Lords Sitting of 27 March 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 Worcester.
The Duke of Beaufort The Duke of Beaufort— Sat first in Parliament after the death of his kinsman.
Lord Dulverton Lord Dulverton— Sat first in Parliament after the death of his father.

Psychotherapy: Development of NVQs
The Lord Bishop of Worcester The Lord Bishop of Worcester asked Her Majesty's Government:
Whether, in setting up the lead body to develop national vocational qualifications in psychotherapy, they will consult the British Confederation of Psychotherapists.
Lord Inglewood: My Lords, the British Confederation of Psychotherapists was consulted in setting up the lead body, Advice Guidance and Counselling and Psychotherapy, but has chosen not to participate since the spring of 1994. Work on national vocational qualifications for psychotherapists is at an early stage and the confederation will be consulted at every stage of development.
The Lord Bishop of Worcester: My Lords, I thank the Minister for that Answer. Is he aware that the Conference of Psychoanalytical Psychotherapists was of the opinion that a deeper and more far reaching discussion was needed? Is he further aware that in February 1995 the Department of Employment declared that it wanted to see higher standards—and this is a matter of standards—in national vocational qualifications and to collaborate with all those who want to see those higher standards? Will the Minister reassure the House that the Conference of Psychoanalytical Psychotherapists will be brought into any further dialogue, in view of the fact that it includes the Tavistock Clinic, the Portman Clinic and the 10 most senior psychoanalytical psychotherapist bodies?
Lord Inglewood: My Lords, the right reverend Prelate is right about the Department of Employment's plans and aspirations for higher level vocational qualifications. It is open at any time for the British Confederation of Psychotherapists to participate in the work that has been carried out. The Department of Employment and the lead body would be most pleased if that were to happen.
Baroness Turner of Camden: My Lords, are those at the Tavistock Clinic being consulted? I recently received a letter from them indicating their grave anxieties. They point out that psychotherapy, concerning itself with the complexity of human emotions and motivation, is singularly unsuitable to be dealt with by mapping occupational competences. In view of the fact that the
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clinic is a major employer of psychotherapists and the biggest training institution for psychotherapy, will the Minister look at those anxieties most seriously?
Lord Inglewood: My Lords, the noble Baroness, Lady Turner, raises an important point. The Tavistock Clinic is an important component in the British Confederation of Psychotherapists. The confederation is dealing with the lead body, but if the noble Baroness wishes to draw to my attention any particular anxieties I should be delighted to receive them and to take the matter forward.
Baroness Masham of Ilton: My Lords, is the Minister aware that there is anxiety about this issue, which is highly complex? Psychotherapists deal with the abused and the abusers. Therefore, will he tell the House whether he is co-operating fully with the Department of Health and his colleague who is sitting at the end of the Bench?
Lord Inglewood: My Lords, I am pleased to be able to confirm that there is close co-operation between the Departments of Health and Employment in respect of this matter. It is true that the whole area of psychotherapy is difficult and complicated.
Lord Hylton: My Lords, while the matter is undoubtedly complex, does the Minister agree that there is some urgency about registration because false memories can be involved, leading to false accusations and some injustices?
Lord Inglewood: My Lords, the Government believe that self-regulation is the best answer in the circumstances. Of course, there are instances where something more binding is relevant and that is why the Government are reviewing the Professions Supplementary to Medicine Act. Against that background, one of the reasons why NVQs are valuable is that they provide a yardstick to the public about the knowledge of people who are carrying out activities.
Lord Dean of Beswick: My Lords, I believe that the Minister just said that self-regulation may be the answer. However, is he aware of some of the appalling consequences that have taken place in America because of unskilled or badly skilled people in the line of psychotherapy being allowed to run wild? Will the Government do their best to ensure that that does not happen in this country?
Lord Inglewood: My Lords, I am sure that we all agree with the noble Lord, Lord Dean of Beswick: we do not want to see that kind of thing happening in this country. However, in reply to the supplementary question from the noble Lord, Lord Hylton, after having said that we felt that self-regulation was the best initial approach, I continued to say that the Professions Supplementary to Medicine Act is being reviewed, and that is obviously something that we shall bear in mind.
The Countess of Mar: My Lords, can the Minister tell the House what is the present route for qualification as a psychotherapist? Further, can he also tell us why it is considered that the essentially modular form of learning which is involved with NVQs is more suitable?
Lord Inglewood: My Lords, one of the problems that faces those looking at psychotherapy is that there appears

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to be no generally recognised qualification. That is one of the reasons for the difficulties as regards the scope of the lead body in the first place. As I understand it, membership of the British Confederation of Psychotherapists requires slightly different membership criteria from the United Kingdom Council for Psychotherapists. It is because there is no agreed corpus of knowledge underlying the particular technique, which, as has already been mentioned, is to do with the treatment of the mind, that many such difficulties arise.

Gibraltar Air Links
2.46 p.m.
Lord Merrivale Lord Merrivale asked Her Majesty's Government:
Whether they will seek talks with the Moroccan authorities towards the implementation of the 1976 Exchange of Notes (Cm. 6798), and the amendment of the current UK-Morocco air services arrangements for a Morocco-Gibraltar-Paris route.
The Parliamentary Under-Secretary of State, Department of Transport (Viscount Goschen): My Lords, Royal Air Maroc can commence operations on a route Morocco-Gibraltar-Paris at any time. However, if a Moroccan airline wished to pick up passengers in Gibraltar for Paris—and vice versa—on that route, the Moroccan authorities would need to seek to amend the current UK/Morocco air services arrangements accordingly. At air service talks on 13th January, the Moroccan authorities made no such request. We expect to resume talks shortly.
Lord Merrivale: My Lords, I thank my noble friend the Minister for his response which rather follows the line of the Written Answer 1 received on 17th January. However, bearing in mind that there is only the UK-Gibraltar-Morocco route and that Great Britain is responsible for the external relations of Gibraltar, is it not for the Government to seek to encourage a further route which would benefit the economic development and the tourism of Gibraltar?
Viscount Goschen: No, my Lords; I do not agree with my noble friend. As with any other country, if Royal Air Maroc wanted to operate a Morocco-Gibraltar-Paris service with traffic rights, it would be up to the Moroccan authorities to request them from us; not the other way round
Lord Boyd-Carpenter: My Lords, does my noble friend the Minister accept that it would be very much to the advantage to the economy of Gibraltar if such a route were put into operation? It would help Gibraltar to combat attempts by Spain to create every sort of difficulty as regards traffic to Gibraltar.
Viscount Goschen: My Lords, the point to be considered here is that we cannot force a foreign airline to operate a service. However, if that airline feels that it has the commercial need and requirement for such a service it
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would approach its national authorities which would seek to engage our national authorities in air service negotiations and make that part of a package.
Lord Merrivale: My Lords, I am afraid that I shall have to refer to my supplementary question again. In fact, I happened to mention "a further route"; I did not just say a route from Morocco. However, as the Government said in a Written Answer on 16th June last year that,
"some details of the 1987 Agreement need to be updated to take account of the liberalisation of air transport in the Community" [Official Report, 16/6/94; col. WA 109.],
can my noble friend the Minister say what progress, if any, has been made? Will my noble friend also bear in mind the fact that Morocco is not bound by Council regulations?
Viscount Goschen: My Lords, indeed, Morocco is not bound by Council regulations. The important point on the airport agreement side is that the ball is in Gibraltar's court. The Gibraltarian administration refuses to implement the agreement because it believes that it cedes important concessions on the issue of sovereignty to the Spanish. This is not the position of Her Majesty's Government. We continue to press the Government of Gibraltar to act in this area. The emphasis is on the Gibraltarians; we will continue to press them to make progress on this important issue.
Lord Clinton-Davis: My Lords, while thanking the Minister for that reply with which I wholly concur—maybe uncharacteristically—can he confirm that this specific Question has absolutely nothing to do with the issue of the sensitive Gibraltarian/Spanish relationship'? Is he further aware that the Opposition support the view that he has taken? There was of course a deal struck in 1986–87, in which I had some part to play, which concluded a not wholly satisfactory arrangement between Britain and Spain on the issue. It is a sensitive matter and it does not help if rather irrelevant questions are imposed on it.
Viscount Goschen: My Lords, it is difficult to separate out the issues. We believe that coming to an agreement on the airport is important for a number of reasons. I wholly agree with the noble Lord that this is a sensitive point. We continue to press for progress.

National Hospital for Neurology
2.51 p.m.
Lord Walton of Detchant Lord Walton of Detchant asked Her Majesty's Government:
Why the application for trust status submitted by the National Hospital for Neurology and Neurosurgery has been rejected and whether, in the light of the concern that this decision has caused in the national and international neurological community, they will reconsider the question.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Cumberlege:): My Lords, we believe that the National Hospital will benefit from trust status but, after careful consideration, my

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right honourable friend the Secretary of State has decided that the hospital's interests will be best served by joining with another hospital that is equally committed to research and teaching, rather than operating independently.
Lord Walton of Detchant: My Lords, in thanking the Minister for that reply, I first declare an interest as the current president of the World Federation of Neurology—a federation of some 75 neurological associations across the world. Does the Minister agree that this hospital has an exceptionally proud record of patient care and service to the community; that it is at the moment financially viable; and that its associated institute of neurology has obtained one of the highest ratings in the HEFC national assessment exercise for the quality of its research? Can we be assured that if it were to merge with another hospital to form a trust its identity would be confirmed?
Baroness Cumberlege: My Lords, I am very pleased to be able to agree with the president of the world federation of neurological associations and I congratulate him on that very distinguished position. This particular hospital and its institute have a very proud record. The hospital is, we believe, of world standing but we do not believe that its future is necessarily viable. That is why we are looking ahead. If it joins a trust—as we are recommending it should—with another hospital, we would want to keep the excellence and the worldwide reputation and expertise embodied in Queens Square.
Baroness Jay of Paddington: My Lords, the noble Lord, Lord Walton, rightly refers to the concern in the international neurological community about a possible merger. Is the Minister also aware of the great concern felt in the National Health Service because of the potential threat to the number of intensive care beds in this specialty which may be threatened by the merger? Have the Government taken into consideration the cases of, for example, the patient who had to be flown from the south of England to Leeds for intensive care, and of the surgeon—a matter raised in your Lordships' House by the noble Lord, Lord Smith—who unfortunately died as a result of a lack of beds? Have the Government considered these service concerns when considering the merger?
Baroness Cumberlege: My Lords, we have considered all these aspects; indeed, we commissioned an independent inquiry, a review of neuro-sciences within the London area. The review was undertaken by some very distinguished consultants and professors in neuro-sciences. Their verdict was unequivocal. They said that the historical pattern of service provision is not fully geared to meet current population needs. Changes in demography mean that service sitings are no longer relevant as we move into the 21st century. As to the expertise in tertiary neuro-sciences centres such as that at Queens Square, the review recommended that such centres should be sited within a multi-specialty general teaching hospital and should have formal research and training links with medical schools and higher education institutes. We have accepted those recommendations,
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but we have suggested to the National Hospital that it should choose its partner rather than be pushed into a gunshot wedding.
Lord Peyton of Yeovil: My Lords, is my noble friend aware that her answer is reassuring in referring specifically to the excellence of this hospital? I hope that I can ask her now to redouble the assurance. Is she quite confident that the excellence of this institution will not be diluted by being spread?
Baroness Cumberlege: My Lords, it is our intention not only to protect and maintain the expertise within this hospital and within the institute, but also to promote its excellence. We believe it is a remarkable institution and we want to see it strengthened.
Lord Stallard: My Lords, can the noble Baroness say which other hospital she has in mind for the merger?
Baroness Cumberlege: My Lords, it really is up to the National to choose its partner. Clearly, it is considering a number of options. As the institute is already looking at University College London, perhaps that may influence its final decision. But the choice is the National's.
Baroness Masham of Ilton: My Lords, will the decision be made quickly? As the Minister knows, committee meetings and consultations take doctors away from patients. Is she aware that some patients are suffering from long waiting times in that hospital?
Baroness Cumberlege: My Lords, we have the support of both the chairman and the medical director of the National Hospital. They are preparing to bring forward a recommendation next month.
Lord Dean of Beswick: My Lords, the noble Lord, Lord Walton, says that the hospital is financially viable. The Minister in her reply says that the decision is based on the fact that it may not necessarily be viable in the future. What evidence has the Minister to substantiate that course of action? What proof is there that the hospital will not be viable? It may well be viable if the case is not proved. Have the Government taken any soundings of the highly qualified professional staff who man the hospital as to whether the service may deteriorate if there is a merger with another hospital?
Baroness Cumberlege: My Lords, we always consult with staff whenever there is a proposal. The evidence is that 13 district health authorities who commissioned services have indicated that next year they will reduce work to be done by this hospital. Indeed, the hospital itself is planning to handle up to 15 per cent. less work over the next three years.
Lord Stoddart of Swindon: My Lords, do the Minister's previous answers imply that there will be no reduction in the number of beds for this particular speciality?
Baroness Cumberlege: My Lords, I cannot give that undertaking. It depends what happens in terms not only of the number of contracts that are placed with this hospital but also movements in clinical activity in the way that medical science is changing. Your Lordships

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will be aware that, because things are done very differently today, over the years we have seen a remarkable decrease in the number of beds as more and more activity takes place on a day case basis.
Lord Walton of Detchant: My Lords, will the Minister accept that there is a major multi-million pound development of a new building going on at the Queens Square site at the moment? If, as she very properly suggests, a merger with another major hospital does take place, may we be assured that the existing site will nevertheless be retained?
Baroness Cumberlege: My Lords, that is really for the trust to decide once it is formed. I am aware that in the National Health Service it is a very dangerous thing to say, "Never, never, ever".

Turkey and Northern Iraq
2.59 p.m.
Lord Avebury Lord Avebury asked Her Majesty's Government:
Whether they will ask the Office of Democratic Institutions and Human Rights to refer the military operations by Turkey in northern Iraq to the Chairman in Office of the OSCE with a view to laying the matter before the Permanent Committee as a violation of Articles 34 to 37 of the OSCE's Budapest Declaration.
Lord Inglewood: My Lords, the matter is likely to be discussed within the OSCE later this week. We would expect Turkey to act in accordance with all the commitments of the Budapest Declaration, including those relating to the code of conduct and the human dimension.
Lord Avebury: My Lords, is the Minister aware that Ambassador Audrey Glover has already referred the matter to the chairman in office and that discussion is taking place on how best to proceed? Is he also aware that at the Budapest meeting it was agreed that, where a matter was of sufficient importance, it could be referred to the Committee of Ministers, and should be in this case? Does the Minister recall the dictum of the former Prime Minister, the noble Baroness, Lady Thatcher, that you do not just walk into someone else's country? In view of the fact that the Turks have invaded Iraq with 35,000 troops, jets, tanks and helicopters and are terrorising not only the PKK but also the native Kurdish people of northern Iraq, is this not a matter of sufficient importance to command the attention of the highest levels of the OSCE?
Lord Inglewood: My Lords, the noble Lord is right about going into other people's countries. We note the Turkish Government's assurances that their operations are temporary and aimed solely at destroying the PKK's capability to mount attacks against Turkey from northern Iraq. We look forward to the Turks abiding by their undertaking to withdraw at the earliest opportunity.
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We have made quite clear our concern that non-combatants in the region, including UN staff and relief workers, should not be affected.
Lord Bruce of Donington: My Lords, is the noble Lord aware that in the Government's own communiqué published by way of Answer to a Written Question in another place recently Her Majesty's Government claimed special credit for the humanitarian issues that were raised at the Budapest conference? In those circumstances, may we have the Government's assurance that they will take the initiative in ensuring, particularly as Turkey is a potential member of the European Union, that the humanitarian objectives and standards (with which Her Majesty's Government have presumably concurred) are observed in both the spirit and the detail?
Lord Inglewood: My Lords, the noble Lord is right. The human dimension of the Budapest Declaration owes a great deal to British involvement. That is something of which we can be proud. The noble Lord is also right in saying that there has been a series of serious human rights abuses in Turkey which the Government have regularly drawn to the attention of the Turkish authorities at the highest level, making quite clear our disapproval of those abuses.
Lord Hylton: My Lords, will the Government work through all available channels to achieve a timetable for the withdrawal of Turkish forces from the invaded territory? Will they also ensure that the UN High Commissioner for Refugees is able to protect those refugees from Turkey already in that area and ensure that none of them is forcibly repatriated to Turkey?
Lord Inglewood: My Lords, I can assure the House that we shall do everything that we can to try to ensure that Turkish troops withdraw as soon as possible. Equally, we shall endeavour to do everything that we can to contribute to ensuring that the actions to which the noble Lord refers take place. However, he will appreciate that the area is a long way from here and it is difficult to stand at this Dispatch Box and say that this or that will happen.
Lord Stallard: My Lords, given the record of the Turks in Cyprus and the Government's continued repetition of assurances that they will do their best, and given the fact that in 20 years no solution has been reached, what grounds are there for thinking that the situation will be any different in respect of this latest invasion?
Lord Inglewood: My Lords, we have to do our best to try to bring about a successful outcome to this matter. The noble Lord mentioned an example where none of us has been as successful as we would have liked.

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However, one has only to look to Northern Ireland to see that if one keeps on trying hard enough one can sometimes make a breakthrough.
Lord Geddes: My Lords, can my noble friend advise the House, or at least this Member of your Lordships' House, exactly what OSCE stands for?
Lord Inglewood: My Lords, it is the Organisation for Security and Co-operation in Europe.
Lord Clinton-Davis: My Lords, the Turkish invasion seems to have attracted little or no protest from Iraq. Does that not suggest that there may well be some collusion between Turkey and Iraq to attack the Kurdish population in that area on the basis of singling out the PKK for attack by the Turks? Is it not a fact also that it is very likely that thousands of innocent people are being caught up in this pincer movement and it is the Kurdish population as a whole who are bearing the brunt of this action?
Does the Minister agree that the welcome evacuation operation undertaken by the United Nations in securing the release of some 2,000 innocent Kurdish people from that situation ought to be thoroughly welcomed in all free parliaments of the world? Is there any hope that that possibility may be reopened in order to secure the evacuation of further people?
Lord Inglewood: My Lords, the point that the noble Lord makes about some form of joint operation between Iraq and Turkey has been canvassed in the media. I know of no evidence to support that view. Clearly, we must all welcome the action taken to secure the release of the people affected, to which the noble Lord referred. Let us hope that we shall see the end of this episode, as he said.
Lord Rea: My Lords, can the noble Lord imagine the furore that would have occurred if before the current peace initiative in Northern Ireland the British Army had gone south of the Border to eliminate possible IRA bases there? What, in effect, is the difference between the current situation in Turkey and Iraq and such a hypothetical situation?
Lord Inglewood: My Lords, with respect to the noble Lord, that is a hypothetical question and there is no direct parallel.
Lord Chalfont: My Lords, does the noble Lord not agree, however, that that question raises the principle of hot pursuit? Do Her Majesty's Government believe that the PKK is a terrorist organisation, and would it not be as well to recognise that fact because so far the questions on this matter seem to have been notably one-sided?
Lord Inglewood: My Lords, the noble Lord is right. The PKK is a terrorist organisation. However, the response to the threat posed by an organisation of that kind should be proportionate.
Lord Avebury: My Lords, is it not the case that under Article 2.4 of the United Nations Charter no state has a right to enter the territory of its neighbour except as a matter of self-defence or in accordance with a
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resolution of the Security Council? Pending any further decisions by the OSCE on action that it may take in the future, could it not send a mission to the area, as it did in the case of Chechenia, to establish the facts and report back so that future decisions may be based on sound knowledge of the violations of human rights and the Budapest Declaration which are occurring?
Lord Inglewood: My Lords, I am sure that the noble Lord is right. It is important that we take decisions and discuss these matters on the basis of information, which at present is sketchy. Obviously any means of improving our knowledge of these matters will be to everyone's advantage.
Lord Wyatt of Weeford: My Lords, is the Minister saying that, despite our knowledge of the serious violations of human rights in Turkey, we shall permit that corrupt country to join the European Union?
Lord Inglewood: My Lords, the question of Turkish membership of the European Union is a long way hence.

Building Societies (Switched Accounts) Bill [H.L.]
3.8 p.m.
Lord Dubs: My Lords, I beg to introduce a Bill to permit the distribution of funds by building societies to a person who switched funds from a shareholding account to a deposit account during the qualifying period for such a distribution. I beg to move that the Bill be now read a first time.
Moved, That the Bill be now read a first time.—(Lord Dubs.)
On Question, Bill read a first time, and to be printed.

Letchworth Garden City Heritage Foundation Bill
Lord Stewartby: My Lords, I beg to move that this Bill be now read a third time.
I do not want to detain your Lordships for more than a moment, but I should like to express thanks to those members of the small but distinguished Committee which carefully examined the business of the Bill. They made a recommendation on a vote of three to two that the sponsors of the Bill should seek to arrange with the Registrar of Friendly Societies that some of the places on the board of the new heritage foundation should be open to election by direct franchise in Letchworth. The sponsors have assured me that they will try to achieve that as soon as possible in accordance with the wishes of the Committee. However, no change is made to the text of the Bill; and, therefore, I hope that the Bill which has been favourably received in all parts of your Lordships' House may now complete its progress.
Moved, That the Bill be now read a third time.—(Lord Stewartby.)
Baroness Hamwee: My Lords, perhaps I may take another moment to add my thanks to those of the noble Lord, Lord Stewartby. As the noble Lord said, the

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selection of the members of the board of management was a matter of concern to many of the petitioners. It was a concern that I mentioned to the House at Second Reading.
I am grateful to the committee for having pursued the matter and for having sought the views of the Registrar of Friendly Societies as there was a widespread understanding that the election would not be an acceptable procedure under the rules governing industrial and provident societies. I was glad to learn that the registrar wrote to the Committee that at no time had he said that a structure involving direct election of governors by a constituency comprising the town of Letchworth, or a section of that town, would be unacceptable. I am glad that the Committee decided to allow for direct election of six of the 30 governors.
I, too, wish to support the Third Reading of the Bill and to wish the foundation well in the years ahead.
On Question, Bill read a third time, and passed, and returned to the Commons with amendments.

Law Reform (Succession) Bill [H.L.]
Report received.

Private International Law (Miscellaneous Provisions) Bill [H.L.]
3.13 p.m.
Report received.
Clause 9 [Purpose of Part III]:
Lord Brightman Lord Brightman moved Amendment No. 1:
Page 4, line 16, leave out subsections (1) and (2) and insert:
("(1) The rules in this Part apply for choosing the law (in this Part referred to as "the applicable law") to be used for determining issues relating to tort or (for the purposes of the law of Scotland) delict.
(1A) The characterisation for the purposes of private international law of issues arising in a claim as issues relating to tort or delict is a matter for the courts of the forum.
(2) The rules in this Part do not apply in relation to issues arising in any claim excluded from the operation of this Part by section 13 below.").
The noble and learned Lord said: My Lords, the purpose of this amendment is to clarify Clause 9(1) of the Bill. Part III of the Bill deals with litigation in one of the three jurisdictions of the United Kingdom concerning a wrong occurring outside that jurisdiction, the wrong being non-contractual—what English law calls a tort and Scots law calls a delict. In other words, the scenario with which the Bill is concerned is an action in England, Wales, Scotland or Northern Ireland about a wrong occurring outside that jurisdiction which, if occurring within, would be classified as a tort or delict.
There are clearly two steps involved in the litigation. The first step is to decide whether the issue relates to what we call a tort or delict. The expression commonly used is "characterised" as a tort or delict. The second question is to decide what law is to be applied to that issue once it has been so characterised.
Clause 9(1) of the Bill, in its present form, addresses only the second step. The first step is assumed but not addressed. To clarify the position, my amendment splits subsection (1) into two parts. The new subsection (1) defines step two: the selection of the law to be applied to the trial of the issue. Although that is step two, it is placed first because that is what Part III of the Bill is all about. Subsection (1A) addresses step one—the preliminary question which has to be answered—as to whether the issue is to be characterised as an issue relating to tort or delict. That is to be a matter for decision by what is called the court of the forum, which by definition in Clause 9(6) means the court sitting in England or Wales, Scotland, or Northern Ireland.
The Public Bill Committee agreed that some such clarification of Clause 9(1) was desirable but the amendment then proposed was not moved. I am indebted to my noble and learned friend the Lord Chancellor for the services of his draftsman in getting the necessary amendment into a proper form. I beg to move.
The Lord Chancellor (Lord Mackay of Clashfern): My Lords, as will be apparent from the introduction by my noble and learned friend, I am very happy with the clarification of Clause 9 of the Bill. I am very grateful to my noble and learned friend for moving the amendment, for the work he did as chairman of the Committee, and to the Members of the Committee who devoted much time to study of the problem. Therefore, I hope that your Lordships will accept the amendment.
On Question, amendment agreed to.
Clause 13 [Exclusion of defamation claims from Part III]:
Lord Lester of Herne Hill Lord Lester of Herne Hill moved Amendment No. 2:
Leave out Clause 13 and insert the following new clause:
("Exclusion of Defamation and related claims from Part III
.—(1) Nothing in this Part applies to affect the determination of issues arising in any claim to which subsection (2) applies.
(2) This section applies to any claim which is characterised by the courts of the forum for the purposes of private international law as relating to tort or delict and which is—

(a) a claim under the law of any part of the United Kingdom for libel, slander, slander of title, slander of goods or other malicious falsehood and any claim under the law of Scotland for verbal injury: or

(b) a claim under the law of any other country corresponding to or otherwise in the nature of a claim mentioned in paragraph (a) above; or

(c) a claim which is otherwise based upon a law for the protection of reputation, self-esteem, privacy or confidentiality, whether of an individual or group of individuals, or of a juristic person or of an organ of government.").

The noble Lord said: My Lords, I am glad that at Committee stage the noble and learned Lord the Lord Chancellor in effect accepted the Law Commission's observation in paragraph 3.31 of its report that,
"given the public interest in free speech and in the proper functioning of public institutions, it is not desirable that those who make statements in this country should have their freedom of expression circumscribed by the application of foreign law".
The noble and learned Lord the Lord Chancellor accepted that observation in relation to defamation law, and Clause 13 has been inserted into the Bill in its present form in Committee so that defamation claims based on foreign laws can be brought in our courts only if they would be actionable under our own laws as well.
In my view there are still two respects in which Clause 13 remains unsatisfactory. In the first place, the definition of "defamation claims" in Clause 13(2), purely by reference to a list of English torts such as libel and slander, and the Scots law of verbal injury, leaves a large degree of unnecessary vagueness and uncertainty. That is one main reason for my seeking to add paragraph (c) to Clause 13(2); in order to create greater certainty by making clear that where a claim is based on a law which does not correspond to the list of English and Scottish torts and delicts, but which is in substance a claim,
"based upon a law for the protection of reputation, self esteem … whether of an individual or group of individuals, or of a juristic person or of an organ of government",
it will be excluded from Part III.
Perhaps I may give an example to explain what I mean. Let us suppose that under the law of Ruritania it is a civil wrong to bring the president or government into disrepute by undermining public confidence in their capacity to govern. A law of that kind is not unknown in some parts of Asia, Africa or the Caribbean. A claim based on such a law would not necessarily be in the nature of a claim of the kind mentioned in Clause 13(2) (a). But it would certainly come within the wider words of my proposed paragraph (c).
As I understand the position, the noble and learned Lord the Lord Chancellor accepts that foreign torts of this kind should be within Clause 13. The first object of my amendment is to put the matter beyond doubt for the sake of achieving legal certainty. Knowing the controversial nature of the decision of Pepper v. Hart, I do not think it satisfactory for the matter to be dealt with only by a statement in the House which can then be placed before the courts. With respect, in my view it should be on the face of the Bill.
The second main aim of my amendment is to cover foreign laws of privacy of a kind unrecognised by common law or statute law in this country. I am glad to be able to report, speaking from this Bench, that, because of the dangers which such a law would create for free speech and a free press, my party recently decided at its Scarborough conference that it was not in favour of enacting a statute creating a new tort of media intrusion on privacy of the kind previously suggested by the Government. The Liberal Democrats preferred to press for the incorporation of the European Convention on Human Rights into UK law and to leave it to the courts to develop appropriate remedies for invasions of personal privacy on a case-by-case basis. According to press reports last Friday, it seems that the Government too have, happily, now decided not to create a general tort of privacy in this country.
The Law Commission in its report drew particular attention to invasion of privacy as a prime example of a foreign tort not recognised in this country. It emphasised that it was not desirable that British broadcasters and
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newspapers should be held liable for such a foreign tort of privacy. I submit that the Law Commission was perfectly right. Surely it is even more objectionable to allow plaintiffs to sue in our courts on the basis of a foreign law of privacy, without a public interest defence, than to allow them to sue on the basis of a foreign libel law less liberal than our own law. A foreign privacy law which forbids the publication of truthful statements and lacks any public interest defence surely poses a greater threat to free expression than does a foreign libel law, especially where prior restraint on free expression may be obtained through interlocutory privacy injunctions.
Perhaps I may give the example of French law. For the purpose of this debate I consulted M. Roger Errera, a member of the French Conseil d'Etat, who chaired the committee of inquiry on the press and the judiciary appointed by the French Minister of Justice, in 1984, and who gave evidence on privacy to Sir David Calcutt's committee. I can briefly summarise the position as follows. French defamation law is civil and criminal in nature. French defamation law is less intrusive on free speech and freedom of the press than is English defamation law. That is because the newspaper has the defence of publication in good faith and also because damages awards are modest compared with English jury awards. However, the limited nature of French defamation law is complemented by French privacy law, even though the two are legally distinct.
French privacy law has developed to protect not only honour and reputation but also the individual's personality. Unlike defamation law, any interference with privacy gives rise to a right to a remedy. Good faith is no defence, nor is the truth of what is published and there is no developed public interest defence in France. The civil courts there have very broad powers not only to award damages for invasions of privacy, but also to order preventive measures, including interlocutory injunctions to restrain invasions. The French civil code was recently amended, in 1993, so that damages may be awarded and injunctions granted against newspapers for breaching the civil right to respect for the presumption of innocence, pending the determination of a pending criminal case. The French courts may also order the press to publish corrective statements drafted by the courts.
Let us then suppose that a British broadcaster or newspaper publishes news and comment which is heard or read in France as well as in this country, and which breaches the French civil law of privacy or of the presumption of innocence or both. Suppose that the news and comment are accurate. They are published in good faith, their publication is in what we would regard as the public interest. As I have explained, these defences are not available in French law. The alleged victim could not invoke French penal law or other public law in our courts under the Bill. But under Clause 13 as it now stands, he or she could sue the broadcaster or the newspaper not only in the French courts for what is wrongful civil and criminal misconduct under French law, but the plaintiff could also sue in our courts for damages and injunctions on the basis of French civil law, even though that conduct is not wrongful under English or Scots civil law.
As regards the claim based on interference with the presumption of innocence, I recognise that our courts might perhaps refuse to apply the French law on the ground that, although civil in nature under French law, in substance it should be regarded as penal in nature in this country. But it is not clear that that would be so and in any event what is clear is that our courts could not do that in relation to a privacy claim, which is plainly civil in nature.
Under the Bill as it stands, the only safeguard for free speech and a free press based in this country would be the power to disapply French privacy law preserved by Clause 14(3) on the ground that it would conflict with British principles of public policy—a power which our courts would understandably be reluctant to exercise.
Because the definition of defamation-related claims excluded from Part III, in Clause 13(2), is so narrowly and technically worded, it would not cover a claim based on these foreign torts, even though—as I have sought to explain—they would unnecessarily interfere with the right to free expression. An alleged victim could therefore use our courts to obtain a remedy for conduct not regarded as unlawful under our own legal system and in circumstances which would severely chill free expression.
That was the very mischief which the noble and learned Lord the Lord Chancellor wisely—if I may say so respectfully—recognised in Committee as needing to be dealt with in relation to defamation claims. It is the very same mischief because a foreign privacy law is at least as capable as a foreign libel law of unnecessarily chilling free speech and a free press. Indeed, I would say that it is much more capable of chilling free speech in the absence of a public interest defence and given the power to obtain prior restraint on publication in the form of interlocutory privacy injunctions.
It may be said that, in the context of the European Economic Area, plaintiffs may, under the Brussels and Lugano Conventions, readily enforce foreign judgments based on foreign torts in this country. That is true. But it seems to me to be one thing to facilitate the enforcement of foreign judgments and quite another to allow our own courts to be used to adjudicate and grant remedies in circumstances which I have described. Moreover, many examples of foreign torts menacing press freedom come from countries beyond the European Economic Area, and therefore beyond the Brussels and Lugano Conventions.
For example, I happened to be in New Delhi in January in court to hear an application by the so-called "Bandit Queen", Phoolan Devi, for an injunction to prevent Channel 4 from exhibiting a film about her life, not only in India but also in the UK and, indeed, world-wide. Her claim was founded partly upon a privacy tort recently developed out of the Indian constitution by the Supreme Court of India. Happily, the case was settled amicably. But if this Bill is enacted in its present form, then it would become possible for another "Bandit Queen" to sue here on an Indian tort of privacy unknown to our law, to prevent a film from being shown here.
In one respect, I recognise that my amendment may be too wide. That is in referring to confidentiality. There are well-developed remedies under our law for breaches of confidence in commercial and other areas of life. It would therefore seem unnecessary and undesirable to refer to confidentiality and I would readily accept that that should be omitted from my amendment. However, that apart, I very much hope that the amendment will commend itself to the House. I beg to move.
3.30 p.m.
Lord Irvine of Lairg: My Lords, the principle of Part III of the Bill is that the double actionability rule should be abolished and that foreign law should be applied to foreign torts. The Special Public Bill Committee heard a broad range of evidence and decided to exclude defamation from the general rule. That had been the view of the Law Commission, and the Committee responded positively to representations it received from the press.
I do not accept that a similar case can be made—certainly, it was not made to the Committee—for excluding foreign breach of confidence or privacy claims. If the noble Lord will forgive me for saying so, it is unduly insular to suppose that foreign laws protecting rights of privacy are beyond the pale. Out of caution I should perhaps declare an interest in these matters as a member of the appointments commission which appoints members to the Press Complaints Commission. The Press Complaints Commission represents a system of self-regulation of the press with a majority of lay over press members.
My position is that I remain a supporter of self-regulation of the press, provided that it remains effective and the public can have confidence in it. At present I am unconvinced that we require a statutory law of privacy in this country. On the other hand, I certainly do not regard a foreign law of privacy as untoward and therefore one that we should not enforce in appropriate cases in this country. Therefore I oppose the amendment.
I have confidence that the courts will have no difficulty in developing the public policy exception in Clause 14(3); I do not agree with the noble Lord that they would show any reluctance to do so. I, too, am confident that the courts would take into account freedom of expression as a value to be protected as a matter of public policy in any privacy based claim from abroad which seemed to imperil freedom of expression in this country.
Further, Clause 13(2) does not call for the amendment that the noble Lord proposes. I am well content for the courts to be allowed to develop, by decision, the existing words in Clause 13(2) (b),
"any claim under the law of any other country corresponding to or otherwise in the nature of a claim",
defined in Clause 13(2) (a).
In my view also, foreign torts protecting reputation and self-esteem would be caught by the language of Clause 13(2) (b), and there could be a danger in attempting an exhaustive list lest it be argued subsequently that any claim not expressly included must

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have been intended to be excluded. For my part, the broad language of the existing Clause 13(2) is preferable. For these reasons I oppose the amendment.
Lord Hailsham of Saint Marylebone: My Lords, I intervene in this interesting discussion to make two points. First, we are signatories to the European Convention on Human Rights, and that convention includes a right of privacy. Secondly, the European Convention on Human Rights, on the matter of privacy, does include a public interest exception. I draw the conclusion which I believe follows from those two observations.
Lord Mishcon: My Lords, that brief intervention was extremely valuable. I follow the line that my noble friend Lord Irvine of Lairg took for a very different reason. Before I develop that reason, perhaps I may raise one very small point; it may be completely incorrect. I had no opportunity of putting down an amendment on this possibly trivial matter, but I owe it to the noble and learned Lord at least to draw the matter to his attention. Clause 13(2) (a) of the Bill contains the words,
"slander, slander of title, slander of goods or other malicious falsehood".
Slander does not of itself amount to malicious falsehood. Libel does not of itself amount to malicious falsehood. It is an entirely separate tort which is meant to cover the situation where someone deliberately tells a falsehood and does so maliciously so as to cause harm. Therefore, it being a separate tort, I do not understand the word "other".
Having made that minor technical point, I turn to the root of the amendment, I oppose the amendment because I should like us in this country to have experience of actions which protect the privacy of the individual. I say that because I hope it will encourage any government, whatever their complexion, to bring in a law of privacy.
Many of us realise that men in public life have some sort of reputation which has to be kept. All of us who are in public life realise that. This country suffers—as do many other countries, including the United States—from the fact that you will never get men and women of calibre, who are capable of serving their country well, when their rights of privacy are from day to day absolutely despoiled in the press.
Noble Lords: Hear, hear.
Lord Mishcon: We have experienced enough for me not to give examples. There are people who are capable of public service in this country who have been not only embarrassed by publicity but hounded out of office as a result of it. I therefore hope that if we have experience of foreign laws that protect individuals—matters of public policy and public interest excepted—we shall then say (we may not follow fully the example of France which was given by the noble Lord, Lord Lester) that in our own way we shall carve out a proper law of privacy to enable people of ability and repute to know that their
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families will not be portrayed on the front pages of a newspaper, nor the fact that one of their children happens to take drugs.
The Lord Chancellor: My Lords, I, too, seek to oppose the amendment proposed by the noble Lord, Lord Lester of Herne Hill. So far as the first part of the amendment is concerned, I consider that the amendment adopted by the Committee is sufficiently wide to cover with sufficient precision the area of defamation, and claims like defamation, which it was thought right to exclude from the general provisions of this part of the Bill. The general principle of this part of the Bill has been to depart from the rule of double actionability which hitherto prevailed in such claims and to use the appropriate applicable law, that law to be determined in the light of the circumstances set out in Clauses 11 and 12 of the Bill.
The Committee that deliberated on this Bill decided that it was wise to give quite a considerable amount of flexibility to the court of the forum by allowing not only the whole case to be the subject of consideration in relation to an applicable law but also separate consideration of whether any particular issue arising in the case should be dealt with by a different applicable law from that which might apply to another issue in the case. So a very flexible system has been set up under this Bill in accordance with the views of the special Committee that dealt with it in detail.
Against that background it seems to me that clear principle is required if one is to make an exception. Having considered this matter carefully, the Committee concluded that it was wise to make an exception in respect of defamation—it received quite cogent evidence on that point—in that statements made in this country might well infringe defamation laws in other countries; and that it was accordingly wise, in the light of the circumstances with which the industry is faced, to make such an exception. In fact, that exception, as approved by the Committee, goes beyond what was inserted by the Law Commission. It is a wider exception than the Law Commission proposed. That having been done, I submit that that is where it should stop.
So far as concerns the amendment of the noble Lord, Lord Lester, your Lordships will see that it does not depend on anything to do with statements. The latter part of his amendment concerns infringements in relation to privacy and confidentiality. In my submission, it would be quite wrong, having regard to the general principle to which I referred, to give effect in this Bill to that amendment.
I have recently looked at the Morris v. Beardmore decision in this House in connection with attempts by the police to go into a private residence. It is a case that has recently been referred to by Anthony Whittaker in The Times as having possibly been lost sight of in the debates about privacy in this country. But the noble and learned Lord, Lord Scarman, said in that case (recorded at page 464 in 1981 Appeal Cases)—which is related, as I said, to the question of police officers entering a private house—
"In formulating my reasons for allowing the appeal and restoring the decision of the magistrates, who acted with excellent judgment in dismissing the charges, I have deliberately used an adjective

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which has an unfamiliar ring in the ears of common lawyers. I have described the right of privacy as 'fundamental'. I do so for two reasons. First, it is apt to describe the importance attached by the common law to the privacy of the home. It is still true, as was said by Lord Camden, CJ … in … 1765".
The noble and learned Lord then quotes those words and goes on to refer to the European Convention on Human Rights. So, the common law of England has long recognised a right to the privacy of one's home. I submit that it would be quite wrong to exclude privacy in the way proposed by this amendment. The way in which the Bill has been dealt with by the Committee amply protects any right of that kind.
The noble Lord, Lord Lester of Heme Hill, once more used a phrase which attracted a certain amount of attention when he used it last. He spoke of "chilling" the press of this country. I believe I am right in saying that in his concluding example he suggested that under this Bill the Indian lady could have required the courts of this country to prevent a film with the kind of subject matter of the case in Delhi from being shown here. So far as that goes, this Bill is concerned with events that happen outside this country. It is in different law districts of this country or outside the country that the matter would arise. I believe that the Bill has been left in an appropriate state by the Committee. This amendment goes too far in trying to restrict the principle of the Bill.
I am grateful to the noble Lord, Lord Mishcon, for drawing my attention to the use of the word "other". I should like to consider that point carefully. We may possibly return to it at Third Reading. It is the kind of issue that might be appropriate for that occasion. In the meantime, I urge your Lordships not to accept this amendment should the noble Lord decide to press it to a Division.
In the course of his remarks, the noble Lord, Lord Lester, made reference to certain decisions of the Government. Obviously, he knows more about those than I do. The question of what should be the law in this country is a matter of concern but different from the particular matter with which we are concerned today.
I hope that, if the noble Lord presses his amendment, your Lordships will not accept it.
3.45 p.m.
Lord Ackner: My Lords, before my noble and learned friend sits down, perhaps I may say on the matter raised by the noble Lord, Lord Mishcon—I invite consideration of this point—that the word "other" was used in relation to slander of goods. I have a very dim, distant and therefore probably wholly unreliable recollection that in regard to that tort malice is required.
The Lord Chancellor: My Lords, I am grateful to my noble and learned friend. That is probably in accordance with the authorities as they still stand, notwithstanding the length of time to which my noble and learned friend referred. There may still be a question
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of whether, in the context, the word "other" is the most appropriate one. I should certainly like to consider that point and I am grateful to my noble and learned friend.
Lord Lester of Herne Hill: My Lords, I feel that I owe some kind of apology to those noble Lords who are not legally qualified and may find this discussion somewhat difficult to follow. Certainly, for myself, this has been an important and interesting debate.
Let me say first that I agree with the noble Lord, Lord Irvine of Lairg, that the way forward in protecting the right to privacy in this country is through effective voluntary machinery—the Press Complaints Commission—and the development of common law. The case of Morris v. Beardmore referred to by the noble and learned Lord the Lord Chancellor, and, I believe, the speech of the noble and learned Lord, Lord Keith of Kinkel, in the Spycatcher case, indicate that there is potential for growth in the common law in further protecting privacy, including media intrusions of privacy. So it is common ground that there is scope for development of the common law and the use of the Press Complaints Commission. So the real issue is about what our courts and laws should do where a foreign privacy law goes much further than would the developing English common law.
It is probably my own lack in grasping what has been said, but I continue not to understand at all the difference in principle between disallowing foreign libel laws where they do not match English libel law on the ground that foreign libel laws menace free speech unnecessarily and yet allowing foreign privacy laws which are not matched by English privacy laws, even though they too might, in a particular case, menace free speech law unnecessarily. It seems to me that both kinds of interference with free speech are simply different forms of interference arising from foreign laws. I fail to understand the principle which indicates why one should be excluded and the other admitted even though there is a mis-match between the foreign system and the English system.
The noble and learned Lord, Lord Hailsham of Saint Marylebone, drew attention to the European Convention on Human Rights which guarantees both the right to privacy and the right to free speech. But that by itself does not provide adequate guidance to English judges, even if it were part of our law, as to how to deal with the problem that the amendment raises. I should make clear—it is a defect in the amendment—that the amendment is intended to cover only statements made by the media in this country of exactly the kind that troubled the noble and learned Lord the Lord Chancellor in relation to the law of defamation.
I should like to reflect on all that has been said in the course of this short but interesting debate and consider whether there is any need to return to the matter at a later stage. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 14 [Transitional provision and savings]:
Lord Howie of Troon Lord Howie of Troon moved Amendment No. 3:
Page 5, line 41, at end insert ("including acts or omissions where the knowledge required to bring an action for damages in respect of any claim for loss or damage they occasion is not available until after the commencement of this Part").
The noble Lord said: My Lords, in moving Amendment No. 3, it may be for the convenience of the House if I speak also to Amendments Nos. 4 and 5. They are all related, as I shall attempt to show.
As your Lordships will know, I am not a lawyer and would not normally intervene in legal matters of this complexity. However, your Lordships may recall that I have a long-standing connection with the construction industry. I was asked by a construction company to raise these matters for clarification due to certain fears it had arising out of the Bill. The company is called Cape. It is a fire engineering company and supplies fireproof materials to the construction industry.
Although I shall refer to the company specifically, its position is quite general in relation to other companies. Cape used to own a company in South Africa which supplied asbestos to customers in the United States of America. That company was sold in 1982 to a South African interest. Cape has been named as the defendant in numerous personal injuries claims in the United States on the basis of United States law in respect of the damage caused by the asbestos supplied by the South African subsidiary. It resisted those claims on the grounds that it has no presence or assets in the United States and is not prepared to submit to the jurisdiction of the US courts. A case was brought against Cape in the High Court in England in 1988—Cape v. Adams —and the judgments in the High Court and the Court of Appeal confirmed that Cape was not liable for the default judgments made against it in the United States. It was confirmed by those judgments that litigants in the United States could not penetrate what is called the "corporate veil" which exists between a parent company and its subsidiaries under English law.
Cape and its lawyers, who drafted these amendments for me, fear that a claim could be brought against the company. When a cause of action arises in the case of industrial disease where there has been exposure to asbestos, the cause for action may not arise until many years after the exposure when the effects of the exposure manifest themselves. In some cases that can take as long as 25 to 30 years. It is feared that the Bill as it stands may leave a company which supplied asbestos to the United States many years ago, prior to the passing of the Bill, exposed to claims arising after the Bill is passed.
As many noble Lords will be aware, a person may be exposed to asbestos as a result of stripping out material from an old building. That may occur at any time because many buildings throughout the world still contain asbestos. In this country the exposure could take place after the passing of the Bill, even though the supplier ceased to have any control over the material many years prior to the exposure. In the United States and Italy, for instance, a parent company is fully liable for the debts of its subsidiaries. In effect there is no
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corporate veil. The Bill will place English companies in a situation where they will cease to be protected by the laws of England in respect of acts carried out by subsidiaries abroad. Also, the Bill makes no reference to damages, which is extremely important when a company is exposed to the laws of the United States where damages may be severe.
Leaving the general background, I rum specifically to Amendment No. 3. In the Second Reading debate the noble and learned Lord the Lord Chancellor said that the Bill was not retrospective. The amendment seeks to make that clear on the face of the Bill rather than in the columns of the Official Report. However, this afternoon I received a letter from the noble and learned Lord—I thank him for his courtesy in sending it to me—which relieves my anxieties in part on this matter. However, at the same time I should like his observations on retrospection to be recorded in the Official Report.
Amendment No. 4 relates to what is known as the corporate veil. For instance, in America liability against a defendant can be established on grounds alien to English law. In broad terms, any parent company obtaining a financial benefit from the activities of a subsidiary can be made liable for the activities of that subsidiary and can be made responsible for any damages awarded against the subsidiary. That is achieved in various states in America by piercing the corporate veil. In England, while that may occur, it is rare and was expressly not allowed in the case of Cape v. Adams where the supply of asbestos was by a South African subsidiary. That should be compared with the practice in the United States, where, on the same facts, American courts entered judgment against Cape for the activities of its subsidiaries even though Cape did not itself supply the product. If the English courts apply American law to the cases in England, it is part and parcel of that law that a parent company can be made liable for the acts of its subsidiaries. English courts will have to apply that law if the Bill is enacted. Amendment No. 3 asks for clarification.
Amendment No. 5 refers to damages. Mr. John Taylor, the Parliamentary Secretary in the Lord Chancellor's Department, wrote to Michael Grylls MP on this matter some weeks ago. Mr. Taylor said that very large damages will not be awarded by English courts, as they are in America. However, the Bill offers no protection in that respect. I take it that the damages will be entirely a matter for the court.
The danger to Cape and other companies lies in the United States where, according to the current issue of the Economist published at the weekend, asbestos victims in the United States are five times as likely to sue as they are in the United Kingdom. Great danger lies there to companies in this position. If Mr. Taylor is saying that, for the purposes of establishing liability between the parties, the applicable law as set out in Clause 11 of the Bill should apply but that such law should not apply to the assessment of damages which would be in accordance with English law, it would be better if the Bill were to say so clearly on its face. I am told that the public policy provisions would not apply under paragraph 13(a) (i) as there is at least one English court decision enforcing Texas levels of damages.
It is not my intention to press the amendments today. My intention is to probe the meaning of the part of the Bill to which I have referred for the comfort of Cape and for the comfort of other British companies which might find themselves in the same position, especially in the United States. I beg to move.
4 p.m.
The Lord Chancellor: My Lords, it may be for the convenience of the House if I take Amendment No. 3 and then deal briefly with the other amendments. Amendment No. 3 suggests inserting at the end of Clause 13 the words:
"including acts or omissions where the knowledge required to bring an action for damages in respect of any claim for loss or damage they occasion is not available until after the commencement of this Part".
The provision in the Bill states:
"Nothing in this Part applies to acts or omissions giving rise to a claim which occur before the commencement of this Part".
I do not think that one can have knowledge of acts or omissions before the acts or omissions occur. Accordingly, the amendment is already more than covered by Clause 14(1). As the noble Lord said, I sought to explain that to him in a letter which I wish he had received even earlier.
With regard to Amendment No. 4, questions of the liability of a holding company for its subsidiary will be an issue which will be separate from the issue of straightforward liability in the area to which the case referred. I would think it highly likely that the correct way to apply this Bill to that would be by determining the relationships between the holding company and the subsidiary on the basis of the law governing that particular relationship in the place where the relationship was constituted.
With regard to damages, issues relating to the quantum or measure of damages are at present and will continue under Part III to be governed by the law of the forum; in other words, by the law of one of the three jurisdictions in the United Kingdom. Issues of this kind are regarded as procedural and, as such, are covered by Clause 14(3) (b).
It follows from this that the kind of awards to which the noble Lord referred of damages made in certain states, in particular in parts of the United States, will not become a feature of our legal system by virtue of Part III. Our courts will continue to apply our own rules on quantum of damages even in the context of a tort case where the court decides that the "applicable law" should be some foreign system of law so far as concerns the merits of the claim.
Some aspects of the law of damages are not regarded as procedural and, in accordance with the views of the Law Commissions in their report on the subject, Part III does not alter this. These aspects concern so-called "heads of damages"—the basic matter which is being compensated for—such as special damage relating to direct financial loss. Whether a particular legal system permits such a head of damage is not regarded as procedural but substantive and therefore not
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automatically subject to the law of the forum. This seems right given the intimate connection between such a concept and the particular nature of the case in issue. But again, I foresee no significant increase in awards of damages because a particular head of damage permitted by some foreign system of law would continue, so far as the quantum allocated to it in any finding is concerned, to be regulated by our own domestic law of damages.
I hope the noble Lord will feel reassured on the three matters he has raised and will feel able in particular to withdraw Amendment No. 3.
Lord Howie of Troon: My Lords, I am always reassured when the noble and learned Lord the Lord Chancellor says something to me, no matter what it is. Not being a lawyer I shall study Hansard tomorrow to see just how and where I have been put right. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 4 and 5 not moved.]

Activity Centres (Young Persons' Safety) Bill
Brought from the Commons; read a first time, and to be printed.

Leeds Development Corporation (Area and Constitution) Order 1995
4.8 p.m.
The Minister of State, Department of the Environment (Viscount Ullswater)The Minister of State, Department of the Environment (Viscount Ullswater) rose to move, That the order laid before the House on 9th February be approved [11 th Report from the Joint Committee].
The noble Viscount said: My Lords, the order was approved in another place on 6th March. It is one of four required to wind up the Leeds Development Corporation. Its effect is straightforward. It simply revokes the 1988 order which designated the Leeds Urban Development Area and established the development corporation.
Revocation is in two stages. That part of the 1988 order which designated the urban development area is to be revoked on 1st April. The part which established the development corporation is to be revoked on 1st July.
I should like briefly to explain why there is a two-stage wind-up process and why we need four orders in total to wind up the development corporation. The intention is that the Leeds Development Corporation will cease to exercise any operational functions after 31st March. It is appropriate therefore that the urban development area should cease to exist as from 1st April. There will then be a three-month non-operational period during which time the corporation, with just a few staff, will prepare its final accounts and report and wind up its affairs. Finally, the corporation will be dissolved on 1st July.
None of the other three orders required to wind up the corporation is subject to the affirmative resolution procedure. A dissolution order will be made at the end of March requiring the corporation to cease to act from 1st April and dissolving it on 1st July. That order is not subject to any parliamentary procedure.
The other two orders were laid before the House on 24th February and are subject to the negative resolution procedure. One order transfers planning functions from the corporation to Leeds City Council at the end of March. The other transfers to the Secretary of State for the Environment any assets or liabilities that the corporation has not disposed of by wind-up. This is a necessary safety net to ensure that there is a residual home for any remaining assets and liabilities.
I have explained what the area and constitution order does and how it ties in with the other wind-up orders. I should now like to explain why the Government are now winding up the Leeds Development Corporation: indeed, why we intend to wind up all 12 UDCs in England over the next three years.
I must make quite clear that this is not because they have failed to meet the objectives we set them: quite the reverse. It is precisely because the Leeds Development Corporation has largely done what it set out to do, and others will have done so over the next three years, that we now are able to embark on this wind-up programme.
UDCs were always intended to have limited lives—some shorter than others, depending upon the extent of the problems they faced. They were set up in order to provide a focused approach to the physical and economic regeneration of particular run-down urban areas; to give these areas a much-needed shot in the arm. At the same time, we have looked to UDCs to establish a solid base for sustainable regeneration that other bodies, both in the public and private sectors, can build upon after they have gone.
This is what Leeds and other development corporations have done: mainly by way of assembling land, providing infrastructure, facilitating much-needed development, and improving the local environment. An important part of their remit has been to lever in as much private investment as possible. Their records in this regard are impressive. Take the case of Leeds. In spending £55.7 million of public money, the development corporation has drawn in £350 million of private sector investment, including £45 million from abroad. That gives a ratio of public to private investment of 1:6.3.
I was pleased to have the opportunity to see for myself how the corporation has transformed the area when I visited Leeds in January. I should like to highlight some of its achievements. In Holbeck, life has been brought back into an important conservation area by restoring historic workshops and redeveloping adjacent sites. The south side of Boar Lane has been transformed into a smart office and hotel location. The Calls and Riverside is now a lively business, residential and restaurant district.
In the Kirkstall Valley, the former power station ash tip has been transformed into a 10 hectare nature reserve. A new village heart has been put back in Hunslet with the new Hunslet Green development,
1424
which has turned 20 hectares of derelict land into a new urban village complete with new shopping and sporting facilities. Under construction at the moment, and due to open at Easter 1996, is the £42 million Royal Armouries Museum. The development corporation was instrumental in persuading the Royal Armouries to move to Leeds, and the development is expected to attract 1 million visitors a year.
I could go on to list many other outstanding examples of the corporation's achievements, but I think I have made my point. The corporation has a record to be proud of, and I congratulate its board and officials for their remarkable achievements in under seven years.
I should mention also that the corporation has made every effort to ensure that its exit is an orderly one, and that suitable succession arrangements are in place. The city council, as well as inheriting the corporation's planning functions, is taking over responsibility for maintaining amenity areas landscaped by the corporation. English Partnerships intends to take over responsibility for a number of projects that will not be completed by the end of March. In both cases, the corporation is paying an agreed endowment sum to its successor.
We charged the Leeds Development Corporation with the task of pump-priming regeneration of its area and it has achieved that objective admirably. We asked it to achieve an orderly exit, and it has done that also. The time has now come, therefore, to wind up the corporation, and we need to approve the area and constitution order to do that. I recommend this order to the House for approval. I beg to move.
Moved, That the order laid before the House on 9th February be approved [11th Report from the Joint Committee.]—(Viscount Ullswater.)
4.15 p.m.
Lord Williams of Elvel: My Lords, the House will be grateful to the noble Viscount for introducing this order. I say at the outset that it is welcome, not perhaps entirely for the reasons that the noble Viscount adduced but because we believe that the proper way to develop inner cities is in partnership between councils, local authorities and the private sector. They can do that by themselves without the need for urban development corporations. Indeed, we welcome the fact that the development of the centre of Leeds is basically going to move along the lines that we would recommend, as the noble Viscount has described.
The question then arises as to whether this urban development corporation has worked in any meaningful sense. Indeed, do UDCs work? I would seek to define "work" a little more closely. Has it really helped to regenerate previously derelict inner city areas which would otherwise not have been regenerated? Has it improved the lot of local residents? Has it created employment that otherwise would not have been created? I believe that those are three good criteria by which to measure the success or otherwise of any urban development corporation, and in particular the one which is before us today; namely, the Leeds Development Corporation.

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I shall not talk about the others, but as regards the Leeds Development Corporation I believe that the position is uncertain. We ask ourselves what it has achieved in seven years of existence. As the noble Viscount will know, there was already a good working partnership between Leeds City Council and the private sector. I ask your Lordships this question: what would have happened if the resources which have been made available to the UDC had been made available direct to Leeds City Council? Our belief is that Leeds would have achieved the same attraction of private funds because that is exactly what it did in the Asda development, which was near completion before the UDC came into existence.
The next question about Leeds is: what sort of jobs have been created? We have heard a figure of over 8,000 jobs. Perhaps the noble Viscount can help me on this matter. I cannot find anywhere a precise statement on whether these jobs are temporary or permanent. Do they relate to the unemployment position in Leeds, which is essentially that of male heads of households? Are the jobs planting trees? Are they jobs in economic and public relations consultancies, in which many have been employed by the UDC and perhaps to good purpose?
I hope the noble Viscount will confirm that these are not jobs which are in pursuit of the development corporation's housing strategy for the simple reason that the corporation had no housing strategy. For an urban development corporation to set out to regenerate an inner city without having such a strategy seems to me very odd, to say the least.
Neither did the Leeds Development Corporation pay much attention to social projects. Will the noble Viscount confirm that of the total expenditure of that corporation only 0.2 per cent. went on any project of a social nature? Will the noble Viscount also confirm that this and the housing question were the objects of a severely critical report from the National Audit Office published on 27th July 1993? So everything is not quite as successful as the noble Viscount described.
The noble Viscount said that he visited Leeds. He will have reflected on and heard the opinions of my honourable friends in another place who said that in many instances the Leeds Development Corporation neglected local small businesses which are precisely the kind of businesses which are required for regeneration of that nature. The corporation is very keen on big developments, but not very keen on local, small businesses.
Generally speaking, have UDCs worked? We understand from the noble Viscount that there will be an orderly wind-up of all 12 UDCs over the next three years. Have the Government lost faith in the whole exercise? We hear very little about UDCs nowadays. They used to be trumpeted as the great new weapon by which the inner cities would be regenerated. There is none of that now. There is none of the publicity or hype that we had previously. The fact of the matter is that urban development corporations have had a difficult time—not least because they have been operating in an economic climate which has not been favourable. I
1426
accept that, but given that the Government are to wind up all of the UDCs, I must ask whether they have lost faith in them. If they have lost faith, I think that it would be more honest for them to say so instead of using the fig-leaf of saying that they were simply pump-priming operations which were to be handed over to the local authorities when ready.
I said at the beginning of my speech—I say it again—that we welcome the order because we believe that the future regeneration of our inner cities lies with local authorities working in partnership with the private sector. It was for that reason that I put my questions to the noble Viscount in a constructive manner and in the hope that he will be able to answer them.
Lord Bellwin: My Lords, I should like to contribute briefly because we are talking about my favourite home-town and I have had some experience of its affairs in a public capacity. We are also talking about what we always used to call "quangos", but they are now referred to as NDPBs—non-departmental public bodies. Given that at the end of this week I finish 10 years' service on the Commission for the New Towns, which is one such body, and I currently chair the Louth Hull Housing Action Trust, perhaps I should declare an interest in the subject.
To appreciate fully the extent of the achievements of the urban development corporation, I believe that one has physically to visit the area in question. It would be even better if one could not only see the area as it is now but know what it was like previously. I can say without any doubt that the transformation—I use that word deliberately—is quite remarkable. Indeed, I commend to your Lordships a splendid illustrated booklet on Leeds. I am sure that my noble friend the Minister will make a copy available to any noble Lord who wishes to see it. It graphically illustrates the "befores" and "afters". It is most impressive.
It has always been said that if one were to give development money to the local authority, it would do the job just as well. But it is not like that. I have worked for a local authority. Indeed, I was the leader of the authority in Leeds for many years—and I know about this. Other Members of your Lordships' House who are in the Chamber at the moment could also tell the House about the constraints upon local authorities when trying to carry out all the functions and services for which they are responsible, when trying to keep an even balance between what is done in one area as compared with another and when trying to match up to the pressures placed upon them by all of their citizens. It is a hard thing to do. And it is not just a question of money. Without breaching any confidences, I can tell the House that it is simply not the case that previously it was only money that prevented us achieving all that we had hoped. Today I can compare my city with any other in the country, but it was not always like that and it was not simply a question of money.
The previous Labour leadership discussed with me at great length what more might be done and how it might be done. Although there were political pressures at the time, when the money became available through the establishment of the development corporation, many

1427
were more than happy that that money was coming in. In fact, the leader and the deputy leader of the city council are members of the board of the development corporation, and I pay credit to them. I am sure that their contributions to what is a small board played no small part in the achievements that are there for all to see.
Perhaps I may comment also on the board itself. According to the proceedings of another place, the chairman of the board was abused in a debate. He does not deserve that because he has done a splendid job of work. He is a most able man. Indeed, I hope that we shall always find such men coming forward on to such bodies and playing their part in helping to regenerate our cities. In fact, all members of the board are distinguished local people. Indeed, the noble Baroness, Lady Lockwood, is a member of that board, and no one can question her abilities and what she has to offer. Therefore, I have to disagree with the noble Lord, Lord Williams, although the point that he made is always made in such circumstances.
Another feature of the work of development corporations is that when money comes into a city, not only does it enable an area or areas of that city to be improved, but it means that the resources of the local authority can be better used to meet its other objectives. I know that that point, too, is appreciated.
The Minister gave us some examples of what he thought were the successes of the corporation. I shall not detain your Lordships by speaking of others, except to mention that one of my favourites is what has happened in Hunslet Green which was a problem area throughout all my years in the city. Any noble Lord who visits the area now and talks to the people who live there and to those in its forum will be able to understand just what the corporation has done and what it has meant to a far greater extent than is possible simply by listening to what is said here today.
The noble Lord, Lord Williams, said that there was no housing strategy. But I must advise him that 561 houses exist today that were not there previously. You can call that "strategy" or whatever, but I like what has happened very much indeed.
There is no doubt that, without the input of the development corporation, the city of Leeds would not now be set to receive the Royal Armouries which will mean so much to it. That is a wonderful example of a local authority, the private sector and the Government all putting in funds. It is a very happy story.
Perhaps I can tempt the noble Lord, Lord Williams, to visit Leeds to see what has happened along the riverside and, who knows, even to stay at one of the hotels there. That part of the city was previously derelict, but it is now delightful. Indeed, I would welcome the noble Lord to the city myself and would be glad to show him round if he needed it.
I must not go on. If my enthusiasm is showing through too much, I hope that your Lordships will make allowances for the fact that I am talking about my home-town. I do not need to go there to see it because I know it. Like my parents, I was born there. I was brought up there, and I am very proud of it.
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I should like to finish by saying one or two thank-yous. I should like to thank the Government for putting in the funds in this way. We would not have had all the extra jobs and the millions of pounds of private sector investment without it. None of it would have happened without that. The Secretary of State who made the appointments to the board deserves congratulations on that. I have already said how much I appreciate what the leadership of the city council has brought to the party. We should not let this occasion pass without a word of praise for its officers. The chief executive, Martin Eagland, is an outstanding officer. Indeed, they have all done a fine job, as have all involved in businesses, the professions and, indeed, the community at large, 300 of whom turned out last Friday to say farewell. The Secretary of State came along. It was a splendid occasion.
There are those who seek to belittle what has happened. Politicians, as they did in another place, seek to score points. There are those who argue about the precise number of jobs that are being created. How many thousand was it really? How many hundreds of millions of pounds have gone in? Was it more or less than has been said? People can argue about that if they like, but when all the talking is done, the reality is there for all to see. An important area of the City of Leeds has been transformed. I use that word again deliberately.
Where there has been dereliction for a long time, there is now much of which everyone in the city can be proud. Much more needs to be done in Leeds. It will henceforth be the responsibility of others to do it. I say merely that I cheer them on in their doing of it because I want to see everything possible done to make the city a better place than it is at the moment—good though it is in comparison with all others. I pay tribute to all concerned for a job very well done.
4.30 p.m.
Viscount Ullswater: My Lords, I welcome the contribution made to the debate by my noble friend Lord Bellwin. He has the knowledge and expertise which I certainly do not have, and so I welcome what he said. From the first he said that the transformation of the areas that the Leeds Development Corporation has tackled is remarkable.
Almost seven years ago the Government gave the Leeds Development Corporation the task of bringing back prosperity, business, jobs and housing to two very different areas of the city, at South Central Leeds and the Kirkstall Valley. It was given the powers and the resources to focus single-mindedly on removing the barriers which were preventing regeneration from taking place. The noble Lord, Lord Williams, said that the city council could of course have done that if it had been given the money. Perhaps it could have done, and perhaps it would have done in time, but, as my noble friend Lord Bellwin said, it was not just the money. It is not always just a question of money. The city council was looking at different priorities, and that makes it difficult for it to focus on any particular area. Hunslet Green was, I understand, an area of high-rise flats. The

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area was derelict for five years or more before the development corporation came along. So it is a question of when the regeneration would have taken place.
The corporation is dedicated to its task. It has shown the vision, focus and determination to solve the problems which were holding back progress. Its achievements in attracting investors and breathing new life into the city are there for all to see.
I gave some illustrations earlier of how the corporation has succeeded in regenerating particular areas of the city. I should now like to sum up its achievements with some key output figures, starting with jobs. During its lifetime the corporation has helped to create over 9,000 jobs. That figure is not one calculated by the corporation itself. It has been arrived at by independent economic consultants, based on a full survey of all completed developments within the designated urban development area. That influx of new jobs bodes well for the future and looks set to increase as new developments are completed and businesses consolidate and expand. The noble Lord, Lord Williams, asked whether the corporation really had created jobs where there were none before. That independent assessment of the number of jobs created is an important one to examine.
Lord Williams of Elvel: My Lords, I am sorry to interrupt the Minister, but I wonder whether he could help me. As I understand it, his ministerial colleague in another place said that 8,300 jobs had been created. Does that mean that an extra thousand have been created in the past month or so?
Viscount Ullswater: My Lords, the final report from the consultants indicated that there has been an increase of over 9,000 jobs during the existence of the development corporation, and so I can give the House an updated figure.
Some 561 houses, as my noble friend said, have been built within the urban development area, mainly in the riverside area and on the Hunslet Green development. Hunslet Green has been one of the fastest selling housing developments in the north of England. As well as low-cost houses for sale, the development includes 58 housing association dwellings for rent.
The noble Lord, Lord Williams, asked whether only 0.2 per cent. of expenditure had been of a social nature. The spending on community projects totals £120,000, but the 58 housing association dwellings for rent represent a social benefit. That is an important part of the scheme.
Other key outputs include the reclamation of 68 hectares of land; the completion of 11.4 kilometres of highways and footpaths; and the creation of 366,000 square metres of non-housing floorspace, with planning consent granted for a further 170,000 square metres. Those are impressive achievements and ones of which the corporation can be proud.
Now that the Leeds Development Corporation has so successfully fulfilled its remit we are able to wind it up. Our aim now is to secure an orderly exit of all 12 UDCs in England over the next three years. In that respect, the
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lessons Teamed from this first wind-up will, I am sure, prove very useful. Furthermore, my department has commissioned consultants to evaluate the impact of Leeds Development Corporation, together with the next two corporations which will be winding up. That will permit an objective, overall assessment of the corporation's efficiency and effectiveness and determine the extent to which strategic regeneration goals have been met.
The noble Lord, Lord Williams, said that there was a National Audit Office report in 1993 which was critical of UDCs. I shall read out the press notice of 25th August 1993 relating to that NAO report. It says:
"Sir John Bourn, head of the National Audit Office, told Parliament today that, overall, urban development corporations have made valuable contributions towards regenerating their areas, with significant successes, although external factors, in particular the economic downturn, have had a crucial effect on the ability of corporations to deliver their intended outputs".
The quotation from Sir John Bourn backs up what I have been putting forward in the House.
In drawing this debate to a close perhaps I may once again commend the achievements of the Leeds Development Corporation in bringing new development and economic vitality to the city. I should like to express particular gratitude to the corporation's chairman, Peter Hartley, and his fellow board members, including, as my noble friend said, the noble Baroness, Lady Lockwood, and to its chief executive, Martin Eagland, and his dedicated staff. They have undertaken their task with considerable dedication. I know that they have worked hard and successfully met the objectives that we set them.
Although the Leeds Development Corporation is coming to its end, regeneration of the city will go on. Leeds has a great deal to offer and I trust that the public and private sectors will continue working in partnership to build upon the corporation's successes. But we must now see through the process of winding up the Leeds Development Corporation. To that end, I commend this order to the House.
On Question, Motion agreed to.

Parliamentary Constituencies (Wales) Order 1995
4.40 p.m.
The Lord Advocate (Lord Rodger of Earlsferry)The Lord Advocate (Lord Rodger of Earlsferry) rose to move, That the draft order laid before the House on 15th February be approved [11th Report from the Joint Committee].
The noble and learned Lord said: My Lords, I begin by thanking the Boundary Commission for Wales for completing on time its difficult, complex and demanding task. Since the report was completed and submitted to my right honourable friend the Home Secretary the commission's Deputy Chairman, Mr. Justice Pill, has been promoted to the Court of Appeal. This means that under the terms of the Act he will no longer be able to serve as deputy chairman. I am sure

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that your Lordships will wish to join with me in paying tribute to the contribution he has made during his period in office.
The order is intended to give effect without modification to the final recommendations for new parliamentary constituencies contained in the fourth periodical report of the Boundary Commission for Wales. Article 2 of the order substitutes the 40 constituencies described in the schedule for the present 38 constituencies in Wales. The draft order has already been approved in another place and, if it is approved by your Lordships today, my right honourable friend the Home Secretary will submit it to Her Majesty in Council to be made. The order will come into operation on the fourteenth day after the day on which it is made but will not affect the existing boundaries until the first general election held thereafter.
The four parliamentary boundary commissions are constituted under the first schedule to the Parliamentary Constituencies Act 1986. Under the 1986 Act, they were required to carry out a general review of parliamentary constituency boundaries not less than 10 or more than 15 years from the date of the submission of their last report. In 1992, Parliament decided to increase the frequency of general reviews and the Boundary Commission Act 1992 provides that a general review should be carried out not less than eight or more than 12 years after the submission of the previous report.
The Boundary Commission for Scotland has also submitted its report, which will be debated by your Lordships as the next item of business. The Boundary Commission for England has not yet submitted its report to my right honourable friend the Home Secretary and I understand that it is unlikely to do so before April. Nor has the Boundary Commission for Northern Ireland yet submitted its report.
The Boundary Commission for Wales began the present review on 9th November 1993 and completed its work in December 1994. The process by which the commission arrived at its recommendations is governed by a set of rules for the redistribution of seats. Those rules are set out in Schedule 2 to the 1986 Act. The rules give the commission a wide discretion in fulfilling its statutory obligations while taking account of local ties, administrative boundaries and geographical considerations.
Inevitably, in any area considered by the commission there are a range of possible options for the drawing of parliamentary constituency boundaries. Often a compromise has to be found. Local opinion may be strongly divided, even on occasions along party political lines. During the review the commission held local inquiries in every county except Mid-Glamorgan, where only one objection to its provisional recommendations was received. Your Lordships will appreciate therefore that there has been a great deal of public consultation before the formulation of the commission's final recommendations and one has only to read the report to appreciate the care which it has taken in conducting the review.
I turn now to the recommendations. The two substantive changes to emerge from the report are the recommendations that there should be additional seats
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in Clwyd and Dyfed. These recommendations have arisen from the calculation of a theoretical entitlement of seats for each county. This theoretical entitlement is the electorate of the county at the enumeration date, divided by the electoral quota for Wales as a whole. In Clwyd that theoretical entitlement was 5.55 seats and in Dyfed it was 4.74 seats. These figures were rounded up to the nearest whole number, six and five respectively.
The commission looked very hard at alternative options that would have avoided an increase in the number of Welsh seats. One way of avoiding an increase might have been to adopt schemes which straddled county boundaries and the commission gave careful considerations to such possibilities. However, it rejected them upon an application of Rules 6 and 7 together with Rule 4. Perhaps I may remind your Lordships that Rule 4, in its application to Wales, requires that so far as is practicable county boundaries should not be crossed. Rule 5 permits a departure from the "strict application of Rule 4" in the two circumstances there specified but these do not allow the commission complete freedom to depart from Rule 4 to achieve electoral equality.
In that respect, there is an important difference between the rules as they apply to England and to Wales on the one hand and to Scotland on the other. In its application to Scotland, Rule 4 merely required that regard be had to the boundaries of local authority areas. That provided the Boundary Commission for Scotland with a good deal more freedom in drawing up constituencies.
The additional seats in Clwyd and Dyfed have necessitated substantial boundary changes in those counties. Elsewhere in Wales, the commission has recommended no change to the boundaries of 27 constituencies. Apart from the changes in Clwyd and Dyfed, therefore, the only changes recommended by the commission are to two constituencies in South Glamorgan to reflect a small change in local government ward boundaries. The commission has also recommended that the name of one constituency in Powys should be changed. Modest though these changes may be, they caused considerable local debate. The issues were fully aired at local inquiries following which the commission decided to recommend the adoption of its final recommendations.
The commission considers that, once the Local Government (Wales) Act 1994 comes into force, it may be appropriate in parts of Wales to hold interim reviews to consider possible realignments of the constituency boundaries it is now recommending. However, following consultations, it has said that it does not expect this to be appropriate before the next general election.
As I said, it is clear that the commission has approached the tasks given to it by Parliament with meticulous care and attention. That was recognised in the debate on the report in another place. Such conduct is only what we would have expected from a totally impartial body of this kind. I therefore have no hesitation in commending the commission's final recommendations to your Lordships.
Moved, That the draft order laid before the House on 15th February be approved [11th Report from the Joint Committee].—(Lord Rodger of Earlsferry.)
4.45 p.m.
Lord McIntosh of Haringey: My Lords, the House will be grateful to the noble and learned Lord the Lord Advocate for clearly setting out the details of the order. Indeed, it was helpful because in many cases he was able to use exactly the same words as his colleagues in the Commons. Therefore, I was able to read his speech before he actually made it.
We on these Benches accept the way in which the boundary commissions have been set up. We also accept the way in which the determination of constituency boundaries has been separated from government and, largely, from Parliament. Clearly, the approval of the orders is almost a formality. It is right that the commissions should be so independent and that the Government should have recommended to Parliament that the orders be accepted without modification. We certainly shall not oppose them.
However, I must point out that the orders before the House are somewhat fragile. The considerations of the boundary commission have taken place at the same time as the reorganisation of local government in Wales. As a result, Rules 4 and 5, referred to by the noble and learned Lord—which prohibit, except in exceptional circumstances, the crossing of county boundaries in setting parliamentary boundaries—refer to county boundaries which, in a very short time, will no longer exist. Therefore, we have new boundaries set for a certain number of counties in Wales—Clwyd and Dyfed are the two that I have in mind—which have been distorted to some extent by existing county boundaries which will no longer exist. That has perhaps resulted in one more seat in North Wales than might otherwise have been justified by the numbers. I can see that the noble Lord, Lord Elis-Thomas, will not be pleased with that conclusion, but that is certainly the effect of this peculiar, fragile, and short-lived boundary commission report which is before the House.
Of course, it is welcome that 27 of the seats will not be changed in any way. I do not suppose that anyone will worry about the change of the name from Montgomery to Montgomeryshire. But, even so, it seems strange that we must have such boundary commissions with that degree of formality when we all know that there will have to be interim reviews very soon. With that very minor caveat, we welcome the order.
Lord Elis-Thomas: My Lords, I have two brief questions rather than comments to put. I will not follow the noble Lord down the route of the number of constituencies in the north because, obviously, one of them—the smallest—would be the constituency I previously represented in another place. I would not want my title in this place to be affected by a change in constituency name.
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The first question that I should like to ask refers to the nature and scope of the interim review which may follow. It would be most helpful to the House if the noble and learned Lord the Lord Advocate could indicate what scope and limitation there will be on the nature of that particular review and how things might have been different. The noble and learned Lord drew attention to the different situation in Scotland. It would be helpful if he could explain a little more fully the situation in Wales.
My second point relates to a direct interest of mine; namely, the promotion of the Welsh language. Where there are two names in regular usage, I believe that from now on the boundary commission should use both the Welsh language and the English language form whenever it designates the name of a place.
Lord Swansea: My Lords, I have a brief intervention to make. I have no quarrel with the recommendations in the order. However, I believe that I detect one or two slight spelling mistakes in place names. On page 6, under the section relating to the tiny constituency of Pontypridd, "Rhydeflen" and "Rhydfelen" are both mentioned in line 6. Of course, one of those must be wrong. I suspect it is the first one. It should be Rhydfelen. Further, halfway down the same page under the heading "Cardiff Central", I believe that the name "Adamsdown" should be Adamstown; in other words it should be spelt with "t" and not a "d". Then, a little further on, under the heading "The Vale of Glamorgan", "Gibbonsdown" should read Gibbonstown. I just hope that the correct spelling will be incorporated and that those mistakes—if they are mistakes—will not be set in concrete.
Lord Rodger of Earlsferry: My Lords, one learns something every day in this House. If I may say so, my noble friend made points that I shall certainly draw to the attention of those who are responsible for setting the exact names to ensure that, when the order is made, it is made in the appropriate fashion.
I turn now to the points raised. Interim reviews and the new local government Act were mentioned. As I am sure noble Lords will recall, even when the new local government Act comes into force for Wales, the counties are preserved for the purposes of parliamentary constituencies and also for the purposes of Lords Lieutenant. The counties are not exactly the same as those which exist now, but the changes are relatively small. Therefore, although the commission could not take account of the new set up, the changes that are likely to be required by virtue of the new preserved counties will not be very large.
As regards the timing of the review, I must stress that that is a matter for the commission. As I indicated, the commission has already said that it does not envisage having such a review before the next general election. As to the scope of the review, that is also a matter for the commission. It is really up to the commission to decide what it wishes to do. Nonetheless, for the reasons I have given, it is not expected that the changes to be made will be substantial. They may be of significance to certain local populations, and so on, but I do not believe that they will be substantial.

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I noted the points made by the noble Lord, Lord Elis-Thomas, as I am sure did other noble Lords. The noble Lord is no doubt aware that much was done during the carrying out of the review by way of ensuring that people who wished to make their representations in the Welsh language had every opportunity to do so. Indeed, that is a further sign of the Government's commitment to ensure that such procedures are correct. With those observations, and sharing those made by the noble Lord, Lord McIntosh, about the need for, and the commendable independence of, such a review, I commend the order to the House.
On Question, Motion agreed to.

Parliamentary Constituencies (Scotland) Order 1995
4.58 p.m.
Lord Rodger of Earlsferry Lord Rodger of Earlsferry rose to move, That the draft order laid before the House on 15th February be approved [11th Report from the Joint Committee].
The noble and learned Lord said: My Lords, I do not know whether, on this occasion, my speech has already been previewed elsewhere, but that may very well be so. Indeed, I see that the noble Lord, Lord McIntosh, is of that view.
Lord McIntosh of Haringey: You cannot change it now!
Lord Rodger of Earlsferry: My Lords, my right honourable friend the Secretary of State for Scotland received the fourth periodical report of the Boundary Commission for Scotland on 15th December 1994. The report recommended changes to parliamentary constituency boundaries in Scotland. I wish, at the outset, to thank the commission under its deputy chairman, Lord Davidson, for all the work it undertook. Again, the commission was presented with a challenging timetable. It fulfilled the task with admirable speed.
When my right honourable friend the Secretary of State received the report, he gave careful consideration to its recommendations. He decided to lay the draft Order in Council which is before the House today without making any modification to the commission's recommendations. The order has been considered by the Joint Committee on Statutory Instruments and was approved in another place. If the draft order is approved by your Lordships today, my right honourable friend the Secretary of state will submit it to Her Majesty in Council.
The new constituencies will take effect at the next general election. Any by-election in the intervening period will not be affected by the new arrangements and will be held on the existing boundaries. Since the last review was completed in 1983, as I said a few moments ago the Boundary Commission Act 1992 has been passed. That set a deadline of 31st December 1994 for the completion of the review. The review has been completed in time. The 1992 Act also reduced the length of time between each review in Scotland from between 10 to 15 years to between eight to 12 years, as in Wales.
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This will allow general elections to be held using constituencies which are based on—as far as possible—up-to-date electorates.
The Act also had a further implication in Scotland with the commission having to consider local authority boundaries which were in place on 1st June 1994. This meant that the commission could not take into account the effects of reorganisation of local government in Scotland. The commission decided at the outset of its review that Scotland was adequately represented with 72 constituencies. It therefore did not propose to increase the number of seats. As is required by statute, the commission calculated that the electoral quota for Scotland for the purposes of the review was 54,569. That was a total electorate in Scotland on 16th February 1992—the date the commission gave notice of its intention to proceed—divided by the current number of constituencies.
To maintain separate constituencies for the islands areas and also to retain Scotland's representation of 72 constituencies with constituencies of roughly equal electorates, the commission decided to cross regional boundaries. The commission decided to pair Lothian and Border regions together and Central and Tayside regions together. To ensure full consideration was given to all the commission's proposals, in mainland Scotland local inquiries were held in each region, or combination of regions, and with one exception they were all conducted by sheriffs principal who were appointed by the Secretary of State. Most of the recommendations made by the assistant commissioners were accepted by the commission.
Much criticism has been directed at the commission's decision to use regional electoral divisions as its building blocks for the constituencies. In its report the commission explains that these were the only up-to-date electoral arrangements available to it. The commission declined to use a mixture of the old district wards and the new electoral divisions as these could not be used universally because they often did not fit with one another. The commission has recommended a reduction of one parliamentary constituency in Strathclyde and an increase of one in Grampian. A reduction has taken place in the City of Glasgow owing to the decline in the electorate there.
I am glad that the commission has recognised that the existing range in electorate is wholly unacceptable. Discounting for the time being the islands areas—the commission correctly considers that there are strong geographical reasons why they should be considered separately—the electorates range from 84,000 in Gordon to just over 31,000 in Caithness and Sutherland constituency. Under the proposals recommended by the commission this range of electorate has been reduced to between 67,000 and 42,000. The commission's recommendations will also mean that 69 per cent. of the constituencies, compared with 42 per cent. at present, will fall within 10 per cent. of the 1992 electoral quota. Some people have said that too much emphasis has been placed on numbers. However, had the commission paid more attention to numbers, the range in the electorate would have been even closer.

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As with all reviews of this nature, criticisms will always be made. We must acknowledge, however, the difficulty faced by the commission in applying the rules for redistribution of seats which contain sometimes conflicting requirements. Under the current statute the commission is able, should it so wish, to undertake interim reviews. I am sure that the commission will give some thought to the contrast which will arise between the recommended constituencies and the new local authority councils. A decision on whether or not to conduct any future interim review is, however, a matter for the commission. The boundary commission is an independent body which has conducted its review with full public consultation. For this reason I commend the draft Order in Council to your Lordships. I beg to move.
Moved, That the draft order laid before the House on 15th February be approved [11th Report from the Joint Committee].—(Lord Rodger of Earlsferry.)
Lord McIntosh of Haringey: My Lords, the noble and learned Lord the Lord Advocate has fallen straight into my trap. He did not repeat the speech made in another place. Instead he is guilty of what Fowler's Modern English Usage calls elegant variation. He cannot win whatever he does. As with the previous order, we commend the arrangements whereby the independence of the boundary commissions is secure. As I should have done in relation to the previous order, we congratulate the boundary commissions for both Wales and Scotland on the way they have carried out their work which has met with widespread approval from those particularly in another place who are most concerned with the recommendations.
But, again, the position in Scotland is that we have an order which will be shortlived. It will apply for the next election but it is most unlikely to apply without modification for any further election. The noble and learned Lord the Lord Advocate told the House that the Boundary Commission for Scotland had greater freedom with regard to crossing boundaries than the boundary commissions for England and Wales. But although it has taken the opportunity to cross regional boundaries in two cases by combining Lothian and Borders on the one hand and Central and Tayside on the other, it has taken the decision—which it need not have taken—to stick to regional electoral divisions. That may not matter too much in most of Scotland where the electoral divisions are relatively small—say 3,000 or 4,000—but in Strathclyde, for reasons that I do not fully understand (although I am sure my noble friends on the Front Bench understand them very well) these divisions are very large. Often they comprise 17,000 or 18,000. That certainly has led to anomalies. It has led to a particular anomaly as between Carrick, Cumnock and Doon Valley on the one hand and Ayr on the other hand. The Carrick, Cumnock and Doon Valley constituency, which is 10 times the size in area of the Ayr constituency, also has a very much larger electorate because the electoral district next to Ayr, which includes Alloway, is so large at 17,000 that if it were transferred to Ayr from the other constituency the imbalance in population would be even
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greater. The boundary commission did not feel that it was able to take Alloway away from the rest of that electoral division.
Therefore, there are anomalies still in the way these matters are considered. Of course, as with Wales, the ongoing reform—if that is the right word—of local government in Scotland will affect regional boundaries and boundaries of individual districts and will make it necessary to have the interim orders which the noble and learned Lord referred to in his speech. But, again, as regards the principle of these orders and as regards the independence with which the boundary commission has carried out its duties, we have no quarrel.
The Earl of Balfour: My Lords, I hope I may be permitted to ask my noble and learned friend one question. Assuming that this order in respect of Scotland is accepted, will the boundaries be on an Ordnance Survey map of the area? That is quite important to people who are trying to find out exactly where the boundaries lie. I know they appeared in the much older maps. I am perhaps asking an unfair question, not having given my noble and learned friend any notice of this, but I would like to have an answer at some time.
Lord Rodger of Earlsferry: My Lords, I do not think I can say that my noble friend's question is unfair. It is challenging and it is not one I can answer. I just do not know whether it is the intention to put the boundaries on the Ordnance Survey. I shall certainly find out and write to my noble friend while taking this opportunity to say that I am sure all noble Lords are happy to see him back in his place after his recent illness.
The noble Lord, Lord McIntosh, while welcoming the order, made points again about the particular problems which arise. I acknowledge that in particular in Scotland, with its regional electoral divisions, there have been anomalies. Indeed, as he knows, there were two judicial reviews brought, one arising out of Ayr in particular. But in the end the decision of the boundary commission was upheld. I think it recognises that the solutions are not ideal, but they partly arose because the local government boundary commission had not yet finished its work on the district wards. For that reason in future it will be open to the boundary commission to undertake further interim reviews of such scope as it considers appropriate. In the meantime, I commend the order to the House.
On Question, Motion agreed to.

Civil Evidence (Family Mediation) (Scotland) Bill [H.L.]
5.9 p.m.
Baroness Carnegy of Lour: My Lords, I beg to move that this Bill be now read a third time.
This is a small Bill with a single, limited purpose. At the same time, in order to scrutinise the Bill properly and to get it right, it has been necessary to take some account of the wider context in which the Bill is set—

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how family mediation is practised in Scotland and how the courts operate in Scotland when dealing with the civil cases to which the Bill relates.
Because the Bill is important to the success of family mediation and because, sadly, as noble Lords have said, family mediation is increasingly important to many people, and notably to their children, it has been most encouraging that during our discussions the Bill has received support from all sides of this House, including the Cross Benches. The Government have been extremely helpful and supportive by making available the expertise of officials and parliamentary draftsmen, and, of course, in what Ministers themselves have said from the Dispatch Box.
I should like to place on record my appreciation of the contributions made by many people, both inside and outside this House, during the passage of the Bill. I am grateful to the Law Society of Scotland for its advice and support for the Bill; to the Comprehensive Accredited Lawyer Mediators (CALM) for the thoughtful, helpful and co-operative way they have contributed their experience and wise thinking which has led to useful amendments to the Bill; to Dr. Eric Clive of the Scottish Law Commission for his expert help in suggesting amendments; and to the Lord President of the Court of Session for his advice. I am sure that we all look forward to the introduction of the Lord President as a Life Peer in this House tomorrow.
I am also extremely grateful to noble Lords who have spoken so helpfully and constructively in our debates. From the Labour Front Bench the noble Lord, Lord Macaulay, with his usual skill and thoughtfulness, raised important points which have led to significant amendments to the Bill. From the Liberal Democrat Front Bench the noble Earl, Lord Mar and Kellie, has brought his supportive and professional social work experience to bear in a most useful way. The noble and learned Lord, Lord McCluskey, from his long experience as a High Court judge, in commending the Bill, pointed out a desirable improvement that might be made. The noble and learned Lord the Lord Advocate was subsequently able to respond with amendments which the House accepted on Report. The noble and learned Lord, Lord Simon of Glaisdale, who I am delighted to see is again in his place, has taken a close interest in our proceedings and has written to me about one point. My noble friend and neighbour, Lord Lyell, has given support with characteristic enthusiasm, for which I am grateful.
Above all, I am grateful to my noble and learned friends the Lord Advocate and Lord Fraser of Carmyllie for the work they have put in on the Bill, and to the officials of the Scottish Courts Administration and the Scottish Home and Health Department who have given generously of their skill and expertise and shown great patience and tolerance in so doing.
Last but by no means least, I pay tribute to Family Mediation Scotland, and notably to its director Susan Matheson, who is my principal adviser on the Bill and has done her best to assist other noble Lords who have asked for advice. Being a voluntary organisation, Family Mediation Scotland has limited resources at its disposal but its expertise and professionalism are of the highest
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quality. That, coupled with copious energy and dedication, has made it possible for me to steer the Bill thus far. I pay tribute to all concerned in Family Mediation Scotland.
During its passage through this House we have amended the Bill in a number of important ways and, I believe, have improved it considerably so that it is now a workable piece of legislation within which mediators, with small adjustments to their present practice, will be able to work more successfully than ever before and with even more fruitful outcomes for their clients in Scotland.
I hope that your Lordships will give the Bill a Third Reading and a fair wind to continuing all-party support in the other place. I commend the Bill to the House.
Moved, That the Bill be now read a third time.—(Baroness Carnegy of Lour.)
5.15 p.m.
Lord Simon of Glaisdale: My Lords, the noble Baroness, Lady Carnegy, periodically makes forays over the Border, and the noble and learned Lord the Lord Advocate, to general acclaim, carried through the Local Government (Wales) Bill. Flushed with that success, he has today carried through a measure of Welsh law. Despite that fact I am conscious that any contribution by English lawyers on matters of Scots law are rarely received with enthusiasm. I intervene at this stage to make three short points, and I do so early so that anything that I say which is incorrect may be corrected by the famous Scots lawyers who are present in your Lordships' Chamber.
My first point concerns a matter of general agreement, namely to congratulate the noble Baroness on having carried through this Bill. In England we have the same problem, namely the confidentiality of statements made during the course of marriage conciliation. My predecessor in office set up a small body of welfare officers founded on the probation service to assist in family conciliation, particularly as regards children. During my time that was extended because the various marriage guidance agencies were prepared to help. The National Marriage Guidance Council (now called Relate), the similar Roman Catholic body and the Jewish Marriage Council were all agreed that, if their work was to proceed, it was essential that it should be undertaken under the cover of confidentiality. Otherwise, parties would simply not be prepared to make candid statements to the person engaged in helping them. That is the problem that faced the noble Baroness.
In England we managed to proceed by judge-made law. I believe that in this branch of the law that is generally preferable. The judge-made law made it plain that statements made in the course of marriage conciliation would be privileged and would not be disclosed in subsequent proceedings. Although I have preference for judge-made law in this regard, I wholly agree with the recommendation of the Scottish Law Commission that in this case it was essential to have legislation. That is because judge-made law can proceed only when the suitable case comes up. It was impossible

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to wait for that in the sphere which this Bill covers. I entirely agree that that was the right way to proceed; and I congratulate the noble Baroness.
I wish to mention a matter that I raised with the noble Baroness. She sent my second letter (she having thrown the first into the wastepaper basket) to the noble and learned Lord the Lord Advocate. He promptly answered it, and I am grateful. He will forgive me if I say that I am not sure that I entirely agree, for this reason. It is a question of retrospection. The issue was raised at Committee stage. It seems to me important that this veil of confidentiality should be drawn over conciliation whenever it takes place.
The normal English law—I do not know whether it is the same in Scotland; I believe that it is—regarding construing statutes is that where a provision affects substantive law, there is a presumption against it being retrospective; but when it affects procedural law, there is a presumption that it is retrospective. Matters of evidence generally, and certainly in this case, are considered as matters of procedure. I believe that it is desirable that the Bill should be retrospective.
In his letter, the noble and learned Lord the Lord Advocate pointed out a complication. When I wrote to the noble Baroness I suggested that the point should be dealt with expressly on the face of the Bill. I do not now believe that that is desirable. I believe that the Bill should go through the other place on the nod. I apprehend that, if it does not do so, it would have great difficulty in being carried into law this Session. I merely ask the noble and learned Lord the Lord Advocate to keep open the possibility of argument for retrospection if I am right in thinking that that is desirable.
The last point that I wish to make arises from a remark by my noble and learned friend Lord McCluskey at Committee stage. He hoped that the system of mediation would be carried beyond the matrimonial law into the general civil law. I strongly agree with that. It seems to me highly desirable that no one should be embroiled in litigation if mediation, counselling, can avoid the conflict.
As for conciliation in matrimonial affairs, there have been overwhelming arguments in favour of a family court. That was suggested as long ago as the 1950s in evidence to the Morton Royal Commission on Marriage and Divorce. It has been taken up repeatedly ever since by persons of the highest authority. For example, the Law Society Family Law Committee has endorsed it. The only department which I know is opposed to it is the Lord Chancellor's Department. I venture once again to urge the value of a family court. In particular, I envisage that it should have two sides: a welfare side and a judicial side, rather like the Conseil d'Etat in France. The welfare side would have a conciliation department; and only after conciliation and counselling have failed would the matter go for resolution by the judge himself.
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With those suggestions, I end as I began by congratulating the noble Baroness on having carried this far what I regard as an important and valuable measure.
Lord Macaulay of Bragar: My Lords, I join with the noble and learned Lord, Lord Simon of Glaisdale, in extending congratulations from this side of the Chamber to the noble Baroness for the work that she has done in this difficult area of society. The noble and learned Lord has put many propositions before your Lordships' House. I am sure that when we have an opportunity to study them in greater depth noble Lords will find them fascinating. Indeed, perhaps some government departments may even find them fascinating. If I may say so, he certainly raised some interesting matters.
However, as I understand it, the essence of the Bill is simplicity. I would hope that simplicity will be the keynote of family mediation. The noble and learned Lord raised issues which seem to have been matters of correspondence between himself, the noble and learned Lord the Lord Advocate and the noble Baroness to which I have not been privy. Therefore I do not choose to trespass on that ground. No doubt the noble and learned Lord, Lord Rodger of Earlsferry, will deal with those matters when he speaks.
I congratulate the noble Baroness not only on introducing this important socio-legal Bill but also on guiding it through the House with considerable negotiating and presentational skill. I do not wish this to become a mutual admiration society, but I am grateful to her for the kind remarks she made about my contributions to the Bill as it progressed through your Lordships' House. I entirely agree with her that it is a small Bill, but it has large implications. It is hoped that in operation it will bring a civilising influence into an area of life which was, and perhaps still is, associated with animosity and antagonism between parties. Very often the children were the victims while the parties fought their own battles.
During the passage of the Bill reservations have been expressed about certain areas. I know that those have been considered. While the final shape of the Bill will be subject to further scrutiny—for example, in relation to the child under Clause 2 of the Bill—I agree with the noble Baroness that, as amended, it is a practical Bill. It gives a statutory foundation upon which the people involved in the mediation process can operate. I am sure that the agencies to which the noble Baroness referred will be grateful to your Lordships' House. We hope that the Bill will receive the same consideration in another place.
As is the custom and practice in your Lordships' House, we hope that the Bill has benefited from the scrutiny to which it has been subjected. Once the Bill is brought into operation, its practical functioning will be the real test. Any serious defect which comes to light may be considered in the context of the Children (Scotland) Bill when that legislation comes from another place to your Lordships' House.
The relevance of the proceedings to criminal proceedings is a matter which I raised. Perhaps I sounded a little tedious, but I wanted the point clarified. That has now been done without shadow of doubt, with

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the result that the form which persons attending mediation signed beforehand and which stated that all matters which had passed during the mediation would he confidential, will be altered. Thus the parties coming into the mediation process will know that any matters which arise can be admitted in criminal proceedings. It is to be hoped that, if family mediation means anything and is successful, the number of cases to which the point may apply will be few.
The Bill is a good example of non-controversial, purely Scottish legislation which, with co-operation and common sense all round, has been seen through your Lordships' House without undue delay after its introduction. The noble Baroness indicated that she is somewhat intimidated when intervening on Bills of a basically legal content. However, the resolution which she has shown indicates that she need no longer fear lawyers and as time goes on it may be the lawyers will have to fear her. With that concluding remark, I repeat my congratulations to the noble Baroness on the work she has done.
5.30 p.m.
The Earl of Mar and Kellie: My Lords, I join other noble Lords in continuing to support the Bill and in thanking the noble Baroness, Lady Carnegy, for the vigour, energy and enthusiasm with which she introduced it, encouraging us all within and outside the Chamber. I also wish to express my thanks to Susan Matheson, the director of Family Mediation Scotland, for her help and encouragement.
The Bill makes a useful contribution to the social work task of converting the sad area of failed adult relationships and broken homes into the possibility of continuing family life within estrangement. The contribution of the Bill, when enacted, can be characterised in this way. First, I believe that there will be more joint minutes of agreement presented in the divorce courts, both before the sheriff and before the Court of Session. Secondly, I believe that the process will enable separating couples to make workable agreements, workable arrangements for the care of their children in the future and help them become effective parents in estrangement rather than bickering adults. I commend the Bill, not only here but in its passage through another place.
Lord Rodger of Earlsferry: My Lords, I too support my noble friend Lady Carnegy in her Bill. I join other noble Lords in congratulating her on the tact and skill which she has shown in dealing with the various issues which have arisen during discussions in your Lordships' House.
The Bill is relatively straightforward in principle but points were made in our debates which were not without difficulty. As a result of them being raised, the Bill has been greatly improved, but they were not altogether straightforward to resolve. We are grateful to the noble Baroness for all she did to ensure that the difficulties were resolved.
Many people outside this House who helped with the Bill have been mentioned. I concur in thanking them and express particular appreciation to Dr. Eric Clive of
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the Scottish Law Commission, who was helpful in resolving some points raised at short notice. His knowledge of the area of family law was invaluable. Like others, I thank all those who contributed to the work on the Bill, in particular the noble and learned Lord, Lord McCluskey, the noble Lord, Lord Macaulay, and the noble Earl, Lord Mar and Kellie. In their own ways, they all brought their experience to bear.
Today the noble and learned Lord, Lord Simon, intervened and, far from that being unwelcome, it is always good to hear him. At the weekend it happened that I was reading one of his most distinguished contributions to Scots law on an appeal some years ago on a matter of assythment. He referred to the "legal Briinnhilde" of assythment in Scotland —a very elegant way of putting it. He has intervened to effect in Scots law in the past. He made several points today and I am sure we all agree that, whatever the scope for judge-made law, it was an area in which legislation was required.
The noble and learned Lord raised a question with my noble friend Lady Carnegy as to the precise scope for retrospection in relation to the Bill. For the reasons I gave in correspondence with him, we envisage that it would be best to apply the Bill so that it comes into effect on cases where the evidence is heard after the date of commencement but not those where the evidence has been partly heard, because that could lead to injustice. Subject to that, we are anxious for the legislation to come into force as quickly as possible.
The noble and learned Lord, Lord Simon, also mentioned the general principle that mediation and informal resolution are better than litigation. I am sure that noble Lords agree and there are now facilities for alternative dispute resolution which we hope will lead to such matters being resolved. The noble and learned Lord particularly referred to the role of the family courts. In Scotland, the sheriff court has traditionally been thought of as the best way of dealing with the matters. There are problems over jurisdiction in Scotland, where the smaller population makes it more difficult to have a family court. However, the points which he made will certainly have been noted by us and also by others because his experience in family law is unrivalled. The points made in that connection may arise in relation to the Children (Scotland) Bill.
Finally, it is hoped that the Bill will contribute to strengthening the whole system of mediation. In that spirit, I, like others, hope that the Bill will commend itself to those who deal with it in another place.
Baroness Carnegy of Lour: My Lords, I thank all those who have contributed to the short debate and particularly the noble and learned Lord, Lord Simon of Glaisdale. Having listened to us at some length, he at last spoke and we were extremely interested in what he said. Some of it I shall only understand when I read it—if then. I am glad that he agrees with the Scottish Law Commission that in this instance there is no time to wait for judge-made law and that it is right to intervene with legislation for Scotland.

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As regards retrospection, I am sure that my noble and learned friend the Lord Advocate will bear what the noble and learned Lord said in mind when, in due time, he makes the order for the commencement of the Bill.
The noble Lord, Lord Macaulay, revealed to me that I had omitted to let him see the letter from the noble and learned Lord, Lord Simon. I thought I had done so and apologise to him. If he would like to see the letter retrospectively, I should be only too glad to provide a copy! The first copy disappeared—I know not where. The noble and learned Lord, Lord Simon, forgave me and sent another. He suspects the wastepaper basket, but I am not sure.
The noble Lord, Lord Macaulay, has been anxious about the position of the child right through the proceedings on the Bill. I am sure that he and all of us in the House—certainly myself—will pay careful attention when we take the Children (Scotland) Bill through its stages, to ascertain whether the necessary cross references to this Bill have to be made.
I simply say to the noble Lord that the day when lawyers do not intimidate me has not yet arrived. It may come one day, but I find it rather an alarming business when we get into the deep arguments in which we often engage in this House and in which we have been involved in relation to this Bill. I thank the noble Earl, Lord Mar and Kellie, for his kind remarks.
The noble and learned Lord the Lord Advocate responded in part to the noble and learned Lord, Lord Simon of Glaisdale. It will be interesting to see, as the Bill proceeds, and as the Children (Scotland) Bill proceeds, how he can take account of the noble and learned Lord's remarks. I thank all noble Lords for their kind remarks. I commend this Bill to the House.
On Question, Bill read a third time, and passed, and sent to the Commons.

Insurance Companies (Reserves) Bill
5.41 p.m.
The Earl of Northesk: My Lords, I beg to move that this Bill be now read a second time.
On 6th March, the Insurance Companies (Reserves) Bill was read in this House for the first time, having been passed by the other place. The Bill seeks to amend the law relating to insurance companies, in particular the Insurance Companies Act 1982. The main purpose of the Bill is to confer power on the Secretary of State to make regulations requiring the maintenance of reserves by insurance companies.
It is an indication of how desirable this measure is that it is supported by all the main parties, as well as the industry itself. It is worth noting particularly the very great depth of consultation between the Association of British Insurers, the DTI, the Government Actuary's Department and the Inland Revenue that prefaced the matter being brought before Parliament.
Although the Bill is short—it comprises only three clauses—it is highly technical. That said, this should not be allowed to obscure its importance and the very
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considerable and beneficial impact that it will have on the prudent regulation and international competitiveness of the UK insurance industry.
Before embarking on a detailed explanation of the Bill's clauses, it may be helpful to the House if I indicate the areas of the insurance industry where these regulations will not have effect. First, the Bill will not impact upon the operation of Lloyd's; nor will the scheme apply to or have any effect upon insurance brokers or other insurance intermediaries. Equally, those areas of the market that are non-volatile—for example, health and motor insurance—will not be subject to the regulations. The reality is that claims equalisation reserves would not, in fact, have any impact upon claims management of such business on the basis that the judgment as to the likely exposure to claims pay-out in any given accounting period is a relatively predictable discipline. Therefore there is no requirement to set aside any additional contingent reserves in expectation of a random and unexpected increase in exposure.
Indeed, this factor lies at the heart of the perceived requirement for equalisation reserves. The July 1993 consultative document envisaged that any CER scheme should apply to,
"certain types of particularly volatile non-life insurance business … [where] the requirement should be focused on high risk/high reward lines where the profitability of the underwriting is dependent on the random incidence of infrequently occurring events".
Such classes of business have an inherent instability. Unpredictable tragedies and events create sudden and substantial claims within the industry. For example; the dreadful storms of 1987 and 1990 in the south east resulted in property damage claims of £1.4 billion sterling and £2.4 billion sterling respectively over and above and beyond the normal cycle of experience for this class of business. Thus, there is a strong argument in favour of limiting the impact of this volatility by introducing mechanisms whereby the insurance industry can impose as much stability as possible upon its management of catastrophe risk and claims. This is the purpose of equalisation reserves; namely, to equalise the level of risk and claims exposure over the perceived cycle of the class of business.
I turn now to a detailed examination of the clauses in the Bill. Clause 1(1) is its main provision. It inserts the new Section 34A in Part II of the Insurance Companies Act 1982, which contains various provisions relating to the regulation of insurance companies, and is particularly concerned with various continuing financial obligations of insurers. Subsection (1) of Section 34A confers, and defines the scope of, the power of the Secretary of State to make regulations in respect of equalisation reserves.
It is important here to recognise that the phrase "general business" is specifically defined in Section 1(1) of the 1982 Act and, for the purposes of interpretation, can be assumed to be "non-life" business. The intention is to ensure that those certain types of general business that display the characteristics of volatility for which equalisation reserves are appropriate can be subject to the regulations.

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The Bill does not contain any express rules for determining how such regulations may be made, although subsection (4) of Section 34A defines their anticipated structure in broad terms. This is entirely consistent, in so far as Section 97 of the 1982 Act already confers power on the Secretary of State to make regulations for any purpose for which regulations are authorised or required to be made under that Act. In this context, my understanding is that the consultative process entered into by the DTI on this is ongoing and it is likely to be in a position to present its proposed regulatory framework in the near future.
By way of explanation, it is envisaged that general business insurers will be required to place a proportion of their premium income, the amounts being varied according to type, in the described business to a non-distributable equalisation reserve. A maximum size of the reserve will also be prescribed. Amounts will he required to be taken from reserves according to a prescribed trigger related to exceptional claims. It should also be noted that the regulations will make appropriate provision for special circumstances, such as where insurers transfer or cease writing business.
Nor does the Bill make express provision for penalties for non-compliance with Section 34A. Again, this matter is adequately covered by the 1982 Act, Section 71 of which will automatically apply in cases of default.
Subsection (2) of Section 34A describes in, as it were, a geographical sense the insurance companies to which Section 34A applies. Essentially, as defined in Section 15 of the 1982 Act, the intention is to include all insurance companies which are subject to the requirement to obtain authorisation and which are subject to supervision in the United Kingdom.
It is possible that equalisation reserves may be inappropriate for certain descriptions of insurance company, notwithstanding that they may qualify for the regulation by virtue of subsection (2) of Section 34A, and that therefore facility for such companies to be excluded from the scheme be allowed for in the regulations. This is the purpose of subsection (3) of Section 34A.
Clause 1(2) of the Bill inserts in Section 32 of the 1982 Act a new subsection (7), the purpose of which is to require insurance companies to treat their equalisation reserves as a liability for the purposes of calculating their margin of solvency.
The primary purpose of Clause 2 is to enable the Secretary of State to provide in regulations that Section 68 of the 1982 Act should apply to Section 34A. Section 68 allows the Secretary of State to ensure that the suitability and appropriateness of regulations and obligations imposed on individual companies by virtue of the 1982 Act can be assessed on a case-by-case basis. I should stress that, at this stage, no clear need for Section 68 to apply to Section 34A has been established—hence the provisions of subsection (2) ensuring that it does not apply automatically —but it remains important to ensure that the Secretary of State is in a position to respond positively should such a need arise.
Clause 3 concerns the Short Title of the Bill together with its commencement and extent.
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Noble Lords will be aware that the Bill has a European dimension. Few would question the enormous importance of the insurance industry to the nation. Despite some of its recent difficulties, it continues to be one of the UK's greatest assets, making substantial contributions to the economy in terms of employment (some 60,000 jobs in London) and invisible earnings (some £4.6 billion sterling in 1993). Here, I cannot resist the opportunity to celebrate the very welcome balance of trade figures published last week. It is therefore salutary to reflect that that performance has been achieved against a background of competitive disadvantage with a number of our European partners.
As your Lordships will be aware, the Insurance Division of the DTI is the regulatory and supervisory body of the UK insurance industry. The main statutory authority for its work is the 1982 Act. However, there is also an extensive history of insurance directives emanating from the Commission and being implemented by member states. The primary aim, effectively sealed by the implementation of the third non-life directive in July last year, has been of harmonising the regulation of insurance companies and the introduction of home state supervision, thus facilitating the development of the single market in insurance throughout Europe. Further harmonisation is anticipated from such measures as the insurance accounts directive, which is intended to take effect from the current financial year onwards.
However, it is generally accepted that the UK insurance industry cannot compete on an equal footing with many of its European counterparts, notably France and Germany, because of the availability of equalisation reserves in such countries. As the DTI/Inland Revenue consultation document observed in that context:
"for a variety of reasons there has been a decline in the UK share of world insurance markets. It is often argued that this decline will accelerate as the single European market in insurance grows in importance".
Thus, since 1989, over 60 UK and foreign-owned companies have ceased writing business in London, contributing to the loss of some 10,000 jobs in the industry. That has occurred during a period of increasing competition and a run of natural disasters—for instance, the Piper Alpha tragedy, Hurricane Andrew and the storms of 1987 and 1990, to which I have already referred.
Recent results demonstrate a welcome recovery—again, I sing the praises of last week's trade figures—but there can be no doubt that equalisation reserves can play a very important part in further improving the UK industry's European and international competitiveness.
In this context I venture to suggest that, whatever the state of the current debate about Europe and wherever individuals may wish to place themselves on the Europhile/Eurosceptic divide, there appears to be a consensus that Europe should be a free trade area. Thus, I see no inconsistency at all in seeking as a matter of priority and urgency to put our non-life industry on a more equal footing with those of other member states. Indeed, I would further argue that it is entirely prudent and desirable that we should seek so to do.

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That leads me to a secondary plank of the Bill. It was said in another place that, however sensible its provisions are, implementation of the scheme will be meaningless unless it is accompanied by a corresponding accommodation with respect to the tax treatment of the equalisation reserves. The competitive advantage of other nations' insurance companies is as much a function of the tax relief allowed against their reserves as of the schemes themselves. In that context, my right honourable friend Stephen Dorrell, when Financial Secretary to the Treasury, observed:
"Given the overall fiscal position, I am clear that it would not be appropriate for the Exchequer to suffer a net cost from the introduction of such a scheme".
In fact, implementation of an equalisation reserves scheme would be broadly neutral, except in so far as payment of tax on sums transferred into reserves would be deferred until such time as they were transferred out. In effect, the amount of tax due will not change but its payment will be spread over a longer period. Viewed from a more sanguine perspective, there is a mitigating principle of prudence that argues in favour of tax relief for reserves.
I have already alluded to the impact that the equalisation reserves scheme will have on the UK industry's ability to compete more effectively in Europe. But over and above that, there exists the clear benefit of giving considerable additional comfort both to regulators and to policy holders as to the underlying financial and commercial security and health of the companies concerned. Pursuing the logic of that a little further, it is entirely possible, if not very likely, that those UK companies which are subject to the proposed regulations will be very much better placed to expand their business. Given the considerable expertise that exists in this country, it is churlish to imagine that the industry would not be able to respond positively to that challenge. Increased turnover implies improved profits, which in turn would generate more revenue for the Exchequer.
I am mindful that the Treasury prefers to think in terms of certainties rather than such speculative postulations. Nonetheless, it is my understanding that Treasury Ministers have given an undertaking to consider tax relief for a suitable scheme. DTI and Revenue officials have been working together to that end. Proposals for a scheme of tax relief which the Government might be minded to implement will be included in the consultation document which is due for publication in the spring.
I am equally conscious of the concerns of many noble Lords with respect to delegated powers—notably the concerns of the noble Lord, Lord Peston. I would not seek to dissuade the noble Lord from his deeply held convictions on this matter; but there are some broad principles underlying the regulation of the insurance industry which may be instructive in this context.
As I have already explained, the 1982 Act confers a number of regulation-making powers on the Secretary of State. In that sense, a body of delegated legislation already exists in this area. It is entirely appropriate that the purposes of the Bill should be consistent with
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existing procedures. Indeed, Section 97 of the Act prescribes the use of the negative resolution procedure as the means for effecting regulations made under its existing powers. It is also worth noting that equalisation reserves are necessarily complex and technical instruments, requiring considerable flexibility in the light of changing circumstances and experience. Because of that, a considerable amount of time-consuming consultation is required to draft workable regulations. It is for those reasons that the negative resolution procedure is deemed appropriate.
My explanation of the Bill thus far has been entirely enthusiastic. That said, I am not blind to a need for some minor consequential amendments. Therefore, I should like to give your Lordships advance notice that I shall propose amendments to the Bill in Committee. It occurs to me that a requirement exists, as it were, to broaden the scope of the reporting arrangements in Companies Act accounts. At present the Companies Act only refers to credit equalisation reserves. In my view, it will also need to refer to any equalisation reserves required by this Bill.
Finally, although I have touched on a number of these points already, I should like to consider in a little more depth the potential benefits which will accrue from the Bill being enacted. Let us first consider the consumer. It is the general perception of the industry that those classes of business which are anticipated to be subject to regulation have in the past, because of their volatility, exposed policy holders to knee-jerk price reactions arising from sudden increases in claims exposure. For example, home building premiums increased by some 50 per cent. between 1989 and 1993, principally, although not exclusively, because of the high incidence of claims arising from the windstorms of 1987 and 1990. However, many households are now experiencing level or reduced premiums. Equalisation reserves will considerably assist insurers to smooth the impact of such random peaks of claims experience, thereby enabling them to pass that on to the consumer in the form of very much more consistent pricing of premiums and, by extension, increased price stability should have the eventual benefit of making policy premiums more affordable.
What of the industry itself? I have already mentioned the benefits of increased competitiveness, particularly in the single market, and a potential upturn in general business capacity. Such effects are very welcome, the more so if they contribute favourably to maintaining the UK's special status in the global insurance market. Perhaps more importantly, equalisation reserves attracting tax relief will enable insurance companies to manage and administer their capital more efficiently. Additionally, they will add to a company's solvency and availability of capital to underwrite risk. In an industry so reliant on public and market confidence in its financial health and well-being, that is of crucial importance. In this context, as I have already intimated, the prudential aspects of the Bill are paramount and will make a major contribution to the protection of the policy holder, thereby greatly improving the reputation of the UK industry globally.

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In conclusion, the thrust of the Bill is to achieve two worthy objectives: first, to make the regulatory supervision of volatile non-life business more prudential; and, secondly, to confer competitive equality upon UK insurance companies in the single market. With that in mind I commend the Bill to the House and hope that your Lordships will be content to give it a Second Reading.
Moved, That the Bill be now read a second time.—(The Earl of Northesk.)
6 p.m.
Lord Ezra: My Lords, the House will be indebted to the noble Earl, Lord Northesk, for the comprehensive way in which he introduced this Second Reading. The purpose of the Bill (which, although very technical, is very simple), is, as he explained, to introduce a scheme for the equalisation of reserves for the non-life business of insurance companies, particularly in relation to insurance claims arising out of catastrophes. It is not hard to think of the sort of catastrophes that may arise, because there have been so many in the recent past. We had the Piper Alpha catastrophe in the North Sea in 1988; the European storms in 1987 and 1990, to which the noble Earl referred, and the various hurricanes in the United States and elsewhere. It would seem obvious, therefore, that something needs to be done to build up reserves to meet that sort of situation. That in itself is sufficient justification for the Bill.
A further justification relates to what is happening on the Continent of Europe. As the noble Earl clearly stated, these arrangements apply to our main competitors, particularly in Germany and France. If we are to compete with them, then clearly we ought to be observing the same broad rules so long as they appear to be justifiable, which I believe them to be in this case.
I am a great believer in smoothing-out operations. If we had been able to work out a way in which we could smooth out the ebbs and flows of booms and busts, I am sure that we should all be much better off. For one thing, the level of unemployment would be much lower. That may be more difficult to achieve than the limited objectives of the present Bill, but, where we can carry out smoothing operations and where, from the fiscal point of view, that can have a neutral impact, then we should do so.
The fiscal aspect is of great importance. It is not mentioned in the Bill, but the understanding is that, when within the next few weeks the Government release their consultative document, they will lay down the basis on which the regulations will be framed and that will include the fiscal aspects. Clearly this scheme could only work if there was a fiscal benefit to the insurers to set up the fund which will be offset when the reserves are drawn out.
We from these Benches support the Bill for three reasons. First, it would give the insurers greater stability of earnings and thereby help them to promote and extend their business and make them more competitive. Secondly, it would lead to greater stability of premiums for the insured. After the storms of 1987 and 1990 particularly in this country, premiums went up to a high
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level and subsequently subsided. That volatility of premiums is to the disadvantage of those who take out insurance and to some degree it may be avoided. Finally, from the Treasury's and the taxpayers' point of view, it could lead to a smoothing out of tax receipts and, let us hope, to some increase in overall receipts if the regime expands the amount of insurance business. We therefore support the Bill.
6.5 p.m.
Lord Peston: My Lords, I too support the Bill and thank the noble Earl, Lord Northesk, for introducing it. I made the mistake of looking at the Bill too closely. I feel that I would be better off if I had preserved my original ignorance of the subject. However, having become involved in certain matters, I feel that I must continue.
I agree with the noble Earl regarding the importance of the UK insurance industry. It follows, a fortiori, that we must make sure that in a single market the industry can compete effectively with industries from other countries. However, I shall not follow the noble Earl—not out of any discourtesy—on the subject of the balance of payments. I agree as to the contribution that the industry makes to the balance of payments. If by chance the noble Earl should venture into your Lordships' Chamber on Wednesday afternoon, he may hear me offer a correct interpretation of the figures that the Government announced last week.
The purpose of the Bill is to deal with insurance companies' non-life business. It concerns the UK insurance industry. One of my puzzles, and perhaps either the Minister replying or the noble Earl himself may resolve it, relates to what constitutes the UK industry for this purpose. The philosophy behind the Bill would appear to mean the industry as owned and operated in this country. One of my difficulties is that, when reading the Bill, I wonder whether that is in fact the case, or whether it is the case that non-British businesses may gain from the provisions simply because of their location in London and their being subject to UK regulation.
Perhaps I can say in my usual acerbic way, en passant, that subsection (3) of the new Section 34A, to which the noble Earl referred, is completely incomprehensible to me. I am sure that it means exactly what he said it means, but if I were asked to say what it means, even having heard him, I would have to say that I do not have the faintest idea. Presumably it does have a purpose and means something.
The noble Earl referred to my attitude as regards the use of regulations. As I understand it—I believe he confirmed this—the philosophy of regulations introduced by the Minister goes back to the Act of 1982 and the negative procedure. I believe that the noble Earl is saying that the negative procedure would apply in this case and he believes that to be right. One of my objections is the usual pig-in-a-poke one; that is, that I have not the faintest idea of what will be in the Secretary of State's regulations when they occur. Since the essence of the Bill is in the regulations, we face our usual problem of approving the Bill and giving it a

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Second Reading without the faintest idea of what it is we are agreeing to. Also, your Lordships are not consulted in any sense when the negative procedure is invoked. We simply receive the regulations in due course and chat about them at that stage; but we would not dream of voting against them. That is the reason I find this sort of thing most unsatisfactory. But that is a general comment and has nothing specifically to do with the Bill. It will not cause me to say that we should stop the Bill proceeding.
Perhaps I may raise another matter which did not occur to me until the noble Earl spoke. He said that he had been assured by the Financial Secretary to the Treasury that the Bill would proceed on the assumption that it was fiscally neutral. I am afraid I became lost at that point. I believe he said that it would not represent a net claim on the Exchequer. What eludes me is that I assumed immediately that the whole point of the Bill was to make a tax concession to the insurance companies in order to encourage them to put it into practice. I cannot follow the logic of what the noble Earl said. For it to be an incentive, there must be a tax concession. The whole point is that the claims equalisation reserve should be tax deductible. That is the whole logic that lies behind the Bill. Therefore I do not see how it becomes fiscally neutral. What else will be raised in tax to offset it?
Speaking as someone who used to regard himself as an expert on the economics of taxation, I must say that it was at that point that I completely lost the basis of the Bill. Without wishing to prolong the proceedings, essentially if the total revenue is constant, if there is not a tax concession here, what else makes the whole thing add up? I do not know the answer.
My last comment on this matter relates to the taxation side and to how we proceed anyway. Of course I am delighted that the Bill is going forward. I am delighted that the noble Earl is taking a leading role. But, on reflection, where we are discussing matters of tax deductibility and of essentially a form of regulation—we are discussing a form of order-making power—I have to say that I am not all that happy that any of this should be taking place by means of a private Member's measure. Given the importance of the industry and given the importance of this reform, I at least would have been happier if the department itself had felt that this was government business and that it should therefore take the lead. I say this again with no disrespect to the noble Earl or to Mr. Oliver Heald MP, who carried the Bill forward in another place. But I am a little puzzled that legislation of this kind should come forward in this way.
What I have said sounds a little acerbic and churlish. I do not mean it to be that, because it merely results from my interest in the subject. Perhaps I may add that I am a little taken aback that we may have an amendment or two, but we shall look at those in due
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course. What I most hope is that we shall give the Bill a Second Reading and that it will become law in the very near future.
6.11 p.m.
Lord Inglewood: My Lords, on behalf of the Government I should like to start by congratulating the noble Earl, Lord Northesk, on introducing the Bill to the House and on the skill with which he has described what is a very technical matter and, to the layman, a very arcane one. I should also like to thank the honourable Member for Hertfordshire, North who introduced the Bill in another place.
This is a worthwhile and welcome Bill and one which I believe enjoys wide-ranging support in general and certainly on the Floor of the House this afternoon. As we have already heard, the insurance industry has for some time sought the introduction of a scheme for establishing equalisation reserves. Industry leaders have made it clear that they regard this as of great importance to their future competitiveness. I also welcome the measure as an addition to the regulatory options available to us, since such reserves should assist insurance companies in settling exceptional levels of claims in bad years from funds put aside in good years. The Bill is an important step along the way to establishing such a scheme, which we believe will assist the British insurance industry as a whole as well as the consumer.
The noble Lord, Lord Peston, asked what constitutes the UK insurance industry. It is best described in new Section 34A(2). That refers to those insurance companies which are controlled here in the United Kingdom, bearing in mind the workings of the European single market in insurance, where the underlying principle is that there is home country control tied in with host country rules of business: in other words, first, those whose head office is in this country; secondly, firms whose business is restricted to reinsurance, because reinsurance falls outside the scope of the single market in insurance; and, thirdly, those firms whose head office is not in this country or in another member state but outside the Community and which obviously do not fall within the scope of the single market either.
As the noble Earl has explained, the Bill is an enabling measure. It may be helpful if I say a little about the work that has been done and the Government's plans in this regard. While no final decisions have yet been taken on the details of the regulations which will be introduced following the passage of the Bill, officials in the DTI and the Inland Revenue have been involved with the working group led by the Association of British Insurers—the ABI—in carrying out considerable preparatory work on a proposed scheme. The working group has already made recommendations about the details of the scheme and a report has been sent to government and circulated to a wide cross-section of ABI members. I should like to take this opportunity to thank the ABI for the work it has done.
The insurance industry generally declared its support for the working group's recommendations and it is now the Government's intention to issue a second

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consultation paper this spring, giving details of a proposed scheme which I expect will incorporate many of the industry's recommendations. It is our intention to publish the actual regulations in draft form before they are laid before Parliament to enable the industry and other interested parties to have the opportunity to comment on them.
I should also like to say something on the matter of tax relief for such reserves and to turn briefly to the point made by the noble Lord, Lord Peston. With regard to fiscal neutrality, the effect of putting money into reserve is essentially to pay a claim on account. Provided that the claims come out of the reserves in due course, the procedure will turn out to be tax neutral.
Lord Peston: My Lords, is the noble Lord saying that it is tax neutral over time rather than at a point in time?
Lord Inglewood: My Lords, that is my understanding of the matter. At the end of the day this is a matter for Treasury Ministers and any legislation would be included in a Finance Bill. I can say, however, that my right honourable friend the Member for Ealing Acton, the Financial Secretary, has indicated that they will be prepared to consider tax relief for an acceptable scheme, which is something on which officials in the DTI and Inland Revenue are working. Before any scheme is introduced we would be looking to ensure that it was acceptable to the industry, Treasury Ministers and the Secretary of State.
In closing, I should once again like to thank the noble Earl for his work on the Bill. The Government welcome the Bill and we intend to assist its safe passage.
6.14 p.m.
The Earl of Northesk: My Lords, I shall be very brief. I wish to express my gratitude to the noble Lords, Lord Peston and Lord Ezra, and my noble friend Lord Inglewood for their support. I can but hope that it presages safe passage for the Bill through your Lordships' House.
I think that the noble Lord, Lord Peston, slightly misheard what I said with regard to tax treatment. The reality is that the Bill is only about regulatory requirements. Changes to the tax regime are specifically the province of my right honourable friend the Chancellor. It would be wholly inappropriate for me or the Bill to seek to address those. The inescapable reality is that unless the regulations are in place any judgment about the tax regime is wholly redundant. Without the chicken the egg cannot be laid.
In conclusion, the Bill is concerned primarily with imposing greater levels of prudence on the supervision of the insurance industry as well as putting it on a more equal footing with our European partners. That seems to be the consensus of all your Lordships. I ask the House to give the Bill a Second Reading.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Commonwealth Development Corporation Bill
6.17 p.m.
Lord Inglewood: My Lords, I beg to move that this Bill be now read a second time. The Bill before us, when it was considered in another place on 16th March, was unopposed at every stage. That showed the support that exists in all parties for the CDC and for the Bill. I am sure that the chairman, board and staff of the CDC, who are fully behind the Bill, were heartened by the expressions of support that they received on that occasion, I hope that our debate this evening will be equally supportive of CDC and of the Bill.
Praise for the CDC is well deserved. It has been a remarkable success story over what is now nearly a 50-year history; and particularly so over the past five to 10 years. The main purpose of the Bill is to build on that success and to continue for the future. It will put CDC in a position to grow up to and beyond the turn of the century.
In speaking of the success of CDC, I should like to refer to the service of the noble Lord, Lord Kindersley, who was chairman of the corporation from 1980 to 1989. I also want to pay tribute to the work of the current chairman, Sir Peter Leslie, and the board which directs CDC's activities and to the new chief executive, Dr. Roy Reynolds, and his predecessor, John Eccles.
As your Lordships will be aware, the corporation is charged under its Act with the task of assisting overseas countries—not exclusively Commonwealth countries—in the development of their economies. It provides equity and loan capital to private sector companies to enable them to develop profitable and efficient businesses which are environmentally and socially sound. It also promotes, controls and manages companies in certain sectors specified in the Act, and provides related services to them.
At the end of 1993 CDC had investments and commitments in 51 developing countries, 39 of them members of the Commonwealth. Total investments and commitments stood at more than £1.6 billion. Full details are in the annual report, which is available to the House.
Although the audited results for 1994 are not yet available the preliminary figures indicate a continuing strong performance. New investments were at record levels of £240 million. Some 80 per cent. of approvals were in the poorest countries; 90 per cent. were in the private sector, and 22 per cent. took the form of equity capital. The rate of return on investments over three years at 8.7 per cent. also exceeds the target set for CDC, of which the House was informed by my noble friend the Minister for Overseas Development on 3rd May last year, following the completion of a five-yearly review of the CDC.
CDC's task is to use the disciplines and practices of the private sector in order to promote sustainable development in third world countries. Its development report published in 1993 set out three key principles: to invest only when projects are expected to make a positive contribution to national development; to

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participate only when its involvement adds value; and to structure its investments according to commercial criteria. Its new management team is actively seeking to improve the links with British and other private sector overseas investors so that it can build on its traditional role as a catalyst for mobilising international finance alongside its own investment.
The new focus in developing countries on private sector-led development is opening up new opportunities for CDC, both in new and traditional areas. For example, in October last year CDC took a majority shareholding in Chilanga Cement Limited, the largest producer in Zambia and an essential component of the Zambian economy. CDC has management responsibility for a major programme of rehabilitating and enhancing the productive capacity of the company. Just as important, 30 per cent. of the company's shares are to be sold to local private investors, marking an important stage in the Zambian privatisation programme and the return of an active capital market in Lusaka. I could multiply examples. Noble Lords will no doubt add to them during the debate.
CDC thus continues to prove itself as an effective and essential arm of the British aid programme. We believe that in order to continue to carry out this role, it is right that CDC should remain in the public sector.
Unlike the Crown Agents, CDC is making long-term financial commitments in areas and activities which commercial lenders consider to be on the margin of acceptable risk. That is why my right honourable friend the Minister of State told the Foreign Affairs Committee of another place in April 1993 that the status of CDC should remain unchanged. It is this public sector status which enables CDC to focus its resources on the poorest countries and to work in the most effective manner.
CDC's capital has been provided through concessional loans from the British Government. The returns made on the proceeds of its investments, including equity realisations, are available to the corporation for further investment, subject to interest and the repayment of capital. Over the years this has produced an increasing level of internally-generated resources available for new investment.
Following the 1992 Public Expenditure Survey it was announced that CDC would no longer receive net new loans from government, but that it would also no longer be required to pay interest on new and existing loans. Although the interest rate was lowered to nominal levels in 1994, a full interest waiver requires an amendment to the existing Act. That is proposed as part of the Bill presently before the House.
The Bill also recognises that CDC will continue to draw on external borrowing. Last December it arranged borrowings for the first time from a source other than the British Government; in this case the European Investment Bank. A loan of £27 million will, we hope, be followed by further similar borrowings. CDC is also exploring potential borrowings from other lenders.
CDC total borrowings are already very close to the existing statutory limit of £850 million. The limit also covers the borrowings of CDC's overseas subsidiaries, which will increase roughly in line with the overall
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increase in its portfolio. An increase in the limit is essential to ensure the future financial health of the corporation. The level of increase which this Bill proposes is initially to £1,100 million, and then following the further agreement of Parliament through an affirmative resolution, to an overall ceiling of £1,500 million. This should be sufficient to provide a firm basis for CDC's future investment programmes for the next decade.
It is a reflection of CDC's success in managing its existing portfolio that the overwhelming majority of new investments will continue to be financed from the returns on existing investments. The year 1993 was exceptional, with equity realisations of £27 million allowing an overall increase of £48 million in CDC's net assets. It still remains the intention of CDC's management to unlock the very substantial value of some longstanding investments—particularly, but not only, in Asia—in order to secure resources for further expansion of the programme.
The challenge facing CDC in Africa is more difficult. Reflecting its economic and political problems, Africa's share of CDC's portfolio has declined in recent years. The CDC is now seeking to reverse that.
South Africa is obviously a key area and one which we very much have in mind following the very successful state visit by Her Majesty last week. During that visit, CDC announced an investment of £9 million in a new development capital fund which CDC will manage. It will act as a magnet for domestic and foreign private capital to finance small-scale business development in South Africa; precisely the kind of practical contribution to economic development which this Bill seeks to promote.
Last year in South Africa, my right honourable friend the President of the Board of Trade signed an operating conditions agreement with the Government. This year CDC plans to open offices in Mozambique and Uganda. Identifying viable business which meets its investment criteria in Africa is still hard. But let me give two further examples of what is possible. CDC helped to establish in 1993 a venture capital fund in Tanzania, which it also manages. It provides risk capital for local businesses, and complements efforts to establish a local equity market. Total funds at 8 million United States dollars sound small, but this is breaking new and untilled ground.
We are ready to consider with CDC whether there are other areas of the world where it could deploy its unique skills. Noble Lords will no doubt have their own views on particular areas. It will be clear from what I have said that CDC has a very full agenda, particularly in those countries on which our bilateral aid programme is concentrated. It would have to look carefully at the resources available before contemplating new areas of activity, such as eastern Europe and the former Soviet Union where there are other existing channels for providing help. In the short and medium term I do not detect any great desire by CDC to move into those areas.
I should finally briefly outline the provisions of the Bill. Clause 1 deals with the increase in borrowing limits which I have described. It also removes the separate limit on borrowing by CDC from government. We

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believe that a single limit for all borrowing is the most sensible way to proceed. Clause 2, allows for the full waiver of interest on past debt and provides for future interest free loans.
Clause 3 deals with the arrangements for board appointments. We have taken the opportunity of the Bill to align these more closely with those for other public corporations so as to allow key executives to join the board. This clause also places the responsibility for remuneration and similar matters wholly on the Secretary of State, thus removing the requirement for the Treasury to be involved in the detail of pay for individual members of the corporation. But the Secretary of State will, of course, take these decisions within the Government's approach to public sector pay as appropriate at the time. I hope the House will see this as a useful updating provision.
I hope that I have said enough to illustrate the valuable work which CDC is doing and should continue to do, for developing countries and for Britain. I hope that today this House, like the other place, will again agree to endorse the work of the corporation and to place it on a sound financial footing to carry it into the next century. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(Lord Inglewood.)
6.28 p.m.
Lord Judd: My Lords, I thank the noble Lord for the very helpful way in which he spoke to the Bill. Many of us on this side of the House enjoy his refreshing and friendly style. When he took up his Front Bench responsibilities we recognised that he was an inherently decent and thoughtful person and also incredibly hard working, as today's business has made clear. But, as with the noble Baroness, Lady Chalker, with all his reasonableness we cannot help feeling that at times he must wonder whether he is on the right side of the House. I can assure him of a warm welcome whenever he wants to join us.
I must declare an interest. As a lover of Cumbria, where I am in the process of putting down roots, I cannot help relating to the noble Lord over his deep attachment to that glorious corner of the United Kingdom.
I assure the noble Lord that if the proceedings on this Bill in the other place are anything to go by, we shall have a thoroughly constructive and positive exchange. Reading the debate in the other place, I can hardly believe that it is the place that it seems to have become in recent years: it sounded quite civilised with Members positively splashing about in good will.
The noble Lord mentioned the Crown Agents. In that respect we cannot help but register the absence of the noble Baroness, Lady Chalker, this evening. Is she being coy? Does her absence for whatever apparently good reason not indicate what we all know; that her heart was not in all that nonsense last Thursday when she unconvincingly endeavoured to defend the patently ideological privatisation of the Crown Agents? We can see that it would have been acutely embarrassing for the noble Baroness a mere four days later to stand in the
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same place and speak to this eminently sensible Bill which is designed to give the Commonwealth Development Corporation more scope for expansion within the public sector, a common sense and practical approach which is exactly the kind of model that we on this side of the House advocate for the Crown Agents and, indeed, for the Post Office.
I turn, first, to the good things about the Commonwealth Development Corporation. As the noble Lord said, it has an outstanding record of achievement. After a slightly sticky start, it has proved to be the robust, grown-up child of a far-sighted Labour government and one therefore of which we on these Benches are particularly proud. It was good to see the Monopolies and Mergers Commission in 1992 evaluating it as an especially valuable form of assistance to economies in developing countries. Its high standard of management and sound decision-making have enabled it to ensure that its investment funding has been largely self-generating, supplemented by long-term, low interest loans—all that with relatively low operating costs. It has been encouraging to see the way in which CDC has provided badly needed inward investment in challenging areas where the external private sector hesitates to tread. I refer to areas such as sub-Saharan Africa, to which the noble Lord referred, and in particular to Uganda, which is a telling example.
As was said in the other place, by its pump-priming the Commonwealth Development Corporation sends out positive signals to the rest of the world. It has been playing a vital role in stimulating the local private sector in third world countries and achieving the genuinely local capital which is essential for sustained, dynamic, self-generating development. Chilanga Cement Limited, to which the noble Lord referred, is a pillar of the Zambian economy. It is a good example, with, as the noble Lord explained—the point needs to be underlined—30 per cent. of the shares going to the local private sector. I note that last year, of the £240 million that was invested overall 80 per cent. of the approvals were in the poorest countries. That is something for which all concerned should take a bow.
I understand that the Commonwealth Development Corporation is involved in more than 340 businesses, creating several hundred thousand jobs in projects which tend to last between 10 and 20 years, representing long-term investments of which the world could do with far more—not least, I sometimes think, in the United Kingdom.
All that is a powerful story and one which shows what imaginative professionalism and inspired leadership in the public sector, driven by a sense of social purpose and public service, can achieve where it is patently obvious that the private sector would not have responded in the same way. It is a fascinating model for effective social and economic development. I just hope that unwittingly the removal of Treasury guidance over salaries, pensions and allowances will not spoil all that by ushering in a more crude market culture. Sometimes I fear that the ideologues and captains of the market feel threatened by examples of good public service and set out to seduce or bully those involved into adopting their own soulless materialism. They simply cannot bring

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themselves to accept that excellent results can be achieved with service as the motivation and that the best results do not invariably flow from those who are motivated primarily by acquisitive ambitions—far from it, as recent events have amply demonstrated.
I turn now to the questions. Most were raised during the proceedings in another place but, with respect, I do not see much evidence that they were fully answered. Let us first consider the title, the Commonwealth Development Corporation. What new research has been done to see whether keeping that title is a help or a hindrance in expanding the organisation's work increasingly widely as this Bill is intended to make possible? How does the concept of "Commonwealth" go down outside the Commonwealth? What about Latin America or, at some future date, perhaps China? Or is it that virtually nobody uses the word "Commonwealth" when speaking about the corporation and that almost everybody talks about the "CDC"? Would more be gained or lost by a change of name? It would be good to hear the noble Lord's thoughts.
If the Commonwealth Development Corporation is as successful as we all argue, why has the ceiling for increases in resources (made possible by the Bill) been pegged at the new level? What was the rationale behind that? Is it enough? Will it be adequate in the long term? Why has the opportunity not been taken, as recommended by both the Monopolies and Mergers Commission and by the Select Committee on Foreign Affairs in the other place, to free CDC of corporation tax? If it were so freed, that would not only immediately make more funds available for CDC's programmes; it would also enhance CDC's ability to negotiate favourable tax status in host countries, thereby having a multiplier effect on investments by CDC.
After the Pergau Dam débâcle, the Government decided that the aid-trade provision would no longer be available for countries with a GNP of more than 700 US dollars. Will the same apply to CDC loans in future? If not, what is the rationale for a different approach? Is there a danger that repayments from poor developing countries could be used to finance loans to less poor countries in places such as east Europe?
That brings me to the question of CDC and east Europe. Are there to be safeguards for ensuring that Peter is not robbed to pay Paul; that CDC developments is east Europe are not at the expense of work in developing countries? What are the safeguards? That point, it seems to me, should be watched carefully at a time when the operating target for the percentage of CDC investments in the Commonwealth has been dropped.
By contrast, are there plans, as was asked in the other place, for CDC to move into poorer parts of the Middle East, including Gaza and the West Bank'? Following his reference to some of the tougher challenges, it was exciting to hear the noble Lord emphasise developments in South Africa. The key issue is that if CDC, with all its enviable experience and expertise, is to move increasingly into east Europe and perhaps Russia, can we be absolutely certain that it will be a matter of additionality and not at others' expense?
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Most importantly, there is the issue of preserving or enhancing human rights. Can the noble Lord tell us how CDC deals with that sensitive priority? What is happening, for example, in Nigeria? What does the CDC do about Indonesia in the light of the grim story of East Timor? I note that £13 million has recently gone into three new projects in Indonesia, a relatively high amount. Did CDC take human rights into account? What was the outcome of its deliberations if it did? How does CDC's human rights policy relate to the three new projects which it now envisages?
There is also the question of the composition of the board. That deserves some attention. Why so great a gender imbalance? Why is there no non-governmental organisation expertise? We keep hearing that the Government respect the operating effectiveness of non-governmental organisations. Would not their experience be relevant? How are the merchant banking representatives selected? I take it that Sir William Ryrie is there because of his distinguished Treasury, ODA and Bretton Woods service and experience rather than because of his role with Barings.
Finally, the Minister said that another place had deliberated upon other things CDC would like to do but could not do under the present statutory powers. He indicated that they were a matter for discussion between CDC and the Government. Whatever they are, they seem to have missed the Bill. Why? What exactly is going on? Our appetites are whetted. In the name of open government, we should like to know.
It would be helpful if in his reply the Minister could, in his usual cheerful, forthcoming and courteous way, deal with all those points. I am delighted to confirm that on the whole the Opposition are inclined to give a fair wind to this useful piece of legislation. If only the good sense and logic most of it enshrines were typical of the Government's legislative as a whole! Sadly they are not. The Bill stands like an oasis in an ideological desert. Long may CDC remain a development agency with social purpose, using appropriate market and business disciplines when necessary. May it never become primarily just another market-oriented business with an incidental economic and social development interest. Incidentally, pray God that the pass has not, in this context, already been sold on the Crown Agents.
6.40 p.m.
Lord Redesdale: My Lords, I shall speak briefly, because the issue is not contentious. I also promised the Minister that I would not try to inveigle him onto the Liberal Democrat Benches.
One of the reasons why the Bill is not contentious is that the CDC's effectiveness is beyond dispute. It provides a service which few other agencies can provide at such a low cost. The service it provides does not meet with opposition. Promoting the private sector in third world countries is a laudable aim. It is only through the development of the private sector that jobs and wealth will be created in many third world countries. The importance to many countries of the private sector cannot be underestimated.

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I turn to the subject of Africa. The Minister said that in future a great deal of money will be spent on South Africa. I cannot object to that, because I lived in South Africa for some time. There are many areas in which money spent by the CDC would be well spent. But I hope that will not be to the detriment of other African countries. There seems to be an idea that money spent in Africa is often money thrown away. My experience in Africa is that that is wrong. The profitable business that British banks such as Standard Chartered provide in Africa shows that there is money to be made through the private sector.
I was especially encouraged to hear that the CDC will be moving into Mozambique, a country that has suffered a devastating civil war. I spoke last week to Mr. Dhlakama who said that the only hope of moving away from the threat of war is by creating jobs. Obviously, one way of doing that is by promoting the private sector in Mozambique.
One question which should be addressed, which the noble Lord, Lord Judd, mentioned, is the CDC's area of operation. I have no penchant for removing the word "Commonwealth". I am proud of that word. It is a word which is used with great pride in Africa. Those countries which are now members of the Commonwealth are proud to be so. Although Mozambique does not qualify, it would very much like to be a Commonwealth member.
There are areas of operation into which the CDC could move. I am thinking of areas such as the West Bank and Gaza. I have to declare an interest in respect of eastern Europe as I am on the advisory board of the Know-How Fund. I hope that the Minister can reassure us that money will not be diverted from Africa, which has the majority of least developed countries, to eastern Europe.
I should like to finish on the subject of the Crown Agents versus the CDC. The Minister will have an ingenious reason for why the CDC is remaining in the public sector whereas the Crown Agents are being jettisoned into the private sector. I look forward to hearing his reply. I reiterate the invitation to the Minister to go to South Africa in May to play for the parliamentary rugby team. He would then see at first hand some of the issues involved in Africa.
6.45 p.m.
Lord Thurlow: My Lords, I am grateful to the noble Lord, Lord Inglewood, for his clear exposition of the scope of the Bill. As he explained, it is narrow in scope, but, so far as it goes, all sides of the House have welcomed its provisions. We are especially glad that the ceiling on the CDC's operations is being expanded. I understand that the new ceiling will be set no lower than the CDC itself would wish.
We are glad to have, as other noble Lords have said, the opportunity to pay the warmest possible tribute to this extraordinary organisation. I have had the privilege
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of seeing it at work for nearly 50 years. The Minister in another place used what can be regarded as pretty extraordinary phraseology when he said:
"I know of no CDC scheme that has been the subject of public criticism, either in the country concerned or in this country".—[Official Report, Commons, 16/3/95; col. 1042.]
That is an extraordinary record, especially having regard to its scale of operations.
I have experienced the strictness with which the corporation sticks to commercial principles. I have tried to obtain money from the CDC for good causes in Commonwealth countries and been shot down because it could not be sufficiently indicated that there was a prospect of enough profit being made. That is right and proper. I accept its refusal, but it illustrates that although the corporation is in the public sector it has successfully combined the principles of private sector work with its public sector status.
I shall refer to the problem that has been mentioned of whether the corporation has the powers to do what it wants to do. The Minister in the other place reaffirmed that the Government are anxious that it should have such powers. Discussions are going on because the corporation does not feel easy about the present legislative framework and the rules. If the result of that discussion should be that a change to the legislative framework is necessary, I hope that the Minister will be able to give us an assurance that time will be found within the reasonably foreseeable future for such necessary brief legislation.
Perhaps what is necessary can be achieved by rules and without legislation. However, if legislation proves to be necessary it would be a pity if the opportunity provided by this Bill were not taken. I do not believe that any of your Lordships would advocate amendment of the Bill to extend its scope by, for instance, redefining in the Long Title, or whatever. That would mean going back to the other place and we know the problems of the timetable. Nevertheless, we would like an assurance that whatever action is necessary to remove the uncertainties of the corporation it will be taken and facilitated by Ministers.
I wish to refer to the basis of the funding of the CDC. Under the announcement that the Government made last year, there are to be no new net loans from them. Such notional public funding as will continue will come from the recycling and ploughing back. Given the fact that in future the corporation will not get more new money from the Government, is it not a little disingenuous for the expenditure of the CDC to be recorded in ODA reports as part of our overseas aid contribution?
That is not merely a matter of semantics. We all know the pressures on overseas aid funds, but by introducing what appears to be a slight misrepresentations of the future nature of the corporation's funding the figures quoted publicly for our overseas aid, bilateral and multilateral, are inflated.
Finally, I turn to the semantics of whether it is right and proper to retain the title "Commonwealth". As all your Lordships know, the corporation's overseas work is referred to in common parlance always under its initials of CDC. I cannot believe that any additional foreign countries that may come within the scope of its

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good work will be inclined to question whether it is proper for the help that they receive to come in the name of the Commonwealth.
I conclude by repeating my warm tribute to the CDC for its work in the past and my admiration of its present staff. I express my good wishes that it will go from strength to strength and thereby enable taxpayers in this country to continue to take great satisfaction from the high rate of gearing under which, during the past 50 years, a relatively small amount of public money has resulted in four or five times as much assistance to valuable development projects.
6.55 p.m.
Lord Trefgarne: My Lords, I know that at one time it was thought that we might take more than the Second Reading stage of the Bill today. I and perhaps other noble Lords indicated that we would prefer to have a slightly more formal timetable. Thus it is that we shall take the remaining stages after Easter. If, by causing that delay, I have inconvenienced any noble Lord, and in particular my noble friend, I apologise.
The Commonwealth Development Corporation is the very crown jewel of our overseas development policy, the Rolls-Royce vehicle by which so much of our overseas development funds are dispersed. It has performed in an admirable way since the day it was set up. I have a certain connection. My late father was the first chairman of the corporation. The noble Lord, Lord Thurlow, said that he had never heard of a single project being criticised. I am afraid that I must correct the noble Lord. In the early days one or two attracted a certain amount of attention. Modesty forbids that I mention them now.
Be that as it may, I strongly support the Bill as far as it goes. However, I am disappointed, as are the noble Lords, Lord Thurlow, Lord Judd and Lord Redesdale, that the Bill does not do more for the powers of the corporation, in particular by defining more widely the nature of the projects in which it is authorised to invest. Undeterred by the difficulties referred to by the noble Lord, Lord Thurlow, I inquired of the authorities in this House about the possibility of introducing amendments to deal with them. The amendments would not have been long or difficult to draft but I was firmly and properly told that they would be outside the scope of the Long Title. As your Lordships recognise, the House is always most reluctant to amend the Long Title. Indeed, I am told that our Procedure Committee has recently decided on a yet more stringent line. I concluded that amendments which did more than tinker with the problem were impracticable.
That is not to say that nothing can be done. It would be possible—and it may be the right course of action—to introduce a Private Member's Bill in this House or in the other place to deal with the issues that have been raised. I am attracted to that course of action. However, one must recognise that, although it would be perfectly practicable in a comparatively short time to persuade your Lordships of the merits of such a Bill, at this stage
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in the parliamentary year it would reach the statute book only if the Government were able to offer encouragement for it in the other place.
I noted with interest the words of my noble friend Lord Inglewood on the previous Bill with which we dealt tonight. He said that the Government would provide support for the measure in the other place. Therefore, I ask my noble friend in plain terms whether, if a Private Member's Bill is brought forward in this House which meets with your Lordships' approval, the Government will find time for it in the other place in order that the widening of the powers—which everyone, including Ministers, accept to be appropriate and desirable—can be achieved. I believe that that is the only course of action now open to us to deal with the difficulty. I hope that the Government will be persuaded of the merit of my proposal.
Perhaps I may just say again that I warmly support the Bill so far as it goes. I would have wished it to go further; sadly, it cannot. However, I hope that the Government can give me some encouragement along the lines I have proposed. I certainly hope that the Bill swiftly reaches the statute book.
7 p.m.
Viscount Waverley: My Lords, from conception in 1948 to the completion of the strategic review in 1994 the Commonwealth Development Corporation can be rightly proud of its achievements. In broadly welcoming the Bill, I take the opportunity to draw attention to a number of points which have arisen during its passage to date.
However, before commenting on specifics, I should say that my interest in the corporation stems from CDC's commitment to the developing world, investing and managing in areas where there are many less fortunate than ourselves. Target areas stretch from South-East Asia at 21 per cent. of its portfolio to West Africa, with 9 per cent., and Central and South America at 8 per cent., and so on around the globe. It is hoped to stimulate other investments in sub-Saharan Africa as a result of a recently started operation in South Africa. There is also the possibility of ancillary offices, as has been mentioned, being opened in Uganda and Vietnam, in addition to the 21 already operating.
CDC, at 31st December last, had invested or committed £1.7 billion to projects ranging from primary production and processing and finance of commercial and industrial projects in areas such as hotels and tourism to general infrastructure projects in the power, water and telecommunications fields.
Current initiatives include developing a role in privatisation projects. As the noble Lord, Lord Inglewood, and other speakers mentioned, an example is the Chilanga cement factory in Zambia. Indeed, the shadow overseas development spokesperson in another place is visiting that project today. I look forward to hearing her observations.
In addition to promoting venture capital businesses, CDC is pro-active in infrastructure, food and beverages, forestry and general industry. Specifically, in South Africa, CDC has just announced two funds aimed at

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assisting black entrepreneurs. That is to be encouraged. It is easy to be impressed with the work of the Commonwealth Development Corporation. I note that it has been investing outside the Commonwealth since 1969.
I turn to the Bill itself. I thank the noble Lord for rendering a detailed account of it. However, the measure seemingly fails to act out in full the recommendations contained in the quinquennial review. I understood that the Government had endorsed its conclusions. Indeed, the Minister confirmed that in a reply on 3rd May 1994 in response to a Question tabled by the noble Lord, Lord Brabazon of Tara, who is not in his place today. The noble Lord, Lord Judd, also seems to have understood that during the Committee stage of the Crown Agents Bill.
I am bound to say that I have difficulty in seeing where all the recommendations have been included. For example, the review recommended that CDC's powers should he expanded so that it could play an even greater role in the development of emerging economies. Recommendation 10 clearly stated:
"In any future legislation agreed by Ministers to increase borrowing limits some changes could usefully be made to the CDC Acts to clarify CDC's powers, and extend these in ways consistent with its contribution to aid objectives".
I am bound to say that we owe it to CDC to organise its future in as unfettered a manner as possible.
I have two questions for the Minister, of which I have given advance notice. First, why does the Bill not clarify and extend CDC's powers? Secondly, how will the Government ensure that those issues are properly addressed'? I also look forward to hearing the noble Lord's comments on the merits of the proposal put forward by the noble Lord, Lord Trefgarne, regarding any future passage of a Private Member's Bill. I am concerned that legislation could not be enhanced through lack of parliamentary time or that it falls outside the scope of what is known in parliamentary parlance as "The Long Title".
7.5 p.m.
Lord Rea: My Lords, I should, first, apologise for not putting down my name to speak. However, I have a very brief intervention to make. My purpose is to press the noble Lord further on one or two points made by my noble friend, by other speakers and, indeed, by Members of another place.
The overriding question from our point of view is to ask why the Commonwealth Development Corporation is so suited to being a public sector body whereas the Crown Agents are not. In fact, as the role of the CDC is very largely with the private sector—to launch and support viable and profitable enterprises—on the face of it it would seem to be more suitable for privatisation than the Crown Agents who, more often than not, work on behalf of governments. To me it is really a revealing comment on how skin deep the Government's belief is in the reliability of a market economy that they believe that a publicly owned enterprise is necessary in order to get profitable enterprises off the ground in a developing world.
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If an enterprise is thought to be viable, it should be worth putting risk capital into it. But, of course, private finance is not available for the long-term projects which the CDC has so successfully initiated and run in many countries throughout the developing world, and, indeed, continues to do so. As the noble Lord put it, the capital required is on the margins of acceptable risk. I thought that a rather nice way of putting it. In fact, those who have money to invest want to gain profits much more quickly and reliably. That is why the Commonwealth Development Corporation is needed. The private sector is not really interested in development when quick profits are not available.
I mentioned that we are not talking just of the Commonwealth; indeed, the noble Lord said that 13 out of the 51 countries involved are outside of the Commonwealth. That fact was mentioned in another place as a reason perhaps for questioning whether the name "Commonwealth" is still appropriate. Of course, we all know what the CDC is, and it would probably be difficult to call it the BDC or the IDC instead. However, perhaps the Minister can answer the point and also amplify what he said about other countries being suitable places for investment of projects by the CDC, especially in eastern Europe. I hope that he will answer the point made by my noble friend as to whether that would be additional to the current capital projects being entered into or whether it would be subtracted from what is already available.
In conclusion, I believe that it is good that the Government are increasing the borrowing capacity of the CDC. But, like other noble Lords, I feel that the opportunity could have been used to do more for the CDC. I was most interested in the suggestion made by the noble Lord, Lord Trefgarne. Indeed, I look forward with interest to the introduction of his Private Member's Bill. I hope that we shall be able to support it on this side of the House. We support the Bill as far as it goes; it is useful. However, as my noble friend said, we are a little worried about the removal of Treasury guidance regarding staffing, salaries and pensions. Nevertheless, we feel that it is a useful little Bill. We certainly do not oppose it. We wish it well.
7.10 p.m.
Lord Inglewood: My Lords, I do not want to detain the House longer than is necessary, but perhaps I may answer some of the points that have been raised by noble Lords in debate. I must begin, after the opening remarks of the noble Lord, Lord Judd, by emphasising that the reason I am here rather than Lynda Chalker—I am less visually attractive—on the Front Bench is not that she does not feel inclined or cannot answer the point that he put but that she just happens to be unavailable. Even though the noble Lord suggested that I might come across onto his Benches, I was delighted that on the principle of "If you can't beat 'em, join 'em", he has come to Cumbria.
A number of speakers referred to the title of the CDC. As I think is generally known, the Commonwealth Development Corporation is invariably known as the CDC where it operates. There seems no good reason to change the name. It is the name with which it has grown

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up and by which it is well known, and there is much good will attached to it. I was also asked by the noble Lord, Lord Judd, why we should not free the CDC from corporation tax. If one looks at it in the round, it seems to us that there are no special grounds for treating the CDC differently on taxation to other corporations in the public sector which are taxed on the same basis as private companies. We do not feel that the nature of the CDC's activities are such that they justify special tax treatment in themselves because, if one did that, there would then be all sorts of problems as regards distinguishing it from other bodies doing equally worthwhile work in the developing world.
A point was raised about the application of the aid and trade provision in respect of CDC investment. That is quite a separate part of the aid programme not connected with the CDC. A number of noble Lords have asked about investment in parts of the world where the CDC is not currently investing. The position is that if the CDC wishes to invest in a new country it must seek authorisation from the Government. As a general policy, we do not think it is appropriate for the CDC to develop in places where there are other organisations which may be doing the same kind of thing. That is not necessarily an invariable rule but it is the general approach we adopt. For example, if one looks at the former Soviet Union and eastern Europe, there are a number of agencies already at work there. We feel that if resources were to be devoted to that part of the world, to use those agencies would be the right way to do it rather than for the CDC to spread its empire. At the end of the day the reality is that the CDC has a finite budget. We must contain the amount of investment it undertakes within the scope of the resources at its disposal.
Mention was made about the composition of the board and, associated with that, whether the change in the way in which its remuneration was to be decided might have a deleterious effect on the operations of the CDC. I do not think that that will be the case. The reason for doing this is to free up the procedures to ensure that it attracts the best people for the job and that the packages that may be offered—whether they are full-time or part-time people—are appropriate in the wider world so that one can obtain the people one wants. The noble Lord, Lord Redesdale, made the point—
Lord Judd: My Lords, I am grateful to the Minister for giving way. This is an important point. Could he possibly explain in the context of all the positive comments being made about the record of the CDC what it is that has not been achieved with management and leadership based on the principle of public service rather than what normally motivates the private sector?
Lord Inglewood: My Lords, I thank the noble Lord for his intervention. That was the point I was going to come on to when talking to the point made by the noble Lord, Lord Redesdale. There is not necessarily any dichotomy between public service and the private sector in this regard. Clearly, those who work for the CDC are working in the best traditions of British public service. But just as that is not a grasping thing to do, neither should the employer be mean in the way in which he
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approaches them. What we are trying to do is to give flexibility to the system rather than to make any particular criticisms of what has occurred in the past.
The noble Lord, Lord Redesdale, talked about making money in Africa. Of course the private sector is the means for making money, but at the same time it is now deemed an essential tool for development since private sector investment is an appropriate—perhaps the best—way of stimulating economic development. It is for that reason, rather than the primary reason of maximising return, that the CDC is operating in this area.
I now come to the question that perhaps everyone in the Chamber has sought an answer to; namely, why is it that we wish to privatise the Crown Agents while we wish to retain the Commonwealth Development Corporation in the public sector? The answer is that the Crown Agents as a body do business for other people. In short, they might be described as a procurement agency. The Crown Agents can be operated most flexibly and most effectively in the private sector, while the Commonwealth Development Corporation, as I hope I made clear in my opening remarks, is about investment on the margins of acceptable risk. There are difficulties in doing that outside the public sector. Because of the security that the public sector provides, we felt on balance that that was the appropriate way of dealing with the matter.
A number of noble Lords have raised the question, in slightly different ways, of whether the powers that the CDC has are appropriate to enable it to do what it ought to be doing. As noble Lords may be aware, a statutory instrument was made in December 1993 to allow the CDC to invest in new areas of business. However, that does not deal with the slightly wider problem of the vires under the CDC Act which concerns the circumstances in which it can invest and carry out the activities it is permitted to undertake.
I listened with great interest to the proposal from my noble friend Lord Trefgarne about the possibility of a Private Member's Bill. Suffice it to say that we will undertake to look at this matter most carefully. We give no undertakings, but we thought it was important to proceed swiftly with this Bill because, as noble Lords may have noticed, the thresholds over which the CDC will want to borrow will shortly be exceeded. That is an important consideration bearing in mind that there is an overriding requirement from the CDC's perspective to get the extra borrowings permitted.
That covers the point made by the noble Viscount, Lord Waverley, and others on why the Bill does not go further. We decided on balance that the right thing to do in the circumstances was to proceed with the Bill as it is. As I have already described in responding to the comments of my noble friend Lord Trefgarne, we can consider further steps later if we conclude it is necessary. Finally, there was a point raised by the noble Lord, Lord Thurlow—
Lord Trefgarne: My Lords, my noble friend was saying that he would consider further steps if they were thought to be necessary. As I understand it, the

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Government have already said that they accept the need for wider powers for the Commonwealth Development Corporation; it is just a question of how we get there.
Lord Inglewood: My Lords, my noble friend is right to pick me up. I was perhaps slightly too lax in my phraseology. We will certainly look at the best way forward for the CDC in the way I described. Finally, the noble Lord, Lord Thurlow, made an important point about why the money of the CDC is included in the ODA' s budget and is contained in that part of the public sector accounts. The reason is that, while interest is not now being repaid to the Exchequer in respect of the loans, it is nonetheless public money which is being used by the CDC, even though it is allowed to retain the profits generated by it. Of course, that capital which is invested in the CDC is part of the overall Exchequer debt on which interest is paid in the wider context. I hope that I have covered all the main points that noble Lords have made. As there is widespread support for the CDC and for the Bill, I very much hope that the House will grant it a Second Reading.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Motorail and Sleeper Service to West Highlands
7.19 p.m.
Lord Gray Lord Gray rose to ask Her Majesty's Government whether they will advise the Director of Rail Franchising to maintain the West Highland Sleeper and Motorail Service and to instruct British Rail to retain that service at least until the consultation process is completed.
The noble Lord said: My Lords, had the Fort William sleeper not run last night I would not have been here to ask this Question. However, it is not self-interest that leads me to do so, rather it is the potentially serious consequences for the social and economic welfare of the West Highlands that the possible withdrawal of the services threatens.
Ironically, 100 years ago there was an almighty political wrangle over whether the Mallaig line should be built because of the need for a subsidy, which the Tories favoured. The economy of the West Highlands is subsidised. It has to be, and considerable sums are involved. I dislike Euro-jargon, but it is an "objective one" area. A comprehensive transport infrastructure is essential. The railway is a key component, and the sleeper/motorail service is a key element.
This is not a privatisation debate, but the proposed axing of the services has aroused passions and the public debate thus far has at times engendered more heat than light. I hope that this evening we shall turn down the heat and turn up the light and will be able to persuade the Government to look afresh at the problem.
Not only is withdrawal of the sleeper and motorail service threatened, but ScotRail has announced that additional seasonal trains will not run on either the Oban or Fort William lines this summer—all this at the beginning of the tourist season upon which Lochaber,
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Argyll and the islands rely so heavily. It is also relevant that there is a proposal to de-trunk the A.828, which we had hoped to see improved.
Furthermore, all these cutback proposals coincide with the announcement that 19 oil companies want to go ahead now with developments off the west coast. Service cuts now do not auger well for Oban, Mallaig or the islands benefiting from any oil-related boost. Lost business is often nigh impossible to recover and opportunities missed seldom return. Surely it is time for investment, not cutbacks.
An aspect which unites those campaigning for the retention of these services is a disbelief in a variety of official statements, particularly on the cost of services and the level of subsidy. They are frustrated at BR's refusal to give details. In the face of that coyness the only way I can challenge those figures is to advance rival ones.
Individuals and campaigning groups have painstakingly researched detailed costings. I am indebted to three sources for the calculations which I am confident are realistic: London Friends of the West Highland Line, Professor Bill Bradshaw of Oxford (an adviser to Her Majesty's Government on rail privatisation) and Mr. Jack Shaw-Stewart. They have produced assessments of the direct costs of providing the services, including Rai1track charges.
Before taking into account any revenue, their assessments are £2 million, £2.3 million and £1.8 million respectively for running the Fort William Sleeper and Motorail Service as at present. The figure of £2 million is more precisely £2,003,466 per annum, or £3,042 per train.
The same sources assess revenue at £1.28 million. That is based on 16,000 passenger journeys with fare variations. Current improved performance and uncertainty concerning strike days last year suggest that 17,500 journeys and £1.4 million revenue might be nearer the mark. The figure of 16,000 passenger journeys had to be estimated because of last year's strike.
Those figures assess operating deficits at £740,000 or £604,000. Whichever one takes, it is a far cry from the officially quoted figure of £3 million. It is important to remember that the contribution to Railtrack which is included would not represent a saving on withdrawal of the services.
Perhaps a better way of looking at the matter is to examine what would be saved by axing the services. My sources assess avoidable costs at £1,094,000 a year. That is £186,000 less than the estimated revenue from 16,000 passenger journeys. There is therefore no net saving to the taxpayer from axing the services. Surely that points to the adverse effect that taking off the sleeper and Motorail services would have on other services on the line.
The scenario against which the matter has been aired is unsatisfactory. We were told that franchising would be based on the 1994 timetable. Consultation has been provided for and repeatedly promised. However, while we await consultation Mr. Salmon, Director of Passenger Rail Franchising, has announced that he will

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exclude the Fort William Sleeper and Motorail Service. Then BR announced that they will axe the services on 28th May. That is why my Question has to be double-barrelled. One might be forgiven for feeling as if one had gone to play a crucial match and found that someone had nicked the goal posts and dug up the pitch and the referee had lost his whistle. I do not accuse the Government of interfering with posts or pitch—that was done by Mr. Salmon and British Rail—but the Government do appear to have lost their whistle.
We have been given assurances that no final decision has been made. My noble friend the Minister said as much at Question Time on 28th February, and he explained why Mr. Salmon had made his announcement. But that explanation did not excuse Mr. Salmon pre-empting consultation. I see that Mr. Swift, the rail regulator, says that BR is out of order. I hope that he is right.
It is reported that the Scottish Office has refused BR a subsidy. I hope that it will note that on the basis of my figures a three-month operating subsidy would require only about £200,000. It is reported that Mr. Salmon has withdrawn subsidy. How does he withdraw what is presumably already in place and was not in his gift? Surely when so much is at stake for a heavily subsidised economy the decision whether to subsidise an important aspect of infrastructure for an area of special need should be a hands-on political decision taken from a wider viewpoint. Can my noble friend the Minister say whether there has been a thorough review of the wider implications for the economy of the West Highlands of the withdrawal of these services?
One might have hoped that privatisation would afford an opportunity for entrepreneurial improvements rather than a death sentence. Once the service has gone, trying to win back business would be daunting.
It has been irksome when trying to discuss this matter to be rebuffed with repetitions of the figures of £543 per passenger and a subsidy of £6.6 million per annum. If British Rail's operating subsidy is £3 million that puts access to the Railtrack system at more than £3.5 million, although a leaked letter now suggests that it is less, and it has already been admitted that Railtrack costs will not reduce with withdrawal of the services. Without knowing the construction of the Railtrack access charge how can we judge its relevance to this debate and to the threatened services? I remain suspicious.
Since the Fort William sleeper service was moved from Kings Cross to Euston, BR has done it few favours. There seems to be a corporate lack of will to maximise business, as current experience with freight is proving. Freight is not on the agenda tonight, but I am told authoritatively that £1 million worth of freight traffic is currently going begging on the Fort William line.
In order that before consultation starts everyone is briefed to discuss the subject on the same basis, I ask my noble friend that British Rail and rival costings should be independently analysed, or that British Rail should release its calculations for study in exchange for those I have mentioned this evening.
I have come to the end of my speaking time. There is much else that I should like to have said. I have a great affection for the line for which I once travelled as stand-in for a sleeping car attendant. However, it is not my relationship with that line which is at stake; it is the relationship of that line with the area about which I have spoken.
I hope that those noble Lords who have so kindly put their names down to speak tonight, together with my efforts, will be able to persuade the Minister to have another look at the problem and to give us some encouragement.
7.30 p.m.
The Earl of Mar and Kellie: My Lords, I congratulate the noble Lord, Lord Gray, on introducing this useful debate. I should declare some interests. I am a member of a frequent flyer programme with both British Midland and British Airways and in receipt of a car park pass from the British Airports Authority. Having got that out of the way, I can tell the House that I have been a railway enthusiast since I was aged 14. Also, and more cogently, my brother is catching the night sleeper from Fort William to London tonight and will join the train at two minutes past 10 in Crianlarich. Therefore, although I live in Clackmannan, which is distinctly not in the West Highlands, I feel that I have some connection with the area.
I deplore the planned withdrawal of the West Highland Sleeper and Motorail Service during, or almost before, the consultation period with possible franchisees has begun. Does that mean that the carriages must rot and the staff be dispersed? I do not understand how the service could be taken on as it will not be a going concern unless the discussions with potential franchisees take place extremely swiftly. I am, too, worried about rumours that business is being turned away by British Rail in order in some way cynically to prove that the service is not working.
In a small way, the proposal gives an economic kiss of death to the fragile economy of Lochaber and the North Argyll area. All this is happening in the country which invented railways. As regards public transport in Scotland, there is a choice of rail or air transport from North, East and Central Scotland. There are airports in Edinburgh, Glasgow, Aberdeen, Inverness, Wick and Campbeltown, not to mention most of the islands. In the East of Scotland, Dundee and Perth do not have a significant airport, but they have motorway connections with airports. Therefore from the East Coast, North and Central Scotland, it is possible to travel either by air or by rail. However, there is no air service out of the West Highlands despite there being a small airfield at North Connel. A person wishing to travel from that area by rail after the withdrawal of the sleeper motorail service would have to drive through to Kingussie to catch the sleeper from Inverness, no doubt at some awkward time, having travelled the road through Laggan—a route which I should hardly recommend in winter.

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The West Highlander who wishes to travel by air has to go by Glasgow or Inverness, again on awkward roads which quite distinctly are not motorways and which have to cross mountain ranges at such passes as Rest and Be Thankful.
The withdrawal of the sleeper motorail service creates a black hole in public transport in the West Highlands. But what are we really considering? We are looking at a Government of 16 years with what must be considered an anti-rail policy. Scotland needs a more positive government attitude towards railways in remote areas. When in 1880 the Callender and Oban railway was being built, when the North British Railway Co. was constructing the West Highland line in the 1890s, and when the Mallaig extension had to be built with public funds, it was recognised that it would not be easy to run a rail service in that area, but that a rail link was definitely needed if there were to be any possibility of economic development.
I believe that the Minister has to face up to the fact that his department is throwing away Scottish rail services. I fear that that enhances what I like to call "Britosceptic" thinking. I sum that up in this way. What is the point of two nations having a united Parliament if Scotland gains policies that it does not want? I believe that a Scots Parliament would have a more positive attitude towards railways in remote areas. It would recognise that social subsidies are involved.
I conclude by urging the noble Viscount to retain the service in order to allow the fullest and most realistic discussion with potential franchisees.
7.36 p.m.
The Earl of Buchan: My Lords, I wish to address the House for six minutes and to congratulate the noble Lord, Lord Gray, on his tenacious efforts to keep the West Highland line open, in particular for the throwing of light on tendentious figures issued by British Rail and other interested parties. This noble House, incidentally, has to listen to Erskines speaking for 12 minutes—I refer to my noble kinsman Lord Mar and Kellie, and myself.
Perhaps I may address the Minister on a matter not directly connected with the issue. Since Cross-Bench Peers were falsely accused of being "whipped" during the debate on the Pensions Bill, this Cross-Bench Peer has no inhibitions about offering advice to the Government. Would it not be kinder and shrewder to adjust the length of the debates in accordance with the likelihood of Her Majesty's Government being able to do something about the issue in question? Indisputably, the Government have the power to close or to keep open the West Highland line; they could do something about it. Thus, the next time that an occasion arises where time is asked for a debate on an issue such as a United Nations conference on the imperfection of Western man with particular reference to the vileness of the developed world, could not the answer be roughly along the lines of, "Very sorry, Her Majesty's Government can do nothing about the imperfections of Western man: You can have 15 minutes maximum in which to speak"?
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In encouraging the Minister to maintain the sleeper and Motorail services on the West Highland line, perhaps I may make a plea on behalf of those living in remoter parts of Western Scotland such as Ardnamurchan and Morven, where a great many people seek to make a living through holiday camps, fishing, fish farms, forestry, the retail trade, the holiday trade and fanning. It cannot be right that those people's connections with the remainder of the United Kingdom should be changed at the whim of a secretive franchise director. It is now assumed in that part of the world that once Baghdad bazaar standards are applied to the railways the next argument will be, "Now that them is no night service on this line, let us take away the day service because the costs cannot be shared". It cannot be right that remote places such as Acharacle can be cut off from the remainder of the United Kingdom, resulting in it being more difficult to get from there to London than from Brussels to London.
Perhaps I may seek to soften the Minister's heart and draw his attention to a most unfortunate coincidence of dates. The year 1995 is the 250th anniversary of the landing of the Young Pretender. That event will be commemorated loyally at Glenfinnan and will draw a great many visitors from literally all over the world: America, Canada, Australia, New Zealand and other similar places—even France and Italy. It must appear to the organisers of the commemoration a snub that almost to the month Motorail and the sleepers to Fort William are being taken off. Perhaps noble Lords would consider how the event could be commemorated and what could be done with a little marketing and publicity. One could have an announcement along the lines of:
"Join the Motorail sleeper in Rome, after visiting Henry IX's tomb in St. Peter's, and be at Bonnie Prince Charlie's memorial via the Channel Tunnel the next day!"
A little imagination and a little hard work marketing the service should make it prosperous.
The noble Lord, Lord Gray, touched on the history of the line. As he said, it has been running for 101 years. However, what he did not mention is that the Treasury gave a subsidy of £260,000 towards the cost of the building of the line at that time. It was never a question of the line being profitable. Noble Lords might be interested in the comment by the chairman of the North British Railway in 1899, that company having guaranteed the capital for the West Highland railway. He said:
"I would not venture to prophesy it will ever pay an adequate return."
It has never paid, but it represents a hundred miles of well-maintained, single track line between Helensburgh and Fort William. It could be made more prosperous.
Perhaps I may make a point on press comment on the issue. The Times newspaper has covered the issue fully and fairly in my view, and I hope that it will continue to do so until the cause is won or the proprietor runs out of newsprint. The Economist, on the other hand, produced a rather facetious article on the West Highland line and I do not commend it to noble Lords.

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Finally, I implore the Minister to reconsider the issue and request the railway authorities to keep open the line for both the sleepers and Motorail.
7.45 p.m.
Lord Rankeillour: My Lords, I intend to leave the statistics and business data of this sad and sorry tale to those noble Lords best versed in such matters. My own contribution is merely intended to bring the attention of this House and the kingdom to other curious things that are said to lie behind British Rail's dismembering of the West Highland line.
This is not the "Deerstalkers' Express": it is used by people in every walk of life, even more so since the huge ski complex was built in the high hills outside Fort William, which attracts tourists in great numbers, winter and summer, from all over the world. I wonder why BR—which apparently claims that its sleepers and Motorail carriages are so empty—has not lowered its charges (I emphasise "lowered") to attract the army of skiers and tourists, as well as their motor cars, for the haul of hundreds of miles from the South to Fort William. Indeed, how well has BR tried to advertise the line with the new honeypot at its northernmost end, one wonders?
Imagine, if you will, that BR suddenly announced that it was to rip out all the seats from a few carriages in all its commuter trains between, say, London and Manchester or Birmingham, for the given reason that they are too expensive to maintain; and, anyway, what is wrong with making the passengers uncomfortable throughout the entire journey! What is wrong goes far deeper than just bad marketing and a poor sense of the needs of the travelling public. In the case of the Fort William to London Euston trains, the matter becomes a lot more serious, for not only would the removal of the sleeper service and Motorail be a giant step backwards for BR, but also the people of the Highlands and Islands would at once lose their only safe, all-weather, year-round, fast means of restful transport. Our lifeline would be snuffed out like a candle's flame: there a moment before, but suddenly stone dead.
We are not like somewhere in the Home Counties with an airport and a choice of good fast roads between London and front doors elsewhere. We in the Highlands and Islands are an ever-increasing population trying to live, as the noble Earl, Lord Buchan, said, a peaceful, constructive life in a territory that by nature requires greater consideration from such people as British Rail than almost anywhere else south of the Border.
In short, this is our railway too. My ancestor, Lord Annandale, did not form his Caledonian Railway Company during the Industrial Revolution to survey a route from Glasgow to Fort William just for us now to see the West Highland line dismantled, stone by stone, apparently in the name of cost. Does not BR know the word "amenity"? Does it not care? No, he had a dream; and in time a railway was built along that surveyed route but, alas, not by his company, as history shows for all to see. But at least that selfsame track is still in use—so far.
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But for how much longer? If BR is to care so little for its travelling public, how does it view the metals themselves? Will they be torn up too? We in the West Highlands remember all too well what Beeching did to our way of life all those years ago. Are we now to have the coup de grâce?
Our West Highland line is not just a statistic in BR's company books, it is our lifeline: a living legend, an old scenic marvel, admired throughout the world, a fast vital means of transport between calm and chaos. Yet, despite all that, BR has for years been gnawing away at its foundations instead of gently improving them. Why?
In The Times leader of 20th March this year came the charge that,
"booking clerks discourage passengers in order to support claims that the sleeper runs almost empty on most nights".
That is said to be,
"all too believable in the light of earlier tactics by railway bureaucrats".
So perhaps the time is ripe to ask the Minister whether there is any truth in that report and whether the bureaucrats are indeed accountable.
Even now, some sleeper attendants at Fort William have been summoned to the severance pay desk, one girl near her marriage day. What a wedding present to start out on life's hard road, having just been fired by a company set, she thought, to see her through to retirement.
Is it really beyond the wit of man to improve our beloved railway to the point where it can flourish as well as, or even better than, in its Victorian heyday? Is there no chairman available or capable of pulling it up by its bootstraps, to give the staff their pride back; to reintroduce observation cars, the better to see the gorgeous scenery en passant; to put attendants in uniforms that look correct and are not ragbags; to use some imagination in the matter of the present unmanned stations and to keep the entire length of track free of rubbish?
The train goes through my West Highland village. I am an ardent passenger on it and have been since a boy, when the station was the hub of our universe and the corrals held our livestock for transport to the lowland markets. Nowadays only a hut and a platform remain of that boyhood memory.
In those days of BB (before Beeching) British Railways very much cared for its stations and passengers. Why does it not still? After all, the whole north west of the Highlands and Islands survives. Those areas still need the attentions of the Belford Hospital consultants, fast transport for businessmen and freight, and tourism. Now that the ski complex is blossoming, British Rail announces its closure of the sleeper and Motorail. In company with everyone who is concerned with the Highland line, I am appalled.
BR must be told in no uncertain way that it simply cannot cut off the Highlands and Islands sleeper/Motorail services just because, as yet, the line does not balance its books. Railtrack might consider running it all on its own from the vast sums that it charges other operators. Amenity can bring its just rewards sometimes, if given a push. The alternative is

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bleak for the north west of Scotland, if we are to be deprived of services which in most other parts of this kingdom people regard as their common right. Let us just look at a road map of Scotland and ponder on the dire alternatives and consequences for the future.
What benefits will this privatisation bring to railway passengers north of the Border? Apparently none. It is a clear indication that British Rail and the Royal Mail would be a lot safer in the hands of nationalisation (one of the few exceptions to the rule now surging through this kingdom). Keeping the railways and the Royal Mail under government eyes would make me feel a lot safer than just throwing them to the avaricious wolves.
7.52 p.m.
Lord Mountevans: My Lords, I am grateful to my noble friend Lord Gray for asking this Question tonight. As ever on railway matters, I declare an interest. It will come as no surprise to noble Lords that I have some sympathy with the British Rail decision. I also have to say that I have some sympathy with the speech of my noble friend Lord Rankeillour. He has probably travelled that railway more times than have the rest of us put together.
The noble Lord is a lover of the West Highland railway, and so am I. I am sad to see the sleeper threatened with withdrawal. But I have to say that I find annual subsidies of £2.6 million for the operation of the train and £4 million for infrastructure quite unacceptable in my capacity as a taxpayer. In terms of costs per passenger, these figures become £180 per single journey and £450 respectively. They are all 1993–94 figures from an Oral Answer in another place; and they relate to the 14,600 passengers carried by the West Highlander in that year: 284 passengers per week spread over 12 trains, six each way. With six trains each way, you get an average load of 23 passengers per train. I shall return to that point later.
If the press comments, some of which have already been prayed in aid this evening, repeating that shibboleth "Beeching", or talking about "withering on the vine" or about lack of investment and lack of marketing, were true, I should have a great deal more sympathy with those who spoke passionately tonight for the train. But, sadly, they are not totally true.
To quote Beeching would involve closure of the route, touched on by the noble Earl, Lord Buchan, and mentioned by my noble friend Lord Rankeillour. But we are not talking about closure of the route. In this case we are talking about the withdrawal of one train.
Turning to the idea of withering on the vine and to investment, the West Highland has received a disproportionate amount of investment in the past decade. I wish that my railway from Waterloo to the New Forest had received similar levels in terms of the passengers that it carries. Millions are spent on radio electronic tokenless block signalling and on new day-time trains. The sleeping cars themselves are much more modem than those on many of the trains on which I travel down to the New Forest. Indeed, they are much
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more modem than the high-speed train fleet, which is a means of communication for many Members of this House.
With other investment over the decades, the journey time from London has come down by some two-and-a-half hours since I first travelled on the route, and indeed on the night sleeper, in 1962. There is one monster difference, which nobody has mentioned, between 1962 and today; namely, the presence of the motor car.
Is lack of marketing to blame? That was also touched on by noble Lords. I hardly feel so. Last year saw the centenary of the West Highland line. It was celebrated with additional steam services. There was a new video—the second film in effect in recent years; I can remember paying, in my British Tourist Authority days, for the early 1980s film. There are cassette tapes, a new history of the line and a very attractive description of the sights on the route which make the journey by daylight very appealing indeed. My noble friend Lord Lindsay was at Fort William for the centenary celebrations with the West Highland line steam locomotive that was rescued by his late father. The West Highland line and the West Highlander have scarcely ever had that much publicity before.
What about the more specific appeal to the customer's pocket? My noble friend Lord Rankeillour mentioned lack of marketing. But he will recall that in the past two or three years I told him of certain opportunities and he has indeed used them. There has been a very great deal of marketing in an effort to keep this sleeper going. There has been advertising at both ends of the route. With the Apex tickets, similar to the airline ones, one saves money by booking some time in advance. There have been discounted berths for family Railcard holders, including the offer of two berths for the price of one. There have been offers of sole occupancy of twin berth compartments for second-class ticket holders; special packages for couples; and off-peak first-class offers—to say nothing of Motorail offers, which I believe I specifically mentioned to my noble friend. There have been four special Motorail offers, Let us not forget the work that was done by the Scottish Tourist Board and my erstwhile friends in HIDB, which in those days had tourist cars covering the line, as well as my erstwhile colleagues in the British Tourist Authority.
I am always delighted when tourism is prayed in aid, as it has been tonight by the noble Lord, Lord Gray, and the noble Earl, Lord Buchan, among others. But all this promotional and marketing activity suggests to me that the train does not meet tourism needs which cannot be met by other services on the route.
Where does all this activity leave us? On my last journey on the West Highlander, last October, there were 10 passengers, of whom five were my colleagues—British Rail's "best kept station" judges—and five were revenue fare paying customers. Those five in no way cover the staffing costs: seven people are required to run the train, actually on the train between Fort William and Glasgow. They do not cover the staffing costs, the rolling stock costs or the traction costs; and them is no way that they could cover the infrastructure costs, no matter how we calculate those.

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You could have given some away for free and the train would still have been losing a fortune. To put it another way, the £180 per passenger subsidy figure that is mentioned is four-and-a-half times that payable for a passenger who uses the Inverness sleeper and 11 times that of using the Edinburgh sleeper.
The West Highlander has, sadly, run its course. I sympathise with BR's decision to withdraw it. In the light of the franchising director's decision to withdraw subsidy—it was the franchising director who took that decision—given the numbers, I would be reluctant to look for subsidy from any other source. Rather, we should hope that the Inverness service, with its ongoing subsidy and its prospects, is given a fair crack of the whip.
This is an emotional issue, and I share that emotion. But emotion does not pay the bills. Let us celebrate the West Highland line and the West Highlander. But let the latter go, and let us concentrate on the much greater problems facing British Rail as a whole nationwide. The battle is really for the railways. The West Highlander seems to me to be but a smokescreen.
8 p.m.
Lord Renton: My Lords, for reasons which have already been given and which I shall attempt to support, I do not go the whole way with my noble friend Lord Mountevans. Fortunately, my noble friend Lord Gray has already deployed in great detail and with great accuracy the financial implications involved. I am glad that he did so. It saves us all a bit of time.
I have no interest to declare in this matter. I used the West Highland line quite often until about 40 years ago. Since then I have not used it very much and certainly not in recent years. I remember the West Highlands for some of the most wonderful scenery in the world, and wonderful wildlife too. It is a great potential tourist attraction, not merely for people from the southern half of England but from the rest of the world. Fortunately, there is a growing tendency to treat the world as one place. Air travel has made that possible.
The noble Earl, Lord Buchan, mentioned Rome. It so happens that I was there yesterday concluding a three-day visit—not, alas, on holiday. I was working rather hard, unpaid I hasten to add. I was astonished at the number of Japanese people in Rome. That is just a symptom of the ever increasing travel between various parts of the world involving people from all over the world.
Most long distance travel is done by air. But, as the noble Earl, Lord Mar and Kellie, said, in the West Highlands the air services are somewhat limited. They are limited for the tourist trade. Some of the landing fields are so small that they can take only very light aircraft and might not meet the needs of tourist traffic if it increases, as I believe it will, in the years to come.
For that reason the West Highland line to Fort William is truly essential. The question that remains is whether the night sleeper service is also essential. I believe that it is and will become more so as the international tourist trade expands, as it undoubtedly
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will if those in this country who are responsible for developing what is a great money earner for this country—it helps the balance of payments—do as well as they should. If so, the tourist trade to the West Highlands will undoubtedly expand over the years. That goes beyond the valid reasons for the West Highland line stated by my noble friends Lord Gray and Lord Rankeillour.
I must say a word about the cost of the sleeper service and attempt to answer some of the points made by my noble friend Lord Mountevans. I voted for privatisation. But during the discussions on the Bill I never understood—I do not think I was given to understand—that services such as these would be closed down. The railways, even though privatised, are a public service. It would go against principle if only those services were operated which made a good profit. Within a few years only suburban services, inter-city services, football specials, summer seaside services and a few profitable freight services would be running. I was very interested to hear my noble friend Lord Gray mention the potential for freight services on the West Highland line.
Surely, it is unbelievable that privatisation could result in the loss of all other services, some of them somewhat marginal and some losing small sums of money, which are necessary to the life of the people in the country. If that were to happen, our roads would become even more congested than they are already. Therefore, I believe that some traffic which does not pay or does not pay well enough should be subsidised. If the West Highland night sleeper services were better advertised, as has been suggested, they would be subsidised less.
But even if they have to be subsidised, they should be kept going as a public service. I agree that it is a question of the amount of the subsidy. Obviously, that must not get out of hand. But it is a matter for those who will have the responsibility of running the services to see that they are well advertised and that the public are persuaded to make the fullest use of them.
It would be absurd to discontinue this service in early May without further thought being given to what has been said in this evening's debate, without further thought for the future, and indeed ignoring the 250th anniversary of the landing by Prince Charles Edward, as the noble Earl, Lord Buchan, mentioned. Alas, this debate is not about Motorail on which, as an octogenarian widower, I have become rather dependent in travelling between Euston and Carlisle and which, I dare to hope, may too be given an extended lease of life.
8.7 p.m.
Lord Gainford: My Lords, it is a pleasure to support my noble friend Lord Gray and other noble Lords who have spoken on this matter. My personal interest is indirect. I used the line and its sleeper services quite a lot when living in Argyll. I still have family there including a brother who recently moved to Roybridge and is a close neighbour of my noble friend Lord Rankeillour. He has told me about the anxiety of local people.

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It is not just those who live close to the line who are concerned. The railway has, expressed in geographic terms, a vast catchment area. The West Highlands depends on the line for both trade and tourism. And tourism is not just a summer matter. Skiing has made it an all-year-round industry. I am told that at New Year, when a vast number of skiers headed for Fort William, there was a desperate call for additional coaches on the trains, both sleepers and ordinary coaches. For some reason, British Rail was not able to supply them. I merely repeat what I have been told. Perhaps my noble friend the Minister can look into the matter and write to me. If I have been misinformed, I am most sorry.
The feeling of the local people can be illustrated by a page from the Fort William newspaper Press and Journal. I have shown it to my noble friend and he has taken a copy of it. There are three main headlines. One says, "Appeal to Premier to save North rail lines". It tells how the regional council convenor, Duncan McPherson, is attempting to save the Motorail's sleeper service and how a number of honourable Members in another place representing the Highlands are trying to interview the Prime Minister about it. Two further headlines are "Timetable of broken promise" and "A feeling of betrayal".
There is another matter to be considered. The railway line is extremely famous. It is featured in a book which I received at Christmas called, Train Journeys of the World. It describes 30 journeys throughout the world: among them is Glasgow to Fort William on to Mallaig. It contains descriptions of the wonderfully scenic journey that can be experienced. If British Rail insists on withdrawing sleeper and Motorail services, the West Highlands will begin to consider what other services can be cut. As was pointed out, there is no airport near Fort William and therefore the railway line is vital. Will British Rail eventually cut the lifeline?
Lady Saltoun of Abernethy: My Lords, before the noble Lord sits down perhaps I can say that the Press and Journal is a north Scotland newspaper printed in Aberdeen.
Lord Gainford: My Lords, I am grateful to the noble Lady for that information. The cutting was sent to me by my brother who lives near Fort William. I thought therefore that it was from that district. I am grateful for the correction.
8.11 p.m.
The Earl of Dundonald: My Lords, I too add my support to that of other noble Lords in the Chamber. Many of us feel strongly about this matter. I wish to start by looking at the other side of the coin to the one presented by my noble friend Lord Mountevans.
The Government clearly have a duty to deal in the best possible way with the assets owned by British Rail. I should like to point out to the Minister and to others that the principal asset of the West Highland line is that of the track. Any businessman will say that one should make the maximum use of any fixed asset if one is paying for it day in and day out regardless of whether or not it is being used. I suggest, therefore, that if we
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were realistically looking at the business we would be trying to run services on the line 24 hours a day, 365 days a year. Clearly that is not possible—hut we should try to move towards that.
The other aspect is that the rolling stock is bought and paid for. I know that it is going into a separate leasing company, but if there is to be an excess of rolling stock once this service, and perhaps others, are cut, then there will be a lot of secondhand rolling stock lying around the country and it will not have the same value as its original cost. The break-even point on this service, therefore, is the cost of the variable costs of the business, not that of the fixed or rolling costs. The variable costs do not amount to much; they incorporate things like wages, fuels and everyday repairs and renewals. The Government really should take note of that.
Coming back to the point relating to the track, if the Government are saying that we should preclude ourselves at this moment in time from using half of that asset—that is, the night time part of it—then it will be that much more difficult to see any form of realistic payback on it. Hotels, golf courses, or any other assets that deal with services and people, do not take that view.
The next point is a follow-on and one to which other noble Lords alluded. If we take away half the available time to make money to recover those costs, it makes it that much more expensive to run the other part of those services. It means that the Government will have to subsidise the other services more than they do at present. It may be possible to take the view that it would make closure of the line in its entirety that much easier at some time in the future. I should like to think that that is not the case, but it may be possible to draw that conclusion.
I should perhaps draw my noble friend's attention to a letter received by his friend in another place, Lord James Douglas-Hamilton, from Arjo Wiggins, a major employer in the area. It made the point that the company transports 55,000 tonnes of freight annually. In the event of the line being closed—I know that that is not what we are discussing tonight, but it may be possible to suggest that—it would cost an additional £160,000 per annum. That makes it extremely difficult to run those sorts of businesses.
To turn to the effect on local businesses in the area, it seems strange that we should be discussing the closing of an opportunity tonight when recently there was talk of through sleeper services from both Glasgow and Edinburgh to Paris, Milan and other European capitals. I do not understand the logic and perhaps my noble friend the Minister will explain that to me in his response. There are 16,000 passengers who use the sleeper service on an annual basis. That is a lot of people.
Lord Mountevans: My Lords, if my noble friend will allow me to say, that amounts to 14 people per train. The figure of 16,000 sounds a lot, but it is only 14 people per train.
The Earl of Dundonald: My Lords, perhaps I can continue and expound the point in relation to local businesses. Assuming those passengers spend £100 a

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head, to withdraw the services may produce a fallout of as much as 50 per cent. The effect on the local economy, therefore, could be as much as £1 million per year. That is a significant part of the tourist income in an area such as Fort William and Lochaber. Again, I do not understand the logic of that. When we are trying to encourage tourism in those areas, that does not seem logical.
We have the opportunity to make British Rail in the west of Scotland work properly, and that opportunity is being taken away. I draw the attention of my noble friend the Minister to the Scottish Association of Public Transport which wrote, as he may or may not be aware, to the Prime Minister on this matter promoting its North Star proposals where the franchise director may be encouraged to incorporate services other than the ones he is at present considering into the ScotRail franchise. They would include the opportunity to expand and develop the sleeper services on the West Highland line. What better way of arriving in Fort William or the west of Scotland than having had a good night's sleep and breakfast on a sleeper car, passing over Rannoch Moor.
In conclusion, it seems illogical, just as the Government are trying to encourage new franchisees into the system, to close down what is a wonderful opportunity for those businesses.
8.18 p.m.
Baroness Thomas of Walliswood: My Lords, like others, I thank the noble Lord, Lord Gray, for introducing this debate. In particular, he not only asked two important questions which query the Government's willingness to exercise their remaining powers in regard to privatisation, but in doing so he provided, as several other noble Lords pointed out, a valuable series of figures and advice drawn from known experts in the field as to the real cost of maintaining this service. I hope that the Minister, in responding to the debate, will clarify how those costs compare with the figures given by Ministers in another place. It may be that those figures were given here. If so, I apologise for the error. It seemed to me that there was a considerable discrepancy between the two which needs to be clarified.
In addition, the noble Earl, Lord Dundonald, made some extremely good points about the importance of not ascribing the whole cost of any particular part of the railway to one service and about the difference between total cost and marginal cost. I hope that the Minister will respond to those points.
Many noble Lords have spoken about the local situation. I have nothing to say on that subject. I claim no knowledge whatever of the West Highlands. But when one hears people who have lived there all their lives speak of those needs, we all have to pay attention. My noble friend Lord Mar and Kellie, who has not claimed to live there all his life, and the noble Lord, Lord Rankeillour, expressed those local needs very vividly indeed. Those needs should be taken into consideration, as in particular should the lack of alternative direct links with the capital of what is still
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supposed to be a united kingdom—however much I may agree with some of the points which my noble friend made, this is perhaps not the place to have that debate—and the fact that, as the noble Lord, Lord Rankeillour, said, the service is a lifeline to the outside world which is still required today. That is a good reason for maintaining it.
Other noble Lords have spoken of the opportunities that are available to advertise and to gain more users of the service. I should like to endorse what the noble Earl, Lord Buchan, said about the importance of these long-distance services now that we have a direct rail link to the rest of continental Europe. It is ridiculous to be destroying this kind of service at the very moment when it becomes more relevant, if anything, than it has been before. Now is not the time to be carrying out such destruction.
In a way, the noble Lord, Lord Renton, summed up these views when he spoke of the need to regard rail services as part of a public service approach to transport. I endorse that and add a point which essentially many noble Lords made, although not directly. Transport is not just one thing taken in isolation. The Government approach it in that way. It is very difficult to perceive any integrated transport policy in their attitude to such matters as the destruction of this or that part of a given service. I see that the Minister shakes his head—not his hands: he might be wringing his hands perhaps, but not visibly. Perhaps he can explain to me how the withdrawal of subsidy for these services satisfies some overall public transport good. I must say that it is invisible to me, as it is to many other noble Lords present today.
I should like to add one or two points which have not been mentioned by other speakers, at least not directly. The first concerns the relationship between what is happening here and rail privatisation. There is no doubt in my mind that the two matters are intimately connected, if only because it is the franchising director's decision not to include these services in the public service requirement for franchisees—not to subsidise the services—that has brought them to a point of crisis. The situation has been worsened by the fact that ScotRail, presumably a potential franchisee which would want to run this part of the rail service, is apparently threatening to cut the services in advance of the completion of the consultation process set in motion by the franchising director. It is that aspect of the matter which is the most shameful because it is not a suitable way to go about public business. As has been said, it is rather like closing a school and then consulting on the future of that school. That is not the kind of thing that local authorities on the whole do; and if they do, it does not reflect any credit upon them.
We believe that at least a golden share should be retained in Railtrack. That would remove one of the causes of this whole problem—the separation between Railtrack and the train operating companies. That is precisely why it is so difficult, as the noble Lord, Lord Gray, said, to distinguish between the costs of Railtrack and the costs of train operating when one is dealing with , this or any other part of the growing and emerging so-called rail system in this country. We believe that we

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should retain at least a golden share in Railtrack so that the public interest and the public transport policy aspects of government can be encouraged through that share ownership.
Finally, I plead with the Minister to use his residual power to prevent the closure of this service before the public consultation has been completed. That public consultation should be used to bring all the concerns which noble Lords have expressed today into the public arena. I very much hope that he will be able to reassure us on that very important point.
8.26 p.m.
Lord Clinton-Davis: My Lords, I thank the noble Lord, Lord Gray, for initiating this important debate. It is a story that has been marked by an extraordinary amalgam of confusion, evasion, contradiction and non-answers, and also tonight by a number of admissions on the part of noble Lords opposite that perhaps they were wrong about support for privatisation—at least they have expressed some doubts about that.
It was last December that the franchising director, Mr. Roger Salmon, announced that he would not include Motorail trains on the Fort William/Carlisle and Carlisle/London, Plymouth/Edinburgh/Glasgow sleepers in his passenger service requirements. The Minister categorised that as a preliminary announcement—some preliminary announcement! But evidently the franchising director expected that the trains would keep running in the meantime. On the other hand, British Rail interpreted his announcement to the effect that the services should be withdrawn and in fact decided to do that as from 28th May this year. What is offensive about what has happened is that there was apparently no consultation about the effect on Scottish tourism. There was no consultation about the employment effects. But we were still informed that the formal consultation would take place. What did happen, according to British Rail—this was not mentioned by the noble Lord, Lord Mountevans—is that it consulted the Scottish Office and the Department of Transport and gained the approval of the Office of Passenger Rail Franchising before deciding to withdraw the service. I put it to the Minister: is that version correct?
A number of strange answers appeared in Hansard in both Houses about all this. But, as the noble Baroness just said, to imagine that in the light of what the franchising director had said, and furthermore in the light of what had been said by a colleague of his, Mr. James Watson, on behalf of the franchising director, that they were not intending to review the decision which was announced before Christmas but that they were intending to consult on that decision as part of the ScotRail PSR, who can believe in any genuine consultation? He has made up his mind. What will really happen now is simply that the franchising director will go through the exercise and say, "I have undertaken my statutory obligation", and that is that. The result is wholly predictable. I know that the Minister disputes that, but I really do not believe that he can say that with any conviction in his voice or in his thoughts.
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On 6th March the franchising director said that he expects "consultation" (so called) to begin in May and to last not less than eight weeks. Yet on 15th March, Mr. John Swift, the rail regulator, said that it is not up to British Rail to withdraw the trains. The decision should be made by the Government and the Office of Passenger Rail Franchising. That is precisely what happened. They have both colluded in that.
I want the Minister to answer this question: can the Secretary of State force BR to maintain the service until the so-called "consultation" has taken place? Do Ministers have any role? If they do not, why were they consulted by British Rail and why does British Rail pray in aid their support? Can Ministers interfere with the rulings of the regulator?
What about the users' committee? We know that Major General Lennox Napier, the chairman, declared roundly that Mr. Salmon should not have made the announcement that he did last December. He said that he should have waited for consultation to have taken place. That is patently obvious, as the noble Baroness put it in her contribution a moment ago. Evidently his pleas fell on deaf ears, as we have heard from Mr. James Watson, speaking on behalf of the franchising director.
So what is to happen? Having consulted the Scottish Office, the Department of Transport and OPRAF, British Rail proposes to keep the locomotives and coaches mothballed. What they should be doing, of course, is keeping the trains running pending consultation. The Government should take immediate steps to safeguard the services until proper consultation has taken place, although obviously that is now very difficult. They should undertake a proper, independent survey on the implications for employment and tourism.
Mr. Ian Grant, the chairman of the Scottish Tourist Board, has expressed deep concern regarding the implications for Scottish tourism, which brings in no less than £800 million to Scotland each year. So how is that likely to be affected by this decision?
Can the service be reinstated after it has been mothballed? The Minister must answer these questions. What about redundancy legislation and how that affects re-employment of redundant sleeper staff if the trains are reinstated after consultation? Would it not be necessary to have new recruits brought in who would have to be hired and trained?
Perhaps the most telling indictment in all this comes from Mr. Alex Lynch, the acting director-general of ScotRail for another few days. He is a most powerful witness. He said that BR and the franchising director have colluded in an unholy alliance to ensure the demise of the service before privatisation begins to take effect, undercutting the whole concept of consultation. The Minister must answer that accusation.
I shall not say anything about the cost because we know that the figures are clearly disparate and have been interpreted in a very different way. We have heard tonight the noble Lord, Lord Mountevans, say one thing and the noble Lord, Lord Gray, say another. What the House is entitled to demand from the Minister is a proper, independent investigation into the calculations. But whatever those calculations may be it is chicken feed compared with the amount that has been

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squandered on privatisation so far, which amounts to many hundreds of millions of pounds including £4 million for those advising on rail privatisation.
I believe that this is really about reducing the rail network over a period to a core of lines requiring no subsidy. It is a story of no effective consultation. It sets an appalling precedent. It is not fair, it is not reasonable, it is not democratic and all concerned should think again.
8.45 p.m.
Viscount Goschen: My Lords, I am indeed grateful to my noble friend Lord Gray for introducing the question of the West Highland sleeper this evening. As we have heard—especially from at least one of my noble friends whom I have not had the pleasure of hearing before—this is an issue which arouses strong feelings. I begin by acknowledging the strength of that feeling. I undertake to convey the feelings of the House to the franchising director. However, I believe that a little balance is required. I take the opportunity to clear up some of the misconceptions which have been aired.
I have not heard much defence of the level of subsidy this evening but a questioning of the figures. I shall go into the level of subsidy later on. But I feel that that is vitally important in considering the future of this service. I have also not heard a great deal about the levels of occupancy of the service. We have heard a great deal from noble Lords who feel that a case has been made for the retention of the service, but I do not feel that the issue of the very low levels of occupancy of the service has been fully addressed this evening.
In addition, this matter is not about the closure of a line, as some noble Lords have suggested. Indeed, a noble friend of mine said that he was not talking about the closure of the line, but then went on to talk about that. I would also strongly contest the conspiracy—
The Earl of Dundonald: My Lords, I wonder whether my noble friend will give way. I did not actually speak about the closure of the line but about the possible closure at some future date and this simply being a first stage.
Viscount Goschen: My Lords, I am very well aware that my noble friend is himself fully aware of the statutory closure process that the closure of any line has to go through. I do not see that the closure of the West Highland sleeper line is related to that issue at all. I would strongly contest the conspiracy theory put forward by the noble Earl, Lord Buchan, and the, shall I call it, "anti-Scottish theory" put forward by the noble Earl, Lord Mar and Kellie.
To these ends I believe it might be helpful if I give a little background to the situation which might help clarify some of the issues that we have discussed this evening. I believe that a good starting point would be a discussion of the role of the franchising director. He has been given the task of securing that passenger railway services are franchised as soon as reasonably practicable. He has statutory powers and duties which are set out in the Railways Act. Under Section 5 of that
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Act the Secretary of State has powers to set him objectives and to give him instructions and guidance. He is required to encourage efficiency and economy and to promote the use and cost-effective development of the rail network. I believe that that is an extremely important point.
In franchising rail services the franchising director has to secure value for money for the funds which he has available and to allocate them in the best interests of passengers. My noble friend Lord Renton went into this issue. I was very pleased to hear him acknowledge that the levels of subsidy must be taken into account in the context of the levels of occupancy. I am sure that my noble friend did say, and would say again, that he would not want to see levels of subsidy not examined and that they are of great importance in considering the issue.
Lord Renton: My Lords, perhaps my noble friend will allow me to intervene. He should also bear in mind that I said that the level of subsidy can be considerably reduced, as has been mentioned by some of my noble friends.
Viscount Goschen: My Lords, I believe that the only hard evidence that we have to go on is the actual levels of subsidy at the moment and the services offered by British Rail. As my noble friend acknowledged, the whole purpose of rail privatisation is to encourage a more efficient railway. We believe that the franchisees, in taking up the franchises, will be able to create great efficiencies and make more efficient use of the network.
It is important at this point to say that, should the successful franchisee wish to take forward a service, there is nothing to prevent him from doing that. The question under consideration is the passenger service requirement or the guarantee.
The question of the efficient allocation of funds will inevitably require the franchising director to take difficult decisions. One such decision is the level of the provision of sleeper services to Scotland. The franchising process is already well under way. The franchising director issued a pre-qualification document last December inviting organisations to apply for consideration as bidders for eight franchises, including ScotRail. Last week Roger Salmon announced the results of that exercise. Thirty-seven organisations have applied to pre-qualify. Many are interested in more than one franchise, with the result that the total number of applications for the eight franchises is over 160. So there is clearly healthy private sector interest in running passenger services.
Each franchise will be built around a passenger service requirement. The so-called PSR will specify the contractually guaranteed level of service which each franchisee will be required to operate. Among other things, it will specify frequency, journey times, first and last trains and weekend and off-peak services. Passenger service requirements will protect services to every station and on every route on the network. I hope that that guarantee will reassure my noble friend Lord Gainford about his concerns, which ranged beyond the question of the West Highland sleeper.

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Draft passenger service requirements for four of the first franchises were announced by the franchising director and my right honourable friend the Secretary of State for Transport last month. They cover the Great Western, London Tilbury & Southend, Gatwick Express, and South West Trains franchises. The proposed passenger service requirement for ScotRail will be announced in early summer. This will include proposals for those Anglo-Scottish sleeper services which the franchising director believes should be protected by the PSR.
There has been some discussion this evening, particularly by the noble Lord, Lord Clinton-Davis, about consultation and the early preliminary announcement by the franchising director. As has been said, the franchising director has already given an indication of the sleeper services which he is minded to include in the passenger service requirement. He announced on 14th December that he was minded to include sleepers to four of the five existing Scottish destinations—Edinburgh, Glasgow, Aberdeen and Inverness. At the same time, he made it clear that he was minded not to include the Fort William sleeper or any Motorail services in the PSR.
As we have heard, some people have taken the view that the franchising director's announcement has pre-empted the consultation exercise on the future of those services. I vigorously deny that. It is not the case. At the time of his announcement, there was considerable speculation about the future of sleeper services generally and worries that the franchising process would see the end of all Anglo-Scottish sleeper services. It was to calm this speculation that the franchising director made his intentions known.
Lord Clinton-Davis: My Lords, I am much obliged to the Minister for giving way, but will he indicate whether or not the charge that was made by the deputy or acting director general of ScotRail was right—that the Government had colluded and had agreed to the closure of the service as from 28th May?
Viscount Goschen: My Lords, I do not think that there are any accusations of collusion to be made at all. I shall set out what has happened; the reason for the franchising director's early announcement to quell speculation; the role of the franchising director; the role of the Government; the role of BR and the interaction between BR and Ministers.
As I have said, the ScotRail passenger service requirement will be subject to consultation in early summer. All the issues that have been raised this evening concerning tourism and other important questions will be fully aired.
Baroness Thomas of Walliswood: My Lords, I apologise for intervening, but is it not the case that an announcement that the service will be ended was made before the end of the consultation process which the franchising director instituted? That is the question to which we are all awaiting a reply. If that is not the case, why does the Minister think that that impression has
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been so widely received by most noble Lords, including the noble Lord, Lord Gray, as he mentioned in the opening speech?
Viscount Goschen: My Lords, I believe that there has been some misunderstanding. If the noble Baroness will allow me to say so, I think that perhaps she has perpetuated some of that misunderstanding—
Baroness Thomas of Walliswood: My Lords, I was asking a question.
Viscount Goschen: My Lords, I believe that the noble Baroness is confusing the role of the franchising director, who is involved in setting the passenger service requirements for guarantees of future service levels after privatisation, and the question of BR announcing that it would no longer run the service. That is not the passenger service requirement. That is not the role of the director of rail passenger franchising. This is a question for British Rail—
Baroness Thomas of Walliswood: My Lords—
Viscount Goschen: My Lords, if the noble Baroness will remain in her seat for a moment longer, she will hear me fully explain the situation.
Perhaps I may return to the issue of consultation. The draft passenger service requirement will be sent to all the interested local authorities and to the relevant rail users' consultative committees. The Office of Passenger Rail Franchising will have detailed discussions on the services to be included and the franchising director has made it clear that he will consider any representations he receives about the inclusion in the PSR of the Fort William service.
I turn now to the reasons why the franchising director reached the preliminary view that the Fort William service should not be included in the PSR. Essentially he was concerned that the very high cost to the taxpayer of these services and their low usage suggested that they represented very poor value for money indeed. In respect of the Fort William sleeper, the cost in subsidy to the taxpayer of keeping that service running is £450 per passenger journey including infrastructure costs.
The noble Baroness, Lady Thomas, challenged me to explain the difference between my figures and those given by my noble friend. I do not believe that I can do that at the Dispatch Box. Our figures come from British Rail. After all, it is British Rail which operates the service. The figure that I have quoted is not far short of the average subsidy which travellers in the south east receive for a full year's commuting. Whatever strong arguments or otherwise have been put forward this evening, I believe that it is vital that that context is taken into account.
I believe that levels of usage are critical in analysing the case that has been made by noble Lords. On average, the Fort William sleeper is only 60 per cent. full in summer—about 36 passengers per train—and 50 per cent. full in winter when the number of carriages per train is reduced. Average occupancy in the winter, therefore, is about 18 people. In addition, demand is

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falling and could be expected to continue to do so in future. On Motorail, 17,600 cars were carried in 1993–94, representing 48 per cent. of capacity.
Faced with those figures it is perhaps not surprising that the franchising director reached the preliminary view that he did. Nevertheless, he is certainly well aware of the importance which is attached to these services locally, which has been ably expressed in the House this evening. He will also have noted the campaign which has been mounted to save the services. I have given the undertaking that he will take fully into account the report of this evening's debate. The franchising director's mind is not closed and if the consultation process leads him to conclude that the services should be preserved, they will be included in the PSR and the franchisee will be contractually required to operate them.
It is for the franchising director to use his judgment to decide what services to include in franchises in the light of the consultation. The objectives, instructions and guidance which have been issued to him give him general guidance but leave specific decisions to him. The Secretary of State has therefore instructed the franchising director to ensure that for the initial letting of franchises, the passenger service requirements are based on the service level being provided by BR immediately prior to franchising. This does not mean that he has to include every service provided by BR. It would be wrong to try to fossilise the existing pattern of services in this way.
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The second half of my noble friend's Question deals with British Rail's decision to withdraw the Fort William sleeper and Motorail services from the summer timetable, which effectively means that the services will stop operating on 28th May. This is the point about which the noble Baroness was talking. Until franchises are let, decisions about individual services are a commercial matter for British Rail. It is for BR to judge the market and to allocate its resources in response to the needs of passengers. Ministers have no powers to direct it on matters relating to the provision of individual services. On this occasion, BR has taken the view that it cannot justify continuing the services into the summer timetable.
I regret that I have run against the buffers of the time limit. My right honourable friend has asked BR to ensure that all the assets needed to run the Fort William sleeper and Motorail services will be kept available at least until the end of the consultation process on the ScotRail franchise.
I hope that the House will accept that Ministers and the franchising director are in no doubt about the strength of feeling expressed by noble Lords this evening.

Jobseekers Bill
Brought from the Commons on Friday last and printed pursuant to Standing Order 48; read a first time.
House adjourned at nine minutes before nine o'clock.