of Mar: My Lords, I thank the noble Earl for his reply. In view of the fact that many of the pesticides used are too poisonous to test on humans, how are the maximum residue limits set? Why, in the case of the recent carrot scandal, was the maximum residue limit raised when we should be aiming to lower the residue levels?
Earl Howe: My Lords, it is important to recognise that maximum residue levels are not in themselves safety limits. The maximum residue level that is likely to be left in the crop in question, under the approved method of use of the pesticide, is determined on the basis of experimental trials. A risk assessment is then made to ensure that consumption by a consumer of a sample of the crop with the maximum residue level would not exceed the acceptable daily intake for that compound. That ADI has a substantial margin of safety built into it.
On the advice of the Advisory Committee on Pesticides, Ministers agreed last year that the MRL for one particular compound, triazophos, should be set at a higher level in the light of recent data on actual residue levels. Since then, on a purely precautionary basis, the Government have issued new advice to farmers on the application of OP pesticides to carrots. But that did not in itself give rise to any change in the maximum residue limits in carrots for those OP compounds.
Lord Gallacher: My Lords, can the noble Earl say whether the maximum European Community residue levels for fruit and vegetables are observed by non-EC countries which export to the United Kingdom? Can he tell the House what checks are made in the United Kingdom on residue levels generally, particularly those coming from non-European Community countries, including at airports as well as seaports?
Earl Howe: My Lords, the working party on pesticide residues carries out extensive surveillance monitoring of the UK food supply. Surveillance monitoring involves the analysis of 2,000 to 3,000 samples every year for a wide range of pesticide residues. The number of pesticide/commodity combinations analysed is around 70,000. The surveillance monitoring effort is directed to areas where experience and intelligence show that it is most needed. To answer the noble Lord's question about produce from outside the European Union, enforcement action at ports can be taken, if necessary. Consignments containing residues in excess of MRLs can be seized and disposed of, or indeed refused entry into the United Kingdom.
Lord Ashley of Stoke: My Lords, in view of the great public concern about this issue, does the noble Earl consider that what he called "annual surveillance" is in fact sufficient? Is he aware that the recent scandal about carrots referred to by the noble Countess was only revealed when the experts stopped inspecting batches and began inspecting individual vegetables? Can he tell the House what further efforts can be made? Is he aware that the Pesticide Trust has suggested that there should be a special task force to look into this matter? Would the Government consider such a body, possibly with an independent chairman such as the noble Countess, Lady Mar?
Earl Howe: My Lords, the independent Advisory Committee on Pesticides has concluded that the elevated residue levels found in a small minority of carrots—I stress that—do not represent a threat to health. The Government have accepted the ACP' s advice and restricted the number of organophosphorous insecticide applications that can be applied to carrots. In approving any pesticide, we build in, as I said, substantial margins of safety in determining what are acceptable daily intake levels. Where those margins are at risk of being eroded—I stress that word too rather than "eliminated"—as in the case of OP residues in carrots, it is a prudent precaution to seek to restore those margins. That was the entire raison d'etre for the Government's announcement earlier in the year on OPs in carrots.
Earl Baldwin of Bewdley: My Lords, does the noble Earl agree that it is important that doctors should be able to recognise symptoms of pesticide poisoning when they present themselves? Will he perhaps have a word with his colleagues at the Department of Health to ensure that, if possible, all doctors are better trained in dealing with cases of chronic low level toxicity?
Earl Howe: My Lords, the noble Earl will be aware that the Chief Medical Officer has during the past four years circulated GPs with an advisory letter on pesticides and veterinary medicines and the possible hazards arising from their misuse. We keep the need to inform GPs under regular review.
Lord Cledwyn of Penrhos: My Lords, can the Minister say how the vegetables grown in this country compare with those imported from other European countries as to the content of pesticides?
Earl Howe: My Lords, it is very difficult to give a general answer to that question because different pesticides are used in different countries. However, our effort in targeting surveillance is based upon experience. We target those consignments and those crops which have proved to be most suspect in the past. I can assure the noble Lord that consignments coming into the UK from abroad receive their due measure of surveillance.
The Earl of Clanwilliam: My Lords, is my noble friend aware that he has clearly explained the expensive and extensive costs of surveillance, research and monitoring? Will he accept that all those activities are entirely unnecessary in the matter of products provided by organic farming?
Earl Howe: My Lords, my noble friend is a consistent advocate of organic farming. The Government are very much in favour of consumer choice, provided that it is informed choice. Organic produce is grown without the use of pesticides. But the Government would deprecate any implication that anything that was not organically grown was unsafe to eat. The UK has standards of safety in food production that are second to none in the world.
Lord Mackie of Benshie: My Lords, in view of the immense importance of pesticides to farming and the production of food in this overcrowded world, can the Minister tell us what the Government are doing to support research into mechanical methods; namely, producing sprayers which can be effective with smaller globules; producing plants which are resistant to diseases and do not need pesticides; and in general helping forward the spread of knowledge which can make food safe and at the same time ensure the supply of food to the people of this country and the world, which I am afraid that the present level of organic farming will never do?
Earl Howe: My Lords, the Government have an extensive research programme devoted to pesticides which we update on a regular basis. The control of pests on vegetables need not be undertaken purely by chemical means. There are very exciting possibilities in the field of biotechnology also. It is perhaps worth stressing—to balance the message, if I may—that carrots in particular make a useful contribution to a healthy diet. They are a valuable source of vitamins and they are delicious cooked or raw. Government dietary advice is to eat more fruit and vegetables, including carrots. I commend that advice to your Lordships.
Lord Mason of Barnsley: My Lords, is the Minister aware that if people stop eating carrots, they are bound to go blind?
Earl Howe: Yes, my Lords, but that does not affect the taste.
Lord Bruce of Donington: My Lords, in view of the noble Earl's observation that the standards that we apply are the highest in the world, will he give us an assurance that this is a matter which will remain of exclusive national competence? In order to ensure the maintenance of that position, will he consider making official approaches to the noble Countess, Lady Mar, so that she can be incorporated into the supervisory procedure?
Earl Howe: My Lords, the noble Countess's expertise in these matters is well known to all your Lordships. However, there are certain benefits in harmonising pesticide approvals across the European Union. It is generally to the benefit of business, both in this country and across the Community. I am pleased to say that we are making progress in that field.

Air Pollution
2.58 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
Whether they are considering further measures to reduce air pollution at times when weather conditions lead to harmful combinations of gases in certain areas.
The Minister of State, Department of the Environment (Viscount Ullswater): My Lords, the Government are currently reviewing the advice provided to the public during episodes. The case for additional measures, including traffic bans, in the event of particularly severe pollution episodes is kept continually under review.
Lord Campbell of Croy: My Lords, I am grateful to my noble friend for his reply. Can he confirm that such mixtures of gases in these circumstances occur in predictable places, where there are concentrations of motor traffic? Does he agree that sufferers from asthma in particular are likely to experience a worsening of their affliction when they are in those areas at the time?
Viscount Ullswater: My Lords, unfortunately, one cannot make such a generalisation. During normal conditions, ambient levels of most pollutants tend to be highest by roadsides. But ozone levels tend to be highest in rural locations, where traffic is sparse, as a result of ozone formation caused by the reaction of ozone precursors emitted from urban areas and reacting with sunlight. Everybody should be concerned about the effect on asthma sufferers, particularly parents of children with asthma. However, medical opinion is that the cause of asthma remains unclear and there is no convincing evidence that air pollution can cause asthma to develop in those who do not already suffer from the disease.
Lord Dean of Beswick: My Lords, is the Minister aware that Manchester comes within the "certain areas" referred to in the Question? Is he aware also that, from the cradle to the grave, the numbers of people dying in Manchester from the effects of the type of activity he mentioned are among the highest, if not the highest, in the United Kingdom? Can the Minister tell me, if not today then perhaps he can publish his response in the Library, the levels reached in the five largest metropolitan areas outside of London? In doing that, will he consider whether anything can be done to lessen the pollution in the city of Manchester because of its adverse effect on people in general?
Viscount Ullswater: My Lords, the Government monitor air quality extensively in major urban centres through their enhanced urban network. They are seeking to expand that network further, integrating local authority
1264
monitoring networks. I shall write to the noble Lord regarding the five largest metropolitan districts and the levels he asked for. However, as I indicated to my noble friend, the levels of primary pollutants will inevitably be higher in urban areas where traffic levels are higher. Government proposals published in January aim to identify those areas where national air quality targets are likely to be breached and target appropriate action to ensure that air quality is improved.
Lord Brabazon of Tara: My Lords, will my noble friend give encouragement to the use of natural gas vehicles? I declare an interest as the president of the Natural Gas Vehicles Association. Those vehicles have significantly lower levels of the type of pollution referred to in the Question.
Viscount Ullswater: My Lords, the Government are currently sponsoring research at the Transport Research Laboratory into a range of alternative vehicle propulsion technologies, including compressed natural gas. I hope that the results, when they become available next year, will point the way forward for cleaner vehicles in the future.
Lord Ezra: My Lords, the noble Viscount indicated that the Government are carefully monitoring the situation and are considering when the episodes, as he described them, occur. Can he tell us whether those episodes tend in normal circumstances, in urban areas, to occur at certain periods of the day and times of the week? If so, can measures be taken to deal with that situation?
Viscount Ullswater: My Lords, the timing of the episodes is rather difficult to predict. Ozone is a Europe-wide problem. Much of the ozone in last month's episode was carried into Britain from northern and central Europe on easterly airstreams. The correlation that the noble Lord is looking for, therefore, is not really available. The chemical smog that is made above industrial areas produces ozone concentrations at lower levels outside those areas. It is difficult to predict where the episodes may occur.
Lord Williams of Elvel: My Lords, does the noble Viscount recall that during the passage of the Environment Bill before your Lordships' House, the Government undertook—after many debates on air quality—to table an amendment in another place which would deal with the matter. Has the amendment been tabled? If not, why not?
Viscount Ullswater: My Lords, we shall be tabling amendments to the Environment Bill this week, implementing the proposals on air quality management that we published earlier this year and which were warmly welcomed. We are therefore undertaking to implement what I said in this House when the Environment Bill was before us.
The Countess of Mar: My Lords, does the noble Viscount appreciate that air pollution is not confined to urban areas? He said that ozone is prevalent in country areas, but problems also exist when farmers burn plastic bags and so forth causing dioxins and when they overspray in windy weather causing volatile pesticides to enter the atmosphere. There seem to be links between

1265
occurrences of asthma—it may be bronchial constriction rather than asthma—among children in rural areas. Can the Minister say what research is taking place in that field?
Viscount Ullswater: My Lords, all the items identified by the noble Countess acid to the number of pollutants which are present in the atmosphere individually or collectively. The same problem occurs with photochemical smog, except that in country areas the precursors would probably be widely dispersed before it developed. It is in urban areas, where there is a concentration of pollutant emissions, not only from motor vehicles but also from power stations and so forth, that problems of ozone are created which then cause the irritants which people with respiratory diseases find uncomfortable.
Lord Renton: My Lords, is there not another factor in his matter which must not be overlooked; namely, that in any weather more air pollution is caused by oil-fired and coal-fired power stations than by nuclear and other forms of generation? Will the Government ensure therefore that in any further development of our needs for electricity, priority is given to nuclear and other forms of generation?
Viscount Ullswater: My Lords, we need to bear those matters in mind. However, it is because half of the pollutants are generated by the transport sector that we need to turn our attention more precisely in that direction in order to make certain that we alleviate the problem. Of course, my noble friend has brought out an extremely interesting and valuable point.
Baroness Robson: My Lords, does the Minister agree that it is not only motorcars, but also diesel buses that cause pollution in our cities? Oxford is a perfect example. No doubt the Minister is aware that Oxford has entered into an experiment by starting to use a number of electric buses. What assessment has been made of the success and economics of using those buses?
Viscount Ullswater: My Lords, that goes back to the research taking place at the Transport Research Laboratory into the range of alternative vehicle propulsion technologies. When we seek to achieve improvements in our air quality in urban areas, it is important that we make certain that the public sector plays its part with public transport to reduce the number of cars being used. I am extremely pleased to hear that Oxford is using electric buses because the resultant pollution from them will be minimal.

Activity Centres (Young Persons' Safety) Bill
3.8 p.m.
Lord Dean of Beswick: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the order of commitment be discharged.
Moved, That the order of commitment be discharged.—(Lord Dean of Beswick.)
On Question, Motion agreed to.

Gas Bill
3.9 p.m.
The Minister of State, Department of Trade and Industry (Earl Ferrers): My Lords, I beg to move that the Bill be now read a second time.
I remember, after the war, thinking that gas—with those awful grey kitchen stoves and funny flickering railway lights and remembering, even as a child, the lamplighter going round the streets with his stick switching on individual street lights—was a relic of the Victorian era. It certainly was to me. But my goodness, how wrong could one be!
Gas over the years has transformed itself into being a clean, highly efficient, highly competitive form of energy. In my book, that is a staggering achievement and one which, in the 1950s, would have been quite unthinkable.
It is not, therefore, surprising that there has been a long history in this country—and elsewhere, for that matter—of the gas industry being organised on the basis of a monopoly. It seemed the logical and sensible thing to do. That dates back as far as the Gasworks Clauses Act 1847, which I doubt if many of your Lordships will be able to recall! Like much Victorian infrastructure, those provisions were built to last. Many of the ideas behind that legislation continue to be reflected in the current Gas Act.
But what our predecessors, nearly 150 years ago, did not foresee—and, indeed, what has only become clear in recent years—is that having a monopoly in the ownership and maintenance of the pipelines is not incompatible with having competition with the gas which is actually transported through the pipelines and which eventually ends up in the homes or businesses of the consumers.
The idea that one could separate the function of supplying gas from the operation of providing and looking after the distribution system—in other words, the pipes—has emerged progressively over the past few years as a successful and competitive market has been developed in the supplying of gas to industrial and commercial customers. That happened in 1988, and has continued since. It has happened to those premises which consume more than 2,500 therms a year. They have been able since then to choose their suppliers. In fact, independent suppliers have taken over half of the business in that particular market, and real prices to those industrial consumers have fallen by about a third.
This Bill is really a continuation of that experience by providing the necessary legislation to extend the benefits of competition to the 18 million or so domestic gas consumers in Great Britain. The proposal is that competition will be introduced progressively from next year, 1996, and it should be able to cover all of Great Britain from 1998. It will start with a pilot phase in the South West consisting of some 500,000 domestic consumers. A second phase involving 2 million customers will follow in 1997 and there will be competition nationwide in 1998.
By doing this in stages, it will be possible to ensure that the necessary technical, administrative and licensing arrangements will be operating properly before the competition is extended to all the 18 million or so consumers throughout Great Britain.

1267
The purpose of the Bill is to give consumers choice. It will enable them to choose the service which they want. It will provide a powerful incentive on the suppliers to become increasingly more efficient, for nothing concentrates the mind in business better than the thought that there may be somebody who can do the job which you are doing better or cheaper than you are doing it. It will provide a strong pressure for prices to be lowered. Independent suppliers have already said that they believe that they will be able to offer average savings of around 10 per cent. on British Gas's current prices.
The first supplier to confirm its intention to enter the market in the South West next year has said that it will cut existing bills by at least as much as 10 per cent., giving savings of £30 or so a year on the average domestic gas bill of £300. The provisions of the Bill will be supplemented—as was the case in the 1986 legislation—by licences. Drafts of the standard conditions of those licences have already been made available for public consultation, and they were considered when the Bill had its Committee stage in another place.
We are now considering all the comments which we have received and, while technical changes will certainly be required, we have not heard anything at this stage which would make us want at present to make substantial changes to the principles of the licences. Once we have finished that consideration, we will be able to publish the revised drafts. I hope that we will be able to do this, particularly for the supply licence standard conditions, while the Bill is still before your Lordships.
I think that it might help your Lordships if I were to outline the three important principles which have guided us in formulating the legislative and licensing proposals. First, there is safety. That is an issue, quite obviously, of the greatest importance. That is why the Government asked the Health and Safety Commission for a thorough report on our competition proposals. It made that report; we have published that report; and we have accepted that report. Its recommendations will be implemented by the Bill, by the licences or by separate regulations under the Health and Safety at Work etc. Act 1974.
British Gas will continue to provide a first-class safety service to customers through its pipeline business which is called TransCo. Members of the public will have a single, national emergency telephone number which they can contact if they suspect that there may be a gas leak, whether that is in the home or in the street.
Secondly, I would like to give some assurance about that horrible expression which is sometimes used. I have heard the noble Lord, Lord Clinton-Davis, use it. I expect he will use it again today, but I hope that he will not because I shall mention it for him. It is that horrible expression "cherry picking". That is the idea that new suppliers will just pick and choose the best customers—those assumed to be living in the largest houses and who therefore use a lot of gas—and will just ignore the rest who would then have to face higher prices from British Gas as a result.
But both theory and experience suggest that fear is wholly misplaced, and that any relative difference in prices which may emerge must be seen against the likely reductions in overall prices. Competition itself limits the
1268
ability of suppliers to pick and choose because it gives that right to customers. If all suppliers were to aim only at a small part of the market, there would be insufficient business to go round and the margins would be minuscule. Suppliers are much more likely to seek a broad base of customers in order that they can build up a strong market share.
Experience in the industrial gas market supports that. When we opened that market in 1988, people expressed those very doubts and thought that suppliers would just pick the best customers. But that has not happened. Instead of prices rising, industrial customers of all sizes throughout Britain have seen substantial price cuts—averaging about a third in real terms—since competition started. But in order to ensure that there is no chance of that happening, we are taking some measures which are designed to add to the market forces in bringing the benefits of competition to all customers. Not only are we proposing to impose on suppliers an obligation to supply on request any customer who resides within their licence area, but we are making that choice a real one by requiring suppliers to offer a variety of different payment methods. And there will be a requirement for the supplier to publish the terms on which he will supply the gas.
The third important point is to provide effective protection to older or disabled customers or to those who have difficulty in paying their gas bills. All suppliers to the domestic market will be required to provide a number of special services for older and disabled customers which, in the future, will all have to be free of charge. These services will include such things as a gas safety check of the customer's fittings and appliances; special controls and adaptors for prepayment meters and gas appliances; repositioning of meters; special means of confirming the identity of callers; and many others. Where customers get into genuine difficulties, they will be able to have recourse to the debt and disconnection procedures which all suppliers will have to follow. Those procedures will include offering payment plans and prepayment meters in order to help the customer to be able to discharge his liabilities and to pay for his gas.
I am afraid that the Bill itself contains some pretty technical stuff. This particular subject is not what one might call light tea-time material. I think that it is only fair to warn your Lordships that I am afraid that it will be necessary for me to put forward a number of amendments during the course of the passage of the Bill. I will endeavour, though, to ensure that, wherever possible, your Lordships receive good notice of those amendments, which will be mainly technical, together with a written explanation of why they are being made.
The Bill's main task is to divide the old "public gas supplier", which was at the centre of the Gas Act 1986, into the three separate types of gas company which will be appropriate for competition. The first type of company will be the public gas transporter. It will operate the pipelines. That function will remain a monopoly at the local level. The second type of company will be the gas supplier. It will offer consumers contracts for the supply of gas, and it will have the responsibility of actually providing services to the customer. It will be possible for several suppliers to be licensed for the same area so that they can compete with one another for the business of

1269
supplying the gas to individual households. The third type of company is the gas shipper. It will have the specialist function of arranging with the public gas transporter for, as it were, shoving the gas into the pipe and then ensuring that it gets out at the other end into the consumers' premises. The Bill allows an organisation to act either as supplier or as shipper or both. However, public gas transporters must be separate legal persons.
The Bill amends Part I of the Gas Act 1986 in order to reflect this new industry structure and the consequences of competition. Clauses 1 and 2 adapt the duties of the Director General of Gas Supply and the Secretary of State to the new framework and they put in place additional safety considerations. The Bill introduces a new licensing framework, which is appropriate to the three new types of gas companies, together with certain exceptions and exemptions.
Licences will be granted by the Director General of Gas Supply. These will normally be on standard conditions and they will be set initially by the Secretary of State. That will ensure that the conditions are the same, unless special arrangements are justified. Ministers will have a reserve power of veto over subsequent changes to the standard licence conditions or, where changes may be made to those conditions as a result of a reference to the Monopolies and Mergers Commission, a power of veto over the reference itself.
The Bill provides for exclusive areas for distribution of gas by public gas transporters. We expect that British Gas TransCo will continue to undertake the great majority of gas transportation throughout Great Britain. But there will be scope for other companies to compete for licences to convey gas to new areas. That will help to encourage the extension of the gas network. There are also arrangements to ensure that supply licences do not unfairly exclude pensioners or the disabled or those who are likely to default on payments. And there are provisions governing the coming into effect of the supply licences during the pilot phases and how applications for licences may be made. The Bill sets out the scope of conditions which may apply to licences, including the arrangements which may enable certain costs to be shared among all suppliers. All those matters, together with the arrangements for the standard conditions of licences, are set out in Clauses 3 to 8 of the Bill.
The new "gas code" is proposed in Schedule 2. That replaces the one in the 1986 Act. It sets out provisions on metering; on the supply of gas to consumers; on the handling of gas escapes; and on rights of entry. It also provides for deemed contracts where consumers are taking a supply of gas but where they do not have a contract with a supplier.
The Bill provides new powers for the Secretary of State to direct the operators of certain gas processing facilities in order to make them available to other people. These powers fill a gap in the present regulatory arrangements and they complement the existing powers which relate to offshore pipelines. The Bill also contains a number of detailed modifications to the existing Gas Act, reflecting the introduction of competition, and it contains transitional arrangements in order to facilitate the reorganisation of the industry. These are set out in Schedules 3 and 5.
1270
The whole purpose of this Bill is to bring the benefits of competition to gas consumers all over the country—and in many different ways. Perhaps I may highlight just three of them. The first is that competition will give a new commercial impetus to energy efficiency as suppliers compete, as it were, to the warming of houses rather than just to selling therms of gas. In the past, when there was a monopoly, trying to get energy efficiency programmes to work has been rather like pushing water uphill. If you run a monopoly you do not increase your business by actually selling less gas. Life just does not work that way. In the same way you do not set out to trim a tree if you are sitting on the branch which you are proposing to cut off.
But competition changes all that. In a competitive market a supplier can win business by being more competitive than his opponents. A competitive supplier is interested in the size of his particular slice of the market and not the total size of the market. It will, therefore, be in the supplier's interest to promote energy efficiency as a means of getting more custom, even though the total consumption may fall. By harnessing the power of the market to the cause of energy efficiency, we believe that substantial gains are possible. The new funding for the Energy Savings Trust that the Government have announced will get these initiatives off to a good start.
The second benefit which the Bill will provide is that consumers will welcome the opportunities of having cheaper gas. New organisations are already talking about charging 10 per cent. below the present British Gas prices when the pilot starts next April in the South West.
The third benefit which the Bill will produce is that it will bring service to the forefront. After 150 years of monopoly, there is now a tremendous opportunity for the consumer to turn the tables on the gas supplier and for the consumer to say what he or she wants as opposed to just sitting back and getting whatever is provided, and having to pay the bill without any alternative.
The Bill has been widely welcomed not only by the gas industry—including British Gas, which may surprise your Lordships—but by consumer bodies, including the Gas Consumers' Council which will play an important part in the new market. Each of those interests has qualified its welcome with its own particular points, but welcomed it they have.
I hope that your Lordships too will welcome the Bill. I have great hope, now that noble Lords opposite have done away with Clause 4 and all that jazz and have turned their backs on nationalisation that they will agree that privatisation of the gas supply is a good thing. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(Earl Ferrers.)
3.27 p.m.
Lord Peston: My Lords, I thank the Minister for introducing this most interesting Bill. He is right about it being technical. I glanced through it during his speech and

1271
wish to refer your Lordships to Schedule 2, paragraph 25, which is headed, "Gas meters and fittings not to be subject to distress". Sub-paragraph (2) states:
"In the application of sub-paragraph (1) (a) above to Scotland, for the word 'distress' and the words 'in bankruptcy against' there shall be substituted respectively the word 'poinding' and the words 'for the sequestration of the estate of'".
I hope that in due course your Lordships will not be distressed by having to discuss such detail.
Perhaps I may make four general points at the outset and reassure the Minister by saying that I welcome the Bill, mainly on the ground that it enlarges the scope for competition, which must be to the advantage of most consumers. I use the word "most" advisedly because there is a question to which I must return; namely, whether "most" can be replaced by "all".
When the 1986 Act was debated, the central focus was for or against privatisation. The Government argued for a regulated private monopoly. The Opposition took the view that if the industry was to be a monopoly it should remain in public hands. However, some believed in the classical view that whether or not privatisation was good, it was vital that the newly privatised industry structure should be one of competition. The Government resisted that. The most that they were willing to allow was that competitors of British Gas could use its pipelines to supply large industrial users. Subsequently that was extended to smaller industrial users.
In essence, the Bill recognises the original error of setting up a private monopoly and seeks to rectify that. It is worth recalling that the previous director of Ofgas accused British Gas of anti-competitive practices and the Monopolies and Mergers Commission ruled that some of British Gas's practices operated against the public interest.
My second general point is to repeat that I recognise how technical the Bill is. Therefore, much of what I wish to say about it is best dealt with in Committee. This afternoon I shall indicate those areas of the Bill which are most in need of clarification and change.
Thirdly, it is difficult and probably futile to debate a subject like this without referring to general energy policy. But that is what we are obliged to do. Despite requests from all sides of your Lordships' House, no time has been found to debate the White Paper on nuclear power. That would have been the ideal context within which to place the future of the gas industry. Whether we are looking at the demand for coal, the scale of nuclear production, the use of gas for electricity generation, who will be the new entrants to the gas industry or for how long gas reserves will last, all those matters need to be considered if we are to take a rational view of this measure. But we shall not be able to do that.
Fourthly, the Bill raises important questions about the regulatory framework. Is it working well? Can it be made to work better? The questions which arise in that regard are to do with what is called regulatory capture and disclosure of information which should be in the public domain but which firms claim is commercially confidential. Of course, we must look also at the balance of the interests of shareholders and consumers.
1272
Now perhaps I may indicate some parts of the Bill which I consider to be the most important. On that, there is one further general point to be made. Much of the Bill amends the 1986 Act. One reason for that is the need to provide for the extension of competition. But it may be that the Bill has amended that Act for other reasons too and we shall need to pursue that.
I start with competition itself. The Bill refers to "effective competition". As an economist, I am not at all sure what the Government have in mind. I understand what competition is but I do not understand the expression "effective competition". I shall table an amendment to clarify the meaning of the word "effective".
In that connection, perhaps the Minister will be able to tell us whether he has had any indication of the number of potential new entrants in the long and short term and who they may be. There is an image that the competitors will be small relative to British Gas. Nothing could be more mistaken. I presume that some of the new entrants will be massive organisations; for example, the oil companies.
In another place the Minister was asked about the probity, financial and otherwise, of possible new entrants. He said that that would be dealt with by the director general. That may well be right, except for the lack of accountability of the director general. Since it is not obvious that the maintenance of supply can be guaranteed and the supplier of last resort function remains problematic, to say the least, we need further clarification of that. Again, in due course I shall table a probing amendment which will enable the Minister to say more about that.
I note in the Bill the repetition of the phrase that is in the 1986 Act:
"to secure that, so far as it is economical to meet them, all reasonable demands in Great Britain for gas conveyed through pipes are met".
Again, apart from the question of interpreting what is meant by "economical" and "reasonable" together in the same sentence, we need to ask whether that condition has always been met in practice since privatisation and whether the wording is correct for the new competitive circumstances.
That relates to the problem of whether all consumers will gain. It is alleged that in existing circumstances some high cost consumers are helped by cross-subsidisation, which is feasible given British Gas's monopoly power. I think that the Monopolies and Mergers Commission said that there would be some consumers who would lose as a result of this new measure. It states:
"We recognise that, while introduction of competition may well result in a reduction in the overall level of prices, some groups may be worse off".
As noble Lords know, I have a rather low opinion of the Monopolies and Mergers Commission's activities in recent years, and some of its reports have been bizarre, to put the matter at its mildest. The Consumers' Association, which, like the other consumer organisations, supports the Bill, has written to a number of your Lordships saying that it will benefit all consumers. The National Consumer Council is a little more cautious. What is the Government's opinion? Is the Monopolies and Mergers Commission mistaken? Can we be assured that, without a shadow of doubt, all consumers will benefit?

1273
Furthermore, on consumer protection, noble Lords will have heard from the Gas Consumers Council. It says:
"We believe strongly that the move to a competitive market should not require the relinquishing of major statutory principles inherent to consumer protection, particularly since the Gas Bill does not give the Director General an overt duty to secure effective choice for gas consumers".
That is an important matter to which I shall return in Committee.
A most important part of the 1986 Act was Section 17 on meter testing and stamping. I am sure that all noble Lords will have acquainted themselves with that section of the 1986 Act. That is replaced by paragraph 13 of Schedule 3 to the Bill. However, there appear to be important changes which involve the director general. Meter examiners are now to be members of his staff, whereas before they were appointed by the Secretary of State. Again, without prejudging whether that is in the interests of consumers, we need to examine carefully the new words.
That takes me on to:
"the interests of those who are disabled or of pensionable age".
I am aware that that repeats what is in the 1986 Act and nothing that I say should be interpreted as being unsympathetic to those groups, as I approach both categories myself. However, I must ask why it applies only to them and not the poor in general.
En passant the noble Earl referred to those who have difficulty in paying their gas bills as being a responsibility, but I see nothing at all in the Bill which refers to that. Therefore, I should like clarification.
In that connection, we should note that all that the relevant powers that be—the Secretary of State and the director general—have to do is to "take into account". Why should they not be obliged to take into account any action by gas suppliers which are to the detriment of very poor people, especially in the light of my question of whether all consumers will gain? That is the view of the National Association of Citizens Advice Bureaux and I agree with it. Noble Lords will be aware of the existing code of practice which provides a number of important services free to the old and disabled. Will that code of practice continue? What is its statutory basis? Will it apply to all new entrants to the industry?
On pensionable age, we have the twin difficulties that at the moment the pension ages for men and women differ but in future, as the method of equalising, the age for women will be raised. When we are discussing couples and the question of pensionable ages arises, can we assume that the lower age will be relevant? When we equalise pensionable ages, which I favour—and in this case they are being raised—for that purpose, why should not the pensionable age for couples be deemed to be 60?
There is considerable interest in the environmental reference in the Act and the Bill. Again, we shall need to explore whether extra safeguards will be needed in the new commercially competitive environment. The Country Landowners' Association has written to many noble Lords on the environmental impact of the laying of new high pressure distribution pipes. Those fears are serious and we must address them.
1274
A similar point applies to safety. Gas is one of the most dangerous substances to be found in peoples' homes. I have been asking people what they think is the most dangerous substance in their homes. The list is enormous but gas is certainly on it. Therefore, there is certainly a public interest in ensuring safety. If appliances are installed poorly or are not well serviced, or if problems such as leakages are not dealt with promptly and efficiently, the danger is to neighbours as well as to the household immediately affected.
Although it is important not to discourage entry into this market, it is vital that all suppliers have the same obligations in regard to safety. In Committee we shall raise questions about so-called Corgi standards. The Gas Consumers Council has reported an increase in the number of complaints that have been made against registered installers. After the enactment of the Bill there is a danger that those problems will increase. We shall therefore need to look at a statutory foundation for standards of service in installation and repair.
The question of licences is largely a matter of detailed scrutiny but I should like to make some general points. The noble Earl has given us useful information about the progress that he has made. When will we have the details of the licences that will be offered? He stated that he hoped that we would have them during the passage of the Bill. Is it too much to hope that we could have the detailed forms so that we can debate them by means of amendments in Committee? We all agree that we cannot accept these licences sight unseen; they must be subject to parliamentary scrutiny.
In raising the following aspect of an obligation to supply, I declare an interest, which is that I live in a block of flats. Will an obligation to supply apply to households or to premises? Will there be an obligation to supply each individual flat owner, or is the obligation to supply the whole block? That is not a trivial matter.
All those matters relate to amendments to Section 10 of the 1968 Act which is contained in Schedule 3 to the Bill. I shall reflect on what the noble Earl has said, but it appears that there is no statutory obligation to supply individual customers. We shall look at that more carefully at a later stage.
The subject of licences leads on to the role of the regulator. Regulating a private monopoly involves different considerations from regulating a competitive industry, albeit one in which competition will be less than straightforward. I cannot believe that the new job will be any easier. I add in parenthesis that I have no intention today of discussing the pay of the regulator, although in my view all regulators need careful scrutiny, especially the one or two who perform their jobs in a less than satisfactory manner.
I shall take the opportunity at the next stage of the Bill of putting down amendments to clarify the role of the regulator, especially in regard to answerability to consumers, shareholders and the public. There is an element of arbitrariness in the scope of the regulator which should be examined. Can the Minister confirm that in the Bill the Secretary of State appears to be giving himself new powers akin to those of the regulator? That matter should also be examined in detail.

1275
I move now to the area of transparency. Competition must be based on full information if it is to work properly: that is one of the oldest propositions of economics. As Adam Smith emphasised, firms intrinsically hate competition and find every reason under the sun not to compete and to justify secrecy. The Government have fallen for that nonsense on more than one occasion. Consumer protection requires that full information is available to everyone as to the prices charged by all firms and the terms and conditions on which supply is made available.
The current example of Which? magazine offers a useful comparison of best buys in telephone services. I am sure that the Consumers' Association and Which? will do the same good job in relation to gas. But we cannot rely on such an organisation, excellent though it is, to perform a job which is essentially one for the public sector and for government. There must be no secret contract and no small print. That is a matter of law and something which should not be left to market forces. The National Consumer Council suggests that the responsibility for providing consumer information enabling national choice to be made should lie either with Ofgas or the Gas Consumer Council. That is worth pursuing further. As the Gas Consumers' Council asserted, nothing in the Bill should lower the degree of consumer protection that is already enshrined in statute.
As the noble Earl stated, before the changes envisaged in the Bill come into force there should be some pilot exercises. Can the Minister tell us later this evening the details of those studies? What is their purpose? Will they be published? If problems are discovered, how will that effect the legislation, the licences or the regulation? Parliament in general and your Lordships in particular, I am sure, would wish to be informed of those studies in order to be able to comment on them.
I have tried throughout my speech to be constructive. If there is to be a widening of competition it must serve the intended purpose of lowering prices and improving services to consumers. For firms to make money out of those circumstances is incidental to the main aim and is not the primary objective. The Bill does not go far enough to help the consumer but we can improve upon that situation. Having said that, I should like to reassure the Minister that, subject to those remarks, the Bill is welcome.
3.45 p.m.
Lord Ezra: My Lords, I wish at the outset to declare an interest. I have been in competition with the gas industry in one way or another since 1947. While I was in the coal industry I fought hard to build up coal's share in the markets in which gas had penetrated. More recently, I have been involved in competition within the gas market as chairman of an independent gas supply company. Over the decades, therefore, I have gained considerable knowledge of the gas industry from the outside, and I agree with the tribute that was made by the noble Earl to the enormous technological progress that has been achieved by the gas industry in the long period in which I have been involved in competing with it.
1276
When I started, coal was exclusively used as their feed stock; then they moved to oil; then they moved to liquefied natural gas that was imported from Algeria, and finally to natural gas that was obtained from the North Sea. The most outstanding achievement was the way in which all the gas appliances were changed throughout the country. We should pay tribute to that great industrial achievement in this country.
Creating competition within the markets for gas has taken many years. That is the object of the Bill and something that from these Benches we fully support. It was intended to be introduced by the Oil and Gas (Enterprise) Act in 1982. That Act gave free access to gas pipelines. However, there was one snag. No one could get hold of any gas because British Gas bought it all. The situation continued after the Gas Act 1986 which confirmed the monopolistic position of British Gas. The only change was to a private monopoly. I recall the debates during the passing of that legislation. I was one of those who raised the question of competition. I received the answer that there was competition with other fuels. When I argued that many consumers, particularly the smaller ones, were locked into gas I was told that nonetheless there was freedom of choice.
It was due to the intervention of Sir James Mackinnon, the first director general of Ofgas that competition was introduced into the industrial and commercial gas markets. It took a reference to the Monopolies and Mergers Commission in 1988 and to the Office of Fair Trading in 1991 for that situation to be brought about. Approximately 52 per cent. of the total gas market is now open to competition and over half of that percentage is supplied by independent operators.
The Bill is concerned with the opening up of the remaining 48 per cent. of the market which is represented by domestic consumers, If, as is proposed, the market is fully opened up by 1998, it will have taken 16 years to achieve full scale competition in the gas market, involving three separate pieces of legislation, two references to the Monopolies and Mergers Commission and one to the Office of Fair trading. At last we are getting there.
In spite of the present criticisms, British Gas provides a good service to domestic consumers. I happen to be one myself. Since December 1986 domestic gas prices, excluding the effect of VAT, have fallen by 22½ per cent. in real terms. The supply is reliable, there is a good back-up service, and safety is given absolute priority. Further, elderly and infirm customers are specially cared for and provision is made for those who have difficulty in meeting their bills. So it is fair to ask whether the new arrangements proposed in the Bill will improve on that or, at the very least, not in any way weaken this already good service provided to customers.
There is at present a common price for domestic gas throughout the country. Price freedom is henceforth to be allowed. The noble Lord, Lord Peston, referred to that point. But I believe that we should ask what the impact of that will be on those consumers furthest placed from the points of supply and taking only small quantities. The Minister gave us an assurance about preventing "cherry picking", but can he give an indication of the range of prices likely to be anticipated under the new regime?

1277
Service is a vital ingredient and is of relatively much more importance to domestic than to industrial consumers. Can the present high level of service clearly given by British Gas be assured when the market opens up? Above all, as mentioned by the noble Lord, Lord Peston, will the elderly, the infirm and those having difficulty meeting their bills be treated at least as well as they are at present?
British Gas has a good record of dealing with safety problems, to which the Minister and the noble Lord referred. TransCo, the transportation arm of British Gas as now reorganised, will retain responsibility for dealing with gas leaks and other risks. But the consequent repairs, after the risk has been dealt with, will be a matter for the consumer to sort out with private sector operators. How will that compare with the present situation when British Gas can deal with the whole matter at one go, thus avoiding consumers being deprived of gas supplies for a period, which could be serious if it occurs in winter? Prices, service and safety represent essential issues. Domestic consumers who have been used to high standards under the regime of British Gas will need to be reassured under the new regime.
In that connection, I must say that I was disturbed to note that, in Clause 1 of the Bill, protecting the interests of consumers of gas is given a secondary priority. That is surely a matter of prime importance. I would welcome the views of the Minister as to why it has been given such a secondary priority. A further duty which has also been accorded a lower priority is the promotion of efficiency in the use of gas. I find that extraordinary in the Government's oft-repeated commitment to improve the environment and diminish harmful emissions. Indeed, the Minister referred to the importance that the Government attach to energy efficiency which he thought could be promoted by competition, but why has that been made a secondary duty in the Bill?
A welcome feature of the Bill is the retention of the Gas Consumers Council. It has proved itself to be a worthy champion of the domestic gas consumer. It is regrettable that the Government have refused similar arrangements for other privatised fuel industries.
I turn now to the licensing arrangements. The draft transportation, supply and shipper licences have been issued, although they may be changed. We are told that the revised version of the supply licence, for example, will be available to us in sufficient time for us to debate it at later stages. Those licences fill many of the gaps left open in the Bill. However, it could be argued that too much has been put into the licences and too little into the Bill. That continues a recent trend in legislation to minimise what is in Acts of Parliament and to maximise what is left to discretion. It means that changes on quite major issues can be made without parliamentary scrutiny. That is an issue which will undoubtedly be raised as the Bill goes through its other stages in the House.
As a result of the Bill, and in particular the granting of licences, Ofgas will have its powers substantially enlarged. Therefore, it is of increasing importance that it should operate in an open and accountable manner. Indeed, I believe that consideration should be given to an appeals procedure.
1278
In an operation as complex as the opening up of the domestic market for gas, it is right that there should be pilot exercises. We are very pleased that the Government have decided on that procedure. We have been told that such exercises will take place in 1996 and 1997. However, it is a matter of concern that neither the DTI nor Ofgas propose to issue reports on the conclusions to be drawn from the pilot operations. That was particularly requested by the Trade and Industry Committee of another place in its report of 23rd November 1994. The committee recommended that,
"the DTI and Ofgas should set out how they propose to monitor the impact of the limited competition during the transitional period, what arrangements there will be for consultation and parliamentary scrutiny, and what criteria they will use to assess the success of competition in the pilot areas. Provision should be made for reports to the House on experience in the pilot areas before further steps are taken".
That seems to me to be an eminently sensible proposition which, however, the Government appear to have rejected in debates in another place and in their answer to the Select Committee's report. It would be helpful if the noble Earl could comment on the situation. Further, can the Minister also indicate whether there could be a delay in introducing the first pilot scheme due to disagreements over the Network Code—a very complex arrangement— which was referred to in this morning's edition of the Financial Times?
There is one further aspect that I should like to touch upon briefly; namely, that of the assignation of rights and liabilities which is contained within Schedule 5 to the Bill. Paragraph 2 of the schedule, as currently drafted, would permit British Gas to assign contracts, without counter-party assent, to an affiliate. That has raised concerns with some of the gas producers who are parties to those contracts. I can see merits on both sides of the argument. On the one hand, companies which have invested significant sums of money against the security of their gas contracts are troubled if the contracts are assigned to a subsidiary without the financial strength of the parent; on the other hand, conditions in the market have radically changed and some discussion and flexibility may be needed.
The assignment of those contracts to a subsidiary does not seem to me to give British Gas an easy option to repudiate them. It would be a very serious step for a company like British Gas to walk away from a subsidiary. I am sure that that is not in the company's mind. It is clearly an important issue and I shall be interested to hear the noble Earl's views on the subject.
The Bill represents the conclusion of the long process of opening up the gas market to competition with which, as I indicated, we on this side of the House agree. British Gas generally provides a good service to its domestic consumers and has kept prices under control. It is essential that the standards set by British Gas, particularly in its treatment of its consumers who are elderly, infirm or on low incomes, are maintained at least: at the present level, if not improved upon. More emphasis needs to be given in the Bill to the duty to protect the interests of consumers and to promote energy efficiency. In my opinion, a better balance needs to be struck between what

1279
is contained in the proposed licences and the Bill itself. I am sure that these issues will be covered at subsequent stages of our debate.
4 p.m.
The Earl of Caithness: My Lords, first I should like to declare none of my interests. I have no shares in British Gas or gas companies, nor do my children. I am not paid by gas companies, although I admit that I have asked for briefing from some and received unsolicited briefing from others. I have even received unsolicited briefing from a company that appears to have changed its name following some pretty bad publicity. I sometimes wish that we could do the same!
The unease that I feel over this Bill is concerned with its principle. It affects a company that is already in the private sector. Therefore, the share price will be affected. I do not like any government to do that, and that is why I declare an interest in having no shares. It is the principle that I dislike. It is detrimental to the share price, and that is bad. I fully approve of the objectives of the Bill. As my noble friend the Minister has said, it will give consumers choice. I am all for consumers having choice. I may benefit from it in London, but I certainly will not benefit in the country. The greater competition that the Bill will offer is undoubtedly good for the industry and for us.
I believe that we must bear in mind two forms of competition. So far my noble friend the Minister and the noble Lords, Lord Peston and Lord Ezra, have concentrated on competition within the United Kingdom. I wish to touch on that matter and also competition worldwide. So far as competition within the United Kingdom is concerned, there must be a level playing field. (I know that my noble friend the Minister loves expressions like that.) At the moment, there is not the transparency that the noble Lord, Lord Ezra, mentioned. We need that transparency so that consumers can make a rational choice. The noble Lord, Lord Peston, mentioned the Which? report on telephones. We need to have that information, not in a magazine, but clearly presented. It means that each company needs to have information about the others so that there are no hidden costs, and one company is not forced to disclose its prices and others do not. That is wrong, and we must not allow that to happen in the competitive domestic market.
It is also important that the companies which stand to make a good reward within the gas business also suffer the same risk. One cannot have one lot of companies subject to a different risk from another lot of companies. The playing field must be level for consumers and the companies. We in this country are extremely good at opening up our market to competition. As a result of this Bill, state-owned companies will come into our market when there is not the remotest chance of our getting into their home markets. That point needs to be borne in mind.
That takes me logically to the next step: worldwide competition. I do not believe that we realise just how lucky we are in this country to have a company of the stature of British Gas. Whatever has been said recently— I make no judgment upon whether it is true or false—we have a world-class company with world-class people. It is
1280
a world leader and is a huge asset to UK Limited. Here, I put on my old Foreign Office hat. When travelling in the Far East, in particular, I was struck by how immensely important it was for any British company that wished to do business overseas, particularly in that market, to have a strong home base and to be able to provide exactly the same services in the countries in which it wished to do business as it proved it could offer at home. I believe that we must always have that in the back of our minds when we look to divest the monopoly situation from British Gas. We need to leave the company with the right amount of infrastructure in this country so that it can legitimately go abroad and say that what it has done in the United Kingdom can work in that particular market, too. Without that added strength the marketing opportunities for British Gas will be reduced; this in itself will be detrimental to UK Limited. I am sure that none of your Lordships wish that to happen.
I turn to the pipeline situation and TransCo. This is a unique operation. One is considering something like 160,000 miles of pipeline, which is about six-and-a-half times around the world. That is a fundamental base on which British Gas can sell its expertise worldwide. I believe that the Bill has it about right, and I do not wish to see any change.
So far as I am concerned, one other point in the Bill deserves brief mention at this stage I refer to the existing gas contracts which have been mentioned by the noble Lord, Lord Ezra. He is right to say that there are arguments both for and against a change. However, some of the briefing that I have received tends to put the companies that wish to seek a change in the Bill in the position of having their cake and eating it. Any of us would like to be in a position where our risk was severely limited by a guarantee but we would be open to take whatever rewards were available. I return to my original point about a level playing field. All of the companies must face the same risks and rewards. So far as existing gas contracts are concerned, I support what is in the Bill, in Schedule 5, Part II.
Having expressed my unease, I reassure my noble friend the Minister that I support the Bill. I hope that this House gives it a fair and speedy wind on to the statute book, and that we as consumers will benefit from it but that we as UK Limited do not deprive ourselves of any benefit either.
4.7 p.m.
Lord Wade of Chorlton: My Lords, like other noble Lords, I approve of the Bill. I support anything that improves the opportunity for new businesses to develop and offer wider services. Both my noble friend Lord Caithness and the noble Lord, Lord Ezra, said that British Gas had proved itself to be a most successful company and had brought great wealth and opportunity to Britain. It is the fifteenth largest company in Europe. It is the leading gas company in the world. Britain is looked upon more and more as the leader in the development of new technology in all aspects of energy.
I declare an interest. I am president of the Combined Heat and Power Association. We have a considerable interest in seeing a reduction in gas prices. There has been

1281
a reduction in industrial gas prices by over a third during the time that British Gas has been in operation. That has brought enormous opportunities as well as technology improvements. I believe that that same improvement and reduction in prices will continue as the Bill comes into operation and many more companies come into the business.
The noble Lord, Lord Peston, said that what should first be considered was an energy policy. I would have thought that, as the Government's energy sectors had improved, and new Bills introduced and approaches developed over the past few years, that was exactly what we had. What we will have as a result of this Bill is a further step towards the development of energy service industries. At one time, one dealt with large monopoly companies which sold one energy source. Slowly, we have companies that are involved in a whole range of energy activities. Following this Bill, the next stage is the development of companies that will not provide actual energy sources but heating or hot water as a general commodity to meet a requirement for the wellbeing of one's home or business. In a sense, we are evolving an energy policy that will create a whole range of forceful, independent, high-tech companies that can provide to the customer a whole range of services that he wants. I believe that that is the right approach. Those companies will be competitive and will be encouraged to come into the industry with new ideas and opportunities. As a result, all consumers will benefit.
The noble Lord, Lord Peston, also said that the purpose of the Bill would be to reduce prices and not produce profits. I believe that that is what he said. If he did not do so, I apologise.
Lord Peston: My Lords, the purpose of the Bill is to reduce prices. If as a consequence profits were made, that is all right. My point was that the purpose of the Bill was not to produce profits per se.
Lord Wade of Chorlton: My Lords, I would argue that it will be difficult for the consumers to achieve their aims unless it is clear to everyone that profits can be produced. One of the advantages of the Bill is that many more companies will be encouraged to come into the business, to invest in it, and to be aware of the consequences of their actions. To ensure that companies do that, they will have to make a profit. It is clear that we must not set up a series of regulators and regulations which discourage people from taking the opportunity that the Bill offers. The purpose of opening up markets is to encourage more people to invest in them. That is where the benefit to the consumer lies.
The noble Lord, Lord Peston, also referred to the question of pipelines over land. I cannot help but support him on that. The greatest rows that I have ever had in my life have been with people who wished to put pipelines over my land and did not pay me the compensation that I thought was my due. I envisage more rows of that ilk. If the noble Lord wishes to raise those issues during Committee stage, he will find a supporter on this side of the House. I hope that we can make clearer provisions regarding compensation so that we can seek to avoid the rows and difficulties in which landowners and those who wish to put pipelines over their land are now involved.
1282
I welcome the Bill. It will open many more interesting opportunities. I hope that with a further reduction in gas prices we shall see combined heat and power used on a greater scale. Within that context, the Government have to be aware that as the opportunities for investment widen we shall see further developments resulting from the reduction in gas prices. Over the next few years attitudes to energy and energy use will change quite dramatically.
With regard to other aspects—again I must declare an interest in energy from waste organisations—we must ensure that Government do not put unnecessary regulations in the way of allowing the market to evolve to the benefit of all. I hope that the Bill is another step forward in allowing the market place and the demands of the consumer to set the pace at which change occurs.
4.13 p.m.
Lord Skelmersdale: My Lords, when I started to prepare for this Bill, in which I should declare an interest as an adviser to British Gas, my eye lit on one of the many booklets I have accumulated about the utilities, which have become one of my abiding interests over the past few years. It is called, Gas: The Final Act and is subtitled Securing benefits for all consumers. It was part of the lobbying of the Government at a time when it was doubtful that legislative time would be found for the Bill in this Session of Parliament.
It occurred to me that it was a very apt title and my mind went back to the usually unsung but amazingly successful progress of the gas industry in this country over almost two centuries—rather longer than the noble Lord, Lord Ezra, has been involved in the energy field. The discovery that town gas could not only be liberated from coal but piped quite long distances and used both for heat and light, even in your Lordships' Chamber, was followed by the creation of a multitude of small gasworks up and down the country.
An element of regulation started to creep in. Was it, I wonder, for the first time that that word was used in relation to the utilities? I was not around to know! And this plethora of small companies and municipal undertakings was, as we all know, nationalised in 1949. The next 40 years of progress was truly amazing, as the noble Lord, Lord Ezra, said. Somehow this country—which really means the gas consumers of the 1950s, 1960s and 1970s—managed to finance the development of gas from the North Sea, and, more importantly, to lay thousands of miles of steel pipeline crisscrossing the country, and to convert every single appliance to natural gas so that 19 million domestic and business customers had access to gas in factories, workshops and houses the length and breadth of Great Britain. That network is now valued at a massive £17 billion. I would describe the process as a second industrial revolution.
It is, I believe, no accident that this Bill keeps that staggering undertaking, as my noble friend Lord Ferrers called it, as a near-monopoly pipeline system under the control of British Gas, albeit hedged about with Chinese walls so that the trading arms of the company should be treated in the same way as any other customer and not have a better deal. In another place, there was a question of turning the enterprise into a fully fledged

1283
subsidiary—a "separate legal entity" as it was called. For my money, that means that British Gas becomes a holding company with at least two subsidiaries— TransCo, and everything else. There would be immediate calls for all five business streams—I shall refer to them in a moment—to be independent, and eventually bids would come in for parts of the company. I firmly believe that separating out TransCo in such a way would lead to the break-up of British Gas. Even though it is currently turning itself from a home-based gas production and delivery company to one of our major export winners, it is not in the interest of government, the company or its shareholders for your Lordships to encourage that situation. To put it bluntly, it is not in the national interest.
But I am getting ahead of myself. For 10 years I was inveigled away from the energy field, but I was able to watch from the sidelines the rapid changes that were occurring and the arguments, both pro and con, that were developing. Regarding "the selling of the family silver", how wrong that phrase turned out to be, with net revenue to the taxpayer increasing by leaps and bounds. In retrospect, putting revenue on deposit and earning interest might have been a better expression. Then there was the phrase which was peculiarly inappropriate for gas. "Privatising a monopoly", was the sneer from the Benches opposite, and from some on this side too. They conveniently forgot to mention that although, yes, British Gas was a monopoly supplier of a product, it was not a monopoly energy source—the noble Lord, Lord Ezra, made that point—nor did it have a monopoly of production.
No one has to use gas. In modem times the industry has always competed with electricity, oil and coal for heating. Firms and people use it because it is clean, convenient, as safe as possible, with a very good back-up service, and above all cheap; and it is becoming cheaper almost, it seems, by the minute—a reduction of over 20 per cent. after inflation in untaxed terms since 1986. Even in taxed terms that means a reduction of about 16 per cent.
Can we say the same of electricity? No. The only utility with which we can compare the industry is the telephone industry, which, although quite different, gives us some pointers as to what will occur when the Bill fully takes effect. So, too, does the competition introduced in 1990 for the industrial and commercial sector, and the few domestic customers using more than 2,500 therms a year. They have seen their gas bills fall by between 10 per cent. and 20 per cent., and, incidentally, the market share of British Gas fall to well below the 55 per cent. level suggested as appropriate by the Monopolies and Mergers Commission.
The industrial gas market is now completely open to competition, and competitors, mainly linked to oil and electricity companies, now supply more than half the total gas used in this country. That is quite a change since 1986. That is not why British Gas is going through a difficult stage at present. It is because it has been persuaded, by a mixture of Ofgas, the MMC and Government, all of which jointly hold the whip hand—and currently rightly so—to disaggregate the company.
1284
The original suggestion was just to separate gas trading from the transport of gas, which will, one can safely assume, remain a monopoly activity for many years to come. However, the board decided to go a great deal further and separate into not two but five business streams. TransCo, which operates the gas pipeline and storage business, would, as I have said, have been forced upon the board even if it had not gone along with the proposal willingly, as I believe it would. TransCo is now accompanied by Public Gas Supply, which deals with the 18 million customers using under 2,500 therms a year around whom the Bill revolves; Business Gas for those using more than that figure; Retail, selling a wide range of domestic cooking and heating appliances not necessarily powered by gas and thus directly competitive in the high street as that sector has always been; and finally Service, providing installation and servicing, mainly to domestic customers and small businesses, and again not a monopoly. So there are five business streams, each with its own managing director. I consider this restructuring as the business equivalent of the distribution network feat I mentioned earlier. Added to this, the customer base has fallen and obviously will continue to fall; so, if for no other reason, cost cutting is essential.
It is a truly massive upheaval, and it cannot be achieved without pain both to British Gas and to its customers, who, like all of us in these islands, are basically conservative with a small "c". (As my mother's family motto puts it, "Plutôt mourir que changer"—"better die than change": singularly inappropriate for this day and age, at least in this context, but there we are.) No wonder standards of service have slipped a bit and customer complaints have risen, but we should keep our perspective. The complaints may number thousands, but the customers number millions.
While talking about standards of service, it has been suggested by the Consumers Association that some standards are not appropriate for the new competitors that this Bill promotes but that they will remain appropriate for British Gas. In my book, this idea, which tilts the playing field that my noble friend Lord Ferrers is so keen to get away from in a totally unknown direction at the whim of the regulator, who already has far too much freedom, should be resisted. We all approve of competition but it must be fair and public—transparent, as my noble friend Lord Caithness called it.
We have already seen unfair competition in the gas industry, or at least competition which is less than even-handed, in the liberalisation of the contract market in order to encourage competitors. Only British Gas has had to publish its contract prices, thus giving the competitors a benchmark, while British Gas has had no knowledge of the prices it was competing against. I am very pleased that the regulator intends to correct this anomaly at last, but only for a trial period. It must not be allowed to happen at all with any gas sales, and I was glad to hear my noble friend on the Front Bench say that it could not happen under this Bill. Where would telephone competition be without the publication of the various firms' tariffs? How else can consumers make the fundamental choice that my noble friend talked about?

1285
I believe that this is a good Bill, even a very good Bill and that, despite the strictures of my noble friend Lord Caithness, it deserves support on all sides of the House. However, there are very real worries. British Gas, with the Government behind it, has over the years built up an enviable reputation for protection for those customers who find it difficult to pay their bills on time— incidentally, not necessarily those on income support and family credit. The citizens advice bureaux are quite right about this. It is vital that those schemes continue in the new competitive era.
It would also be damaging to the Government's reputation if the new entrants to the market were allowed licences for very small areas; for example, the Grosvenor Estate in London, without, say, Westminster City Council's flats in Page Street. This is why I am delighted that a sensibly-sized trial is to be made in the West Country, with its mixture of conurbations and rural areas.
I know that in some quarters the transferability of long-term contracts is a worry. They are to be moved as a block to new trading subsidiaries. How anyone can argue that British Gas should so damage its reputation as to allow the subsidiaries to fail is totally beyond me, and clearly also beyond the noble Lord, Lord Ezra. Sunoil are so insistent on this point that they sent me, through their lobbyists, not one but two briefing papers showing their concern. One wonders why, if it is a real point, other potential suppliers have not sparked on this.
I agree with the noble Lord, Lord Peston, about probity. Much more worrying to me are the financial standing and gas supply proposals of the new entrants. Both are of paramount importance but, so far as I can see, only the former is covered by Clause 1. If the new entrants' businesses were to fail, it would indeed be a section of the 18 million who would suffer. I should like to be told that the regulator will control this firmly and refuse licence applications if there is any doubt on either of these two scores: otherwise it will be a blow to the Bill, and perhaps an irredeemable one.
To sum up, fair competition with common rules which cannot be changed at the regulator's whim is good competition. It is good for the consumers and good for the suppliers, both new and old, as we have seen in the telecommunications industry. That is what I hope we all want to see in the gas industry. I think this Bill goes a long way to achieving it and, with a few tweaks here and there, will make a very successful Act of Parliament. For today it behoves all of us, wherever we sit, to wish Gas: The Final Act a safe passage through your Lordships' House.
4.26 p.m.
Baroness Macleod of Borve: My Lords, I should like to start by thanking my noble friend the Minister for the excellent way in which he has drawn our attention to what I believe is an excellent Bill. I must also declare not only an interest in, but an affection for, this Bill and all that is in it, because I had the privilege of being the first National Gas Consumer Council chairman. I think that was in 1971; and in those days I was able to work, not in conjunction with, but with "Mr. Gas" himself, Sir Dennis Rooke, who was responsible for making British Gas what it is today. I should also like to thank the noble Lord, Lord
1286
Ezra, for all that he said about British Gas. Of course I cannot speak on behalf of British Gas, but I know that he is right and I thank him very sincerely for all that he said.
We are today discussing one of the most important service industries in the country, and indeed in the world. By 1998 the competition in British Gas will have been introduced to 18 million domestic customers. It will include many more people in the country: those who for many years have wanted to have British Gas and to be on the pipeline. They may now have more opportunity for that than they have had in the past. But overriding everything, as we all agree, is safety. That problem has been overcome in most areas. There are very few problems now with safety, but because gas is a substance that can be easily ignited, it must be underlined that safety is paramount and is still the most important criterion for all suppliers and users of gas.
That leads me to say that domestic appliances and equipment must be installed by trained operators. I hope that that requirement will be in the Bill. British Gas has always trained its own installers in the past and I know that today many of the installers have been there, man and boy, from leaving school right through until retirement, such is their devotion to British Gas. I think perhaps I might be allowed to say that. They have been ably assisted, of course, as we know, by the members of Corgi, but it is vital that all new suppliers are required to use equally well-trained operators when they install appliances in domestic and other premises.
I can speak from knowledge of the problems of the Country Landowners' Association, which have been brought to our notice by the noble Lords, Lord Peston and Lord Wade. If they went to Bacton and saw how North Sea gas has been brought under the cliffs and through pipelines in Norfolk, they would be amazed at how British Gas has managed to restore the countryside of that county. It is difficult to find the pipelines. I believe that I am right in saying that the little yellow caps on the tops of stakes which we occasionally see in the countryside are the only means of denoting where the pipes lie beneath the surface. I hope that the Country Landowners' Association will be reassured that British Gas is one of the best organisations when it comes to restoring the countryside after installing gas pipes.
As I said, I was at the Gas Consumers Council when gas was first brought in from the North Sea and we all changed to North Sea gas. I say "we", but unfortunately I do not have gas. But everyone who is lucky enough to have it changed to North Sea gas. I well remember that at first North Sea gas was disgustingly smelly. It smelt so disgusting that British Gas removed the smell from the gas. It devised another smell which was not quite so bad, but at least the gas had some smell, so that one could not put one's head in a gas oven, as people occasionally did, without smelling the gas.
As the noble Lord, Lord Peston, said, the Gas Consumers Council received 25,500 complaints during 1994. Few problems arose from the service; most of them related to the method of payment and ability to pay. The present systems of payment, which will presumably be universal, are by direct debit, credit, or prepayment meters. They all seem to be unpopular, but then of course paying bills is always unpopular. That is more so now that

1287
there are only just over 300 showrooms where one can pay one's bills, have a grouse about services, or talk about whatever it is one needs to talk to people from British Gas about. However, there are 19,000 post offices. A great many of these are now far too small and it is sometimes difficult to get in to a post office. Nevertheless, one can pay one's bills at a post office.
The subject of paying bills takes me on to a point which I want to raise with the Minister; namely, the standing charge. The Minister was kind enough to draw our attention to the problems of the elderly, the disabled and people who cannot take enough exercise to keep themselves warm. They often use more fuel in their houses than the younger or the able-bodied among us. Bearing in mind that elderly and disabled users frequently feel the cold more, I want to ask the Minister today whether consideration can be given to reducing the standing charge for disabled and elderly people in our society. That would be enormously encouraging to them. I know that they would be very grateful.
Shareholders and consumers are important people and are the end users of all the work of British Gas. I urge those who are now running this vast and important industry to recognise that, although the customer is not always right, without them life in this country would be much the poorer. I wish the Bill a safe, short and quick passage.
4.34 p.m.
Lord Gisborough: My Lords, like so many of your Lordships, I welcome the introduction of the Gas Bill. Consumers in the industrial and commercial gas supply market have already benefited by savings of as much as 20 per cent. as a result of competitive marketing, and in April 1996, as we have heard, domestic consumers in the South West pilot area will benefit from similar price reductions through the process of liberalisation.
British Gas will inevitably lose some of its share of the domestic market, which will in turn mean that it will require a smaller quantity of gas supplied from fields in the North Sea operated either by itself or by other investors in North Sea oil or gas production. While British Gas may lose a share of the market, the size of the market will still remain constant or will possibly even expand, so British Gas should not find it more difficult to reassign to the new independent gas marketeers, at market rates, some of the supply of gas it will no longer require.
It is against that background that I am concerned about the precedent being set in Schedule 5, where we are effectively allowing the renegotiation of gas supply contracts freely entered into in the past by two willing parties just because the supplier at the consumer end may possibly change some time between 1996 and 1998 or beyond. I believe that that provision will have profoundly damaging effects both in relation to the future development of Britain's offshore gas and oil resources— and, hence, longer-term gas supply security—and internationally in relation to the sanctity of contracts, a principle that is fundamental to the interests of a country whose offshore sector enjoys such extensive offshore investment. For example, investment banks may be
1288
reluctant to supply investment capital to explore and then produce from North Sea fields if they believe that contracts to supply the oil and gas produced can be renegotiated at more favourable terms to the buyer some time afterwards, thus reducing the revenue and increasing the risk of the investment.
I am reminded of other legislation in an entirely different area which also threatened the sanctity of contractual law—namely, the Leasehold Reform Act, which also raised considerable concerns, particularly on this side of the House, back in 1992. In fact, that Bill led to something of a breakdown in party discipline for some time afterwards. The Leasehold Reform Act followed a precedent created by the previous leasehold reform legislation of some 20 years earlier under Labour. Every time this happens it becomes easier to legislate against existing contracts, until retrospective legislation will become fully acceptable. That will be a sad and highly damaging state of affairs. I am, as I was then, a strong supporter of liberalised markets, but not if it means sacrificing the United Kingdom's reputation internationally for respecting the sanctity of contract law.
Paragraph 2 of Schedule 5 as currently drafted would allow British Gas without counterparty assent to assign contracts to an affiliate which may not have the financial means and structure necessary, or even possibly the inclination, to meet the commitments that British Gas made on freely entering those contracts. As it has been expressed by one Member in another place, if the going got really tough British Gas could allow those smaller operations to founder as companies and its obligations would then disappear. The gas suppliers would then be left to pick up the tab.
I believe that there is merit in British Gas being able to renegotiate gas supply contracts in the event that its share of the domestic market reduces with the introduction of competition, but only in circumstances where the North Sea producer is aware of that option when he enters into an agreement with British Gas initially. In other words, the retrospective aspect of the provision should be withdrawn so that the assignment of rights and liabilities applies only to gas contracts negotiated and agreed after the Bill has received Royal Assent. Any future gas supply contracts negotiated after Royal Assent would be subject to liabilities being reassigned, but then at least both parties negotiating would be aware of that extra dimension at the time of negotiation.
4.39 p.m.
Baroness Gardner of Parkes: My Lords, I have no more interest to declare than anyone who has a gas supply in the house. However, listening to the statement that there were few service complaints made me realise that I must pursue mine. For four months I have been writing to British Gas and making numerous telephone calls which have resulted in no action at all.
This is a most interesting Bill, which will have a far greater impact on the 18 million gas consuming households than the privatisation of British Gas as an integrated, though strongly regulated, monopoly. As we have all heard, from April 1996 in the pilot area domestic

1289
gas consumers will be able to choose who supplies the gas on which they depend for warmth and comfort in their homes.
I welcome the new Gas Bill as a landmark in the progress towards choice for the consumer. In drafting the Bill, the Government have no doubt taken account of the importance of making sure that entry into the market by new gas suppliers will not be hindered. But in examining the Gas Bill, particularly from the standpoint of consumers—and I speak now on behalf of the Gas Consumers Council, which has asked me to raise the point—I see that the balance of parliamentary protection may be moving away from the domestic consumer towards the gas supplier.
My concern is that the Bill on its own will not provide as much statutory protection for consumers as the present Gas Act, which had already been improved through the Competition and Services (Utilities) Act 1992 to incorporate principles of public service embodied in the Citizen's Charter. The supply of gas, electricity, water and telephone services into people's homes is widely recognised as a public service. The Citizen's Charter has clarified what the consumer is entitled to expect from the utilities that provide those services: accessibility, choice, information, non-discrimination, openness and standards, including redress.
It is the Government's intention to transfer key obligations to the standard supply licence conditions. Those obligations will then cease to be matters for parliamentary control. They will instead be under the discretionary control of the Secretary of State for Trade and Industry and/or the regulator.
The move to a competitive gas market should not require the relinquishing of major statutory principles of consumer protection which serve to promote the public service ethic. The rationale of the Citizen's Charter has clarified what a consumer is entitled to expect from a public utility. Why, if an industry is about to become competitive, should those carry any less weight?
An example of that in the new Gas Bill is the decision to remove "public gas supplier" from the 1986 Act and replace it merely with "gas supplier" or "licensed supplier". I hope that in reality it does not reflect a new attitude towards treating the supply of gas like any other commodity, rather than as a public service.
What are the most important structural changes? First, the removal of the statutory obligation to supply: Section 10(1) of the Gas Act 1986 places an obligation on the gas supplier,
"to give and continue to give a supply of gas".
That obligation has been replaced by an obligation on the public gas transporter (TransCo) merely to connect the premises to the network. That is in paragraph 4 of Schedule 3. The omission of that fundamental obligation seriously diminishes consumer protection. The Gas Consumers Council believes that most suppliers to domestic consumers would find such obligations acceptable and that there should be a statutory obligation to supply any consumer who requests it. As has been mentioned by many speakers, that is vital to prevent cherry-picking and ensure that all gas consumers have the opportunity to benefit from competition.
1290
The obligation to supply has been transferred to the gas supply licence (Condition 2). Many speakers have already voiced their concerns about the extent to which consumer issues have been transferred to something that is not subject to parliamentary scrutiny. My particular anxiety with the obligation to supply in the gas supply licence is exacerbated by the obscure wording that is used.
"To make available a supply of gas",
means little in comparison with the wording contained in the Gas Act 1986, which has been in use in other pieces of legislation since the last century. I should certainly welcome clarification of what that means. I had hoped that there would be a revised version of the Draft Standard Conditions of Gas Suppliers Licences available for Second Reading which would have clarified the issue. I trust that it will be available at the Committee stage.
Then there is the removal of the statutory obligation to publish prices. Again, the subject has been mentioned by many others, including my noble friend Lord Skelmersdale, who made it clear that British Gas would like to see that obligation. Section 14(1) of the Gas Act 1986 requires the public gas supplier to fix tariffs from time to time and to publish them,
"in such manner as in the opinion of the supplier will secure adequate publicity for them".
The Gas Bill seeks to delete that requirement in paragraph 8 of Schedule 3.
The requirement to publish price information so that all gas consumers in the supplier's licence area have access to it is fundamental to the creation of a market that serves all consumers and not just those who are "economically active". The point made by my noble friend Lady Macleod is relevant there. People who have disabilities or are unwell certainly do not have the time to be "economically active" enough to seek out the best thing for them. General publication of prices will be to the advantage of consumers and will be one of the key means of discouraging cherry-picking.
Like the obligation to supply, it will be a feature of the supply licence under Condition 3. I believe that availability of that price information is too important to leave to regulation, which again can be changed at any time by the Secretary of State and the regulator without the consent of Parliament.
I have been told that this obligation may have been moved to the licence to allow for flexibility in the market since consumers themselves, as has happened in the industrial and commercial market, may find that they do not want the rigidity of a statutory obligation to publish prices. The industrial and commercial market is the home of the professional energy buyer for whom negotiation of energy contracts is a means by which to steal a march over his competitors. I find it difficult to imagine that 18 million domestic consumers would each want to negotiate his or her own individual contract. It is remarkable how many widows have never even signed a cheque. We are seeing a gradual change, but many women have never made any arrangements for themselves. As time goes by, the same state will apply to men or women; they have always left it to their partner to make arrangements and suddenly they will have to make choices for themselves.

1291
My final point is that there is a duty to secure effective choice. I draw noble Lords' attention to Clause 1 of the Gas Bill, which will give the director general a primary duty to,
"secure effective competition in the carrying on of activities the carrying on of which is required to be licensed under section 7A below".
That is delightfully woolly. It is primarily a duty for the director general to secure competition between competing elements of the gas industry, but it will not necessarily afford effective choice to all gas consumers.
The aim of the Gas Bill should not merely be the introduction of competition into a monopoly market for the industry, it should be the means by which all gas consumers achieve the benefits of choice. Competition and choice are not necessarily synonymous; it is important to appreciate that within the context of the Bill. Competition should not be an end in itself, it should be the means by which all consumers are able to benefit from lower prices and better service through a real choice between gas suppliers.
Clause 7 of the Bill gives the director general a duty not to grant licences to certain applicants, as has already been mentioned together with the point about the disabled. I welcome that duty. It seems to me that it would be better, as the noble Lord, Lord Peston, pointed out, to refer to "low income households" or, "households in receipt of income support", rather than using the phrase,
"likely to default in the payment of charges".
That could refer to people who are well able to pay for their gas supply but do not wish to do so.
Returning to the point about Clause 7, I see that the duty is only the first hurdle in deterring cherry-picking. A licence area may have been framed so as not to exclude artificially any of the groups mentioned in the clause, but there is no provision requiring the supplier to show that in actuality he is supplying a fair proportion of those consumers. Nor is there a corresponding duty on the director general requiring her to monitor the consumer mix or the portfolio of consumers to show that suppliers she has licensed are committed to the public service ethic that is integral to the gas supply.
There should be a clear, unequivocal duty on the Director General of Gas Supply to work towards establishing choice for 18 million gas consuming households. Competition will mean little if consumers do not have choice. This Gas Bill should mean that choice will be available. I support the Bill.
4.50 p.m.
Lord Cochrane of Cults: My Lords, I welcome this Bill very much. It is a good Bill. First, I must declare an interest. I am chairman of a family company which is an exempt gas supplier. This company, for which gas supply is an incidental service to customers, is a member of two trade associations in the holiday parks industry. I advise both associations on an informal basis, without remuneration or expenses. The members of those associations could benefit in certain circumstances were
1292
the Bill to be amended or were the Secretary of State to use other powers contained in Clause 4 of the Bill that is now before your Lordships.
As I said earlier, this is a valuable Bill, intended to promote competition in the gas supply industry, and I am sure that it will achieve much of that. However, complicated arrangements are needed to achieve the extreme fragmentation among consumers that is envisaged.
There is a price to be paid for promoting competition in the gas industry. The more the competition, the higher that price could be; the greater the fragmentation, the greater will be the price that will be exacted in administrative, legal and operational complexity. So far, with gas, that has not bitten very hard at the consumer level. But as the number of deregulated consumers increases towards the intended 18 million, so it will become plainer and plainer, unless simple in concept and lightly applied.
Experience since 1986 indicates that that has not always been the case. The Gas Act imposes a far greater potential for control and regulation through Ofgas and the pipeline executive on small-scale gas systems than occurs with comparable electricity systems. Put simply, that is because the Electricity Act controls only supply at high voltage, whereas the Gas Act (and this Bill) controls gas supply at any pressure. Consequently, a number of persons who in a small way could distribute gas usefully are faced with an elaborate licensing system imposed by the Act and administered by Ofgas. This anomaly has been partly recognised in a previous Act which exempted piped supply within a building—for example, flats or bedsits; perhaps I may reassure the noble Lord, Lord Peston, that I think he is safe, but one cannot count on it— by a landlord, or if the supply to any premises is mainly propane or butane.
Noble Lords will note the contrast between "buildings" on the one hand and "premises" on the other. It should be remembered that for these purposes a supply through pipes can involve a pipe almost as short as 18 inches—or so Ofgas, in one of its more excited moments, told me. An unauthorised supply is a criminal offence. Perhaps my noble friend can tell me how many prosecutions, successful and unsuccessful, have been authorised since 1986. If the answer is that there have been very few, it must surely be a spent provision and should therefore be removed from the Bill, perhaps to be replaced by a civil offence.
One way to reduce the economic price of fragmenting supplies is to reduce the number of controlled suppliers by exemption. In another place my honourable friend the Member for Melton and Rutland introduced amendments that would do just that. And better still, they would promote the supply of natural gas, which always comes through pipes, to small communities and groups which larger suppliers might find unattractive for some reason. That point has been made earlier.
My right honourable friend the Member for Enfield North, Mr. Eggar, said of the amendments of the Member for Melton and Rutland that he was "on to a good point". That, I might say, was high praise indeed. He added that when the Bill was passed it would be possible, by powers contained in Clause 6A, to deal with the point. However, it will be more reassuring to those concerned—who are

1293
not necessarily all in caravan parks, as was implied in the reply to my honourable friend—if my noble friend could state that he plans to deal in one way or another with the anomaly revealed.
Today, on a caravan park, there is a choice of four main fuels for customers. Traditionally, and still by far the greatest fuel supply used for cooking, and space and water heating is bottled butane, the supply of which is exempt from control under the existing Gas Acts and remains so under this Bill. Next, there is electricity, which similarly is not controlled, although there is a price cap on it. Finally, there is piped propane, exempted by the 1993 Act. This means that the Bill's effect is to oppose the adoption of piped natural gas and favour, as less regulated although not always cheapest, the other fuels. It also has to be remembered that bottled gas is generally more expensive, less convenient and in certain limited circumstances more dangerous than any of the alternatives. I repeat that at the moment in this industry bottled gas is the dominant fuel. It should now be recognised that its continuing use should be regarded as obsolescent and its abandonment should be hastened.
I am confident that my noble friend the Minister responsible for small businesses recognises the immense burden that well-intentioned, though inappropriate and unnecessary, legislation can impose on business, and particularly on the smaller or newly established trader, or indeed on a trader seeking to make large capital expenditure to improve the facilities that he offers. He, too, can be over-burdened.
In the past few days it has been publicly declared that the Director General of Gas Supply—that is, the head of Ofgas—has asked for a substantial pay rise because the workload of Ofgas is now far greater than that contracted for at the time when she first took post. I believe that claim to be well-founded, on the facts that I have just given. The 1994 annual report of Ofgas states that in that year staff numbers increased from 45 to 65; that is, by more than 40 per cent. An extra Treasury grant had to be sought and funding agreed for the increase and for extra office space. That is a direct result of the scattergun approach to increased competition, perhaps rather hastily adopted.
To avoid more escalating charges and red tape, it is now inevitable that regulating natural gas supply down to the smallest level cannot be sustained either usefully or sensibly. The answer is to adopt a policy of low-level deregulation that mimics that applied to the three competing fuels. By that means, the greatest good will accrue to the customers and the least amount of red tape will be deployed.
For those reasons, which I have put as briefly as I can, my noble friend should use the enhanced powers that he will possess after Royal Assent to deregulate the lower levels of natural gas supply so that there can be a uniformity of competitive control. An assurance to that effect will naturally be widely welcomed.
I now turn to a wholly unexpected power contained in the Gas Act 1986 which will continue unless this Bill is suitably amended or the point is dealt with in some other way. That power concerns the rights of sovereign states in terms of the Visiting Forces Act which, as a noble and gallant Lord said to me the other day, is seen as allowing visiting forces to do much as they choose, with the general
1294
framework of the common and criminal law providing the long-stops. But they may not distribute gas, except propane or butane, through pipes without authorisation from Ofgas and a cash deposit to ensure continuity of supply. In a Written Answer to me in yesterday's Hansard, I gather—I think from the American Government—that the sum of £1,330.74p has been deposited over a number of years. Should I have added up the figures wrongly, I apologise to your Lordships. I do not have Hansard beside me. That seems to be a nonsense. I hope that my noble friend will feel that that extraordinary arrangement can be dealt with by way of amendment. As it concerns a sovereign state, I feel that it would be better in every sense for it to be written into the Bill rather than dealt with by powers which he undoubtedly possesses under Section 6A of the 1986 Act, as amended.
Despite those strictures, which for me are quite mild, I am sure that the Bill takes a valuable step towards freedom of choice. For that reason I shall support it with even more enthusiasm when my noble friend agrees that the improvements that I have suggested also have his support.
5.1 p.m.
Lord Sefton of Garston: My Lords, I gave notice to the noble Earl that I intended to speak in the gap. Quite deliberately, I did not put my name on the List of Speakers because I expected that this would be a Second Reading debate. Normally, during a Second Reading debate the principle of the Bill is discussed. The Bill is given a Second Reading and it goes into Committee, when we start to talk about the detail. It seems that we have done the reverse of that today. Everyone seems to be talking about the detail.
But that is not the reason why I have risen to speak. I do so because everybody seems to welcome the Bill. It is likely that I shall not oppose the Bill. Indeed, it would not be sensible to do that. But certainly I do not welcome it. I believe that in the few short minutes available to me, I have a duty to tell the House why I do not welcome it.
I do not welcome the Bill because it drives the energy systems and production in this country further into the hands of private concerns, whose main aim will be to increase the number of customers to make the maximum use of the product that they are selling. Nobody, not even the noble Lord, Lord Wade, would disagree with that. I do not think that anybody in the House would disagree with that definition of what is being done.
But this is not just a matter of gas consumers being affected by the Bill; it concerns the whole of our energy system. I was glad to hear that the noble Lord, Lord Wade of Chorlton, brought in the issue of combined heat and power. That is a system which, if it is to be successful at all, will call for massive government encouragement and investment. It is a sensible thing to do. I am worried that the Bill does not contain a clause which in any way relates to the question of our energy resources.
When we discussed the Coal Industry Bill, I said that what would happen would be that the coal industry would go out of existence. It is not far off going out of existence. I just heard someone say, "That's ridiculous".

1295
But is it? I believe that the coal industry will decline further. I must be careful what I say because if I talk about the past the noble Earl, Lord Ferrers, will describe me as being bizarre.
Earl Ferrers: My Lords, I would not say that talking about the past is being bizarre. I said only that the noble Lord's expressions are bizarre.
Lord Sefton of Garston: My Lords, that is not what the noble Earl said and that is not what is recorded in Hansard. The noble Earl said that the noble Lord, Lord Sefton, made a speech that was bizarre. We are talking of some things that have not changed over 50 years. Of course some things have not changed over 50 years! Many people believe in Jesus Christ. That has not changed in 2,000 years. I believe that what I was saying 50 years ago is still correct. I still believe that.
Baroness Gardner of Parkes: My Lords, I thought that the noble Lord imagined that he had lip-read what I had said to myself about the coal industry. My comment was not, "That's ridiculous" but "It's recovering".
Lord Sefton of Garston: My Lords, I am sure that all the miners who are being made unemployed today will welcome that statement. It was made in such an authoritative way. But I do not believe that the coal industry is recovering. Because of its very nature, the coal industry will not be able to compete with the new forms of energy and will go out of existence. But that is not the important point. What is truly important is that coal is the last remaining large reserve of our energy resources. We must look at this matter from the viewpoint of the nation's needs.
I have asked several questions lately, in the form of Questions for Written Answer as to the energy resources that we have left in terms of oil and gas. I cannot obtain a satisfactory answer. I am worried that we encourage more people to burn gas and yet do not bother to ask whether electricity would be a better fuel. There is no co-operation between the two; there is competition between them. People are encouraged to use gas regardless of the fact that already in the North Sea oil rigs are being pulled down. God knows where the rest of our energy resources will come from.
I do not welcome the Bill. I believe that it is still right that the energy resources of the nation should be under the control of the nation. The nation should decide how gas should be used, when it should be used and at what price it should be sold to the customers. That is what I believe. Therefore it would be wrong of me—earlier I was the only Member to speak from these Benches—to allow statements to be made that could conceivably suggest that I, or any Socialist like myself, could possibly welcome this Bill. It is a Bill which places all our energy resources one way or another in the hands of a greedy set of people, whose only interest is the amalgamation of power and profit.
5.7 p.m.
Lord Clinton-Davis: My Lords, it is always refreshing to speak after my noble friend Lord Sefton. He speaks as he feels; and he feels very strongly about this matter and
1296
indeed many other topics. He is absolutely right, and I agree with him, in that, as my noble friend Lord Peston, said at the beginning of the debate, it is extraordinary that we should be debating this issue without in fact examining energy policy as a whole. That is a serious deficiency.
I believe that it is unlikely in the extreme that this Government will, in their own time, enable any debate on energy policy to take place in this House, in particular on the issues which were the subject of a Statement only a couple of weeks ago affecting atomic energy. One has to ask why they adopt that point of view. Why should they expect us, with our very limited time, to provide time to debate issues, such as the Statement, which are introduced by the Government in the first place? So perhaps the Minister, when he replies, will give an indication of whether we are likely to debate these issues. I suspect that the answer will be in the negative or that it will be a matter for the usual channels or that kind of drivel. I was very sorry to hear of the difficulties confronting the noble Lord, Lord Cochrane of Cults. I sympathise with him. Just before he spoke I was combating a fit of coughing and I said to myself, "My goodness, disease stalks this Chamber".
This has been an interesting debate. I do not agree with my noble friend Lord Sefton when he complained that your Lordships have directed attention to matters of some detail and to areas which will engage our attention at Committee stage. I believe that it is appropriate to gain from a debate of this kind some indication of the anxieties that beset individual Members of the House.
At the beginning of the debate I was given a firm injunction by the noble Earl, Lord Ferrers, that I was not to use the term "cherry picking". I will obey that injunction to the full, though I note that it fell on deaf ears elsewhere. I suspect that he would like to be able to dictate my speech to me, but it would be much worse if he did so. I am not suggesting that my speech will be any good, but his would be worse.
It is clear from this debate that deep anxieties are felt. They were encapsulated by the noble Baroness, Lady Gardner of Parkes, when she said that protection was moving away from the consumer and shifting to the supplier. That incorporates some of the anxieties—not all of them—expressed by numerous non-governmental organisations which have made representations to your Lordships in preparation for this debate. I refer to Age Concern, the National Association of Citizens Advice Bureaux, the Gas Consumers Council, the National Consumer Council, the Royal National Institute for the Blind, the Country Landowners' Association and others. They feel, as we on this side of the House feel, that serious deficiencies exist in the Bill. They are matters which will come before us in detail in Committee—we shall ensure that they do—and I simply want to give some idea of the main issues that we feel need to be ventilated. I can only hope that the Government will be more responsive to these criticisms—after all, they are designed to improve the Bill rather than to rend it asunder—than they were in another place.
There is no doubt that the Bill requires amendment so as to enshrine in the law some basic ingredients rather than leaving them to be dealt with in the licensing system, which is capable of substantial variation from time to time

1297
without any, or any adequate, parliamentary debate or scrutiny. That is a wholly unsatisfactory state of affairs. My noble friend Lord Peston dealt with a number of those issues and I propose to enlarge on them and to mention some with which he did not have time to deal.
First, I want to refer to questions affecting consumer interest. There is no direct provision in the Bill for consumer protection. We were reminded by the noble Baroness, Lady Gardner, that there are 18 million consumers of gas. At present there are regulatory safeguards in being, including service safeguards and price controls, which affect British Gas. It will be some considerable time before the Bill comes fully into effect and in the meantime it would be inequitable that consumers should or might be obliged to pay the price for competition years before they can realistically expect to obtain benefits which may ultimately accrue to them. That is a matter that needs to be dealt with.
We know that low-income consumers on prepayment meters are paying far more proportionately than other gas consumers. Does the Minister regard that as just and fair? No safeguards are provided for rural consumers and that is unsatisfactory because of the specific circumstances which affect them.
The duty to supply should be enshrined in legislation. That concept was dismissed in another place by the Government. But it is noteworthy to point out that in the United States, where gas monopolies are required by law to do precisely that, it has been found to be perfectly satisfactory. Why therefore should not a provision apply here, thereby putting the issue beyond any legal doubt?
My noble friend Lord Peston made a point which was reiterated by the noble Earl, Lord Caithness, and the noble Baroness, Lady Gardner, concerning the imperative of transparency to enable the consumer to obtain maximum information, within reasonable bounds, and to enable the consumer to make informed decisions concerning the choice of gas supplier. That is a vital matter because it is only in that way that a full and proper comparison can be made of what is offered by possible suppliers.
We feel also that the Gas Consumers Council—the noble Baroness, Lady Macleod, was involved in that many years ago—should continue to play an important role in protecting consumers' interests, as the noble Baroness self-evidently believes. In order to do that one must ask—we shall put this by way of a probing amendment—whether it should have a formal role, with its responsibilities being clearly defined in law.
Consumers should have wider access to the courts to enforce rights and pursue remedies by way of representative actions than is envisaged by the Government. The Government have chosen to construe very narrowly the right of consumer organisations to undertake representative actions. They confine that right in relation to consumers' contracts under the Unfair Terms in Consumer Contract Regulations 1994, which purport to implement the European directive, to the Office of Fair Trading exclusively. That is in marked contrast to the attitude of most member states of the European Union, which have chosen to give a wide range of organisations powers of that kind. One must ask therefore why the Government have chosen to do this.
1298
That single fact illustrates all the cant in which the Government engaged over subsidiarity. Here we have a right which is designed to empower citizens to obtain remedies through representative organisations. The Government limit that right. When this issue was raised in another place in Committee on 27th April, all that the Minister could say was, "We have decided against the amendments proposed". He went on to say:
"We believe that the present remedies available via the DGFT are appropriate. We do not think that other bodies should be able to exercise those remedies".—[Official Report, Commons, Standing Committee A, 27/4/95; col. 322.]
That was a sort of "Giordano" response and it is not acceptable. The Minister must explain why, if other member states can go down that route empowering their citizens in a much more meaningful way, the Government are against that position. We believe that the situation is wrong; we oppose the current position and we shall introduce amendments to broaden it.
The Minister may ask what other bodies there are. We believe that Ofgas and the Gas Consumers Council—which will be the recipients of large numbers of complaints from consumers and are therefore in a peculiarly advantageous position to adopt this role—should be able to pursue those remedies in the courts. The OFT is not the right instrument to protect consumers because it is not designed to adopt a position of defending the interests of consumers; it is designed to maintain a careful, independent, objective balance between industry and the consumer. I ask the Minister to let us have a response to that point. It is certainly not what Mr. Eggar said in another place.
In this general context we share the anxieties of the Consumers' Association concerning the powers of the Secretary of State to veto a reference to the Monopolies and Mergers Commission without being properly accountable. We believe that it is questionable whether he should be able to exercise such a veto, but in any event, if he does, he should be required to justify to Parliament that intervention in each case. One also has to ask whether the Secretary of State's power does not impair the powers and independence of the regulator, about which the Government frequently wax so enthusiastic.
I turn from that to the question of guaranteeing security of supply, which has been mentioned by a number of your Lordships in this debate. In that regard I turn to what the Gas Consumers Council says. It says:
"Our anxieties have been exacerbated by the obscure wording used in the licence. 'To make available a supply of gas' means nothing in comparison to the wording of the Gas Act that has been in use since the last century".
It is deeply concerned as a matter of principle about that.
How can we be assured that new suppliers and other companies will have the duty to undertake this and have the necessary financial resources to guarantee security of supply to customers and to implement the conditions in the draft suppliers licences? Ministers in another place say that the regulator is in a position to fine licence holders if they fail to comply. In my judgment that is hopelessly insufficient if for financial reasons the supplier has failed to undertake his obligations.
There is a clear need to define the term "fit and proper persons" in the context of the Bill much more specifically regarding financial status. Ministers in another place

1299
argued that there is provision elsewhere in the Bill to respond to a situation where companies fail to perform this role adequately, due to perhaps insufficient technology or failure to provide sufficient managerial or financial resources. If that is the case, where does it appear in the Bill? I may be wrong but I have not detected it.
The next point I wish to refer to is a representation made by the National Association of Citizens Advice Bureaux. It says,
"The CAB Service would be extremely concerned if competition meant that a public gas supplier was able to supply cheap gas at the price of a worse service, as this would inevitably lead to greater hardship as low income households are attracted to the cheapest supply. Competition should not be about low income households having to sacrifice standards of service to secure lower prices".
That is a powerful observation and I hope that the Minister will respond to it, if not now, then certainly during the course of the Committee stage.
I turn next to safety, which is another matter referred to by my noble friend Lord Peston. We are talking here about safety not simply for those employed in the gas industry, although that is important enough, but also for customers at home. In that regard it is essential that new suppliers should have well trained people undertaking these safety processes. Problems were raised by my noble friend regarding the existing Corgi standards. We shall return to that in the further stages of these debates.
The environment was referred to by my noble friend Lord Peston and in a rather oblique way by the noble Lord, Lord Wade. It is essential that we should have full regard for environmental considerations in the Bill. The Minister said that it is perfectly all right when it comes to energy efficiency because these new companies will be able to diversify their functions to deal with that. Is that to be made an obligation in the licence? Will they have any choice in the matter? There may be certain temptations not to go down that route. The Minister must respond to that point.
We also say that transporters should be obliged to take account of the concept of sustainable development and to inform the director general how they are undertaking this duty. Equally, suppliers should be under an obligation to provide customers with details of how they can obtain free advice in relation to energy efficiency, perhaps by giving details on all invoices, as the Gas Consumers Council has suggested.
I want to end on the matter of executive salaries. It is relevant to refer to this because of the anxieties that were expressed by large numbers of people only the other day. When Mr. Giordano, Cedric Brown and government Ministers say that it is all about the politics of envy, they have got hold of the wrong end of the stick. It is to miss the point about the concerns which have been expressed by individual shareholders. They have questioned not only the propriety of the announcements concerning huge benefits afforded to the executives, but also the managerial skills which enable them to do that, coinciding with the announcement of huge job cuts and cuts in employees' remuneration and benefits, as well as the closure of gas showrooms. In the view of thousands of investors—and we agree with them—that demonstrated poor management and poor judgment. They should not be grotesquely rewarded as they have been. The board
1300
treated these criticisms with lofty disdain and with an arrogance, armed as it was with the block votes of the large, unaccountable institutions.
So much for the Government's oft proclaimed powers of individual shareholders to influence events. Incidentally, so much for their complaints about block votes at Labour Party Conferences, which are at least out in the open. There has been unreasonable profiteering in this industry. Profits are derived from consumers, and they have been excessive. Shareholders have been unable to control these abuses and when they try they are dealt with dismissively and defensively by those in power. We shall seek to deal with these abuses when we have won the next election. Meanwhile, we shall seek to mitigate the position vis-à-vis this Bill since clearly the Government have no interest in so doing.
We shall be proposing amendments to require that all licence holders shall publish on an annual basis details of all salaries, benefits and share options receivable by directors. We shall seek to regulate and take account of the level of pay and share options and the extent to which they reflect performance in setting prices. We believe that the interests of those shareholders, which have been spoken of airily by the other side for so long, should be respected. They should mean something. With those criticisms we propose to improve this Bill in the stages that remain.
5.28 p.m.
Earl Ferrers: My Lords, I am grateful for the way in which your Lordships have discussed this Bill. As one would expect, it has been a very informed debate. The interesting fact is that there has been very little dissent from the basic approach, which is the extension of choice to those 18 million customers currently enjoyed by consumers in the commercial and industrial market. There was one dissenting voice; namely, that of the noble Lord, Lord Sefton of Garston. He is entitled to his point of view. He said that I called him "bizarre". On the last occasion in which he took part in a debate I said that he made a bizarre speech. Indeed, when he made a similar speech today I thought that that was just as bizarre, because part of it was about the coal industry which has nothing to do with the gas industry which we are talking about. On the previous occasion when I happened to say that the noble Lord made a bizarre speech, without being at all controversial—
Lord Sefton of Garston: My Lords—
Earl Ferrers: My Lords, I shall give way in half a moment. The noble Lord really must let me finish what I was saying. On the previous occasion I said that there are some people in the Labour Party who have not moved one inch during the past 50 years and that the noble Lord, Lord Sefton of Garston, is one of them. I believe that his speech today confirms that view—
Lord Sefton of Garston: My Lords, does that mean that you disagree with what I said? If so, that means that the question of "bizarreness" was directed to me personally. Perhaps I could remind you of the "Companion of Honour", so called, in this House.
Earl Ferrers: My Lords, I can remind the noble Lord of one of the rules of procedure, which is that one talks in the third person and not in the second person. I was not being offensive to the noble Lord. Indeed, I was not being offensive but saying merely what I thought of his speech—
Lord Sefton of Garston: My Lords, you would be better off answering the argument.
Earl Ferrers: My Lords, I do not wish to be distracted by the noble Lord, Lord Sefton, any more than is necessary.
The noble Lord, Lord Peston, was most constructive in his opening remarks. He said that a number of the points that he wished to make were Committee points and he then gave indications of them. These are technical matters and we must deal with them.
I was grateful to the noble Lord, Lord Ezra, for paying tribute to the great industrial achievement of British Gas during the past 40 years. It is astonishing and we must never forget it. My noble friend Lady Macleod was right to pay tribute to Sir Dennis Rooke and the work done by British Gas at Bacton in Norfolk. It deservedly has earned a reputation for showing great sensitivity in the work that it has undertaken there.
I am sorry that the noble Lord, Lord Clinton-Davis, thought that I was telling him how to make his speech. I should never dream of doing such a thing. I did not actually tell him not to refer to cherry picking; I merely said that I thought that he would because he did so last time. The noble Lord avoided doing so today and I regret the fact that I referred to the matter because it enabled a number of my noble friends to use that horrible expression. My noble friend Lord Caithness made the matter worse by talking about level playing fields, which I believe is an equally objectionable expression.
The noble Lord, Lord Clinton-Davis, has spurred me into saying something that I had not intended to say about British Gas. I do not wish to enter into discussions about the showrooms which British Gas has closed or the salaries paid to chief executives. However, perhaps I may make it clear that when British Gas was privatised there were 4 million individual shareholders, who were commonly known as "Sids". There are now 1.7 million shareholders and they hold 22 per cent. of the shares of the company. Of those people, 4,500 attended the annual general meeting and nearly 12 per cent. of the 1.7 million returned proxy cards. It is interesting to note that 88.5 per cent. of those individuals, whom we call "Sids", decided not to vote. That is similar to what has happened in previous years when 90 per cent. of those individuals have not voted. Therefore, what happened last week is a reflection of what happened in the past. I am bound to say to the noble Lord, Lord Clinton-Davis, that it is not an argument to say that the block votes of the institutions stop proposals being carried. There is no comparison between the block voting of the institutions and the block voting in the Labour Party. The fact is that all institutions—all shareholders—have the right to vote, but if they do not wish to vote they need not do so. The fact is that 50 per cent. of the capital voted, which is interesting to note.
1302
Your Lordships asked a number of questions and I shall answer them as best and as expeditiously as I can. The noble Lord, Lord Clinton-Davis, referred to consumers. There is an important protection for consumers in the Bill. It is the duty of the Secretary of State and the director to protect the interests of consumers. The noble Lord said that in the Bill there is a balance between consumers and industry. That is not so; the Bill is about consumers. The balance comes when the industry can compete within itself and one against another for the interests of consumers—
Lord Clinton-Davis: My Lords, I am grateful to the Minister for giving way. He has taken my remarks out of context. I said in a totally different context that the balance lay in the duties of the Office of Fair Trading.
Earl Ferrers: My Lords, I apologise to the noble Lord for having noted his words incorrectly. It is a hazard in trying to take notes but I shall study what he said in Hansard. The noble Lord referred also to the Secretary of State's veto. The provisions follow the Electricity Act. Let us assume that an amendment tabled on Report narrowed the power of the veto for the standard conditions only. We believe that the veto is appropriate to ensure that there is proper parliamentary oversight as regards the changes to the standard conditions. The obligations placed on companies by the licences are just as effective and as effectively enforceable as those imposed by the Bill.
The noble Lord, Lord Peston, said that the Monopolies and Mergers Commission stated that there would be losers. That assessment was based on a table submitted to the commission by British Gas. However, the table was withdrawn in October 1994 in evidence to the Trade and Industry Select Committee of another place. There is no reason to believe that competition will lead to higher prices for any consumers. However, the nature of a competitive market is that one can never guarantee that. There may be some price variations on the general downward trend and we must see what the result is.
The noble Lord was also anxious about the drafts of the licences being available in Committee. It is our intention to publish a new text of the supply licence for the Committee stage, if that is at all possible. We plan to leave the technical revision of the other licences—and they are more technical—for later consultation.
The noble Lord, Lord Peston, was also concerned about disabled people and pensioners being dealt with separately, but not the people who have difficulty in paying. He asked why that was. Pensioners and disabled people have special needs in relation to gas. If their supply fails they may be more susceptible to cold, they may need their meters moving to more accessible locations or they may need adaptors for appliances. Low income users do not have such special interests. Their real interest is in cheaper gas, which is similar to the interest of every other consumer. However, the director has a duty to protect the interests of gas consumers in respect of the continuity of supply. That includes possible disconnection and provisions to avoid unnecessary disconnection.
That point is not dissimilar to an anxiety expressed by my noble friend Lady Macleod. She asked whether we can reduce the standing charges for disabled people. The

1303
role of the standing charge is to recover the fixed costs of supply. However, one benefit of a competitive market is that different suppliers can adopt different practices and marketing strategies in order to win customers. One supplier has said that he is considering offering a zero standing charge, which would meet not only my noble friend's anxieties but those of many other people.
The noble Lord, Lord Peston, asked whether there would be a single pensionable age and why not leave it at 60. The Bill defines the pensionable age as the female pensionable age, so it is quite discriminatory! That is the lower of the two pension ages. However, when the age is equalized at 65 it will be inappropriate for us to define people below that age as pensioners.
The noble Lord was anxious to know whether there is a statutory obligation to supply and whether the obligation is to supply a household or a premise. That is an important point. The obligation to supply is set out in standard conditions of the gas supplier's licence. It applies to prospective customers and that means persons at a particular premises. But each flat in a block of flats would normally be regarded as separate premises for that purpose.
The noble Lord was concerned also about whether British Gas's debt and disconnection code would continue. The answer is that it will. British Gas will continue to operate to its current code. The only difference is that in future, it will operate that code as a requirement under its new licence as a gas supplier rather than under its old authorisation as a public gas supplier.
The noble Lord was anxious about why the Secretary of State is taking new powers to regulate. The Secretary of State has been given further reserve powers so that Parliament can be assured that the regulator cannot change major policy issues without political consent for which the Secretary of State will be accountable to Parliament.
He asked also about how many new entrants there might be. It will be for new entrants to make their own decisions on how and whether to make an entry into the market. But so far, some 20 suppliers have taken a close interest in the formulation of the licence conditions for domestic supply.
The noble Lord asked whether the code of practice on disconnections would apply. All suppliers will be required to follow debt and disconnection procedures which will apply to any customer who has genuine difficulties in relation to paying his bills. They are set out in the supply licence standard conditions and I gave your Lordships an idea of what they would be when I made my opening remarks.
The noble Lords, Lord Peston and Lord Ezra, asked whether the public should not be notified of the evaluation of the pilot phase. We have made it clear that the purpose of the phased transition to national competition is to provide an opportunity to test the necessary technical and administrative systems. It will allow British Gas, TransCo and competing gas suppliers to iron out any problems with their systems while they are operating on a relatively small scale. The pilot is not intended to test the principle of whether competition will go ahead. It is intended to test how it will work in practice. The director will obviously
1304
wish to monitor the progress of competition and we expect to seek the feelings of consumers and suppliers as to their experiences during the transitional phase. If the monitoring by the director showed that the licence conditions were not operating in the intended way, the director could make proposals to change them. That monitoring process will enable Ministers and the director to report appropriately to Parliament about progress, and it is our intention to do that.
The noble Lord, Lord Ezra, was concerned about the promotion of energy efficiency and the protection of consumers being a secondary duty upon the Secretary of State and the director. In a perfect world, we should like all duties to be primary, but the Bill imposes both primary and secondary duties on the Secretary of State and the director. The primary duties are concerned with providing that there is an effective framework for the competitive supply of gas; for example, to ensure that licence holders can finance their activities and that there is proper competition. The interests of consumers in relation to energy efficiency, important though they are, must obviously be subject to those primary duties. It is no good trying to secure the interest of consumers if no companies are competing in the market.
The noble Lord referred to the assignment of contract. The Government made a detailed statement on that in another place. Schedule 5 follows closely similar provisions in several other statutes, and a major feature of the arrangements that we propose is the separation of the functions of gas transportation and supply. That is to ensure that competing suppliers, including the supply arm of British Gas, use the pipeline network on the same basis. It follows from that that provision must be made for a scheme under which British Gas will allocate its various rights and obligations between the different legal entities which it will need to create in order to carry on its business. The ending of the monopoly of British Gas and the consequent loss of its market share will inevitably mean that a certain amount of adjustment to contractual arrangements will have to be made. The Government believe that that will be achieved best by discretion on a commercial basis among the parties involved.
My noble friend Lord Caithness was worried about the terms of British Gas privatisation. He said that he did not particularly like the Bill. I thought that was rather disparaging because I believe that it is a very good Bill. He said that he thinks that the measure will affect the price of what is a public company. The prospectus for the sale of the shares in British Gas, which described the policy at the time when British Gas was privatised, said that it was to retain the monopoly. But of course it is quite appropriate and legitimate for policy to change at a later stage in the light of experience. British Gas says that it supports those proposals.
I understand my noble friend's anxiety about other countries being able to supply into our pipelines even though they do not allow us to supply into theirs. It may be that in time, people will realise that total competition such as that which we are having in the UK works best for our consumers in a way which would seem, in the end, to work better for consumers in those other countries. They may then decide that we are adopting the right policy.

1305
My noble friend Lord Wade referred to combined heat and power. I agree with him about the available opportunities in that regard. The endless strengthening of competition which is taking place in the industrial market for gas provides a substantial boost for combined heat and power. That will continue.
I referred earlier to the fact that I did not like the reference made by my noble friend Lord Caithness to a level playing field but, as he used that expression, I shall use it back to him. I assure my noble friend that the guiding principle in the drafting of the legislation and the licences has been to ensure a level playing field among all the suppliers and the transporters, including British Gas. New companies will be able to compete on a fair basis and that is one reason why we rejected the idea proposed in some quarters that there should be some kind of target for the market share of British Gas.
The noble Lord, Lord Ezra, said that there is too little in the Bill and that too much is left to the licences. I understand why he says that. That is a criticism which is often made. He will know that there is a very good reason for that; namely, that the Bill provides the basic structure and the licences have to deal with the details of the matters. It is far more flexible to do that in the licences rather than by including it irrevocably in statute.
My noble friend Lady Gardner of Parkes was concerned about the obligations in the legislation. We believe that it is necessary for suppliers to publish their prices for domestic consumers, at least initially. The reason for placing that obligation in the licences rather than on the face of the Bill is that we do not know exactly how the market will develop. It will be necessary to have a degree of flexibility to allow the regime to adapt to what happens in the market. We wish to be able to change those requirements if experience shows that that will be in the interests of consumers.
Perhaps I may give one example of that. The requirement on British Gas to have published a price schedule in the industrial market was considered to be good a few years ago. Ofgas is now proposing to remove that requirement after representations were made by customers who said it prevented them negotiating. If that requirement were placed on the face of the Bill that flexibility would not exist.
My noble friend Lord Wade was concerned about pipelines over the land. Schedule 3 to the 1986 Act, which we are not amending materially, provides proper compensation for landowners where pipelines are built across their land.
The noble Lord, Lord Ezra, and my noble friend Lord Skelmersdale expressed the desire that the high levels of service provided by British Gas at present should continue. All suppliers will be required to provide special services to the elderly and disabled customers and to those who have genuine difficulties in paying their Bills.
In relation to service standards generally—reading meters, answering questions and so on—competitors will be able to win business only by offering customers what they want and by offering them a better service than that offered by other suppliers. That is why the Consumers' Association does not think that British Gas's 39 service standards, which state, for example, how quickly they
1306
should answer the telephone, should be imposed on all suppliers once the monopoly ends, because competition must set that free.
My noble friend Lord Gisborough was concerned about the vesting of the gas contracts to the new contracts. It is not practical within the structure of the legislation to alter that aspect in the way that my noble friend would like. If the consent of counter parties was required, they could prevent the Bill from taking effect by refusing to sanction an assignment. Therefore, it is necessary that those assignments should be continued. British Gas would not legally be able to continue in operation if its trading activities could not be moved to another body and the Bill would not come into effect if that were the situation.
My noble friend Lady Gardner of Parkes referred to the Citizen's Charter. That relates to provisions of public services to consumers where the consumers have no choice as to where they go for services. They are not relative to a competitive market where consumers can seek the service which meets the required needs and are not stuck with a monopoly supplier.
My noble friend wondered why the words "made available a supply" were used as opposed to "give a supply". I had not realised that that wording would cause the difficulties that it obviously does to my noble friend. I shall consider what she has said and see whether further clarification or elaboration is required.
My noble friend Lord Cochrane referred to caravan parks and visiting forces. My noble friend has great knowledge of that subject which was rewarded with the passing, as a very rare Private Member's Bill from your Lordships' House, of the Gas Exempt Supplies Act 1993. That legislation successfully deregulated holiday parks that supplied liquid petroleum gas. My noble friend asked whether it was possible to extend the exemption to those caravan holiday parks which distribute natural gas. Clause 4 of the Bill provides adequate powers to the Secretary of State to grant exemptions in those cases. Officials in my department are in touch with my noble friend and with the various trade associations to establish the scope of the exemption that would be appropriate and any conditions for safety and consumer protection that should be applied.
The scope of the exemption is not straightforward; there is a balance between deregulation and ensuring in appropriate cases that customers are able to choose their gas supplier. The technical discussions that are under way with my department will, I hope, achieve the best result.
The noble Lord, Lord Clinton-Davis, expressed concern about prepayment meter costs. Ofgas examined the differential in price and decided that that differentia] was appropriate.
I am grateful for the way in which noble Lords have considered the Bill at Second Reading. It is an important Bill. There should be safeguards for consumers in certain important respects, for example safety and provision of special services for vulnerable customers. Those matters are being addressed in the Bill and the licence. We are concerned to allow consumers the choice of not one supplier but a number of suppliers. That, in the long run, will lower prices and bring efficiency. I know that the noble Lord, Lord Sefton of Garston, finds that point difficult to absorb, but I expect that as time goes on he

1307
might be able to absorb a little of it. There are a number of points that noble Lords will wish to discuss at Committee, but I am grateful for the way in which your Lordships have addressed the Bill.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Europol: ECC Report
5.55 p.m.
Lord Slynn of Hadley Lord Slynn of Hadley rose to move, That this House takes note of the Report of the European Communities Committee on Europol (Tenth Report, HL Paper 51).
The noble and learned Lord said: My Lords, it is a considerable disadvantage to have to speak immediately after the forceful, engaging and elegant speech of the noble Earl. It is perhaps less of a disadvantage since we are not playing on the same fields.
The subject of the report that is referred to in the Motion standing in my name is of very considerable practical significance. It also has a procedural significance in that this is the first time that the Select Committee or one of its sub-committees has considered a convention proposed under Article K of the Treaty of Union which in this country is normally referred to as the justice and home affairs pillar. I am not sure whether pillars exist in other member states of the Community, but the adoption of that phrase is regarded as another English eccentricity.
The procedural significance is that Sub-Committee E has been able to look at the draft at a time when constructive criticism could be made. One always lives in hope that suggestions and criticisms that are made by the Select Committee will be listened to, and perhaps even taken into account.
This was a particularly unusual situation in that negotiation was still in progress and it was plain that changes would be made. Since our report a number of changes have been made in the provisional draft which the Minister was kind enough to let me see a few days ago. I do not propose to refer to more than one or two of those changes.
It is significant that a number of the articles in the draft convention are now blank because they are to be the subject of further negotiation at the Paris Council of Ministers. I hope that some of the things that we have said have an effect there.
Crime across frontiers has increased and seems likely to increase further. It has become apparent to everyone that it has to be dealt with in certain areas on a cross-frontier basis. The Maastricht Treaty contemplated that a proposal for a European police office (not a European police force) would be made.
The United Kingdom and Germany have supported that idea throughout. The proposal seeks to achieve an exchange of information between states in order to combat crime. The member states have already experimented in that area with a European Drugs Unit. That is based in the Netherlands and has made a very successful start. The committee, which I have the honour to chair, had considerable doubts about the legal basis of
1308
the European Drugs Unit, but it has provided some experience upon which Europol, the police office, can develop.
It is accepted everywhere that from the police point of view it is important that all data, including sensitive data, should be available for exchange and analysis in respect of certain crimes, if criminals are to be caught. The director of our criminal intelligence service accepts the importance of the new proposals.
It is no less important to ensure that the citizen who wrongly and unjustifiably gets caught up in the system has protection and a remedy. It is also no less important that Europol should be accountable for what it does.
What is to be the task of this new office? Its task is to be limited to the exchange or collection, analysis and provision of information and intelligence. Despite earlier discussions, which, perhaps, were going in a different direction, it is not now proposed to give Europol any operational or enforcement powers. They will remain with national police authorities. The committee which considered the matter thought that that was right. Whether further powers should be given to Europol in the future will remain to be seen in the light of experience. The committee took the view that it might only be necessary to have operational powers if, one day, there is a body of European criminal law. That is something which will have to be looked at as time goes on.
I should like to deal briefly with three issues. The first is the question of how the information should be exchanged and who should have access to it for police purposes. Secondly, what crimes ought to be covered or ought to fall within the Europol remit? Thirdly, how should data, and especially sensitive data, properly be protected and what remedies should there be for the citizen who has been injured by the wrongful giving of inaccurate information?
I shall start with the first question, about exchange of information and access to it. As to the exchange of information, there is really no controversy. Each of the member states is to establish a national unit which will be the only liaison body between Europol and competent national authorities. In the case of the United Kingdom, that authority will be the National Criminal Intelligence Service. That unit in each stage will supply information to Europol to enable it to carry out its task. The information itself will be available to national units of other member states and to Europol.
What will really be important in the future is not just the information which is given; the analysis of the information will also be of very considerable significance. That analysis will be available to Europol and national liaison officers only when authorised. They will be authorised to receive it only when it is necessary for them to have it as part of the analysis of a particular project. In effect, it means that there are two rings: there is the outer ring of information which is not necessarily very sensitive and which will be obtainable by national authorities; and there will be an inner ring of sensitive information which will only be available on a need-to-know basis.
The committee considered that the "need to know" test which has now been accepted is a very important limitation and control. If information is to be given and if

1309
there is to be access to the inner ring, it is important that it should be done speedily. It seems to the committee to be unsatisfactory that an order for opening a new file or for setting out the conditions upon which data can be communicated should require the approval of the management board set up by Europol. That board is required to meet only twice a year. It seems to the committee quite impracticable that such a board should have the final word. The committee recommended that there should be power of delegation either to a committee or to the director to take steps. In the revised draft convention, I have to say that a number of the articles relating to that kind of access and exchange of information are distinct improvements.
I turn now to the second question; namely, what crimes should be covered? It is clearly not necessary in the view of the committee that all crimes, however serious, should fall within the remit of Europol. It is only those crimes which have a trans-national effect—such as drug smuggling, vehicle crimes and illegal trade in radioactive and nuclear materials. There is no dispute in that respect. I am glad to see that money laundering has been added to the list of crimes by the latest negotiations.
On the face of it, it might seem that the most obvious crime to include in the list would be terrorism. In committee, we thought at first that that was something which ought to be included. However, we recognised that, because of the unusually sensitive information which may be held by member states in regard to terrorist activities, terrorism is in a special category. The committee eventually supported the compromise solution which had been arrived at, that terrorism should be included after a period of experience. I note that, although it was contemplated that that would be done within a period of two years, it is now recognised that it may be brought in earlier. As time goes on, I suspect that it will be necessary to consider whether other criminal activities should be included if the police are to be effective as a result of using the new system.
I turn now to the third question: how can the data be properly protected, and what remedy should there be for the citizen who has been injured by the wrongful giving of inaccurate information? As to the first part, it is important to bear in mind that the Council directive on data protection—which was debated in this House some time ago—will not apply to police data. It has always been contemplated that there would be separate provisions. Under the draft convention, each member state must implement in its national legislation a standard of data protection which is at least equivalent to that required by a data convention adopted by the Council of Europe for the protection of individuals and that it should also take account of a recommendation of the Council of Europe which is known as Recommendation R(87)15. The draft convention proposes that Europol will simply take account of those principles.
The Home Secretary, who was good enough to give evidence to the committee, accepted that that recommendation (which lays down very good standards for the police to follow) should be incorporated into the convention in language appropriate to such a document. However, he did not accept that the recommendation in its current terms should be adopted. We accept the attitude
1310
that the Home Secretary has taken on the matter, but we consider that Europol should be bound by the same rules and should not simply have to take them into account.
Access to data by individuals has caused considerable discussion. It now seems that there is no agreed proposal in the convention. It is a matter to be negotiated in the Paris Agreement. We firmly took the view that it was quite wrong that Europol should have the right to refuse to produce information to the citizen about him or about his affairs if the effort to retrieve it was disproportionate to the data subject's stated interest. It seems to us to be critical that there should be a much more precise definition of when Europol can refuse to give information. The same is true of a provision that Europol may refuse to produce information if it is necessary to do so for the proper performance of its task. The committee has urged that such matters should be made more limited and more precise so that people will know where they stand.
Finally, there is the question of supervision as regards what is being done by Europol and by national authorities. This is most important. We strongly support the recommendation that there should be both a national supervisory authority, and a joint supervisory authority, to monitor the flow of information and complaints by citizens that their rights have been violated. If that does not work there must be a fallback position. It is the view of the committee that the citizen should have a direct remedy against national authorities and Europol in the national courts, but not in the European Court of Justice. If there is to be liability for the unauthorised or incorrect processing of personal data the citizen should have the right to go to the national court.
That leaves two important questions. Is it desirable that this convention should be interpreted in the same way in each of the states a party to the convention? What is to happen if member states are in dispute as to the interpretation or application of the convention? It seems right and necessary in principle that an international treaty, like any contract, should be interpreted by all the parties in the same way. They have agreed the words, and cannot possibly have intended that they should have as many different meanings as there are parties to the convention; otherwise, there is little point in agreeing the convention at all. It is absurd that a British subject suing here should be told that the convention means one thing but that if he goes to sue in a Greek, Danish or Portuguese court he will be told that it means three other quite different things. That necessarily involves a body, court or tribunal giving an authoritative ruling. If this convention fell under the Community pillar there would be no problem. It would come within Article 177 and national courts could make a reference to the European courts. Prima facie, under Article K the jurisdiction of the European court is excluded, though it is provided that conventions under the home affairs and justice pillar may stipulate that the Court of Justice shall have jurisdiction to interpret the provisions of the convention and to rule upon them in such a way as is laid down in the convention.
The majority of the Select Committee and Sub-Committee E took the view that for purely practical reasons it was desirable that there should be power to refer the matter either to the European court or an independent

1311
tribunal for an interpretation to be given to apply across all the member states concerned. The minority of members of the committee believe that, despite the clear words of Article K which provide for jurisdiction, to give jurisdiction to the European court is contrary to the spirit of the Maastricht Treaty. I suggest that conventions made under the justice and home affairs pillar need to be looked at on a case-by-case basis. There should not be any dogmatic rule either that they should or should not give jurisdiction to the European court.
Despite that, the difference of view between the majority and minority is not to be blown out of proportion. There is a difference which we have set out in our report. The majority were firmly of the view that it was desirable to have uniformity of interpretation, and that even if most disputes would be settled in the national courts, the management board, or between member states in the Council, there was a need for a fallback position. I am glad to see in the last sentence of the Government's response that, even if they are not convinced that a reference to the European court or an independent tribunal is needed, they will consider the committee's recommendation further in the context of the continuing discussion. It is that kind of undertaking that makes the work involved in these reports worthwhile. In particular, I desire to pay tribute to our legal adviser, Mrs. Denza, her assistant, Mr. Ivan Smith, and our clerk for the work that they have done. I beg to move.
Moved, That this House takes note of the Report of the European Communities Committee on Europol (Tenth Report, HL Paper 51).—(Lord Slynn of Hadley.)
6.15 p.m.
Lord Aldington: My Lords, I start by thanking the noble and learned Lord, Lord Slynn, for the way in which he has introduced this debate with his usual clarity and pleasing method of delivery. He will not be surprised if I say that I have one difference and a few points to make later in my speech about his closing remarks. The noble and learned Lord conducted this inquiry in a masterly way. He handled those of us who had the honour to be members of his committee—I was co-opted onto it—in an excellent way. We had a full set of evidence which enabled the Committee to produce a worthwhile report.
Like many other debates on European Union (formerly European Community) matters, this discussion takes place at a time when my noble and right honourable friends are engaged in intricate negotiations on this subject. I am sure that in the past we have all had that in mind and we have it very much in mind at the moment. I hope that I shall say nothing that will embarrass my noble friend. I join the noble and learned Lord in thanking my right honourable friend the Home Secretary for taking the trouble to come to give evidence to the Committee. He argued his point in a lucid, impressive and powerful way.
The establishment of Europol is a practical example of ever closer union in Europe as a result of intergovernmental co-operation. Police co-operation is necessary and must be based on the full exchange of up-to-date information and intelligence in secure conditions by the authorities concerned. In that way they
1312
can tackle cross-border criminal activities that threaten all of us and presage an increased threat if we do not tackle the situation properly. The sooner the full Europol system can be established the better for everyone in the European Union.
It is worth while seeking, and getting, full agreement of all member states, who have different systems of criminal law and traditions, to the details of the system and the safeguards of private citizens which the noble and learned Lord has emphasised, as indeed we all emphasised in the committee. I for one do not complain about the time that has been taken. I do not complain yet, though I shall if the matter is still unresolved in the latter part of the year. I hope that by the end of the current French presidency all that has to be resolved will be resolved.
The noble and learned Lord reminded us of one or two points on which it might be possible to review the situation later. That is true of the points that he has made and is also true of the points about the jurisdiction of the European Court of Justice, to which I shall refer later.
With regard to timing, in view of the current arguments about what should be done at the IGC in relation to the pillars, I do not believe that the Commission could have secured earlier agreement on Europol matters had the issue been communitised because there are problems to be sorted out between differing member states. Meanwhile, the Europol Drugs Unit can do and is doing good work. I accept the points made in the Government's reply about the validity of that unit. I applaud the agreements that have widened the unit's original remit so that it can be a precursor to Europol. We must accept that, even if we obtain an agreement to the convention in the middle of this year, it will take a number of months before Europol can be fully established. That is clear from the wording of the treaty; and it is clear from an understanding of reality.
Europol will have no operational powers. Those remain with member states, each supplying and having access to information and intelligence gathered on a European Union basis. It seems to me to be in the nature of the third pillar activity of the European Union, Article K, that member states retain responsibility for operational action and help each other to operate more successfully. It therefore follows that citizens seeking redress, whether against their government or against Europol, for any damage that they allege they suffer should seek it from member states using their legal system. The recommendations in paragraph 104 of the committee's report are along those lines. Although in its latest form Article 35 does not follow that argument exactly, it meets my point.
Redress is sought, rightly, in national courts. Any member state found liable may be able to make a claim on another or on Europol. If and when disputes arise, how will they be settled? Article 35 provides for the settlement in the first place by the Management Board or the Council. Our report examines whether the European Court of Justice should have jurisdiction to settle disputes of interpretation or implementation of the convention or disputes between member states. That is clearly set out in paragraph 109.

1313
I say that the argument is clearly set out. The majority view is clearly set out. My noble friend Lady Carnegy of Lour and I parted company with the remainder of the sub-committee and with the majority of the Select Committee. Our arguments are fully set out on pages 36 to 39 in the report. They are not part of the report; I wish that they were. I hope that the House will take as much note of those arguments as of the recommendation in paragraph 109.
As noble Lords will understand if they read those pages, my noble friend and I were trounced by the lawyers. We were trounced again in the Select Committee, where the arguments received some support. However, we both venture to suggest to the House that we might be right and that the others might be wrong. In our view there is no case for providing now—I emphasise "now"—for the involvement of the European Court of Justice in this convention. It was eloquently and clearly argued by the noble and learned Lord that uniformity in interpretation is desirable; indeed, it is said that it is important. I would say that it is desirable and important if other factors are equal but it is not essential. Differing national traditions should not be trampled upon unnecessarily.
If some member states' courts were to interpret the convention in a maverick way, the Council or the Management Board is there to sort out the problem, as the noble and learned Lord said. If that course failed—it would be some years before it failed—the Council could meet again to decide whether the European Court of Justice or an independent tribunal might be necessary. But such a tribunal is not necessary today. If the arguments about the issue were to delay the signing in June of the agreement to the convention, it would damage an issue which really matters to the Community. Therefore the case on uniformity does not seem to be proved.
There is another kind of uniformity which is equally as important and certainly equally as desirable. It is that all citizens of the United Kingdom should have the same right of redress in police data matters whether or not Europol is involved. The European Court of Justice should not be put in a position to overrule British courts where Europol is involved and to have no say where Europol is not involved. The noble and learned Lord stated that there was a strong practical argument for the European Court of Justice to be given jurisdiction in the convention when it is first signed. For practical reasons that is not so. The Council is there to ensure that members observe the convention, and it should not be assumed that it will not succeed. Nor should it be assumed that if the European Court of Justice were to have jurisdiction every member state would immediately follow the course that the Court decided was right. That is one of the problems of today's European Union.
Nor should it be assumed that in all conventions and treaties between member states outside the Treaty of Rome a special tribunal to settle disputes must be provided for. There is no such provision in the Schengen Agreement among six member states on open borders—an agreement which also has police data implications—and it seems to work perfectly well.
1314
I hope that agreement to the convention will not be held up by arguments about the European Court of Justice jurisdiction which are not immediately relevant to today's problems. In principle, I believe it right to keep the two new pillars away from the European Court of Justice, at least at this formative stage when intergovernmental co-operation has to prove itself. A strong case has to be made for the necessity of providing European Court of Justice jurisdiction; and that does not exist here, in the opinion of my noble friend Lady Carnegy of Lour and myself.
Furthermore, as your Lordships know, the Select Committee is inquiring into matters for the 1996 Inter-Governmental Conference, including the working of the two pillars and the European Court of Justice implications. Should we not wait until we have been able to consider anything that the IGC report may say in regard to the European Court of Justice and the home affairs and justice pillars?
Looking back upon my unusual obstinacy in face of the opinions of many colleagues I deeply respect, I have a procedural suggestion to offer to the House. It relates to occasions when differences of opinion occur in Select Committees on points of political importance which have been in the mind of the House in its agreement to major Bills such as the European Communities (Amendment) Bill passed in 1993. In that Bill and in the Maastricht Treaty which it ratified the independence of the two new pillars from the institutions of the Community other than the Council was fundamental, with the treaties spelling out suitable provisions. The noble and learned Lord was quite right to remind the House that there is provision for the European Court of Justice having jurisdiction where it is so decided in Article K matters. Would it not be wise to allow a Select Committee simply to set out the conflicting arguments and points of view, without any need for a recommendation? The House can then make up its mind on major matters which have been in front of it in quite recent months.
My final words relate to the scrutiny by national parliaments of the work of the third pillar, where the House has been enormously helped by the leadership given to it by the noble and learned Lord and his committee. This inquiry, so well led by him and well supported with evidence and documents from the Home Office, shows how this House can be informed of the progress of policy and convention creation and can express useful opinions which the Government can have in mind in further negotiations. We shall in due course be asked to ratify the convention and at that stage we shall have no power of amendment. But today, and through this valuable report, we have an opportunity to influence and to help to mould it. That is important for us in our duties within the United Kingdom constitution, but it is also an important consideration when it is argued, as it will be, that the third pillar is undemocratic and non-accountable and that it should be more accountable to the European Parliament. The accountability of Ministers in the Council is to their national parliaments and this debate, in a long line of others, helps, does it not, in the implementation of that accountability.
6.32 p.m.
Lord Bruce of Donington: My Lords, I should like to pay my tribute to the noble and learned Lord, Lord Slynn, and his sub-committee—to him for the way in which he has introduced the Report to the House and to the sub-committee for the way in which they have presented it. I myself was not a member of the sub-committee—I did not have that honour or pleasure—but I can assure your Lordships that, although I was not present during the giving of the evidence, I have read thoroughly through it since and am familiar with that evidence.
This report has perhaps a rather greater significance than its necessarily academic flavour must have given it, particularly when you have the presence of so many lawyers involved in its production. However, there can be no doubt that the subject matter of the report is of great importance to all our citizens. There are very few areas of our society, in terms of the gradation of society, rich and poor, or in terms of the location in which we happen to live or work, that are immune, for example, to the effects of international crime, particularly in the field of drug trafficking.
This is something which, indirectly or in many cases directly, affects us all. If that be the case, so much more must it be with the trends that have become more inevitable and more pressing since the break-up of the Soviet empire: the traffic that has grown up in radioactive substances, in the disposal of nuclear material, as well as of more commonplace crimes which are again organised internationally in the field of car theft, the theft of goods in transit and matters of that kind. Last, but not least, I would include in the list illegal emigration. So let us make no mistake: what we are talking about today is not something of pure academic or legal interest. These are matters of the utmost importance to us all.
It is particularly important, as we are bound to know, for those in the United Kingdom and indeed in Europe who are entrusted with the enforcement of laws and the arrest and trial of criminals, because, unless they have adequate information, adequate intelligence and adequate analysis available to them, their task is made so much more difficult. Therefore, one must inevitably support wholeheartedly the endeavours that are being made to aid those honoured citizens of ours who, despite reductions in their numbers on the beat for totally different reasons, are entrusted with the enforcement of the law and the apprehension of criminals. So far so good: therefore the purposes of the convention and indeed of the agreement between states, as instanced in the case of Germany in 1993 concerning the Interpol drugs unit, must command the support of all.
But, having said that, I am bound to go, as an accountant, back to the initial considerations of this convention. Many of us forecast—I claim no particular credit for myself for having done so—that, with the abolition of internal frontiers on the scale that was proposed immediately following Maastricht, and indeed before it, this problem was bound to arise. The abolition of international frontiers, which from a trade point of view obviously had its advantages, nevertheless had its downsides. This is one of them and it is noteworthy that Germany should be the principal nation in the European Union to urge this forward, because it was across
1316
Germany's eastern borders that much of the illegal material began to flow. Indeed, even international drug rings now have a route via Germany and via those parts of the frontier that are far easier to cross than taking, say, Eurostar to Waterloo or crossing the English Channel.
Inevitably, therefore, this matter came under the influence of Germany, and so we have the convention. It is perhaps unfortunate that we have not yet got an agreed version. We are still discussing a convention to which further amendments are still being received, or so I understand from the noble and learned Lord, Lord Slynn. He will be well aware that what I have said applies also to the agreement achieved between member states in regard to the Interpol drug enforcement unit. From the practical standpoint I have to ask whether, in considering this problem, any thought was given to the European branch of Interpol. After all, Interpol is an organisation on an international scale that has very great experience in these matters. I am quite sure that those of your Lordships who have any experience with an organised police force—and my own Front Bench is replete with these—will be able to testify that Interpol has been of enormous assistance.
I may not have been able to go through all the evidence in detail, but I can find no suggestion anywhere that the improvement of the European branch of Interpol was considered. I shall be very glad if some information can be given about that. After all, Interpol has a proven track record. I should have thought that there would be an initial assessment as to whether the European branch of Interpol and its functions could have been extended to cover these matters rather than relying on the establishment of a new organisation confined to Europe.
I do not wish to be misunderstood. I am not against the foundation of the organisation which is laid out in the convention or of the Europol Drugs Unit. However, I am curious to know whether that possibility was explored, because cost comes into this. As an accountant I hesitate to bring to the attention of the Government, who are so bent on economies in public expenditure, the necessity for viewing any increases in expenditure with the utmost degree of scepticism. The establishment of such an organisation, with its management committee, liaison officers, data processing requirements and staff will not come cheap. I do not believe that the British contribution, in terms of a percentage of national income, will present overwhelming financial problems, but the costs ought to be considered. It would not have been out of order for the Government themselves to have made some estimate of costs when they presented the convention to us with its explanatory memorandum. We should like to know roughly what the cost will be.
It is quite clear that the operation of the new Europol, relying as it will on recording probably 90 or 95 per cent. of the information it receives in the form of computerised items, will involve some degree of data protection. That has already been dealt with very adequately by the noble and learned Lord, Lord Slynn. But it remains a problem. In the course of the operations of the new Europol, some injury may occasionally be done to the individual. As the report brings out and its recommendation makes clear, in those circumstances redress should be available. Such

1317
cases will probably be exceptional, but provision ought to be made for injured parties to be able to obtain suitable redress.
This is where the whole question of interpretation of the law is extremely important. I have taken note of the arguments produced by the noble and learned Lord, Lord Slynn, with whom I have often argued on a totally different plane. Nevertheless, the provisions of the treaty remain. The provisions of the treaty are not there as a matter of accident. The two pillars of foreign affairs and defence under Title V and the provisions under Title VI of the Maastricht Treaty were included quite deliberately. They mark the agreement of the member states that they do not want one universal writ to rule under the aegis of the Commission but want a degree of co-operation between member states without the impact of the influence of the Commission.
I like to think, perhaps modestly, that the remarks that I have made over the years on the question of international civil servants may have had some impact. There are two types of international civil servant. There is one type which consists of persons who conceive it to be their main purpose to carry out the instructions they have been given and to do so loyally and efficiently to the best of their ability. There is another type of international civil servant, from whom the tendency to desire to increase their power may not be entirely absent, which consists of people who see matters in institutional terms and regard their main role as the extension of their power rather than following the purposes of the nation states which comprise the Union. No names, no pack drill—but if the cap fits in any part of the Community it can be worn.
In this matter I support the Government. Indeed, somewhat unusually, I support the noble Lord, Lord Aldington. Those pillars should remain intact. We must maintain the principle of co-operation, rather than the principle of ever-increasing centralisation, which has been brought out once again by the Commission's own plans for the revisions which are to take place under the IGC. Although I shall not quote from the document now, it is clear that the Commission is bent on revising Titles V and VI in order that it may become fully involved, rather than retaining the existing position fortunately agreed by the member states to co-operate with one another rather than to submit, albeit after argument, to a quasi-supranational authority.
Exactly the same principle applies to the resistance by the Government to the Court of Auditors being brought in to the audit of expense. The Court of Auditors is an institution of the European Community. It is not perhaps known that, if the Court of Auditors becomes involved in auditing the accounts and finance of the new convention and its association of member states, it remains subject to the Community's financial regulations under which it has to take into account at all times the wishes of the Commission. Therefore, the Government are wise to resist that proposal. I cannot find any reason why the Government's attitude on that matter should not be supported.
As I said at the outset of my remarks, we still do not have the final version of the convention. I must address the noble Baroness on this question. In the course of the evidence there was a suggestion by the Home Office that
1318
a document placed in the Library of the House could not properly be quoted until it had been published in another fashion. That, together with a quotation from her department's correspondence, appears on page 30 of the evidence given before the Committee. I made inquiries of the Clerk of the House and am told that that suggestion is incorrect. Once a document is in the Library it becomes public property at the hands of any Member of the House. I hope that some clarification may be given upon that point.
That apart, I give the report a hearty welcome. I congratulate the noble and learned Lord, Lord Slynn, despite my marginal difference with him in agreement with the noble Lord, Lord Aldington. I hope that in due course your Lordships' House may give the matter even further and more detailed consideration when the final proposals are known.
6.49 p.m.
Lord Knights: My Lords, I, too, begin by thanking the noble and learned Lord for providing the House with the opportunity to consider one of the products of the European Union. As the noble Lord, Lord Bruce, said, it will undoubtedly be of considerable benefit to many people in this country. He and his colleagues deserve our thanks for the work they have put in, for producing such a comprehensive and illuminating report, and for exposing some, if not all, of the problems involved in establishing a joint venture of this kind. Speaking personally, I support many, if not all, of the report's conclusions, but there are one or two on which I wish to comment.
Co-operation between police forces of this country and those overseas has necessarily existed for many years; in fact long before the Trevi organisation referred to in paragraph 9 of the report. It was set up in 1976 and was concerned at the outset with co-operation at an operational level against terrorism and other serious crime. It was 1990, however, before the Trevi group of Ministers was given the task of developing concrete proposals for a Europol organisation.
There is clear evidence, I believe, to indicate that the time has long since passed when an effective Europol should have been created. Motor cars, for example, were disappearing off the streets of Birmingham and reappearing somewhere on the continent of Europe well over 10 years ago. Your Lordships may agree that had the European Council of Ministers not authorised the steps it has in advance of a properly established convention—a fact which the committee finds unsatisfactory—then the position in relation to serious crime within the Community might well be more threatening than it currently is.
It is to be hoped, therefore, that the present intention, which I believe is to secure the signing of the convention at Cannes later this month, will be realised and that the necessary legal acts required by the convention will quickly follow. Until they are all in place, presumably everyone concerned with Europol will be acting in a way which will be contrary to the requirements of the convention, with whatever consequences that might have. But it is imperative, I suggest, that the present atmosphere of indecision, which must inevitably hamper the work of

1319
the unit in seeking to combat the burgeoning problem of criminal activity within and without the Community, should be removed.
The creation of any new system of records—whatever its contents—almost inevitably arouses suspicion and fear of misuse. Clearly the protection of the data held by Europol, subject access to that data, and the general accountability of the organisation for its policy and methods of operation are extremely important. The committee's conclusions in that respect should, I believe, be found generally acceptable.
Your Lordships might be surprised, however, that similar detailed requirements do not seem ever to have been debated in respect of this country's link to Europol; that is to say, the National Criminal Intelligence Service which commenced operations on 1st April 1992. Its position is unique in that while police forces are locally established and maintained, the National Criminal Intelligence Service is established by the Home Secretary, using his powers under Section 41 of the Police Act 1964 to provide and maintain common police services. Its director general is accountable directly to the Home Secretary who appoints him. Chief constables are not involved in any way in the management and organisation of that unit. It is the first time, I believe, that responsibility for what most people would regard as an operational responsibility has been assumed by a politician. But this is not the time or the place to debate that issue.
Your Lordships may agree that there are parallels here with the security services. One wonders whether the time may come—indeed may already have come—when there should be established a committee on the same lines as the Intelligence and Security Committee to oversee the policies and activities of the National Criminal Intelligence Service. Perhaps that is the role which will be performed by the national supervisory body which we shall be required to set up to monitor data exchange with Europol. The constitution of such a body seems rather sketchy at the moment and perhaps the Minister will be able to tell us later this evening a little more about what is proposed as regards the national supervisory body.
I turn now to the role and remit of Europol. I very much share the committee's view that Europol should not take on an operational role, for all the reasons advanced by the committee in paragraph 84. Last year, during the passage of the Police and Magistrates' Courts Bill, your Lordships persuaded the Government that policing should remain clearly local in nature. I believe that that is still the correct attitude, however serious the crime may be. As to the crimes with which the unit should be involved, again there can be little argument with the provisions of Article 2 of the draft convention and the annex to it.
Lord Harmar-Nicholls: My Lords, perhaps I may ask a question. Is the noble Lord saying that chief constables have no contact with Europol in carrying out their duties at home?
Lord Knights: My Lords, I am not saying that chief constables have no contact. Of course there is a lot of contact between chief constables and the criminal intelligence service. My point is that they are not involved in any way in its management. I believe that that is unique.
1320
Coming back to the crimes with which Europol will deal, I am doubtful about one or two. I am doubtful about the inclusion of nuclear and radioactive substances and, more particularly, of terrorism, even with the possible two-year delay before terrorism is to be taken up. Your Lordships will be aware that the development of intelligence relating to terrorism is one of the statutory responsibilities of the security services in this country. They also handle crimes involving nuclear substances, and the convention's requirement that there should be one national unit to liaise with Europol would appear to require that the security services' data will need to be fed to the unit via the National Criminal Intelligence Service and vice versa, with the security risks that that might involve. Or is it thought, perhaps, that the two data banks should be combined in some way?
In a Written Answer of 16th May 1995 (at col. 191 of the Official Report for another place) the Home Secretary said:
"If … resources were available to the Security Service and if, within their statutory functions, a useful role were identified for them in support of the police … in their work to counter serious crime, I would be ready to consider such proposals".
One wonders whether there is anything to be read into that in terms of fusing the security services and the criminal intelligence service.
Clearly, there is much to be done in the two years which are to be allowed, if the respective roles of the security service and the National Criminal Intelligence Service are to be satisfactorily reconciled in respect of the handling of terrorist crime.
Finally, like the noble Lord, Lord Bruce, I turn to Interpol. It is mentioned only briefly in the report. At paragraph 14, the Data Protection Registrar is quoted as stressing that,
"Europol would be quite different in character from Interpol, which was based on operational arrangements among police forces without government involvement".
A Select Committee of another place, in a report on practical police co-operation in the European Community in 1990, described Interpol's principal role as being to act as a channel of communication, to send messages from the police of one country to those of another.
There is reason to think that Interpol is seeking to widen that role. For example, in an article in The Times on 26th May this year the director of the National Criminal Intelligence Service is reported as saying that Interpol is building up a database in respect of stolen motor vehicles, which should be running by the end of this year, covering 45 countries in Europe. That sounds remarkably like duplication. Interpol is very much its own creature. If it is developing databases of an intelligence nature, questions must inevitably arise as to its accountability.
I understand that this country's contribution to Interpol is included in the budget for the National Criminal Intelligence Service. No doubt the Minister will correct me if I am wrong on that point. Bearing that in mind, perhaps she will say whether the question of possible duplication is being addressed and whether, in the light of the establishment of Europol, the activities of Interpol within the European Community are still regarded as cost-effective.

1321
The noble Lord, Lord Bruce of Donington, raised a question as to whether consideration had been given to using the European branch of Interpol rather than setting up a new organisation. The difference between the two organisations, as I see it, is that that Europol is very much controlled and very much accountable right up to the Council of Europe; whereas Interpol, as I understand it, is accountable to no one but itself. There is no political connection whatever with Europol. As I say, it is a creature of its own standing. I am quite sure that the committee was right when it agreed that Interpol does not serve a useful purpose in the field of which we are now talking.
We are seeing the birth of a most important joint venture, one that will be of great benefit to us all. I am sure that we should support the committee's recommendations.
7.2 p.m.
Lord Bethell: My Lords, it is very reassuring to find noble Lords unanimous in welcoming this new European enterprise. All noble Lords who spoke, including the noble Lord, Lord Bruce of Donington, welcomed the report—with the exception of certain details encapsulated by my noble friend Lord Aldington. It seems undeniable that, in an age where criminals do not respect frontiers, the police should be enabled sometimes to cross frontiers in the pursuit and apprehension of the criminal. Too often these days the police can be handicapped by the fact that a crime is planned in France by British miscreants, who then commit their crime in Belgium, carry away their ill-gotten gains to the Netherlands and dispose of them in Germany. The police forces of more than two countries can be involved in such a crime. Frequently the police are one jump behind the criminals simply because of the transfer of the action from one nation to another. It is that problem, that security deficit, that the creation of Europol is designed to overcome.
I should emphasise at the outset that in these remarks I have taken the advice of the Police Federation of England and Wales, which I advise over such issues. I understand that the Police Federation is in favour of the development of Europol along the lines suggested.
However, I have one particular query in this connection; namely, how will the officers of Europol who are British be represented as regards a professional body or association? Will they remain British constables, and therefore be represented by their federation, or will they be represented by some other body? I gave my noble friend notice of that question, and I hope that she will be able to inform me.
The scope of Europol has been well set out by the noble and learned Lord in his report. It is undeniable that it can at the moment have no operational powers. But its and analysis role will be exceptional. I do not believe that it can be rivalled, if it works as it should work, by any other organisation, and certainly not by Interpol. I do not believe that any other body would enjoy the confidence of the organisation that already exists in embryo in The Hague. I speak as someone who has been to The Hague and visited police and customs officers in that building. It is my impression that they work very well together, that
1322
they have confidence in one another, and that they can get information from one another far more quickly than they used to do. Many arrests have been made already because of the swift exchange of information provided by that modest building in The Hague. Once Europol is fully under way, with information being provided direct to the central computer, it will be that much easier for criminals to be apprehended and for the police to go about their duty.
I know that there are fears about the power of this new organisation, although it is my impression that those fears are less felt in this country and more felt in countries such as Germany, the Netherlands and Belgium. The idea of some massive "Big Brother" of a computer containing all the information that there is to know about each one of us in the European Union is frightening to a number of people. Questions were rightly raised by previous speakers about how the great power of the new machine is to be controlled and to whom the body is to be accountable.
On the dispute, the disagreement, that arose between the majority and the minority in the noble and learned Lord's sub-committee, I have to say that I come down on the side of the majority. I think it normal that someone who has a grievance about how Europol has been working, who has not achieved satisfaction from a joint supervisory authority, and who takes the matter to the national court, should envisage the possibility of a reference, a search for advice, being made to the European Court of Justice. That can happen in practically any civil action that arises nowadays. It is undeniable, whether we like it or not, that the decisions of the European Court of Justice override those of national courts. It may well be that references to the ECJ in Luxembourg will have to be made from time to time in cases that are brought before national courts. I hope that not too heavy weather will be made of this process, and that it will be allowed to unravel itself in a normal way.
However, before those cases come to court, I hope that they can be tackled by normal parliamentary means. The report before us emphasises the view of the Home Office that individual cases can best be tackled by the national parliamentarians of the aggrieved individual. There is a fair amount of truth in this. But I should put forward a word for the European Parliament in this context. I know that the noble Lord, Lord Bruce of Donington, thinks that the European Parliament is totally useless, but there are times when the European Parliament can help and when an MEP can assist one of his or her constituents. In such questions as the third pillar, as in any other, the president of the home affairs Ministers appears before the Civil Liberties Committee of the European Parliament at least once every six months. Assisted by officials, he fields questions on anything that the members of that committee or other MEPs care to throw at the president in office. It is a forum for debate on third pillar issues which does not yet exist in national parliaments, so far as I know, or in another place. Does the noble Lord wish to intervene?
Lord Bruce of Donington: My Lords, I am most grateful to the noble Lord for allowing me to intervene. He said that I viewed the European Parliament as useless. I have never said that. Indeed, I was an active Member of it for four years. I do not feel that it is all that effective, but

1323
that is neither here nor there. What I had in mind in the context of this debate was the role of the European ombudsman, who appears not yet to have materialised.
Lord Bethell: Well, we do not need to bring up all over again the Maastricht debates, when words which perhaps we have now done our best to forget flew across the Chamber. But the noble Lord is quite right to raise the question of the ombudsman. He is the first speaker to do so. The Minister may care to refer to that at the end of our proceedings today.
I believe that at the moment there is a role for the MEP in representing constituents over third pillar issues, including Europol, just as there is a role for the national parliamentarian to represent constituents on the national scene. I hope that both will be used. When the Home Secretary appeared before the sub-committee, he seemed rather to down-play the role of the European Parliament in this issue. But I refer your Lordships to Article K.6 in the Maastricht agreement, which says quite clearly that the European Parliament has the right to be consulted— not just informed—over these issues.
Some interesting comments have been made about the crimes which could fall within the purview of Europol. It is quite right that we have begun rather slowly. We have begun before we have any legal basis in place, so far as I can see. I understand that doubts have been raised about whether the present unit has from time to time exceeded its legal entitlements. But I believe that it has begun to work well in providing an exchange of information on drugs and serious crimes connected with drugs. I can see no reason why it should not be expanded to deal with vehicle crimes and the very serious matter of crimes involving nuclear material. It is surely essential that such a terrible crime, which could threaten us all, should be tackled on the international level as well as on a national basis—if one likes, not only within Europol but, by agreement, with governments and the law enforcement agencies of all countries where there is nuclear material.
As for terrorism, I suggest that after the statutory two years, it would make sense to begin by exchanging information within Europol, which we hope by then will be thoroughly legal, on terrorism which is non-indigenous. I have in mind terrorism that originates outside the European Union. I can understand that there may be some hesitancy on the part of law enforcement agencies of the Union to pool information that they have on terrorists or terrorist suspects and put it into that great machine in The Hague. Such information is not garnered easily. It is often acquired after exposing police agents to danger and maybe even bloodshed. It is not given away to anyone on an easy basis. So a step forward would be to start with non-indigenous terrorism.
For the future, I wonder whether it would make sense for that body to begin looking into specifically European Union crimes. I have in mind European agricultural fraud, which costs our taxpayers huge sums of money. It is a matter which the Commission is meant to look into but it does so rather inefficiently, without proper attention or despatch. If one has, for better or worse, a European Union police body, could it not tackle the very costly question of European Community fraud? Already, the Commission in Brussels has operational powers. It has the
1324
ability to launch dawn raids on enterprises or individuals in order to acquire documents and can impose arbitrarily severe fines on enterprises and individuals. Would it make sense eventually, if we are reaching a stage at which an operational role for Europol could be considered, to consider European fraud? I believe that that is an aspect of the European Union's work which will be broadly welcomed by the people of the United Kingdom, and even by those who are sceptical about many other aspects of the European Union's work.
The sub-committee is to be congratulated on having produced this document. It is an admirable analysis of the problems raised and the opportunities presented to us. I give it my unqualified support.
7.17 p.m.
Lord Hacking: My Lords, one of the pleasures of serving on your Lordships' committees is witnessing the continuity of our work. There has been no greater pleasure for me than serving on the Law and Institutions Sub-Committee of your Lordships' European Communities Committee.
So we can witness the continuity of our work, as we did in our report, at paragraph 78, when we referred back to our border control report of some five or five-and-a-half years ago. In noting that from 1992 onwards there was likely to be a much greater movement of people of all kinds across borders, we stated that,
"Co-operation and common action against those who break the law must indeed be carried forward".
There is another continuity, which is now a poignant one. Our report on the protection of personal data was the first report to be chaired by the noble and learned Lord, Lord Slynn, when he became chairman of the sub-committee. Regrettably, the report that your Lordships are now considering is one of the last that will be delivered to this House from the sub-committee by the noble and learned Lord under his present tenure as chairman.
When we took evidence in our inquiry on the data protection directive, we received some very disturbing evidence from Liberty. We were told of a number of serious incidents of deprivation of human liberty. I suppose that up to a dozen examples were given to us. I shall recount three to the best of my ability.
First, there was the account of a lady from Germany who used to enjoy taking holidays in Italy—that is, until she went through the experience I am about to relate to your Lordships. On starting one of her holidays she booked into a modest hotel or hostel. In the middle of the night her hotel bedroom was stormed by armed Italian police who seized her and took her off for a long period of interrogation. When she returned to Germany she protested to the authorities there and established with them, as was correct, that she was not a member of the Baader-Meinhof gang. She asked for that information to be corrected and, as I understand it, the German authorities were obliging and said that it would be corrected.
The lady then took a second holiday in Italy and this time, as she was getting in or out of her car, she was again surrounded by armed Italian police, again

1325
mistaking her for a member of the Baader-Meinhof gang, who took her off for interrogation. Even though she protested once more when she returned to Germany, and waited for four or five years, another similar incident occurred. I understand that the lady no longer takes her holidays in Italy.
The second example that was given to us when we were conducting the inquiry concerned a family from the Midlands who were taking a holiday in Portugal. As I recall it, there was a husband and wife—a mother and father—and two young sons. Outside their hotel, shortly after their arrival for this holiday in Portugal, they were surrounded by Portuguese police. They were all thrust into a police van and driven at high speed to a nearby police station. They were then subjected to considerable inquiries and the husband of the family was locked in gaol for 48 hours. He did not speak a word of Portuguese and the proceedings were conducted in that language. It was only through the assistance of the British Consul that he was released. It transpired that the family had been arrested on the incorrect information that the husband had been indulging in criminal or terrorist activities. Presumably that information was supplied from some source in this country.
The third example concerns an employee at Stansted Airport on the eve—or perhaps I should say the morning—of the Queen opening the airport. On that morning the employee opened his front door to the British police who were standing there. They instantly arrested him and with a search warrant gained access to his house. They took possession of a number of documents and video tapes from his home. It transpired that three or four years earlier that employee had been taking a holiday in Europe. During the course of the holiday he and his wife had given a lift to a hitch-hiker over the French-Spanish border in the Pyrenees. It transpired also that photographs were taken of the hitch-hiker, some of which were retained in the hitch-hiker's camera. The hitch-hiker was later arrested as a suspected IRA terrorist. Based upon the photographs, which also recorded the car registration number, the employee of Stansted Airport had a wholly humiliating and distressing experience for himself and his family.
I cite those three examples to your Lordships because when we came to consider the implications of them during our deliberations on the protection of personal data, we came to the conclusion, at paragraph 116, that:
"There is little benefit to the individual in being protected from an unwanted charitable appeal from unfair loading of his insurance premiums or denial of credit if he is not also protected from conviction abroad on the basis of suspect police evidence or from mistaken arrest as a supposed terrorist".
The difficulty that we found when writing the report was that police and counter-terrorism co-operation lay outside the competence of the European Community and therefore we could not make recommendations of changes of text in the draft directive. The best that we could recommend was that member states should agree a Resolution to deal with what we considered to be a serious problem. As far as I know—this is somewhat regrettable—the Resolution has not been agreed.
1326
I do not know whether Interpol was involved in the dissemination of any of the information relating to the three incidents. But I can say to the noble Lord, Lord Bruce of Donington, that under Interpol there was and is no protection to any of the individuals involved. None of the individuals had right of access to the data information nor the right to have it corrected. So it was, when we came to consider this matter in our deliberations on the Europol Convention, that we looked with close scrutiny, as described by the noble and learned Lord, Lord Slynn, at Articles 17 and 18. I believe that this is an important matter and perhaps your Lordships will forgive me if I read in full part of the text to which the noble and learned Lord referred. The paragraph states, as an exception to the right to have access to information, that:
"If the personal data are stored in documents, information shall be provided only if the effort involved in providing it is not disproportionate to the interest in the information stated by the data subject".
As the noble and learned Lord, Lord Slynn, said, those words caused us considerable worry. We were also concerned in Article 17, as he said, about another exception to the right of access to data when there was conflict with,
"the proper performance of the European task".
We believe that there should be a much closer definition in those words if protection is to be provided to individuals.
I am grateful to my noble friend for sending me a copy of the Government's response to our report. I was glad to note at the beginning of the response that it stated that the Government entirely agree that:
"Europol, like all organisations operating within the criminal justice system, must be clearly accountable for its policies and actions. Our approach to the present negotiations and to the organisation's establishment and operation has been based on that important principle".
I felt on reading those words that we were getting off on the right foot—and, indeed, I think we were. But what was worrying, as the noble and learned Lord, Lord Slynn, said, is that we learnt later in the report that that area was still subject to negotiation and that the Government can go only so far in saying that they agree,
"that effective subject access provisions are essential and that exceptions should be no wider than strictly necessary".
I should be grateful if my noble friend could help us more about that. It is a matter of concern shared by all members of our sub-committee.
I do not want to get deeply involved in the debate over the European Court of Justice because, as the noble and learned Lord, Lord Slynn, and my noble friend Lord Aldington have said, in the greater part of our deliberations all members of the committee were agreed. However, we did part company over the role of the European Court of Justice. It was very nice to be refreshed again with the arguments of my noble friend Lord Aldington which he so cogently presented to the committee. We have read the Government's response. I need not read it to your Lordships, although I have some difficulty in understanding why the Government are still showing reluctance.

1327
I certainly have a better understanding during our debates of what my noble friend Lord Aldington was saying. There is a strong case to keep out the European Court of Justice, and other institutions of the European Community, of the two new pillars based on government co-operation. We wholly understand that. The difficulty is that it is not in the area of government co-operation that the concern lies, but in the interpretation of the convention in different national courts. There is also the problem to which the noble and learned Lord has drawn our attention of disputes between one member state and another as regards the convention.
My noble friend Lord Aldington expressed, as he did earlier, a worry that the issue of the European Court could be a cause for delay of the ratification. I certainly hope that my noble friend will assure us that this will not be the case. It is very comforting to read the final words of the response where it states:
"However, the Government will consider the Committee's recommendations further in the context of continuing discussion".
May that be so.
7.32 p.m.
Lord Hooson: My Lords, from these Benches I should like to add my congratulations to the noble and learned Lord, Lord Slynn of Hadley, Sub-Committee E and the Select Committee, on a very important report. It has already been adverted to that this convention still has blanks within it. I hope that they will be filled with an appreciation of the thrust of this report with which I very much agree.
The need for Europol itself is not in issue. Following the collapse of the Soviet Union, for example, the German police authorities have reported a six-fold increase in the number of cases suspected of involving nuclear material. Spain and the Netherlands in particular have been concerned about the increase in drug-related crime, all internationally organised. We in this country have been in the forefront of international action to control money laundering because of London's leading position as a financial market.
The idea of Europol was launched years ago. It had particular publicity in 1991, but nevertheless, despite the need for Europol being beyond dispute, we still lack any formal international agreement. Organised crime is not dragging its feet even if governments are. Organised crime is taking full advantage of the greater freedom of movement across borders, while Europe cannot agree over a regulatory framework for Europol. It is a matter of urgency.
I very much appreciated the speech of the noble Lord, Lord Knights, on this particular point. He rightly drew the distinction between Interpol and Europol. They are totally different organisations. Europol is going to be an accountable organisation, but Interpol is not. I am surprised that the noble Lord, Lord Bruce of Donington, was not concerned about the democratic deficit in Interpol.
Meanwhile, member states have pressed ahead with the Europol Drugs Unit because they had to. Its activities have been extended under ministerial agreements but, as
1328
the noble and learned Lord, Lord Slynn, pointed out, they apparently have no legal force. Moreover, its activities are not subject to common rules on data protection. It is unclear what remedy, if any, would be available to any individual who suffered damage as a result of its actions.
I merely point out these matters because they underline the importance of seeking an agreement on a regulatory framework as soon as possible. Furthermore, the very successes of the Europol Drugs Unit illustrate the benefits that would flow from the institution of a wider Europol. For example, in his evidence to the Select Committee the Home Secretary outlined the matter of the large consignment of drugs which were found on a ship in Greece. Intelligence from Belgium, France and the United Kingdom was brought together with the Europol Drugs Unit within one hour and was passed on to the Greek Europol liaison officer. That led to three crew members being arrested within 24 hours. That is one example of what international co-operation entails.
Perhaps I may say as one who was engaged in practice at the Bar until very recently, that the great British public are taking a very long time to appreciate how very well organised and sophisticated international crime syndicates are. Apart from the areas which come within the remit of the EDU, the methods of communication available to the police forces of Europe are relatively primitive. In the common struggle against organised crime a modern intelligence super-highway is required, with a central body which has the capacity to analyse intelligence.
I very much appreciate the point that one does not want Europol to become operational. It should not be investigating farm subsidy frauds, which are matters for the national authorities. Europol wants to be a central data-collecting body capable of passing on intelligence at speed because undoubtedly the gangs with which it is dealing are doing so at speed and using all possible modern communications. The increased mobility that people enjoy nowadays means that criminals have more opportunities to exploit any gaps in law enforcement structures. It is vital that those gaps are closed.
Drug-trafficking cartels target Europe as a single target. They decide which is the advantageous point at which to enter, whether by sea into the United Kingdom; whether by air into somewhere else; or whether to use the eastern European borders and so on. They target Europe as a single market. Links between the member states need to be formalised so that intelligence over a broad range of crimes can be pooled. Only in that way can the increasingly sophisticated activities of organised criminals be countered effectively.
It seems to me that one of the mistakes of the Euro-sceptics is that they criticise, for example, the disappearance of national boundaries. They are also very reluctant to support effective measures to bring into being new organisations which deal with the problems that arise when national boundaries disappear. The noble Lord, Lord Bethell, referred to the fact that the noble Lord, Lord Bruce of Donington, regarded the European Parliament as being pretty useless or ineffective. Perhaps I may say to the noble Lord, Lord Bruce of Donington, that I am sure

1329
that he would be much more worried if he thought that the European Parliament was effective, and one would have much more criticism of it.
Lord Bruce of Donington: My Lords, the noble Lord must not misrepresent me in this matter. I said at the beginning and at the conclusion of my speech, which I now reiterate, that I entirely support the proposal of the convention. I would have thought that that would have been assimilated by the noble Lord through both his ears.
Lord Hooson: My Lords, I am grateful. I appreciate the knowledge that I gain about the noble Lord's attitude over the years, but I find it difficult to distinguish between one contribution and the generality.
I turn to the final issue of jurisdiction over disputes. In order to ensure a coherent structure and uniformity in the standards of control, it is obvious that the European Court should determine all issues of interpretation. Perhaps I may quote from the evidence given to the committee by the Home Secretary, which I thought was highly unsatisfactory. I quote from page 94, paragraph 507, of the report. The noble and learned chairman asked the Home Secretary:
"Do you not find it unsatisfactory that the Convention should be interpreted in completely different ways by different national courts?".
Mr. Howard replied:
"I do not think it is … It does not seem to me terribly likely that you would get wildly different interpretations".
Perhaps we may stop there for one moment. If one had not wildly different interpretations but interpretations which were sufficiently serious to cause great problems—a different interpretation in Greece from that in the UK and a different interpretation in Portugal—why on earth should we set up a new convention and not provide for that?
At the end of his answer the Home Secretary said:
"If it is suggested that the desirability of uniformity should outweigh other considerations then it would be possible to set up some kind of ad hoc tribunal that might deal with these matters on a more consistent basis".
There he is resiling on the issue. He is objecting to the European Court and then saying, "Oh, well, if there is a dispute we will have an ad hoc tribunal". What kind of decision shall we have from an ad hoc tribunal?
The noble Lord, Lord Hacking, then asked Mr. Howard:
"What is the objection to the European Court of Justice being involved in the adjudication?".
Mr. Howard replied:
"If there is no need for the European Court of Justice to be involved then it is undesirable for it to be involved".
Why is it undesirable for the European Court of Justice to be involved? It is the supreme judicial body in the Europe that has been formed, and whatever form Europe eventually takes it will be the supreme judicial body. If there is to be a problem of interpretation, it should be decided by the European Court.
The noble and learned Lord, Lord Wilberforce, intervened at paragraph 517 with an interesting qualification. In the second part of his question in paragraph 518 he asked:
"Would it be so strong"
1330
that is, the Home Secretary's objection—
"if the European Court of Justice were limited simply to interpretation and nothing else, simply this is what the Convention means?".
Mr. Howard replied:
"It would be just as strong because the question is what kind of interpretation would the Court of Justice adopt. Would the European Court of Justice tend to adopt an expansive interpretation in most cases or not?".
That is asking a question by way of reply.
What is happening is quite clear. The Government are taking the view through the Home Secretary that it is better to have an ad hoc tribunal than to leave the question of interpretations to the European Court of Justice. He obviously believes that there is a possibility of different interpretations in different countries, which would obviously be undesirable. I believe that common sense, pragmatism and everything else points in the direction of the majority recommendation of the committee. I hope the Government pay close heed to that.
7.45 p.m.
Baroness Hilton of Eggardon: My Lords, I too congratulate the committee on this interesting report and its sensible conclusions. As was said by the noble and learned Lord, Lord Slynn, it is essential to have cross-border arrangements in Europe to deal with crime. Even my noble friend Lord Bruce applauded the purpose of the convention. However, the proposal has already been under discussion for several years and, despite the urgency mentioned by several noble Lords, it will probably be several more years before Europol is up and running effectively. Clearly frustration at the lack of progress led to the setting up of the Europol Drugs Unit at the beginning of last year. I understand that there is no formal international agreement or legal basis for the Europol Drugs Unit. It appears that Europol as a whole may continue of necessity to evolve in that way.
The apparently successful first year, which was mentioned by the noble and learned Lord, Lord Slynn, inevitably occurs when one sets up what in the police service we used to call a "squad". To begin with information is floating about and there are various loose ends to which one applies new resources. To begin with there are always great successes. However, I wonder whether there is a danger that in future not only the drugs unit but Europol as a whole will run into the kinds of problems experienced by other squads. Those problems are that one becomes overburdened with information and needs increasing resources and increasingly elaborate data systems. The noble Lord, Lord Hooson, referred to the need for an information super-highway to underpin its activities. More analysis is needed and tight controls must be placed on what could develop into a monster without any legal basis. My noble friend Lord Bruce referred to the possible costs. They will need to be kept under strict control.
A further anxiety is the lack of public debate not only about the setting up of the Europol Drugs Unit but about the draft convention on Europol. I do not believe that the issue of accountability has been fully resolved. Quite clearly, the question of data protection for individuals is an essential aspect of the setting up of Europol.

1331
It is extremely important that there is transparency in anything to do with crime. Some of the stories related by the noble Lord, Lord Hacking, could apply also to the activities of Europol unless it is set up under strict regulations and the terms under which information is passed between police forces is very clear. Mistakes easily occur even within local policing, but they occur more so on an international scene when one is dealing with different systems of crime, policing and judicial systems. There may be mistakes in translation and so forth.
Often the police service is secretive about what it is doing and there is confusion between the need for secrecy in relation to operational intelligence and secrecy about structures, methods, systems and so on. It is essential that the public are able to scrutinise structures, methods, systems and powers even though for security reasons they may not have access to crime intelligence.
That problem would be even more compounded if terrorism became part of the remit of Europol. The secrecy that tends to surround anything to do with the security services could then apply to more mundane types of police matters and crime and could create problems in that way. The whole matter might become shrouded in secrecy. Therefore, the assumption that two years after the setting up of Europol terrorism will become part of its remit could be extremely dangerous. There appears to me to be a clear link between the responsibility for dealing with crime relating to nuclear and radioactive substances and terrorism. I wonder why those crimes were included in the initial suggested remit for Europol. I suggest also that there is another international crime—the smuggling and stealing of arts and antiques—which might more properly be included in Europol's remit. That has not so far been mentioned.
Therefore, there are a number of problems which I feel are unresolved in relation to Europol. There is the lack of accountability, which was mentioned throughout the report; all the problems of definitions of crime in different judicial systems, and problems of interpretation which have been referred to already in relation to the European Court of Justice.
There is also a major practical problem in the setting up of Europol, which is that at present only Britain and Holland have national crime bureaux of the type envisaged by the draft convention. Indeed, it may be many years before such effective crime databases are set up within the other countries of Europe. Therefore, that will be an additional complication in addition to the need for national ratification, even if the convention is approved in Paris this year. As I understand it, it must be ratified by the individual countries thereafter. If each country has to set up on a national basis a crime intelligence bureau on the scale which we have in this country, which has over 100 staff, it seems to me that it will take several years rather than weeks or months for Europol to be up and running and to be really effective. Several noble Lords have spoken about the urgency of setting up Europol, but I wonder whether that sense of urgency is shared by the other member countries of Europe.
1332
My noble friend Lord Bruce raised the question of Interpol and has asked the Minister to explain the relationship between Europol and Interpol. I apologise for not having given to the Minister notice of this question, but I wonder what is the relationship between the United Nations drugs unit in Vienna and Europol. As I understand it, that is also an arena for the exchange of information about drug smuggling throughout the world, and I wonder whether there is a possibility of duplication and overlap.
Like the noble Lord, Lord Knights, and other noble Lords, I too oppose giving operational powers to Europol. I should certainly oppose the suggestion of the noble Lord, Lord Bethell, that it should be immersed in the quagmire of European agricultural fraud. That could become a totally all-consuming task. That would deflect it from more proper aspects of crime intelligence. Like all those who have spoken, I welcome this interesting report and its sound conclusions.
7.52 p.m.
The Minister of State, Home Office (Baroness Blatch): My Lords, I very much welcome this debate and the report of the European Communities Committee which underpins it. It really is testimony to the effectiveness of the scrutiny arrangements that we have put in place for third pillar business. The report represents diligent and painstaking work on the part of the committee under the impressive chairmanship of the noble and learned Lord, Lord Slynn. I know from what has been said already this evening that the House will wish to record its deepest appreciation for that important report.
I am glad to recognise the consensus, not only within the committee but in this House tonight, as to the importance of concerted action to combat the threat of organised crime. Criminal activity is not constrained by national boundaries. Sophisticated techniques and effective joint action are needed to deal with it. That is the opportunity which Europol provides.
But I am equally glad to record and to share emphatically the view that the benefits which can come of those forms of co-operation in tackling serious transnational crime must be balanced by real protection of the rights of the individual and proper democratic accountability. We have sought to emphasise throughout the negotiations the need to have avenues for effective redress through national courts where the innocent individual has suffered injury.
Maintaining that balance between operational effectiveness and the protection of the individual is a proud tradition of our British criminal justice system. I very much welcome this debate as a contribution this evening to maintaining and promoting that tradition in the important work that we are undertaking, with our European colleagues, to promote more effective police co-operation to defeat international crime.
The Government will take full account of the views of the committee and of this House in pursuing that work, both in negotiations to finalise the Europol convention and in subsequent supervision and regulation of the activities and development of Europol itself. My

1333
colleagues and I will answer to this House for the activities of Europol as we do for our own national criminal intelligence and police services.
The committee undertook a great deal of detailed work in a very short time and we have had a very full debate this evening. The issues addressed were wide ranging and complex. I should like to address points in the order in which they were raised in the committee's report. I shall do my best to ensure that in doing so, I also respond to specific points that have been raised in the course of this debate.
The committee began—and the noble and learned Lord, Lord Slynn, referred to this—by expressing concern that the Europol Drugs Unit (the EDU) had been permitted to begin and extend its activities without a legally binding agreement as to the regulatory framework. That point was made by the noble Baroness, Lady Hilton. I am therefore able to confirm the Government's response to that by providing a reassurance, not only that the Government took full account of that dimension in agreeing to extend the unit's activities in the Justice and Home Affairs Council but that we shall continue to do so in scrutinising the unit's activities.
The Europol drug unit's activities are strictly limited by the joint action adopted by the Justice and Home Affairs Ministers on 10th March. Like the ministerial agreement it superseded, the text of the joint action regulating the operation of the EDU is clear as to the commitment which member states have made and the rules that will apply. The Government are satisfied that the EDU and member states are acting strictly in accordance with its provisions.
The EDU's activities are limited compared with those envisaged for Europol. The unit acts mainly as an information exchange. Data is only exchanged in accordance with national data protection legislation. But the EDU is also the precursor to Europol itself. It is important to prepare the way for the new organisation as we near agreement on the convention. The types of crime included in the limited expansion of the unit's remit mirror the initial remit of Europol.
Your Lordships have underlined the importance of ensuring that Parliament can make a proper input to the work we undertake under the justice and home affairs pillar of the treaty. That includes ensuring that an input can be made at a time when there is a real opportunity to influence the outcome of discussions. The Government wholeheartedly agree. That is why, as your Lordships know, we have made arrangements to table the texts of documents and to provide memoranda of evidence in advance of the meetings of the Justice and Home Affairs Council. There are, however, occasions when the pace of negotiations is such that documents are issued very shortly before the meetings at which they will be considered. Some presidencies prefer to conduct negotiations by way of separate discussion documents and working papers. They do not provide a full revised text until very late in the day.
Therefore, there are difficulties to be overcome. But I hope that your Lordships will agree that the committee's report and this evening's debate both illustrate ways in which Parliament can and does exercise influence over matters being considered under the third pillar.
1334
I shall now turn to the provisions of the draft convention itself, beginning with Europol's remit. I am given to understand that at one stage there were proposals for a sort of European FBI. But that was not what we, or the majority of member states, wanted. These proposals have not been returned to in negotiations. These have confirmed that Europol staff will have no operational powers.
The organisation will provide, through intelligence exchange and analysis, a sophisticated means of aiding law enforcement throughout Europe and thus an invaluable aid to action to tackle serious, transnational crime. In saying that, I note the exhortation of the noble Lord, Lord Hooson, when he talked about state of the art technology to underpin the speedy exchange of that kind of information and providing it when it is necessary. The list of crimes for which Europol may be given competence is sufficiently comprehensive to ensure there is scope to meet developments in crime patterns. This is important. So are provisions which allow the Council of Ministers to control and manage the expansion of the organisation's remit and the priorities chosen for it.
There is, very rightly, a great deal of emphasis on data protection in your Lordships' report as stressed by the noble and learned Lord, Lord Slynn. The committee stressed the need for rapid but controlled access to sensitive analysis data; effective protection of individuals by application of national legislation and the Council of Europe Convention as well as suitable arrangements for subject access. Reference was also made to the exchange of data with third parties such as non-member states and the role of the national as well as the Joint Supervisory Body.
National legislation in the United Kingdom already meets the requirements of the Council of Europe Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data. The Government are determined to ensure that United Kingdom citizens will have adequate rights and protection in relation to data held by Europol. Adequate training and procedures must and will be adopted. The "need to know" principle must and will be rigorously applied in respect of dissemination of analysis and other data both within Europol and between Europol and national units.
Noble Lords will be aware that many of the provisions of the draft convention relating to data protection are still to be settled. These are also amongst the most difficult aspects of the convention to agree, not least because of the variation that exists in the detail of legislative arrangements and traditions as between member states. However, progress is being made.
There will be arrangements for providing adequate safeguards where the dissemination and use of sensitive data is concerned. Access to sensitive data will be strictly controlled on a "need to know" basis.
Difficult negotiations over subject access are now favouring a position which would base an individual's access to data held by Europol on the national law of the country in which the request for subject access is made. Therefore, our citizens would continue to benefit from the provisions of our own data protection law. There will be national data authorities responsible for checking

1335
exchanges of data between the national unit and Europol. In the United Kingdom the data protection registrar will probably carry out that task.
We shall continue to take account of the committee's recommendations in the course of negotiations as well as in settling subsequent arrangements for handling such matters as the exchange of data with third parties. This evening's debate has provided a further invaluable opportunity to explore, in a balanced way, the important issues which arise as regards both the rights of the individual and the importance of effective law enforcement. The final issue which both the committee's report and your Lordships have raised is the involvement of the European institutions. Again, this is an aspect of the convention which remains to be settled.
The Government believe that a very strong practical justification would be needed to override their basic presumption against involving the community institutions in an intergovernmental agreement such as this. The Government of the United Kingdom are not alone in taking that view. The current presidency proposals envisage no role for the European Court of Justice. There is substantial support for those proposals amongst the 15 member states.
Reference has been made to disputes between member states. The Government note the views that have been expressed by the committee but see no role for the European Court of Justice. We consider that the Council is the right place for handling any interstate and state Europol disputes. It is common in treaties in other international agreements for there to be no final settlement procedure and for obligations not to be accompanied by any means of enforcement. The good faith of the contracting parties is generally considered sufficient and the member states would resolve among themselves any problem which arose. We see no need for individual grievances against Europol to be taken beyond national courts.
With regard to the national supervisory body, our concerns are with the detailed drafting of this article, rather than its substance. We entirely agree that national supervisory bodies acting under national law will have an important part to play in overseeing the work of national units and liaison officers. It is not necessary to give new formal powers to national supervisory bodies. We wish to ensure that the convention does not give any contrary impression.
Under United Kingdom data protection law there is already provision to require the national criminal intelligence service as a data user to assist relevant inquiries, and therefore no new powers of access are necessary.
The power for the United Kingdom data protection registrar to enter Europol premises in the Hague would be unnecessary and impractical. It would be preferable to emphasise the duties of member states and Europol to assist relevant inquiries.
The noble Lord, Lord Bruce of Donington, raised the point about documents that are placed in the Library. I have the same understanding of that issue as the noble Lord, but he will forgive me if I take this matter back to my department and then correspond with him. If other
1336
noble Lords are interested in a reply I shall ensure that it is placed in the Library and that it can be accessed by everybody.
Several noble Lords raised the issue of costs. It is difficult to say what Europol will cost. The Europol Drugs Unit costs the United Kingdom approximately half a million pounds a year. We pay 15 per cent. of the total EDU budget which is a small sum for the added value that the EDU provides.
The noble Lord, Lord Bruce, and other noble Lords referred to Interpol. Full account will be taken of the role of the European branch of Interpol. The two organisations are already under discussion to minimise any duplication of effort but they are very different bodies: Interpol covers the whole of the world; Europol focuses on 15 states and allows a much more intensive pooling and analysis of the most sensitive intelligence.
My noble friend Lord Bethell asked a specific question of which he was kind enough to give me notice, in regard to the UK staff and their status in relation to their representative bodies. It is too early to say what the arrangements will be for centrally recruited Europol staff; that will be a matter for Europol's director and the management board, and will be covered by the staff regulations. All United Kingdom staff on secondment to Europol, both police and customs officers, will retain their existing rights to federation for union representation.
I can confirm that the assumption of the noble Lord, Lord Knights, is correct, that the budget for the United Kingdom contribution to Interpol is held by the criminal intelligence services. They also hold the budget for the United Kingdom contribution to the European Drugs Unit. We believe that they will be well placed to judge the value for money that we obtain from these different complementary organisations. I have noted the points made by the noble Baroness, Lady Hilton, and other noble Lords about the importance of keeping a downward pressure on what could be spiralling costs.
There are no plans to fuse the criminal intelligence service and the security service, as the noble Lord, Lord Knights, suggested. The diversity of responsibility for tackling terrorism in different member states was one of the reasons why the United Kingdom resisted the inclusion of terrorism in Europol's initial remit. We need time to ensure that satisfactory arrangements can be made with all the organisations concerned to ensure that sensitive intelligence can be handled properly without damaging existing channels.
As the noble Lord, Lord Knights, stated, the National Criminal Intelligence Service is accountable to the Home Secretary, and he is accountable to Parliament. However, the intelligence service is not a police force, as the noble Lord knows. Its purpose is to gather, to develop and to disseminate intelligence. It supports the activity of individual forces, and chief constables are fully involved in a user's committee which meets regularly to look at the services that the NCIS provides.
My noble friend Lord Hacking referred to individual data protection rights. Although the draft article that provides for individual access to data held by Europol is still under consideration, I am able to provide reassurance to all noble Lords on one point that has been raised by the noble and learned Lord, Lord Slynn, and my noble friend

1337
Lord Hacking. They referred to a provision by which Europol could refuse to provide data if disproportionate cost was entailed. That provision has been deleted from the latest working document.
This is not, as has been suggested by the noble Lord, Lord Hooson, a question of dragging feet. This is an important issue. Whilst I understand the need for a resolution, the process of getting agreement between member states and the reconciliation of sensible issues, for example, the protection of the right of the individual, is painstaking work. I agree with my noble friend Lord Aldington that the signing of the convention would be desirable sooner rather than later. We are working to that end. However, there is no wilful dragging of feet.
I have listened to the varied opinions that have been expressed this evening. I have also noted the points made in the report. We shall take the latter into account; as, indeed, we were exhorted to do by my noble friend Lord Hacking. However, I realise that I have missed one point regarding Interpol. It concerns its relationship with the United Nations and was a matter raised by the noble Baroness, Lady Hilton. The two organisations are different. The United Nations unit in Vienna does not look at specific drug offences; it looks at patterns of trafficking. There is no real overlap. However, the point made by the noble Baroness regarding possible duplication is something that we need to watch out for both with Interpol and as regards the relationship with United Nations' organisations.
Perhaps I may conclude by thanking your Lordships for the welcome and constructive contribution which both the report and this evening's debate have made to our work on the convention. We are fully committed to the task of defeating international organised crime. Europol can make an enormous contribution in regard to that task. The Government are equally committed to the protection of the rights of the individual. That aspect must not be ignored in such debates. However, those commitments are ones which we share with other member states, whatever the variations of our national laws and whatever the differences in our traditions. I therefore have every hope and expectation of a successful and fruitful outcome to the present negotiations. Once again, I should like to express our sincere thanks to the noble and learned Lord, Lord Slynn, and to his committee for their report, which has made a very important contribution to the subject.
8.11 p.m.
Lord Slynn of Hadley: My Lords, I thank the Minister for her detailed reply and especially for her undertaking that the rights of British subjects in regard to data protection and the importance of maintaining the need-to-know principle will be persevered in by the Government. I should also like to thank noble Lords for participating in tonight's debate and for the very warm welcome which has been given to the report. However, in view of the hour, I hope that I will not be thought discourteous if I comment on only a small number of points.
The noble Lords, Lord Bruce of Donington and Lord Knights, rightly stressed the importance of the draft convention. I am only sorry that the noble Lord, Lord
1338
Bruce of Donington, apparently thought our report somewhat academic. He appeared to propound the extraordinary notion that lawyers are not practical people. I find that quite a remarkable attitude for any Member of this House to adopt. However, the noble Lord will take comfort from the fact that, in the Select Committee, those voting in favour of the sub-committee's report included only one obvious candidate in that respect, as the others were not lawyers. Therefore, the others must be tarred with the same impractical brush.
I was very sad to note that the noble Lord, Lord Aldington, was not able to concur with the majority in the recommendation made about seeking to achieve uniformity in the interpretation of the convention. But, as a result of his disagreement, I have learnt that the delights of disagreeing with the noble Lord and debating against him are almost as great as the delights of agreeing with him in the committee. The same goes for the noble Lord, Lord Bruce of Donington, outside the committee.
On the question of the European Court of Justice, I should like to make three brief points. If discussion about it and the acceptance of the majority's recommendation were to be the cause of delay, it would be highly regrettable. When we considered the draft convention, there was a provision that the European Court of Justice should have jurisdiction to decide matters of interpretation. Therefore, if there is any delay, it is those who seek to remove that provision who might be the cause of the delay.
There is already a division. I accept the Minister's statement that many states now go along with a proposal to exclude the European Court of Justice. I do not know about that; the Minister knows the details involved, whereas I do not. My information is that a substantial number of member states are still in favour of including a provision giving the European Court of Justice some jurisdiction. However, it is essential for noble Lords to bear in mind the fact that what is being proposed is very limited. In the first place, it is that national judges throughout the member states should have the opportunity—in rare cases, no doubt—to refer to a central court questions regarding the interpretation of the treaty. Like the noble Lord, Lord Hooson, I find it quite extraordinary that the Home Secretary should regard it as not in the least disturbing that the convention should be interpreted in various ways, especially in regard to British subjects, in different states which are party to the convention.
Of course, the intention is that that most of those disputes will be decided without any reference. It would also be hoped that disputes between states could be decided in the Council. But the Minister will not be offended if I say that, if that always happened in all treaties, there would be no need for the International Court of Justice or for the many international tribunals which, over the centuries, have been established. I find it very Utopian to suggest that all such disputes will be decided with equanimity and ease by member states in the Council.
I desire to say something that I did not stress before. I believe that all our witnesses, except those from the Home Office, were in favour of the European Court having jurisdiction. Certainly, Justice, Liberty and the Meijers

1339
Committee from the Netherlands, which gave evidence, and others, were in favour of it. It is not just a lawyer's paradise; it is something which people practically engage in in important spheres, especially those underlined by the noble Lord, Lord Hacking. They really need to be dealt with.
I, perhaps, made the mistake of saying that I was comforted by the final sentence in the reply of the Home Office stating that it would continue to have regard to the committee's opinion when negotiations were taking place on the question of jurisdiction either of the European Court or of an independent tribunal. From what the Minister said this afternoon, it sounded to me very much as if the door was very firmly closed against any such suggestion. However, I ask the Minister to bear in mind the fact that the primary question is not which tribunal; the primary question is whether there should be uniformity.
Finally, in relation to Interpol, I, too, would accept that the latter is very different from the proposed Europol. The kind of data that it considers and its involvement with data protection are very different; it does not engage in the same form of analysis; and, indeed, it is not accountable. I can tell the noble Lord, Lord Bruce of Donington, that we went into the matter but came to the view that the case for having a separate Europol was fully made out.
At the end of the day there is only one matter between us; namely, the question of a uniform interpretation. I hope that the Minister will stick to what was said in the Government's written response and that she will keep our paragraph 109 firmly in front of her when the discussions take place. I am most grateful to all speakers for tonight's most interesting and valuable debate.
On Question, Motion agreed to.

Armagh Observatory and Planetarium (Northern Ireland) Order 1995
8.18 p.m.
The Parliamentary Under-Secretary of State, Northern Ireland Office (Baroness Denton of Wakefield)The Parliamentary Under-Secretary of State, Northern Ireland Office (Baroness Denton of Wakefield) rose to move, That the draft order laid before the House on 16th May be approved.
The noble Baroness said: My Lords, the purpose of the above order is to repeal and re-enact with modern provisions the Armagh Observatory and Museum Act 1791 (as extended by the University and Collegiate and Scientific Institutions Act (Northern Ireland) 1938), while preserving the observatory's historical origins and its mainly ecclesiastical and independent corporation.
The observatory was originally founded and endowed by the Church of Ireland Archbishop Robinson of Armagh in 1790 and established by the 1791 Act, a public Act of the former Irish Parliament. The governors find many of its provisions to be restrictive and archaic. It is for that reason that the draft order is being promoted by the Department of Education for Northern Ireland at the request and with the agreement of the governors of the Armagh Observatory and Planetarium. Consultation on the original proposal has not resulted in any changes to the draft order.
It may be helpful to give your Lordships a brief background to the role and activities of the observatory and the planetarium. The observatory was part of Archbishop Robinson's plan for a university of Armagh, a plan which is now approaching fruition with the establisment of the Queen's University of Belfast outreach centre in Armagh. The observatory is the second oldest in the British Commonwealth.
Armagh has remained at the forefront of observational astronomy and is an important centre of research and advanced education in astronomy and astrophysics undertaken in collaboration with Queen's University Belfast. While astronomical observations are no longer carried out at the Armagh site, its research work involves widespread international collaboration and the use of observing facilities far from Armagh, such as Australia, Hawaii and South Africa, as well as satellite-based telescopes.
The Armagh Planetarium officially opened in 1968. Over the past 27 years the planetarium has gained a worldwide reputation for innovation and achievement in the field of astronomy education. The past three years in particular have seen some dramatic improvements in the facilities, including: a 25-acre astropark designed to give visitors a chance to walk through a scale model of the universe; an eartharium, a 2,000 square metre hands-on exhibition hall devoted to the understanding of the earth and its place in the universe; a hall of astronomy, a 500 square metre hands-on astronomical exhibition area; and a star theatre, equipped with the first digistar virtual reality star projector in the United Kingdom, and interactive response system.
The planetarium's aim is to enhance the public understanding of science, and it is actively involved in science education in Northern Ireland. Over 30,000 school children are expected to visit the planetarium this year. The observatory and planetarium, as well as providing valuable educational and research facilities, provide an exciting tourist attraction, and play an active role in encouraging people to visit Armagh. Tourist numbers have increased from 17,331 in 1991 to over 32,000 in eight months in 1994. Because of the ceasefire the demand for tourism is increasing rapidly, and we can expect to see those figures increase by something like a further three-quarters.
The draft order provides for the continuation of the independent corporation created by the 1791 Act, with its existing powers and responsibilities updated to take account of modern day conditions, and encompasses both existing and possible future functions in regard to research and education. The order will, for example, enable the governors to charge for their services. One of the main changes will be to remove the benefits (lodgings and tax-free income from the observatory lands) applicable to the office, formerly referred to in the 1791 Act as astronomer and keeper, and instead place these at the disposal of the governors for the support of the observatory and planetarium.
Those are the main provisions of the order. The remaining provisions are largely of an administrative nature and are set out in a supporting schedule, the main elements of which cover memberships, staffing and procedures of the governors. I beg to move.
Moved, That the draft order laid before the House on 16th May be approved.—(Baroness Denton of Wakefield.)
Lord Williams of Mostyn: My Lords, since this order regularises and puts in proper order the affairs of the observatory and planetarium and is supported by the governors and staff, we on this side similarly support it. We are happy to endorse the tributes that have been paid to the excellent reputation that the observatory and planetarium have enjoyed.
I noticed with interest that the Minister described an astropark that was able to define the earth and its place in the universe. I conclude from that that the astropark is not sufficiently ambitious to seek to describe the present Government and their place in the universe since they both seem to be rather vestigial.
Lord Holme of Cheltenham: My Lords, I thank the noble Baroness for her introduction to this order. If one were able to ignore a sense of history in this House, which would be difficult, it would be impossible to do so faced with a handful of your Lordships sitting here amending an Act of 1791. It is very interesting to think of a scientific foundation and a wonderful centre of research, which this certainly is, governed by the Church of Ireland Archbishop of Armagh, the Dean of Armagh Cathedral, other members of the chapter of Armagh Cathedral and one or two token laymen in the shape of a representative of the Department of Education and an appointee from Queen's University. It makes one realise that in 1791 there must have been considerable anxiety on the part of those eminent ecclesiastics to keep control of the heavens and not let them pass into alien hands.
It is not just a first-class research facility; it is an important unifying influence in Armagh itself. I believe that it plays a constructive role. It attracts 50,000 visitors a year as well as 20,000 schoolchildren. It is nice to have the chance to pay tribute to the useful work that it does. I have only one question to put to the Minister. When one looks at Schedule 2, paragraph 2(1), of the order, one sees that the governors of Armagh Observatory and Planetarium retain their ecclesiastical presence on the board. I should like to have her assurance that the other nominees of the Department of Education and Queen's will be able to represent the wider traditions, and the other religious traditions, of Northern Ireland. With that question from these Benches, I have pleasure in supporting the order.
Baroness Denton of Wakefield: My Lords, I thank noble Lords for their support for this order. It is indeed an outstanding establishment. I hope that those who have not visited it will find time to do so. I assure the noble Lord, Lord Holme, that the answer to his question is most definitely yes. One of our major tasks in Northern Ireland is to make sure that the benefits that peace can bring are shared by everybody. That applies to every establishment there. I am delighted to tell the noble Lord, Lord Williams, that I now spend my time persuading everybody that Northern Ireland is the centre of the universe. I shall extend that activity to the Government.
On Question, Motion agreed to.

Arts Council (Northern Ireland) Order 1995
8.28 p.m.
Baroness Denton of Wakefield Baroness Denton of Wakefield rose to move, That the draft order laid before the House on 16th May be approved.
The noble Baroness said: My Lords, I beg to move that the draft Arts Council (Northern Ireland) Order 1995 be agreed. I wish to inform your Lordships that as a result of wide-ranging consultation with arts interests it has been decided to drop from the original proposal Articles 4(3) and 9 on powers of approval and directions by the Department of Education for Northern Ireland. Those articles, along with the original draft Article 6 regarding grants to the Arts Council, and the schedule, paragraphs 7(1) and (3) on the approval of arrangements for committees, were the subject of concern by the Arts Council and a number of others. They felt that those provisions vested some unnecessary powers in the Department of Education for Northern Ireland and could have the effect of undermining the Government's commitment to the arm's length principle which allowed the Arts Council independence to make decisions on matters of artistic judgment and allocate resources in line with those decisions.
The Government do not envisage a situation whereby instructions or directions on such matters have to be given to the Arts Council, and for this reason decided that Articles 4(3) and 9 can be omitted from the draft order. Article 6 and the schedule have also been amended.
The main purpose of the order is to establish the Arts Council of Northern Ireland as a statutory body and provide for its membership, procedure and functions. The order is necessary because government expenditure on the arts has risen from £3.2 million in 1985–86 to a planned grant-in-aid of £6.7 million in 1995–96 and it is now appropriate that the Arts Council should be fully accountable to Parliament for this substantial amount of funds. In addition, the council will be responsible for the disbursement of lottery proceeds to arts bodies in Northern Ireland. These will be worth in excess of £4 million per annum.
It has been decided not to place limits on the size of the membership of the council but it is intended that the present members of the Arts Council of Northern Ireland will be appointed as the first members of the statutory body.
It is important that the arts are available to every section of the community in the Province and that no one is precluded from participating in them. The provisions of Article 4 charge the Arts Council with the responsibility of developing and improving the knowledge, appreciation and practice of the arts, and of increasing public access to and participation in the arts. To ensure that there is co-operation at local level the Arts Council is required to consult regularly with district councils.
A major part of the Arts Council's responsibilities will be giving financial assistance to individuals and bodies. Article 5 provides for these safeguards to ensure the effective and efficient use of public funds.
Article 6 permits the Department of Education for Northern Ireland to attach such conditions to grants as it thinks appropriate for securing the proper management and control of money received by the council and to provide power for the department to attach such other conditions as it thinks necessary in the public interest, but not—I stress the word "not"—to exercise this power with the intention of interfering with the exercise of the Arts Council's artistic judgment.
The council will be required to keep account of all monies received and paid out by it and submit its annual statement of accounts to the Comptroller and Auditor General for Northern Ireland for certification. It must also prepare and submit to the Department of Education for Northern Ireland an annual report on the exercise of its functions. A copy of the annual report, together with the certified statement of accounts and any report of the Comptroller and Auditor General, will be laid before the Northern Ireland Assembly by the department. While the Assembly stands prorogued, the report will be laid before Parliament.
I have dealt only with the main provisions of the order. The remaining provisions are largely of an administrative nature and are set out in a supporting schedule, the main elements of which cover membership, staffing and procedures of the council. I commend the order to the House.
Moved, That the draft order laid before the House on 16th May be approved.—(Baroness Denton of Wakefield.)
Lord Williams of Mostyn: My Lords, similarly, we are happy to endorse the passage of the order. In particular it seems that the consultation process was fruitful, in that the Government recognise the limits on sensible directions and instructions in an area of this kind.
However, the corollary to that is the question of accountability. The Arts Council of Northern Ireland is, as I understand it, the successor to the marvellously named Centre for Encouragement of Music and the Arts which was a company limited by guarantee and therefore was liable to have annual general meetings. I would welcome an assurance from the Minster that general accountability will be fully borne in mind in the operation of the new body. Other than that, I have nothing to add or to question.
Lord Holme of Cheltenham: My Lords, I, too, thank the noble Baroness for her presentation of the order. It is one that we broadly support, not least because it has been welcomed by the Arts Council for Northern Ireland and other arts bodies. From these Benches we support the order because it pursues the policy that arts councils should be devolved in structure. It is worth while to pay a tribute to the Arts Council for Northern Ireland, which has responded to the needs of a divided society in a most admirable way by placing valuable emphasis on community arts, on traditional dance and on crafts, as well as supporting the justly renowned Ulster Orchestra, the Belfast Festival, the Grand Opera House and the Lyric Theatre. Anyone who follows the very lively arts
1344
scene in Belfast and Northern Ireland as a whole knows what good work the Arts Council for Northern Ireland does.
From these Benches we welcome in particular the provisions which require that the Arts Council for Northern Ireland consults with district councils. However, the noble Baroness will recognise that district council sponsorship varies greatly. I hope that the Government will keep under review the variable levels of assistance for the arts by district councils so that we can create a more comprehensive arts policy for Northern Ireland.
I should like to take up one issue with the noble Baroness. There is little, if any, reference in the order to the National Lottery. If the Northern Ireland Arts Council receives the anticipated £21 million to £22 million from the lottery for 1995—and, who knows? with the success of the National Lottery the figure may be higher—how will it be implemented? Do the Government intend to maintain the commitment that they have made for the remainder of the UK: that lottery monies will not by used in substitution for existing revenue commitments?
Although the Northern Ireland Arts Council does wonderful work, the noble Baroness will be aware that support for the arts in Northern Ireland has always been lower on a per capita basis than for the remainder of the UK. On a per capita basis, last year's figures were £4.12 for Northern Ireland, £4.73 for Scotland and £4.75 for Wales. Given the vital role that the arts play in rebuilding a civic society in Northern Ireland, and the economic circumstances and geographical isolation of Northern Ireland, should the Northern Ireland Office be looking to achieve at least the same per capita funding for Northern Ireland as is the case in Scotland and Wales? In reply, perhaps the noble Baroness will briefly address that point. Otherwise I have pleasure in supporting the order.
Baroness Denton of Wakefield: My Lords, again I thank noble Lords for their support. The order is important because there is such a wealth of culture and art in all its forms in Northern Ireland. Sharing that wealth of culture has to be part of the task in the years ahead. It can bring unity where there has not been unity before, and that is exactly what we need.
There is much to do, but the growth has been substantial. I hear the point made by the noble Lord, Lord Holme of Cheltenham, that the grant per capita is higher in Scotland and Wales than in Northern Ireland. I am pleased to be able to reassure him that, in terms of percentage uplift, the Arts Council of Northern Ireland has fared better in the current financial year than any of its counterparts in Great Britain. I hope that that will indicate to him that we regard such funding as an area which requires attention, against difficult pressure from other areas. We shall continue to regard it as a key area.
With regard to lottery money I am delighted to assure him that the Government do not intend that money provided to the Province by the lottery—as he rightly says, it could be substantial—should substitute for that provided from public expenditure. It has been

1345
a clear statement that projects should not emanate from government departments but should emerge from the community. We shall be delighted to watch that occur to the benefit of the arts.
The Government fully recognise the importance of the contribution of district councils to the arts. They believe that it is the duty of the Arts Council to seek to galvanise them into further investment. The Government expect the council to enter where possible into partnership agreements with local authorities with a view to increasing their involvement in the support of local events and arts organisations, and to ensure maximum collaboration and complementarity in the use of public funds.
1346
One of the most pleasing aspects over the past few months has been the determination of the local councils to take responsibility for what is happening in their own communities. That extends from the economic areas to the arts and social areas. What we see occurring in Northern Ireland benefits all sections, all sectors and all communities. It is a great privilege to see that occurring.
I thank noble Lords for their support. I commend the order.
On Question, Motion agreed to.
House adjourned at twenty-one minutes before nine o'clock.