Lords Sitting of 23 November 1995

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

NHS: Organisation
Lord Molloy Lord Molloy asked Her Majesty's Government:
Whether they will consider instituting an annual conference of all major organisations involved in the running of the National Health Service.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Cumberlege): My Lords, Ministers and officials have frequent contact on matters of mutual interest with all major organisations connected with the running of the National Health Service.
Lord Molloy: My Lords, I am grateful to the Minister for that Answer. Is she aware that the 30 organisations which comprise the National Health Service are grateful for her endeavours in making representations on their behalf as well as in smoothing the good organisation of the NHS? However, they are concerned about just one matter which the Minister might be prepared to consider. In a national emergency of some sort, and in the event of our country being in some distress, should there not be some arrangements to allow our National Health Service to play its vital part?
Baroness Cumberlege: My Lords, elaborate systems are in place to deal with any national emergency. I do not think that a conference would be the way forward. It would take some time to arrange.
Baroness Gardner of Parkes: My Lords, does my noble friend agree that there are already innumerable conferences on a much smaller scale and that there is already a great deal of networking and liaison between all sectors of the health service? Does she further agree that the proposed annual conference, which I presume would be an enormous jamboree, would be nothing but a terrible waste of money? Does my noble friend have any idea what the cost might be, because most major conferences are really just showpieces and I am sure that we would all rather see that money spent on the National Health Service?
Baroness Cumberlege: My Lords, my noble friend is absolutely right and, being the chairman of one of the most famous of London's teaching hospitals, she has in-depth knowledge of the subject. I have no idea what the cost of such a conference would be. However, I am sure that it would be large and that that money would be better spent on patient care.
Baroness Jay of Paddington: My Lords, but does the Minister not accept that further consultation with those who work in the health service might lead to the restoration of confidence within the health service,
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which in the past few months has been shown to be at a very low ebb among professionals? We have seen unprecedented unrest from the nursing and midwifery professions, and I have now read a survey which states that 70 per cent. of hospital consultants are seeking early retirement—all at a time when patients' complaints are rising by 30 per cent.
Baroness Cumberlege: My Lords, I totally refute that. I visit a lot of hospitals and community units and meet a great many staff. I was with the Royal College of Nursing last week, and met members of the medical profession and managers only last night. I do not accept what the noble Baroness says, although I do accept that there is pressure in the health service because of the demands on the system. However, I do not think that further formal consultation is necessary because it takes place the whole time informally. Indeed, the Secretary of State holds quarterly meetings with all the major organisations.
Lord Molloy: My Lords, perhaps I may advise the noble Baroness that I totally agree with her, although many people believe that there should be such a national conference. Indeed, noble Lords opposite ought to acknowledge that in a free country those who work in the National Health Service have every right to think that. I do not agree that there should be such a national conference and I congratulate the Minister on her response. However, in the event of a grave emergency we should look at how our NHS and its wonderful staff can play a great role.
Lord Butterfield: My Lords, although I agree with all that has been said, I wonder whether the Minister could give some thought to the possibility of holding an annual get-together at which different parts of the health service could boast, as it were, about their achievements in the past year. It would be very interesting to hear what different sectors of the health service felt had been their greatest achievement over the year. Does the Minister agree that that would be encouraging and would perhaps disseminate good ideas? I acknowledge, however, that it would cost money.
Baroness Cumberlege: My Lords, I agree with the noble Lord that our National Health Service is a great success. We are treating more people than ever before. We are seeing waiting times plummet. We are cutting bureaucracy and administration costs and, through the Patient's Charter, we are seeing an improvement in the quality of the services that are provided. We have a great deal, of which to be proud. I am also proud that people from all over the world beat a path to our door to see what we are doing and what we have achieved. There are other ways of disseminating information than through a national conference. I think that it is up to local health authorities and trusts to tell local people exactly what has been achieved. Indeed, many are doing that.

Organophosphates: MS17 Guidance Note
3.6 p.m.
The Countess of Mar The Countess of Mar asked Her Majesty's Government:
Who was responsible for the distribution of the information contained in original Guidance Note MS17 from the Health and Safety Executive of December 1980 and in the revised version of October 1987.
Lord Lucas: My Lords, Guidance Note MS17 was published by Her Majesty's Stationery Office from 1981 to 1993. In its successive versions, it was available as a priced publication from HMSO bookshops, and since 1993 it has been sold by HSE Books.
The Countess of Mar: My Lords, I thank the noble Lord for that Answer. Perhaps I should explain that the guidance note is entitled Biological Monitoring of Workers Exposed to Organophosphate Pesticides. The guidance note states:
"Regular monitoring should be considered for anything more than occasional exposure to OP compounds e.g. garden use".
In view of the fact that many farmers, horticulturalists, forestry workers, contract sprayers and contract dippers use organophosphates on a regular basis, may I ask the noble Lord why the Government have never thought it reasonable to distribute the guidance note to all those who use the products? If the Government had done so, they could probably have saved an awful lot of ill health in the years after 1980.
Lord Lucas: My Lords, the guidance note is designed for health professionals. It has been widely distributed. I believe that about 30,000 copies have been purchased. I agree with the noble Countess that the guidance from 1987 onwards when it was strengthened was that biological monitoring should be considered for anyone using organophosphate pesticides more than occasionally. People excepted from that are those such as farmers dipping twice a year or people who occasionally attach flea collars to cats or dogs. However, health professionals involved with those who carry out contract dipping or who are regularly exposed to organophosphate pesticides should consider monitoring them.
The Earl of Clanwilliam: My Lords, will my noble friend allow me to expand slightly upon the organophosphate problem by asking him, first, if he will assure the House that there is no connection between the application of organophosphate compounds on the spines of beasts, cattle and dairy herds and the incidence of BSE infection in the spinal cords of those beasts, which is causing much concern? Secondly, has my noble friend taken note of the letter of Sir Julian Rose from his farm in Berkshire to The Times on 16th November in which he stated:
"No dairy or beef cattle born and bred on registered organic farms have ever been affected by BSE"?
Will my noble friend comment on that?
Lord Lucas: My Lords, we are satisfied that BSE in the UK is an infection from feed and that it has nothing
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whatever to do with OP pesticides or any other of the wild rumours which have been put around over the past few years. I have not read the letter mentioned by my noble friend, but it would not surprise me at all if organic farms were largely exempt because the feed of the cattle infected with BSE was made out of other cattle and on organic farms they may not use that type of feed.
Lord Monkswell: My Lords, the noble Lord advised the House that the guidance note referred to in the Question was aimed at the relevant health service professionals. Bearing in mind that presumably all of those health service professionals would be employed by the NHS, would it not be more logical that they should be circulated with a free copy of the guidance note rather than have to buy it?
Lord Lucas: My Lords, there is a voluminous series of these notes. Most of the health service professionals have access to them nowadays through CD-Rom and other such technologies. They know that when they come across a potential health problem they should look to the relevant guidance note. They are aware that the HSE covers all such poisons, and they will look for what is required. It is entirely right that when they do so they should purchase the guidance note just as they purchase text books.
Lord McIntosh of Haringey: My Lords, I wonder whether a non-farmer may ask the Government whether they realise how much we admire the noble Countess, Lady Mar, for the persistence of her questioning on this matter in the face of answers which are presumably not inaccurate but which in many cases are incomplete.
Lord Lucas: My Lords, I cede to no one in my admiration of the noble Countess. She has pursued a long, and in many ways entirely successful, campaign, and has achieved a great deal over the years. I have listened to her from both the Front and Back Benches with a great deal of respect. I assure the noble Lord and the noble Countess that I endeavour to give the most complete replies of which I am capable.
The Countess of Mar; My Lords, perhaps I may thank noble Lords for their kind remarks. I am well aware that the noble Lord, Lord Lucas, tries to get me accurate answers on every occasion, and for that I am extremely grateful. Does he accept that the HSE has a duty to inform employers and employees of anything like this which comes into its hands? To whom were the 30,000 leaflets sold, because I have not yet found a GP or an EMAS doctor who has ever seen it? EMAS doctors work within the HSE.
Lord Lucas: My Lords, because the leaflets were sold by bookshops there is no way in which I can tell the noble Countess who purchased them. If she believes that they are not around doctors or health professionals, I shall try to find out whether that is our view of the case. It is not what I have been told, but I shall pursue further research into that matter and write to the noble Countess.

Benefit Disentitlement
3.14 p.m.
Earl Russell Earl Russell asked Her Majesty's Government:
How the Department of Social Security, when considering proposals to disentitle people to benefit, implements the Treasury guidelines that when considering policy changes it should consider the resource implications for other departments.
The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, all departments when considering policy changes consult widely within government to ensure that the full implications of any such changes are properly considered. The nature of such consultation will depend on the policy change in question. Her Majesty's Treasury is fully and actively involved in that process.
Earl Russell: My Lords, when the Minister's department introduced the jobseeker's allowance, how did it set about identifying the resource implications for other departments?
Lord Mackay of Ardbrecknish: My Lords, as I explained, perhaps briefly—I now do so in a little more detail—when a policy is being considered by a department not only are officials involved at all levels but Ministers are involved. Departments look carefully at the consequences of another department's decisions, especially on their budgets, because if they feel that there is a consequence that will fall on their budget they are not slow in suggesting that there should be transfers of resources from that department to the other one.
Baroness Faithfull: My Lords, has there been research into, and have calculations been made of, the cost to the country of young people being unable to obtain social security and so unable to obtain accommodation and a job? There is therefore a great cost to the state in other ways. Has that been calculated?
Lord Mackay of Ardbrecknish: My Lords, my noble friend is not quite right when she says that young people cannot obtain social security. Some young people can obtain income support as can lone parents, carers, the disabled, people who have recently been in prison, and school leavers who are living independently. And, of course, there is severe hardship provision. As I have made clear on a number of occasions from this Dispatch Box, we do not believe that that is the right course of action for any young person. Young people should remain in education, have a job, or undertake training. We seek to ensure that one of those avenues is available to every young person.
Lord Jenkins of Hillhead: My Lords, surely the Minister will agree that while his Answer to my noble friend Lord Russell was perhaps bland rather than informative, his answer to the noble Baroness, Lady Faithfull, missed entirely the point of what she asked; namely, whether there could be research into this matter so that the Minister's answers in future—it has been a long-running campaign—can be more precise.
Lord Mackay of Ardbrecknish: My Lords, it has been a long-running campaign. I have answered the
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noble Earl, Lord Russell, on a number of occasions. It is easy for people to ask for research; it is quite a different thing to see how that research can be implemented when it is not easy initially to identify the group for which one is looking other than by going around the streets asking every youngster whether they are on benefit, whether they have been refused it, and why. Equally, it is difficult to see how one devises a control group.
Baroness Hollis of Heigham: My Lords, to choose a slightly different area, but following the same theme as the noble Earl, do the Government agree that for every pound that the DoE has cut in housing subsidy the DSS has had to pay an extra 75p in housing benefit? As a result, housing benefit has soared. The DSS is now cutting housing benefit so that families face eviction, homelessness, and bed-and-breakfast accommodation which will have to be paid for by the DoE and the local authorities. In other words, is it not the case that as the DoE cuts housing subsidy the DSS pays more housing benefit and as the DSS cuts housing benefit, so the DoE and local authorities have to pay more for homeless families? Is not that endless pass the parcel of exporting costs to some other government department as stupid as it is callous? How does that conform to Treasury guidelines?
Lord Mackay of Ardbrecknish: My Lords, I can assure the noble Baroness that the DoE and the DSS have collaborated closely over the years on the question of public money going into housing. I think that the noble Baroness is attempting to suggest to the House that the Government have been surprised at the shift. Far from it, the Government decided deliberately from 1979 onwards that taxpayers' money should not be spent on subsidising bricks and mortar, as it had been traditionally, but should be spent helping those who cannot afford the rents they are asked to pay. Taxpayers' money should not be paid out to people who could afford higher rents but who were living, especially in local authority housing, in low rented accommodation at the expense of other people.
Lord Avebury: My Lords, are not the increases in crime attributable to young people who have been disentitled to benefit and who feel that they must commit theft or robbery to be able to survive without support?
Lord Mackay of Ardbrecknish: My Lords, that is an interesting proposition which is of course occasionally put forward. There are two defects in it. If crime was being committed only by those people disentitled to benefit, the crime rate would be hugely and markedly lower than it is. Secondly, unfortunately, many crimes are committed by people who have yet to request benefit because they are still at school or, at least, nominally at school.
Lord Stallard: My Lords, is the Minister aware that there is widespread concern about the cuts in income support as regards mortgage interest, which will inevitably create more homelessness because of repossessions? Is he telling the House that the Government deliberately took that into consideration

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knowing the consequences—knowing that there would be more repossessions and further homelessness—and that that is part of his policy?
Lord Mackay of Ardbrecknish: My Lords, we have debated the issue on a number of occasions. I have made it clear to the House—the arguments are there for all to see—that the policy we have pursued in respect of income support and mortgage interest will help the situation. As I have explained to the House, approximately 70 per cent. of home owners are not eligible for income support if they become unemployed. There are a number of reasons for that. They may have capital or their spouses may work, to name but two. Therefore, many people who may require help with their mortgage cannot obtain it through income support. We believe that moving to the insurance-based system, which is proving so successful, will protect not only the people who are currently helped by income support mortgage interest but also those who would not have been helped if they had fallen on hard times.
Earl Russell: My Lords, when the Minister answered my supplementary question he described the administrative method for deciding who was consulted. Would he be kind enough to tell us the method used for identifying the costs to other departments?
Lord Mackay of Ardbrecknish: My Lords, these are quite complicated issues. It depends on the proposal in front of the departments at any one time. But we do attempt to quantify, especially when departments believe that on the premise on which the noble Earl's argument is based they may have extra costs. They are pretty quick to try to identify and quantify them. As I explained to the noble Earl, we have a whole range of statistics collected by government, and especially by the Department of Social Security, on which we can base our calculations of what may be the impact on other departments of any move that one department makes.
Baroness Park of Monmouth: My Lords, in considering all these questions, to what extent does the Minister consult the National Association of Citizens Advice Bureaux, which has a nationwide network of information and knowledge on poverty and the management of poverty?
Lord Mackay of Ardbrecknish: My Lords, my department has frequent contacts with the NACAB. Indeed, it is one of the parties which is always consulted when we go out to consultation on any proposals we may have in mind.
Lord Richard: My Lord, the Minister referred to a raft of statistics and said that they were complicated computations but that his policies are based upon a load of statistics from which he can obtain the true costs. Are those statistics published and if not can they be published?
Lord Mackay of Ardbrecknish: My Lords, indeed they are published. At least, I think they are published; I will check on that. I am sure that I saw a piece of paper passing my desk recently publishing this year's digest of the statistics of the Department of Social Security and that it was a considerable wodge of paper.
Lord Richard: My Lords, that is not what I asked the Minister. He referred to statistics on the comparative costs. He said that they were complicated computations but there were a lot of statistics upon which the costs were based. May we have those comparative figures?
Lord Mackay of Ardbrecknish: My Lords, I think that what I said was that we can make the calculations based on a lot of the statistics we collect. Those statistics are published in documents such as the one I mentioned but whose title, unfortunately, I cannot remember.
The Countess of Mar: My Lords, the Minister said that the Government can make these assessments. Do they make them?
Lord Mackay of Ardbrecknish: My Lords, yes, I think that I did say that. I pointed out to the House that when the Government make decisions about policy the whole Government are involved. All departments are involved. Other departments are interested to watch that the department which is making a policy change is not shifting expenditure in their direction, which is why I pointed out that they may ask for a PES transfer.
Baroness Farrington of Ribbleton: My Lords, will the Minister give information to the House about the calculations made by the Department for Education and Employment and any possible correlation between poverty, homelessness and bad housing and poor achievement in school? Will he inform the House whether any of that was done using the slide rule of the number of children receiving free school meals and poor attainment at school?
Lord Mackay of Ardbrecknish: My Lords, while I should like to be able to respond to the noble Baroness, she takes me wide of the territory in which I am normally involved. It would be better if she tabled a Question on the matter. However, during the past few days I have noticed that the Government's decision to publish league tables about schools has proved very successful, especially in pulling up by the boot straps those schools in the very areas about which the noble Baroness is concerned.
Baroness Farrington of Ribbleton: My Lords, does the Minister not agree that it would be impossible for a school to teach well children who are receptive and able to learn if more than 20, 30 or 40 per cent. of the children in a class were living in poverty and bad housing and suffering from all the family stresses that that involves? Will he inform the House whether within those league tables there was any reference to poverty indicators when comparing school with school?
Lord Mackay of Ardbrecknish: My Lords, I understand that the league tables are largely to do with exam results, which is what I would have thought schools are about. As regards the more general question of measuring people's incomes and so forth, there is plenty of statistical work around and on an area by area basis. I am afraid that the noble Baroness and I are not going to agree on definitions of issues such as poverty because I believe that such aspects are relative, especially when one looks at them around the world.

Trusts of Land and Appointment of Trustees Bill [H.L.]
3.26 p.m.
The Lord Chancellor (Lord Mackay of Clashfern): My Lords, I beg to introduce a Bill to make new provision about trusts of land, including provision phasing out the Settled Land Act 1925, abolishing the doctrine of conversion and otherwise amending the law about trusts for sale of land; to amend the law about the appointment of trustees of any trust; and for connected purposes. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(The Lord Chancellor.)
On Question, Bill read a first time, and to be printed.

Deer (Amendment) (Scotland) Bill [H.L.]
The Parliamentary Under-Secretary of State, Scottish Office (The Earl of Lindsay): My Lords, I beg to introduce a Bill to amend the Deer (Scotland) Act 1959; and for connected purposes. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(The Earl of Lindsay.)
On Question, Bill read a first time, and to be printed.

Party Wall Bill [H.L.]
The Earl of Lytton: My Lords, I beg to introduce a Bill to make provision in respect of party walls, and excavation and construction in proximity to certain buildings or structures; and for connected purposes. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(The Earl of Lytton.)
On Question, Bill read a first time, and to be printed.

Broadcasting: Select Committee
3.28 p.m.
The Chairman of Committees (Lord Boston of Faversham): My Lords, I beg to move the first Motion standing in my name on the Order Paper.
Moved, That a Select Committee on broadcasting be appointed to supervise the arrangements for, and deal with any problems or complaints arising out of, the televising and sound broadcasting of the proceedings of the House and its committees; and that as proposed by the Committee of Selection the following Lords be named as members of the Committee:

L. Chesham,

L. Gladwin of Clee,

L. Graham of Edmonton,

L. Merlyn-Rees,

B. Rawlings,

B. Seccombe,

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L. Thomson of Monifieth (Chairman),

B. Wharton,

E. Winchilsea and Nottingham.

That the Committee have power to adjourn from place to place and to report from time to time;
That two be the quorum of the Committee;
That the Committee have power to appoint specialist advisers.—(The Chairman of Committees.)
Lord Boyd-Carpenter: My Lords, does my noble friend agree that this Select Committee, which is very important indeed to the position of this House, would be even stronger if it included in its membership my noble friend Lord Orr-Ewing who has, as your Lordships know, more experience of broadcasting than any other Member of this House? His experience goes back to before the war. Was my noble friend invited to take part?
The Chairman of Committees: My Lords, I cannot say whether or not the noble Lord, Lord Orr-Ewing, was invited to take part. However, I would say in reply to the substantive point raised by the noble Lord, Lord Boyd-Carpenter, that this is not the first time this particular matter has been raised in your Lordships' House. I would certainly acknowledge immediately that the noble Lord, Lord Orr-Ewing, has a considerable knowledge of broadcasting. It is very extensive and has been gained over a considerable period of time. I believe that many years ago both he and I shared service in what used to be called The External Services Broadcasting Department of the BBC.
I would make the following point, which has been made previously in your Lordships' House but, clearly, it needs to be re-emphasised, if I may say so with respect. This Select Committee is not dealing with general broadcasting in the country. It is dealing with the specific matter referred to in the Motion. I can think of no one who is more well-qualified to chair it, as proposed in the Motion, than the noble Lord, Lord Thomson of Monifieth, and I make similar observations in relation to the other proposed members of the Select Committee.
On Question, Motion agreed to.

Parliamentary Broadcasting Unit Limited (PARBUL)
3.30 p.m.
The Chairman of Committees: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, That as proposed by the Committee of Selection the following Lords be named as members of the Parliamentary Broadcasting Unit Limited (PARBUL):

L. Boston of Faversham,

L. Chesham,

L. Thomson of Monifieth.—(The Chairman of Committees.)

On Question, Motion agreed to.

Earnings Top-up Draft Rules
3.31 p.m.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish rose to move, That this House take note of the Earnings Top-up Draft Rules for a new in-work benefit for people without dependent children.
The noble Lord said: My Lords, this is an unusual occasion. We are here to debate the first ever pilot of a social security scheme in this country. It has been held for the last 50 years that social security changes have to be introduced on a national basis or not at all. That has meant that some good ideas have not been introduced. And some proposals have been introduced which would perhaps have benefited from piloting. It is time we broke out of this mould, and in July we published our plans for doing so in the Green Paper Piloting Change in Social Security—helping people into work.
That set out our plans to pilot a new in-work benefit—earnings top-up designed to assist into work people without dependent children. Because the scheme will be operated for a limited period, it will be introduced on an extra-statutory basis. But it is important that those participating in the scheme should be absolutely clear what its rules are. We have therefore laid before your Lordships' House a draft of the rules under which the scheme will operate. Of course, if it is eventually decided to implement earnings top-up nationwide, then we shall return to Parliament with the necessary legislation.
Earnings top-up is a benefit for people in work. In that respect it is like family credit. But unlike family credit it is for people without children.
It has been accepted for 25 years that families with children needed extra help to enable them to compete in the labour market on equal terms and to remove any disincentives to work which might arise from low earnings relative to out-of-work benefits. The family credit scheme has proved extraordinarily successful in a number of ways—helping unemployed people and lone parents to move into work and enabling other families to stay in work by helping them over a bad patch. The Government now believe it is time to see whether the same principle works for those without children.
When we look at the characteristics of unemployed people we find that 60 per cent. of them—1.35 million out of 2.32 million—are people without dependent children. Of course, the majority are not lower-wage earners within the scope of income-related benefits; and many others move back into work very quickly. But there are others who face disincentives to move into work. The income they could command in work is not enough to provide an incentive to work.
The nature of jobs is changing fast. For example, comparing the same parts of the economic cycle between 1979 and 1990, female employment increased by 17 per cent.; part-time employment increased by 34 per cent.; and overall employment increased by 6 per cent. The demand for unskilled labour has reduced through mechanisation and improved methods of working; and in consequence the price the market puts on unskilled labour has reduced.
Our policies have responded to these changes. As a result, our record on unemployment, including long-term unemployment, is better than the EC average. Our non-wage labour costs—those costs an employer has to pay for but which do not find their way into the employee's wage packet—are lower than most EC countries, the United States and Australia. The UK is the only G7 country where non-wage labour costs take a lower proportion of all costs now than they did in 1970.
We have introduced measures to stimulate employment and to break down barriers which deter unemployed people from taking work. Last year's Budget unveiled a range of innovative measures to this end: from April 1996, unemployed people moving into work will receive housing benefit at the full rate for an extra four weeks; employers taking on long-term unemployed people can apply for a national insurance holiday for a year; faster family credit aims to remove the gap between the end of income support and the first family credit payment; and, finally, from October 1996, the pilot of earnings top-up itself.
Earnings top-up is aimed at an estimated 20,000 people in eight areas of the country. Advice and claim forms will be available at the jobcentre or local Benefits Agency office. They will also be able to phone for a claim form using a locally advertised number. Having claimed and received an award, payment will continue for 26 weeks irrespective of any other changes in income. At the end of 26 weeks, they will automatically receive an invitation to renew their claim.
It will assist single people whose income from work is up to £125 a week and couples whose income from work is up to £164. It will give them an income boost averaging something like £19 for single people aged 25 and over and £24 for couples. The gain could be up to a maximum of £54 for a couple and about half that for a single person.
Your Lordships may wonder why we should pilot the scheme. To introduce a scheme like this nationally would cost over £500 million, based on the higher rate of the two models proposed. It would be an unacceptable risk of taxpayers' money to do that without testing it first in a pilot scheme. We do not know categorically that increasing in-work income will be as effective a work incentive for single people and couples without children as it is for families with children. But research by the Policy Studies Institute clearly showed that family credit helps people with children to move into work and to stay there. That is in its paper Families Work and Benefits 1993. The Centre for Labour Market Studies also found that the amount of in-work income has a positive effect on the decision to take up work, and that the influence is strongest for married men. That is to be found in the document Long-term Unemployment and Labour Market Flexibility 1993.
But there is no previous experience or research which tells us clearly whether people without children will respond to the stimulus in the same way. That is why we need to pilot earnings top-up before we commit resources on a very large scale. It is also the reason why we are piloting two different rates of benefit: to examine whether it is the fact of cash supplement itself or the amount received which has the greater effect on work.
Because piloting an in-work benefit is a new venture we thought it right to set out our proposals in detail. The consultation produced a high standard of response, including comments right at the beginning of the consultation period from the noble Earl, Lord Russell, for which we were grateful. I thank all those who contributed to the consultation. A summary of the points made has been placed in the Library.
The aspect of our proposals which attracted the greatest comment was the feasibility of payment through the wage packet. Both employer and employee representatives expressed concern about it. During the consultation period the Benefits Agency was also busy holding discussions with employers and payroll experts. In the light of that study and the representations received, we have decided not to pursue payment through the wage packet for the present. I am sure that that decision will be welcomed by all who were concerned on that point.
The consultation document set out the basis for the selection of the eight pilot areas in which the scheme will operate. My right honourable friend announced on 6th November what the final selection would be. They include areas in North Wales, central Scotland (Perth, Dumbarton, Stirling), Newcastle, Sunderland, South Yorkshire and the south coast. The areas chosen reflect different types of labour market—major urban areas, large towns, rural areas and seaside towns.
The selected areas have both a high rate of unemployment and a high proportion of vacancies. They are areas where we expect earnings top-up to be successful. They have been chosen to maximise the chance of obtaining a clear result. We are now in the process of tendering for the research which will 'enable us to evaluate those results.
A number of respondents to the consultation exercise, including the noble Earl, Lord Russell, emphasised the importance and difficulty of the evaluation exercise. We acknowledge that it will not be an easy task. We propose to collect a great deal of information about the labour market in the pilot areas—before, during and after the pilot. We shall be able to compare that with what happens to employment in the four matched control areas. We will also know a great deal about the individuals who claim the benefit. From the research we expect that it will be possible to evaluate the effects of earnings top-up and extrapolate the findings nationally.
Perhaps I may now turn to the rules of the scheme. They are based to a large degree on those already operating for family credit. Obviously there are changes in recognition of the absence of dependent children and relating to the limited geographical areas. But at least half of the draft rules are identical to the equivalent family credit provisions.
The rules provide for what will happen when workers move into, out of or between pilot areas. They are provisions with no precedent in social security.
We also propose to pay a lower benefit rate for under-25s, as is the case in income support but not in family credit. That is because younger workers, especially those without children, have a lower pattern of household costs than older workers—quite often
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living at home with their parents or in shared accommodation with friends. Young workers can also more easily be better off in work because their income from out-of-work benefit income is also lower than older workers.
A further difference from family credit is that earnings top-up will be time limited for certain self-employed people. There will be an upper limit of four 26-week awards for self-employed workers whose net earnings are continuously below £20 a week. We have decided to impose that limit because continuous, very low earnings cast doubts on whether employment is truly remunerative. We do not wish to discourage self-employment—far from it—but it is not the role of a social security scheme to prop up failing businesses indefinitely.
The final published version of the rules, and any future amendments, will be placed in the parliamentary Libraries. The Social Security Advisory Committee will also be informed.
The aim of earnings top-up is to help people with low earning power to move into work, or, if they are already in work, to establish themselves there. That is better for them and better for the country. We are piloting the scheme at a cost of £25 million in a full year to see whether it will fulfil those objectives without adverse consequences. We are breaking new ground, and I hope that the House will join me in wishing the scheme well.
Moved, That this House take note of the Earnings Top-up Draft Rules for a new in-work benefit for people without dependent children.—(Lord Mackay of Ardbrecknish.)
3.43 p.m.
Lord Skelmersdale: My Lords, having listened to my noble friend today, I find it very easy to imagine myself in his position, although not in quite so exalted a role. Many is the time that I have stood where he will be in a few minutes' time, responding not to the views of three noble Lords, like today, but to just one—that of the party immediately opposite. No alternative Opposition view would manifest itself on those occasions. Equally, no friendly voice would give cheer from behind. Those which did come from that quarter, on the rare occasions that they did, would be more likely to resemble a serrated knife being slowly and painfully driven into my kidneys with the sole objective of eviscerating my argument.
I hope that, today, my noble friend will find things just a little different. After all, the party opposite has been enjoined by their Leader in another place to think the unthinkable so far as concerns social security matters. We are eagerly awaiting the Opposition's official reaction to the Government's doing just that, as was shown by the Green Paper to which my noble friend referred. However, I hope that we will not hear the argument that the Government are perpetuating low wages, as we heard when family credit was introduced and indeed subsequently. I know of no proof of that happening.

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I have been unemployed twice in my life. I know as well as anyone how demoralising it is for the individual and how wasteful it is in economic terms to the country in general and the taxpayer in particular. I, too, have seen the effects of people going straight from school into the dependency culture about which we hear so much—although, as we heard during Question Time today, it is less easy now. I have seen the effects of marginal rates, of combined tax and national insurance depressing the labour market.
I am encouraged by—and, I am glad to say, I played a small part in it—the modern system of in-work benefits. Family credit—a much more generous top-up benefit for people with children than its predecessor—is now paid to 591,000 people, though it is true to say that its uptake is not as great as, on paper, it could be. However, we should remember that many of those who do not take advantage of it are already in work.
When I arrived on the social security scene in 1987, the planning was over, the legislation passed and implementation was still to come. A few months later I was much more involved in the creation of the disabled working allowance, which was a logical progression of the same train of thought. I am encouraged by the 5,000 take-up. I know that that sounds small, but it represents 5,000 disabled people who would not be in work without the scheme.
But the idea of trialling any scheme, let alone one of in-work benefits, was unthinkable. In that respect, the Government have acted, whereas the Opposition are now for the third time—or is it the fourth?—back at the drawing board. It seems to me that their social security policy is, once again, in limbo. Having said that, this scheme is not as dramatic as it has been or will be painted. What it is, though, is an honest experiment to seek a new way of getting more people off benefit and into work.
Of course, the scheme is the most recent in a long line of initiatives for achieving that objective. My noble friend the Minister mentioned some of them and, of course, there is training for work. For example, there are Jobclubs; the job interview guarantee; work trials; jobplan workshops; Restart courses; the jobfinders' grant; the Workstart Employment Subsidy Scheme (which is another pilot programme); and community action, which provides part-time work in the community for people who have been unemployed for 12 months or more.
The vast preponderance of people do not need those schemes at all. One-half of the people who became unemployed in September will be back in work by Christmas, and two-thirds of them by March. In my view, a modern social security system should not spend too much time worrying about them. It is on those who are unemployed for longer than six months that all, or most, of our efforts should be concentrated—unless, of course, those who have been unemployed for less than six months have very limited savings and very little to live on in which case the state, as the great insurance company, should step in and support them, as it should if they are on very low wages.
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I have long believed that for the first six months of unemployment the jobseekers' allowance (as we must now learn to call it) should not normally be paid. Instead, it should be index linked. In that I am an unrepentant radical. Of course, I realise that that idea has a tremendous knock-on effect. It would mean the destruction of the National Insurance Fund and, therefore, break a fundamental Beveridge principle. Today is not the day to say what else I would do in the field of state support, but that would only be a part of it. Why should Mr. Chris Smith and his cohorts in the Labour Party be the only section of the community to think the unthinkable?
That brings me back to the subject of today's debate. There is a section—probably a fairly small one—of potential job seekers who are better off on benefit than in work. They are single people who would work if their economic circumstances were shifted marginally in their favour. Any scheme which seeks to move them into work should have the blessing of the whole nation. If it works, it will have done all of us a great favour.
I have learnt from my noble friend that, in the eight trial areas, two rates of benefit are to be tested over a three-year period. The money being paid to claimants in the scheme at its finish in three years' time will be continued for another two years. We know that by that time the Government expect 20,000 people will have been attracted by it. No one could call that exactly earth shattering when one considers that nationally unemployment has fallen by five times that amount each and every month on average for the past six months, and when one also considers that 251,000 more people were in work in June 1995 compared with the same month in 1994.
In view of the recent reduction in the rate of growth of the economy, that is a creditable record indeed for government policies. I am no historian but I wonder when last a Labour government could boast lower unemployment than our other major European competitors. That said, it is not only our right but our duty to investigate the scheme a little further. I wish to ask my noble friend three questions.
First, what estimates have the Government made of the take-up of this new scheme were it to go on what the film industry would call general release; in other words, countrywide, and by definition with no trial? That would help us to put it into a proper perspective. Secondly, have the eight areas been selected to fall into either scheme A or scheme B in a rational way? I note of course what my noble friend said about the Green Paper. For example, were they based on the cost of living in a particular area as revealed by the General Household Survey? We know that the Jobcentres in the selected areas have revealed a particularly low take-up of lower paid jobs by single people in those places compared with the rest of the country. When one thinks of the value of the top-up, I think the first question is particularly pertinent.
In that connection, what persuaded the Government that scheme A was sufficiently distinct from scheme B and would result in a differential take-up in the two areas? I really am surprised—if I have understood the

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schemes correctly—that an extra £2 a week for those under 24 and £1 for couples would make a statistically valid difference in the take-up of the scheme. Whatever the answers to these questions, I wish this brave, innovative scheme—which to my recollection is the first social security scheme ever to be piloted by governments of any persuasion—a fair wind and I congratulate the Government on introducing it.
3.52 p.m.
Earl Russell: My Lords, the Minister may remember when he made his social security uprating Statement last year that I said it looked like an airfield after a bad raid: all pilots and no planes. The Minister, if I could read his face correctly, thought that I was being a little ungenerous. It seems perhaps today that I was—but I can only say I was not aware of it at the time—because here we have one of the pilots, to carry on the image I used then, equipped with a plane and ready for take-off. I welcome that warmly.
I offer my general support for what the Government are trying to do. Within the limits laid down by the general outlines of government policy, I think this is a good scheme and I welcome it; indeed I am glad to see it. It is rapidly becoming an all-party consensus that what we need to look at in social security are ways of making it easier for people to get off benefit and into work. We have here what is the real mark of an all-party consensus—that all of us claim to have been there first. It is entirely within the spirit of that game that I join in too and ask whether anyone can advance any higher bid than 2nd July 1990.
Of course this problem is caused partly by the steep tapers of the withdrawal of benefit as people come into work and partly by the declining levels of wages in some areas because of deregulation in the labour market and because of part-time work. Therefore we have a double pressure to make it hard to get back into work: the withdrawal of benefit and the lowness of the wages. It is necessary to address both of those in some ways jointly and in some ways severally. I am also extremely glad to see that this is being extended to the childless. I have never quite understood the logic by which in the old family credit system the childless, and even more the single, were being treated almost as second-class citizens. The whole of the hardship rules as we have them at present tend to discriminate against the single and the effects of that may at times be unfortunate and unfair. Therefore I am glad to see this helping hand—the hand up rather than a hand-out, as the Prime Minister would put it—being extended to the single and to childless couples as well as to those with children. That, I think, is a real step forward.
I would say to the Minister that when he spoke of an incentive to return to work he was identifying a part of the problem. However, I believe it was only a part of the problem. Sometimes it is a matter of incentive but sometimes it is a matter of sheer, stark financial impossibility. The classic case of that of course is fares, but over the centuries the classic case has been being unable to afford shoes. I have no doubt that that on occasion still happens. There are capital expense
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associated with the return to work and occasionally it may be those rather than the overall rate which are the obstacle.
I was grateful for the opportunity to reply to the consultation. I hope I may for a moment usurp the Minister to reply to the noble Lord, Lord Skelmersdale. The choice of the areas for the pilot was one of the central questions put in the consultation paper. I endeavoured to address the job of making them roughly equal in terms of access and transport to work. I think that my suggestions have been in some parts taken. I am sure that there were other people making other suggestions and that there is at least as much an element of rationality in those as one can expect in these things. The only complaint I have to make about the selection of areas for the pilot is that the name of Wimborne, Dorset is misspelt; it should be spelt like the neighbouring village of Cranborne.
Of course I have a few reservations about some of the items in these rules. These are in the main where I have reservations about the general outlines of social security policy, with all of which I am sure the Minister is perfectly familiar. If I touch on these it is lest my silence be taken for consent rather than because I want to reopen a series of old debates.
Regulation 7(4), in the light of last Monday's debate on the Address, is one we might think a little about. That is the one which provides that only one person in each household may benefit from earnings top-up. That actually is an anti-marriage rule; it penalises married couples. In the light of the debate in which the noble and learned Lord the Lord Chancellor will take part over the next few weeks, I wonder whether that might possibly be considered again. Regulation 10(1) on the fixed 26-week period is of course exactly the same as the family credit. We have dwelt recently on some of the problems arising from that as regards family credit. They will arise here too. The Minister is familiar with my arguments and I shall not repeat them further.
Regulation 14(1) will, I believe, cause certain problems, or at least it represents a line in government thinking which to my knowledge is causing problems. That is the one which deals with child benefit. I understand, of course, why they have decided to rule in this context that only one person may be held to have the custody of the child, because in the case of separated couples if they both share the custody they are both ineligible for earnings top-up. However, in general, I think that the administrative assumption that there is only one parent with care after a divorce is not always factually accurate. It is not always desirable on grounds of public policy. It is not always accurate to assume that the child benefit after separation is paid to only one parent. There is a procedure for sharing it, which at present can be stopped if the woman decides to veto it, and her consent may, on occasion, be unreasonably withheld.
That is a matter I ask the Minister to discuss with his noble and learned clansman before the progress of the divorce Bill. It is an issue that we may possibly address in an amendment during the progress of that Bill. It is a complicated matter and it needs some further thought.

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The Minister will not be at all surprised to hear that I deplore the exclusion of students. I shall not dwell on the arguments for that either, but I believe that one of the effects of this benefit will be that it will tend to depress the general level of wages. Therefore, if students are receiving a wage—and many of them cannot do their academic work without receiving a wage—and that wage is depressed and they do not receive the compensation for its depression that everyone else receives, their disadvantage may be increased.
That brings me to the effect of these rules on wages, which is my central area of doubt. I am not generally exceptionally optimistic about human nature, but I believe that human nature does not change as it crosses the employer/employee divide. The same strengths and weaknesses exist on both sides of that divide. I am not certain that the rules meet that maxim.
Rule 34(1) has detailed procedures for dealing with an applicant who voluntarily reduces his hours of work in order to attract more earnings top-up. I can see why. I am rather more perturbed about rule 34(4) which provides for those who provide services for other people without taking payment to be treated as if they did so for wages. That means that every young man who mows a pensioner's lawn may find himself being deprived of earnings top-up as a result. I hope that the rules will not be interpreted in that way. However, human nature being what it is, guidance to those who interpret them on the ground will need to make it very clear that they should not be interpreted in that way.
By comparison with that suspicion, there is no attempt to address the possibility that employers might reduce wages because the people they employ are gaining a subsidy from the DSS. If one thing is possible, so is the other. I do not know whether either will occur frequently, but it would be very foolish idealism to deny that it was possible that employers may lower wages to make up for earnings top-up.
In relation to a question which was addressed in the consultation paper, I should like to know how the Government propose to monitor whether employers will lower wages. If they do, the Government will be taking on an open-ended financial commitment which may become more and more expensive with the years that pass. I cannot help thinking that earnings top-up, much though I welcome it, would fit much more logically side by side with a minimum wage than it fits into the Government's present policy. That is a considerable area of anxiety.
I should like to ask a few questions about how the pilot scheme is to be monitored. What are to be the criteria of success? Will they be simply the number of people who are placed back in work? Will they also include the effect on Crown revenues? If so, will that be confined to income tax and national insurance, or will some attempt be made to monitor the effect, because people who earn more will spend more, and that generates more revenue? Will there be any attempt to monitor the ripple effect of increased employment generating increased spending generating more employment? How is it to be decided what marks whether the scheme is successful?
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Finally, if the House will bear with me for a few moments I should like to say a few words about my party's views and make one or two private suggestions about the general problem of the interface between work and benefits. These rules address only one part of that; a great deal needs to be addressed in other ways.
The Minister knows that we are in favour of an income support disregard. Mr. Frank Field—and I hope that the noble Baroness will confirm that his views are not Official Opposition policy—has expressed a degree of fear about fraud which makes the Daily Mail look calm. It seems to me that, rather than an expensive general attack on means testing, a great deal of this problem would be met much more practically by creating an income support disregard so that people on benefit can do a £5 job painting a neighbour's door without having to lose benefit pound for pound after the first £5. That lack of an income support disregard is an invitation to fraud.
The Minister knows the views of these Benches on the child care disregard and on gentler tapers for housing benefit. We on these Benches agree with the Institute of Fiscal Studies on raising the entry point to income tax rather than creating a new bottom rate. I should like to ask the Minister one or two more questions about the interface between tax and benefits.
First, it occurs to me that one of the reasons why the tax kick-in is so steep is that it is the present policy that benefit is taxable. If benefit were not taxable you could earn your £3,500 personal allowance before the tax kicked in. That by itself would do a great deal to ease the transition to work and avoid poverty traps. I should be grateful to the Minister if he would consult his right honourable friend at the Treasury and get some answers to that question. I should be interested to know what the effects would be.
I should also like to ask the Minister to consult the Inland Revenue about the coding for those who come back into work from benefit. If the Inland Revenue has no information on you when you come into work, it gives you an emergency notice of coding, which means that you pay tax at the full rate. For somebody coming off benefit with no capital, the fact that you get the tax back afterwards is no consolation. It ought to be possible to address that problem. Would it be possible, for example, for the Minister's department to give the equivalent of the P45 to people who come off benefit after a long spell, explaining that these people have not been earning during the period in question and that the Inland Revenue can take note of that fact?
Can the Minister tell us any more about two proposals the Chancellor has made, both of which I have welcomed? One is to extend housing benefit for the first four weeks back into work and the other is the jobfinder's grant. Because the Government, like us, understand that that is not the whole story, those are also welcome measures and I should like to know what is happening to them.
4.8 p.m.
Baroness Hollis of Heigham: My Lords, we all agree that, as the noble Earl, Lord Russell, said, we

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share a problem in respect of the move from welfare to work. If this country were today enjoying full employment or something approximating to it, or if that employment were adequately paid, there would not be a problem because those needing benefit would be few, the incentive to work would be considerable, and social security costs would be modest. Instead, let us remind ourselves, there are something like 2.5 million registered unemployed at this time. One million of them have been unemployed for more than a year and a quarter of a million for more than four years. Something like 60 per cent. of young black men in London are out of work. A million people in this country earn less than £2.50 an hour, and something like 300,000 earn less than £1.50 an hour. It is precisely because so many are out of work and so many who are in work are badly paid—some do not receive a living wage—and because the cost of securing them on social security is so high that we need to address the issue. But let us be in no doubt. We need to address the issue today as a statement of failure of the Government's economic and employment policies.
It is right that we should address the problem. However, the basis of the Government's approach—the ethics as well as the economics—belongs to the alien world of planet Portillo rather than our own. The Government seem to have been arguing over the spring and summer that people are not working, first, because they are work shy (hence the need for a punitive jobseeker's allowance and the Government's obsession with benefit sanctions); secondly, that if they are working or claiming benefit they are fiddling (hence the Government's obsession with fraud); or thirdly—there may be a little more credibility in this argument—that the benefit structure produces an employment trap which discourages people because it is not worth working (hence we have family credit). The remainder of us live in a rather different world. We know that people want to work but cannot do so for one obvious reason. Jobs, especially for unskilled men, simply do not exist. That is fact. That is why people are unemployed. It is not because they are fiddling; it is not because they are work shy; it is not because of the benefit trap. It is because the Government's economic policies have produced long-term unemployment, especially among unskilled men.
We also know that, following the abolition of the wages councils, many people in work receive indecently low pay because of the lack of a minimum wage. I refer to £1.50 or £2 an hour for a cook or a carer in a residential home. That is not decent; we should recognise that. Nor is it true, as the document repeatedly insists and as the Minister suggested, that by letting wages free fall, in some sense people will price themselves into work and more jobs will follow. The evidence does not indicate that at any stage. It suggests the contrary. Cutting wages does not produce more jobs. It merely means that the same people are paid less for the jobs they do.
There are two pieces of evidence. Since the wages councils were abolished, wage rates in those industries have fallen by up to 25 per cent. and at the same time
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there has been a loss of 18,000 jobs. Similarly, over the past four years according to government statistics there has been an increase of something like 75 per cent. in people claiming family credit, but the cost has risen 300 per cent. In other words, the same people are receiving more money. Why? It is because family credit is taking the strain of falling wages. That is the truth. It has allowed more families to take low paid jobs but they have needed to take those low paid jobs precisely because low pay has not produced more work. The long-term and only answer—it is certainly the Labour Party's position—is to invest in our infrastructure, in our industry, to build for economic growth and to ensure that there is a trained and skilled workforce to respond to those opportunities.
Having said that, on these Benches and, I am sure, on the Opposition Benches more generally, we accept that there is a selective place for in-work benefits to help back into work those groups which, because they have become detached from the labour market—for example, the long-term unemployed—are unattractive to employers. We believe that it is sensible to encourage employers to re-employ the long-term unemployed.
There is a second role for in-work benefits; for example, to assist those who need a higher income than the job offers because they have considerable family responsibilities. In order to get off benefit, they need a higher wage than a single person. That is the role of family credit. It is obviously sensible and appropriate.
Equally, we believe that in-work benefit is humane and decent when it helps a disabled person contributing perhaps, although not necessarily, lower productivity but facing more expensive costs or more intermittent work patterns to stay in work. That has been the role of the disability working allowance, and we support it. For example, the person who has caring responsibilities and is therefore a part-time worker needs to top up that work with benefit. For that group of people an in-work benefit is a sane, decent and humane strategy and entirely appropriate.
However, there are two conditions. First, as the noble Earl, Lord Russell, said, in-work benefit should be accompanied by a wages floor, or a minimum wage, so that the employer does not pass on his wage costs to us, the taxpayer. Otherwise the Government will stand accused of being the friend of the "sweater", the ally of the bad employer. Secondly, we have always said that in-work benefit should be targeted at those groups which have specific problems in the labour market. The Government today go well beyond that. They say that in-work benefits should be available for everyone without the protection to the taxpayer of a wages floor. Therefore we have some unease, as does the noble Earl, Lord Russell.
However, there are many aspects of the scheme that we truly welcome. First, I am especially gratified to see the honest attempt to come to terms with research information. One of the most pleasing aspects is the continuing reference to research evidence which has been fed into the DSS. It is one of the more impressive usages of research by the department over the past few

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years. Too often research evidence is ignored because it is inconvenient. It is rather nice to see policy being built upon it, and we welcome that approach.
Secondly, we agree that the scheme is an honest attempt to tackle what we agree is unacceptable: that single people, or a childless couple, face either very low pay or long periods of dependency. However, we doubt whether this scheme is the right way forward.
We welcome the innovation of pilot schemes. It is absolutely right that one should test such schemes and seek to learn from that experience. A sad aspect regarding social security is that it had to be all or nothing. We could never achieve that feedback. The innovation is to be welcomed and the Government are to be congratulated.
We also welcome one fact in the small print which intrigues me. If, in the course of the pilot scheme, a couple without children have a child, they can move from the earnings top-up to family credit, which is more generous, within the six-month period. When we sought to make a similar provision regarding the Child Support Agency, we were told that it was absolutely impossible to do anything until the six months were up. If family credit were determined at one level of maintenance and the partner withdrew that level of maintenance, the family still had to proceed on the original, artificially high assumptions. If the earnings top-up in the family credit can be adjusted in the course of the six-month trial period, I hope that that flexibility can be extended to other areas of social policy.
Finally, we welcome the announcement by the Government—it is a question I would have asked the Minister; I am pleased that he responded to the point—that payment will not be made through the wage packet. If it were just an administrative device, it might be less of a problem. But there is a real fear that the employer would have to take upon himself the task of inquiring into circumstances in an invasive way which we would find unacceptable.
I repeat this point. In the absence of there being any evidence that an earnings top-up will create additional new jobs—family credit has not done so—and in the absence of any wages floor to protect the position of the taxpayer, we are apprehensive about the route that the Government are travelling.
I turn now to some questions. The first is one which the Minister has to some extent answered but perhaps he could clarify my thinking on it. What would the total cost of the scheme be? He mentioned £500 million a year, with £25 million a year for this scheme, making £75 million over three years. In other words, that would be £1.5 billion over the same period of three years if the scheme were applied nationwide. We reached that figure by multiplying for the population across the country as a whole.
Secondly, will the Minister confirm that throughout the Government's reports they assume in their examples a gross wage of £2.65 per hour for a single person over the age of 25? Most of the modelling is based on that, although in the Government's other document on the expenditure plans for 1995–96 and 1997–98 their
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notional wage for the same age group is £3.50 an hour. Will the Minister confirm that every person over 25 will indeed receive £3.50 an hour? That would float them off the need for any in-work benefit at all on the Government's figures.
Thirdly, emphasising the point made by the noble Earl, I ask the Minister whether he can say what checks or monitoring there will be that employers will act responsibly and not cut wages? Will every employee of a company which has low-paid workers—perhaps in warehousing or whatever—married, with or without children, single, young or older, be eligible for and be able to claim in-work benefit? Will all employees know that?
We know that under the family credit scheme there appears to have been very little sensitiveness from the employer as to the effect on wages. The employer does not necessarily know whether the worker has children. However, now the employer will know that everyone in the company is entitled to and eligible for a top-up benefit: either the earnings top-up or the family credit. In that case, it will be an open invitation to the less scrupulous employer to drop wages where he will, knowing that either the earnings top-up or the family credit will take the strain. How will we know that the employer is not doing that? What will the Government do to stop employers doing it? What sanctions will be attached to it? As a condition of the earnings top-ups, will the Government consider ensuring that there is some element of training or education attached to such low-paid jobs so that we do not continue to subsidise what would or could become low-paid and degraded labour?
Fourthly, to revisit a subject which we have debated many times, why are the Government so insistent that the increase in costs and in top-up divides at the age of 25? Why is it age-based rather than household-based? Everyone in the Chamber knows that one's costs do not increase at the age of 26, nor are they less at 24. What matters is whether one is in a household with all the additional costs of housing, cleaning, council tax and the like. Surely that should determine the levels of the top-up benefit.
Fifthly, I wish to ask the Minister a question which bothered many of us when we were discussing the Jobseekers Bill. It is the 24-hour rule, about which I shall remind the House. Under JSA, if a person works for more than 24 hours, for whatever pay and even if it is below JSA figures, the partner loses eligibility for JSA. We said that that was perverse. Not only is there a means test for JSA but there is also an hours rule. Will the same apply to this benefit? If a partner not only earns more—which would clearly take him out of the top-up—but works for more than 24 hours, as with JSA, would it make the other person ineligible for in-work benefit, whatever the joint income might be?
Finally, I come to the crunch question. What additional extra jobs do the Government forecast will be created by what could be, if it were applied nationwide, a very substantial expenditure? We welcome the proposal with quite a lot of cautions and hesitation because at the moment all it will do is to top up the pay

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of those currently in work. The justification at the end of the day is this: what additional jobs in the scheme will be created as a result of the benefit?
We wish the pilot scheme well. We believe that there are better and alternative pathways out of poverty, including, for example, the latest ones from the Labour Front Bench. They are for those under 25 and would offer not only a full-time job, but the work option of education and training, a voluntary placement or work in an environmental taskforce. Those are all the amendments for which we on this side pressed to be given through the JSA and which the Government, in our view foolishly, resisted. We welcome this.
Earl Russell: My Lords, I have resisted the strong temptation to refer to the Opposition's proposals on the under-25s. However, since they have introduced them, will the noble Baroness tell the House whether she thinks that people can live on 60 per cent. of the benefit rates for the under-25s?
Baroness Hollis of Heigham: My Lords, I understand. I believe that the noble Earl is referring to the sanctions attached to the proposals. The sanctions attached to the Labour Party's proposals are clear. If a young person, and only a young person, has available to him all four options—a full-time job, education and training, a voluntary placement or the environmental taskforce placement—and if he refuses all four, then, and only then, would the sanction come into play. In other words, if I may complete the argument, if the full-time job at reasonable pay is on offer but is refused, then the sanction would come into play. But it would not do so for the other schemes. I give way to the noble Earl.
Earl Russell: My Lords, I thank the noble Baroness for that information, which I knew. Can she answer the specific question? Does she think that people can live on the reduced benefit?
Baroness Hollis of Heigham: My Lords, that is one way of putting the question. The other way is to ask whether it is reasonable to expect young people not to take advantage of a full-time job at decent pay, or an education opportunity, or a voluntary placement or a placement in an environmental taskforce. I share the view that if those options are available, every young person I know, like my son's friends, would be delighted to have opportunities that are currently not even faintly available to them. In that sense, apart from the aberrant and unusual case, we do not believe that there will be any problem of sanctions being invoked. Youngsters will have opportunities that young people in this country have not had for the past 20 years under this Government.
We wish the Government's scheme well, but at the end of the day such a scheme is necessary precisely because of the failure of the Government's economic policy.
4.27 p.m.
Lord Mackay of Ardbrecknish: My Lords, I knew that this would be an interesting and stimulating debate. Although we have had only a limited number of
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players—almost the usual ones when it comes to this kind of issue—that has not in any way diminished the interest in the debate. I am delighted to hear that the principle of piloting has been welcomed. The noble Earl tried to claim authorship of the idea and, after all, imitation is the sincerest form of flattery, I believe.
I would have liked to continue in this gentle mode for the rest of my speech, but I cannot resist saying that the imitation in the last part of the noble Baroness's speech is definitely the sincerest form of flattery. Clearly, she listened to my argument that young people should not have the option of being in the dependency culture. I put that argument to your Lordships little more than an hour ago, during Question Time. I am glad to recruit the noble Baroness to the ranks of those of us who believe that youngsters should not have an option. As I said this afternoon, they should continue in full-time education, have a job, go on one of the training places or the other places available. They should not have the option of deciding not to do any of those.
Baroness Hollis of Heigham: My Lords, are we therefore recruiting the Minister in support of the other options in our policy which mark the water between us: for instance, the voluntary sector option that he was vigorous in defeating when we discussed it in this House just a few months ago; the 16-hours rule inhibiting education and training for young people that he was vigorous in defeating in this House three months ago; or the environmental taskforce option that he was vigorous in defeating in this House just a few months ago? Can we welcome him as a willing recruit to those alternative options?
Lord Mackay of Ardbrecknish: My Lords, the noble Baroness ought not to try to push her luck too far. Certainly, I am more than delighted that she has come over to my side on so many issues. I am very pleased to hear it, see it and read it. Indeed I did so with some amazement given the number of verbal lashings that I received from her lips during the passage of the JSA Bill when we discussed these subjects and the fact that some people could be disentitled to benefit. I am glad at least to hear that the noble Earl is consistent in his arguments. But then I am told that the party opposite is now thinking the unthinkable for the third time since the last election on the subject of social security.
I promised myself that I should try not to be controversial this afternoon. However, the noble Baroness tempted me too much—
Lord Graham of Edmonton: You are a failure!
Lord Mackay of Ardbrecknish: My response to the sedentary interruption is that temptation such as that could not possibly be resisted—at least, not by me.
Perhaps I may try to answer the very many questions that I was asked on the subject of the earnings top-up scheme. The scheme is small in terms of proposed expenditure. I believe the noble Baroness's arithmetic is right: the experiment is costing £25 million a year. But were we to apply it nationwide, it would, as I said in my original speech, amount to something like £500 million a year. That is one of the reasons why we think it right to pilot

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the scheme. The noble Baroness agreed with me, as did the noble Earl. To go nationwide with a scheme of this cost without being sure that it will deliver the goods, so to speak, would not be a sensible use of resources.
I thank my noble friend Lord Skelmersdale for his contribution. He asked me to translate the £500 million into people. We estimate that scheme A, if introduced nationally, could help 85,000 couples and 185,000 single people; and that national scheme B could help 120,000 couples and 430,000 single people.
The noble Baroness asked me about the under-25s. We have been over this argument on a number of occasions. As I explained in my introductory remarks, by and large they have lower financial commitments; they also have lower earnings expectations as a reflection of their position in the labour market. Harking back to previous arguments on this subject, the noble Baroness also made the point about the hours rule for partners. Entitlement will be based on one person working over 16 hours, and on joint household income.
I was asked a large number of questions, and a short while ago I was trying to bring some logic to the subject. Perhaps I may start with questions about how we decided on the pilot areas. The noble Earl asked that, as did my noble friend. As I explained, we tried to select areas where the scheme would have the best chance of success. We designed it on an agreed range of objective criteria, about which we consulted.
The building blocks for the pilot locations are the travel-to-work areas. That is the statistical tool that identifies self-contained labour markets by examining the proportion of people living in an area who also work there, and vice versa. Quite clearly, it would not be a good thing to test a system in an area where a lot of travelling goes on outside it. Of course, an area where there is no travelling outside it can very rarely be found, but an attempt was made to study those areas where there was very little. We also identified areas where, as I said, we predicted the scheme would work. Relatively high unemployment and a relatively high proportion of vacancies were therefore on the shortlist of benchmarks that we used to test the areas. We published a list during consultation in July, and comments were then invited.
A number of factors were then looked at to judge the suitability. They related to the need to find areas within the group that were similar enough to be compared. We wanted to be able to make like-for-like comparisons. That is important if a valid test is to be carried out—for example, labour market types; population densities; size and types of firms in the areas. We also had to bear in mind the operational feasibility of the scheme. These are the kinds of matters that we took into account. We also selected areas that would produce results that could be extrapolated for the national scene. It is only fair to say that the research projects (to which I shall turn in a moment) will provide the answers needed to decide whether to go national. We are not committed to going national, but we shall be very much wiser at the end of the evaluation period. We are committed to testing to
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see whether the scheme works. That includes seeing whether we have extra jobs. That is the basis on which the pilot selection was carried out.
I do not consider myself an expert in the field of research, but I gather there is little research to inform us directly on matters such as earnings top-up. However, some research studies have been done, and the background they provide will be very useful indeed. The research specifications for this particular project are out to tender. They invite proposals as to how to monitor changes in wage levels and employment. We expect that that will be achieved by a series of labour force surveys in the areas and by longitudinal surveys of the claimants themselves, as well as surveys of employers in the areas. That should provide us with a wealth of information. It should also be possible through the surveys to pick up some information on increases in consumption by recipients of the scheme, which may shed light on the other issues about which the noble Lord was concerned, the "ripple effect" as he called it. If a subtraction sum is done, it will be realised that something like £2½ million will be put into these areas through the scheme. That is not an inconsiderable amount of money.
The noble Earl asked about the interface between the tax and benefit systems. This side of the Budget, I shall say very little on the general question of taxation and taxation policy; but on his specific question about the interface, those leaving unemployment are issued with a P45(U) to take to their new employer. If emergency tax codes are applied, it is not necessarily to a new worker's disadvantage. The lower take-home pay will result in higher in-work benefit assessments. Normally, the new worker will have an estimate of future earnings, and in the top-up, like family credit, a notional tax code will be applied at ordinary, not emergency, rates. I hope that that is helpful.
My noble friend asked about the essential difference between schemes A and B. He is right to say that the average payment in the higher scheme is about £2 more. But averages do not reveal the whole picture. The higher rate scheme, because of its structure, will reach twice as many people as the low rate scheme. Therefore in practice the effects will be quite easy to distinguish. We expect independent researchers to be able to do so quite easily.
The noble Earl asked about some of the work incentive schemes that I have mentioned at this Dispatch Box over almost a year and a half, during which time I have been at the department. As I mentioned, the extension of housing benefit for an extra four weeks will apply from next April. I also mentioned the faster family credit to speed up payment of benefit; the national insurance holiday; and the jobfinder's grant of £200 which is now available nationally for the two-year unemployed. There is also the £5 disregard and the back-to-work bonus which begins to come into play. All these will help. Those of us who debate these issues all agree on the importance of the bridge between being out of work and getting into work and the costs of crossing that bridge. As I explained before, we hope that some of these measures will help the individual to make that cross-over.

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The noble Baroness asked me whether the models were based on the gross wage of £2.65 an hour. I can tell her that the models were based on an examination of the full spectrum of wages and the levels were pitched in order to ensure that families with children still receive more money.
The noble Earl asked me a question about one of the rules about the responsibility for a child and who qualifies under it. Child benefit is paid to the person who is primarily responsible for the child. It can only ever be paid to one person. That is how responsibility for a child in earnings top-up and family credit provision is decided. A person in work and receiving child benefit would be able to claim family credit.
Earl Russell: My Lords, I am most grateful to the Minister for allowing me to intervene. I believe that the 1992 regulations allow the division of child benefit between separated parents with shared care. I have corresponded about that with his noble friend Lord Astor. The point I raise concerns the operation of those rules. I believe that it is not altogether satisfactory at present.
Lord Mackay of Ardbrecknish: My Lords, perhaps the noble Earl will forgive me if I first give an explanation in regard to the broad picture. I shall check later on the particular point about which he asked me. Perhaps he will allow me to finish my point.
The other working partner would be able to claim earnings top-up. We would not wish to disqualify from earnings top-up any person who has shared responsibility for the child. That means that the answer to the noble Earl's question—whatever has been the situation on previous rules or however he interprets them—is no; there ought not to be a difficulty on that point. It is either family credit or earnings top-up. There ought not to be somebody, so to speak, caught in the middle.
The noble Earl asked me about Regulation 7(4) and why only one person in a household may claim. That is simply a practical matter. Otherwise, earnings top-up would be taken into account as a resource in assessing someone else's entitlement to earnings top-up itself. I do not feel that it passes any judgment on marriage, cohabitation or anything else.
The noble Baroness suggested that family credit may take the strain of falling wages. Her argument might be more persuasive if family credit recipients remained static on the benefit for long periods. But, in fact, most couples receive family credit for only six months or a year. That rather discounts the idea that the benefit encourages low wages. But so far as concerns earnings top-up, that is one of the issues on which we shall expect the researchers to come up with some answers. That is the situation. Certainly, we have no evidence that employers take family credit into account when they decide on wage rates. We believe that employers will continue to pay what is necessary to recruit the quality, experience and skills that they need.
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As I expected, we came toward the territory of the minimum wage versus these in-work benefits. Some, like the noble Baroness and the noble Earl, continue to argue that the minimum wage would be a more effective way of assisting low earners.
Baroness Hollis of Heigham: My Lords, I am sorry to interrupt the noble Lord. We do believe that it is a more effective way of helping low earners. The push of our main argument was that to adopt in-work benefits without a wage floor, a minimum wage, is to ask the taxpayer to pay the Bill for falling wages.
Lord Mackay of Ardbrecknish: My Lords, I believe that I answered the question about falling wages. There is no evidence that family credit acts in that way. We believe that employers pay what is necessary to recruit the kind of workforce that they want. Indeed, in 1994 a study by the Institute of Manpower Studies showed that there was no evidence that the availability of family credit influences wage levels.
Baroness Hollis of Heigham: My Lords, I am sorry to interrupt the noble Lord again and it is kind of him to give way. The point that I am trying to make is that family credit at the moment is payable only to a small proportion of the workforce. The employer will not necessarily know which people are claiming family credit because he does not inquire into their circumstances. But when, as now, possibly every blue-collar member of a small company, whether single, in a couple or with children, would all receive a top-up benefit, then we fear that the situation would be very different. It will depress wages because the employer will know that the taxpayer is taking the strain.
Lord Mackay of Ardbrecknish: My Lords, I believe that I covered that point in some detail by saying that the wage rates and the wage position in the areas involved will be one of the factors that the researchers will be asked to examine. They will be able to make comparisons with the control areas where the pilot exercise is not taking place. I hope the noble Baroness will accept that, although we do not agree with the premise underlying her argument, we shall take steps to put the matter to the test of the researchers.
Let me return to the general argument about either underpinning in-work benefits with a minimum wage or having a minimum wage instead of in-work benefits. A recent report by the Institute of Fiscal Studies said that from tests that were done on the minimum wage:
"the richest 30% of the population actually [have] a larger net gain than the poorest 30 per cent. This is because … the large majority of those on very low wages are members of a family or household in which other members are earning a higher wage … those people most affected would be young single people living at home with their parents and the wives of working husbands … this means that the effects on poverty and inequality would be small".
I believe that the argument goes a good deal wider than that.
Perhaps I may give your Lordships two or three statistics about three countries. Country A has 68 per cent. of its population of working age in employment; it has 8·2 per cent. unemployment, as measured by the International Labour Organisation; and it has a 1·6 per cent. youth unemployment rate. Your Lordships may

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feel that that is not a very satisfactory position. But country B has only 60 per cent. of its working age population in work; it has 11.4 per cent. unemployment; and it has 27 per cent. youth unemployment. Country C has only 45 per cent. of its working age population in employment; it has 22·2 per cent. unemployment; and it has 40·6 per cent. youth unemployment, as measured by the International Labour Organisation.
If one were to listen to the Opposition, one would be inclined to think that country C, with the worst record, was Britain and that the Social Chapter and a minimum wage would bring us to country A. But I fear that the noble Earl will spoil my next line.
Earl Russell: My Lords, the Minister is no doubt aware that all that he is saying is that the philosophies of which we complain are international.
Lord Mackay of Ardbrecknish: My Lords, I shall come to that in a moment but perhaps I may just finish my point. In fact, country A is the country without a minimum wage and which has not signed up to the Social Chapter. It is in fact the UK. The other two countries are France and Spain. I noticed that the noble Lord, Lord Desai, seemed well aware of my point almost before I started to make it.
That brings me to my general point, which the noble Earl allows me to make. At one stage in the noble Baroness's speech she told us that all would be well—motherhood and apple pie would be in vogue—if only the Labour Party sat on these Benches, and unemployment would be non-existent. Those were great promises. But the fact is that unemployment is a world-wide problem. Governments of all complexions throughout the world have to tackle it. As I said, citing two of our close neighbours on the Continent, we have a markedly better record than they do; but we can and must do better. All the schemes that I have mentioned, including the earnings top-up, are designed to try to attack the problems of unemployment and to help those people who have low skills and low earning capacity to get into work.
We know from all the surveys—the noble Baroness has told me about it on a number of occasions and we agree absolutely—that once a person gets into work he or she has a far better chance of getting into better and higher paid work than if he remains unemployed. I believe that this pilot will help us judge whether this scheme will be a way to advance that objective.
On Question, Motion agreed to.

EC Beef and Veal Regime: ECC Report
4.50 p.m.
Lord Middleton Lord Middleton rose to move, That this House take note of the Report of the European Communities Committee on the EC Beef and Veal Regime (13th Report, HL Paper (1994–95) 81).
The noble Lord said: My Lords, I should perhaps declare an interest in the subject of this debate in that I am a director of a farming company which produces, among other things, cattle for the beef market.
Community support for beef and veal was introduced in 1968. When the European Communities Committee last reported to the House in 1989, we drew attention to the fact that, over the previous 10 years, production of beef had consistently exceeded consumption and that massive surpluses had built up. However, largely as a result of the 1992 CAP reforms, the beef mountain has been virtually eliminated. All remaining intervention stocks are expected to be sold off this year.
One may ask why we needed to hold another inquiry. It was done for these reasons. First, it is clear that if nothing further is done to reform the beef regime, surpluses may well return towards the end of the 1990s, for the reasons set out in the report. Those are that beef production is cyclical and the next peak of the beef cycle is expected by the Commission to be in 1997–98; that beef consumption has declined in the EU as well as in the UK. People are eating less beef and more pork and poultry, which are relatively cheaper. There is, too, some customer anxiety on the health aspects of meat eating. A further reason is that progressive limitation on exports are imposed under GATT which will at the same time allow for more cattle imports into the EU.
The second reason for holding the inquiry was that the regime is an extremely expensive one. After cereals it forms the next largest item in EAGGF expenditure, forecast this year to reach over 5 billion ecus. I do not need to remind your Lordships that an ecu is worth around 80p.
Thirdly, the Commission and Council of Ministers are to review all livestock quotas in 1996. Fourthly, consideration is taking place this year in the Commission of the agricultural implications of enlargement to accommodate accession by the central and eastern European countries. Fifthly, our attention was drawn to the report of the Court of Auditors which focused on the beef intervention system and the opportunities for fraud. Lastly, veal production and the export of live calves give rise to strong animal welfare concerns.
We therefore felt that, if changes are to be made to the beef regime, they are better made before surpluses begin to build up again. At this stage, perhaps I may express my gratitude to the Clerk to the European Select Committee, Mr. Pownall, for so ably seeing us through this inquiry and for his work on the report in a period when Sub-Committee D was without a clerk of its own. I am grateful too for the work and support of my sub-committee colleagues and for the response by the Ministry, which is broadly supportive of our recommendations.
I turn now to the report where Part I introduces the subject. Part II outlines the beef regime as it now is, reflecting the changes made since it was introduced. A fuller guide is provided by Annex A of the memorandum by MAFF on page 4 of the evidence section. It can be summarised as follows: the external mechanisms of the regime are import charges and export refunds. The first give protection to such an extent that imports of beef are in practice restricted to the relatively small amount of imports made under preferential access

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terms. Export refunds are, in effect, subsidies enabling Community surpluses to be exported competitively to countries outside the EU with lower market prices.
Internally, direct producers' assistance is provided, first, by means of the beef special premium—BSPwhich is paid in two instalments on each of a producer's first 90 male beef animals within a defined age range. Expenditure on that scheme is controlled by means of a regional ceiling on claims. Secondly, it is provided through the suckler cow premium scheme payable annually on each cow forming part of a specialised beef breeding herd. There is a ceiling on the suckler cow scheme expenditure in that payments are limited by individual producer's quotas, calculated according to the number of cows in that producer's herd in 1992. Indirect or end-price support for beef consists of intervention buying whereby excess supplies are purchased and removed from the market for eventual resale.
Part II also describes the pattern of beef and veal production and the tables and figures illustrate the cost of the regime, the decline since 1992 of intervention buying and the relative production of the member states. Tables 4 and 5 illustrate the fact that the greater proportion of beef and veal originates from dairy cows.
Part III sets out the views of witnesses on the main issues raised. In that regard I thank those witnesses for the care with which they presented their evidence.
In the opinion section, Part IV of the report, we call for early reform of the regime and suggest that it should be done in a manner consistent with our previous CAP reform recommendations. We had to consider what reforms were radical enough to make an impact on the budget, but not so drastic as not to be practical and achievable. At the same time we were mindful of the relative importance of beef production in the economies of member states, especially in the UK and of Scotland in particular, where it is the single most important sector of their agriculture.
In our 1991 report on CAP reform we called for a lower degree of protection of the Community's agriculture with these words:
"The prime means of reform should be reduction in the levels of agricultural support, progressively and to a set time scale towards World market prices".
As I said earlier, end-price support for beef and veal consists of intervention buying. The 1992 CAP reforms provided for progressive intervention price reductions (by 15 per cent. over five years) and a halving of the quantity of beef that could be brought into intervention over the same period. That was effective, as I explained, in cutting down surpluses. What we now recommend is that intervention should be phased out altogether, leaving only safety-net intervention as a last resort in an emergency.
Looking back again at our 1991 CAP reform report, we concluded that,
"Reform of the CAP would be facilitated by the conclusion of an agreement in GATT",
and that,
"cuts in support prices will enable adjustments to be made in the levels of export refund payments and in import controls".
The recent GATT agreement will soon impose limits on the volume and value of beef exports. That and the reduction of price support by cutting out intervention in the manner we recommend will go a long way towards reducing export refunds. These, to quote again from our 1991 report,
"are one of the most objectionable of all CAP instruments. Not only does their existence invite manipulation by fraudsters, but they seriously destabilise World markets".
The last thing that can be said about the beef special premium is that it is uncomplicated. In the UK, where we are meticulous in these matters, this scheme together with the refinements attached, such as stocking densities and extensification premiums, is very complicated and very expensive to run. Furthermore, the total cost to the EAGGF budget of the BSP alone in 1995 is forecast at £1 billion. Accordingly we recommend that the BSP scheme be abolished. We say that if that would not be negotiable, then we should at least cut out the second instalment of the premium payment. We also say that the BSP should be made easier to administer by removing the 90-head limit. That would not increase expenditure, given the regional ceiling already in place.
The suckler cow premium scheme is forecast also to cost the EAGGF budget £1 billion in 1995, so we took a very hard look at it. It too is complicated and expensive to administer. We were, however, impressed by evidence, first, that it is those herds supported by this scheme which produce the best quality beef and, secondly, that beef breeding enterprises fulfil a vital environmental and economic role in the poorer upland areas. For these reasons we recommend that the suckler cow premium scheme should remain in place, though we see merit in replacing individual quotas by regional ceilings.
The European Union provides support for the marketing and promotion of quality beef so as to stimulate and encourage demand. We commend the European quality beef scheme and recommend its extension.
On the subject of veal, we applaud the efforts made by the UK Government in giving the lead to moves towards ending the crate system of rearing veal calves and in promoting and in reaching agreement at the June agriculture council on a framework of law covering the welfare of animals transported throughout the Community. We note the very small UK market in veal, at about 2,000 tonnes compared with 700,000 tonnes in the rest of the EU. Of this 2,000 tonnes, only 400 is from British farms. Nevertheless, we applaud the efforts of MAFF and the Meat and Livestock Commission towards promoting and expanding consumption of home-produced veal. This will be uphill work until consumers are educated to accept the pink colour of veal produced in a "welfare-friendly" system.
Finally, for all the reasons which I have put before your Lordships on many occasions, the momentum of CAP reform must be kept up. I hope that this report sets out in a convincing manner why further changes to the beef and veal regime should now be made. I commend it to the House.
Moved, That this House take note of the Report of the European Communities Committee on the EC Beef and Veal Regime (13th Report, HL Paper (1994–95) 81)—(Lord Middleton.)
5.4 p.m.
Baroness Robson of Kiddington: My Lords, I wish to ask your Lordships' permission to leave before the debate is over. I have to attend a memorial service of a very dear friend of mine and I should hate to miss it. I thank the noble Lord, Lord Middleton, for his comprehensive introduction of the report. It was so comprehensive that there is very little left for anyone else to add considering that we were in agreement in the committee on the recommendations put forward. I thank the noble Lord for his kind but firm chairmanship of the committee. It was a pleasure to work with him. I am sorry to say that I have now been ousted from the agriculture sub-committee, so I shall miss his chairmanship in the future.
It is always difficult to follow the introduction of a report. All I can do is highlight what I feel are some of its most important recommendations. As the noble Lord, Lord Middleton, said, people may be entitled to ask why we have inquired into the beef regime in view of the fact that the surplus beef in intervention seems to have been disposed of since the CAP reforms in 1992. However, as the noble Lord mentioned, there are disturbing forecasts of more surpluses at the end of the 1990s. An additional problem arises with regard to the implications of the enlargement of the Community to the east. It is therefore the right time to look into the beef regime. For once it would be nice if we could take action before something goes wrong rather than wait until it does as it is then much more difficult to deal with the problem.
The committee was sensitive to the problems of an industry which by its very nature requires long-term planning. You cannot switch in and out of beef production in the same way as you might switch types of cereal production or even go in and out of cereal production. In consequence, we realised that the sudden and complete abolition of the beef special premium is not feasible at this moment. However, there are strong arguments, as the report points out, for beginning the process of abolishing the beef special premium by starting with the second beef premium payment. Changing to a one-off premium would have beneficial effects but it might be necessary for a transitional period for the first premium to be somewhat increased in order to reduce the worst effects on the agricultural industry. However, that would be only for a transitional period because the aim is to abolish the beef special premium.
The reason for abolition was mentioned by the noble Lord, Lord Middleton. It would reduce the administrative burdens both on the industry and on the Government. It would therefore create savings. The second beef premium is an inducement to keep cattle longer than necessary, sometimes giving rise to the production of lower quality beef. We want to produce the highest possible quality of beef.
It would mean substantial savings for the Community budget if export refunds could be reduced—in my view, they should be abolished altogether—because the 1995 forecast of the cost of export refunds is 1.351 million ecus. That is almost one-fifth of the figure mentioned by the noble Lord, Lord Middleton. I agree with the
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noble Lord that perhaps the most important effect of reducing export refunds is the reduction in the risk of fraud. It would also help the administration if the limit for the payment of the beef special premium was reduced, so long as the regional ceiling on production was kept in place.
The noble Lord also mentioned the suckler cow premium. That form of support has two beneficial consequences. First, as the noble Lord mentioned, it is the source of high quality beef production. Surely that is what we want to support. Secondly, it fulfils a vital environmental and economic role in the upland areas. I presume that one could argue that the environmental and economic benefits should come from a different budget to the CAP. However, given that that does not happen at the moment, I would hate to see the support removed until we have sorted out the question of from which pocket in the Community those environmental benefits should be paid. I agree that the quota system should be abolished and replaced by a regional ceiling.
On animal welfare, I pay tribute to the Government's efforts in achieving some agreement in Europe on the transport of live cattle and for ending the veal crate system in the United Kingdom. However, we still have a long way to go. I sincerely hope that Her Majesty's Government will continue to make that effort. We must press for improvements. However, as long as we have dairy herds in this country we will produce a large number of calves. Much effort will have to go into promoting what is called "welfare friendly veal". I am told that it is difficult to persuade people that welfare friendly veal, which is not as white as imported veal, is as good or as tasty. From personal experience, I find that it has a better flavour than that funny white stuff that comes in across our borders. In particular, we must persuade the catering industry that welfare friendly veal makes very good eating. Every citizen in the country can help the farming industry. Whenever we go to a restaurant or supermarket we should ask for English veal. In that way we can do an enormous amount to help our agriculture industry. I commend the report to your Lordships.
5.14 p.m.
Lord Gallacher: My Lords, consideration of this report in your Lordships' House has been somewhat delayed yet we on these Benches regard it as still highly relevant. The report strikes a cautious note, but it is progressive in its general thinking. As always, clarity of presentation features in a report from the Select Committee on the European Communities. Only occasionally in this document do I notice what I would describe as a slightly equivocal note. The report states, for example, that the beef market is in better shape. That may be so, but the shadow of BSE is still very much with us here in Britain.
Quotas are due for review in 1996 and the Commission is forecasting a build-up of stocks in 1997 and 1998. Setting a timescale towards world market prices is not without risk given a seven-year production cycle. One recalls, if one is old enough, the serious world price fluctuations in the 1950s when the United

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Kingdom deficiency payments scheme applied; for example, prices of South American imports sometimes rose sharply and the additional supply estimates that were necessitated gave rise to considerable parliamentary rows.
Details of the common agricultural policy costs of the present regime for beef and veal are given in paragraph 40. The noble Lord, Lord Middleton, and the noble Baroness, Lady Robson, have already referred to them. The beef and veal regime is still costly. It is wise to emphasis the sensitivities of the regime. Current intervention usage is reduced but, in our opinion, that position could change. The evidence of the Ministry of Agriculture, Fisheries and Food (which is endorsed in the report at paragraph 48) favours further controls on the intervention mechanisms which were started in 1992. We wonder whether that is still MAFF's view.
Again, the report supports MAFF, as opposed to the arguments advanced by the farmers' unions for both England and Wales and for Scotland, in seeking to phase out quotas which were described by MAFF as both cumbersome and restraining. We note the proposal in paragraph 46 that individual suckler cow premium quota allocations should be replaced by regional ceilings.
Turning to export refunds, all parties accept that the export refund system is a potential source of fraud. Indeed, MAFF's evidence to that effect is unequivocal, even though the refund system is operated by the Intervention Board. The stability of the Community regime rests on regular exports and costs are high. The GATT agreement will ultimately restrict the volume and value of beef exports, but one wonders what effect those restrictions will have on the European Union market, especially a market perhaps augmented by east European imports. If one were to suggest that export refunds would be better controlled if the Intervention Board had its own marketing arm, one would doubtless be told that that would be contrary to the Treaty of Rome. Nevertheless, one cannot help reflecting that dire and continuously serious situations may call for drastic remedies such as a measure of direct selling.
I turn now to BSE. The slow decline in new cases following the measures taken by agriculture departments give some cause for hope. Exports, as well as domestic trade, heavily depend on the continuance of that trade.
Turning to animal welfare, we too congratulate Her Majesty's Government on their hard fight in the Agricultural Council for better rules for animal welfare during animal transport. The directive 95/29 is the result and the deadline for the implementation of that directive is 31st December 1996. The United Kingdom consultation process is now underway. Parts of the directive are straightforward; for example, on loading densities and improved enforcement methods. However, other aspects such as the licensing of transporters and competence requirements for hauliers and handlers are complex but essential. If the United Kingdom could increase exports of meat on the hook, the long-term position would be more satisfactory. That leads me to ask where the responsibility rests for the promotion of export sales on the hook as opposed to the live animal trade.
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The MLC has its European offices in major EU countries. Food from Britain is also export-oriented. Of course, the buyer is sovereign here as elsewhere, but marketing inducements have a part to play. One hopes that that aspect of the problem is not forgotten in the welter of information on this question which sometimes comes our way.
The changing character of our domestic retailing scene continues to emphasise the dominance of multiple supermarkets. Their share of red meat sales is now 54 per cent., and five companies supply 48 per cent. of that. That represents market power in any language, not only buying but selling, and especially in determining gross profit margins. Central packing of meat by multiples is 65 per cent. That information comes by way of the annual MLC report published a few days ago. In that connection, trading trends are also important.
I turn to veal, and I note that paras. 50 and 52 of the report refer to UK sales of veal. That question has already been touched upon by both previous speakers. Even the "welfare friendly" variety of veal has disappointing sales. While there is scope to increase sales, and while the ending of the veal crate system should help exports, if the EU can be persuaded to end that system, a surplus situation seems likely to persist and yet the production of male calves will continue.
In that connection, the work of the Hannah Research Institute in Scotland, which is government supported, is of importance. It is aimed at extending indefinitely the period of lactation, thereby obviating the need for dairy cows to produce calves annually. As the noble Earl who speaks on Scottish affairs in your Lordships' House has responsibility also for agriculture in Scotland, it may be of interest to have a progress report on that research, especially as I believe that the Select Committee on Agriculture in another place is at present undertaking a comprehensive study of the UK milk industry.
We have had an interesting debate, even if the number of speakers is disappointing. The noble Lord, Lord Middleton, presented the committee's report in an excellent way. We look forward, without any trepidation whatever, to hearing what the noble Lord has to say about the Select Committee's endeavours.
5.22 p.m.
Lord Lucas: My Lords, I should like to congratulate my noble friend Lord Middleton and his committee on the thoroughness of their analysis of this complex regime. The committee took evidence from the wide spectrum of interests involved in the beef sector. It was faced with a large number of sometimes conflicting arguments, but it has succeeded in producing a report which sets out clear views on the regime and ideas for change. The Government welcome the report and agree with its underlying theme that the beef and veal regime is expensive and badly needs to be further reformed. The Government have long been critical of it.
High support prices in the Community encourage the production of large surpluses, the disposal of which, generally for export, is exceedingly costly. Not only does that entail a very high budgetary cost but it also works against the interests of both domestic and

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industrial consumers. The Government believe that the long-term aim must be the development of a more market-oriented CAP with, inter alia, a planned, phased reduction in support levels, including direct compensatory payments to farmers such as the beef special premium. We also agree with the committee that export refunds are too expensive.
We therefore welcome the fact that they have been constrained by the GATT agreement and that the Commission is taking this constraint seriously. Indeed it has led to significant reductions in beef refund rates in the past few months, most recently on 18th November by 25 per cent. across the board.
We share also the committee's concerns over fraud and agree that EU controls on refunds must be sufficiently vigorous to counter that. We share the committee's concern that increased production, falling consumption and GATT limitations on exports could lead to a build-up of beef surpluses between now and the end of the century.
The 1992 reforms have certainly been successful in reducing surpluses—beef intervention stocks have fallen from over 1 million tonnes barely four years ago to less than 20,000 tonnes today, as my noble friend said, but that may be only a temporary respite. The Government therefore welcome the committee's endorsement of our proposals to limit further the use of intervention and for phasing out so-called "normal" intervention, leaving "safety net" intervention for emergencies.
We welcome the committee's support for our aim of removing the 90-head limit on beef special premium claims and for replacing individual suckler cow premium quotas with national or regional ceilings. We continue to press for those changes but have not so far gained sufficient support from other member states to make their realisation a viable negotiating possibility.
We agree also with the committee's conclusion that a further supplement to the suckler cow premium from national funds is not justifiable.
So far as the second payment of beef special premium is concerned, the Government remain to be convinced that the case for abolition has been established. In particular, we are concerned that it will be difficult to devise a support system based on a single payment which is financially acceptable to the UK. The extensive production of beef from grass, as in the UK, would be likely to be disadvantaged relative to producers rearing intensive beef on cereals, as in Germany, Spain or Italy. That extensive production should be supported was a key principle underlying the 1992 reform of the beef regime.
The Government welcome the committee's endorsement of our efforts to promote in Europe the case for "welfare-friendly" veal. The Government are continuing to work hard in seeking an end to the cruel veal crate systems across Europe. At the same time, we have been looking at the scope for increasing the market for welfare-friendly veal in this country. Together with the Meat and Livestock Commission and producers, we have been encouraging caterers and retailers to look more favourably at the welfare-friendly UK product.
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That work includes new recipe development and new cutting techniques to make the best use of the whole carcass.
On BSE, the Government agree with the committee that beef markets currently closed on account of unfounded fears over BSE should be opened up. British beef is safe. There is no evidence whatsoever that BSE can infect humans, and any remote theoretical risk should be eliminated by the control measures that we have taken.
On the points made by the noble Lord, Lord Gallacher, yes, BSE cases have started to reduce very quickly. They are falling by about 40 per cent. a year in total. In the younger age groups of cattle they are falling much faster than that. We believe that all our predictions on how the epidemic would pan out will be realised and that we shall see an end of it before too long.
The Government agree with the committee that the UK is well placed to meet the demand for high quality beef and they welcome the effort which the Meat and Livestock Commission has put into the European quality beef scheme. They agree also that the quality beef specification should include Fat Class 4 and will continue to argue for that in Brussels.
Regarding the committee's suggestion that the scheme should be extended, the Government have yet to be persuaded that such an extension would represent good value for money. The EC agricultural budget is already overstretched. Moreover, the evidence that the current scheme has increased beef consumption (thereby reducing expenditure on intervention and export refunds) is far from conclusive. Nevertheless, given that the EC-funded promotion scheme exists, the Government will do all in their power to maximise the UK's share of total expenditure.
The committee referred to its 1991 report on the Development and Future of the CAP. The rural White Paper makes the Government's view of the present CAP very clear: it is costly, inefficient and wasteful. It disadvantages consumers and the food industry and does not pay due regard to environmental considerations. What the Government want to see is an efficient, prosperous and outward-looking agricultural industry which is able to safeguard and enhance the rural environment. The key to achieving that lies with progressive reductions in production-related support and the eventual abolition of supply controls. Remaining support should be better targeted towards environmental and other specific objectives, such as retaining farming in the uplands.
Improving the CAP along those lines should be of benefit not only to farmers but to all sectors of the rural economy. Equally, however, one must accept that achieving change will be slow and difficult. Most member states continue to feel that the 1992 reforms were painful enough and do not want to contemplate further change. However, the Government's aim is to take every opportunity to push the CAP in the right direction, using the conclusions of the CAP Review Group to further this aim.

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I am conscious that I may not have replied to all the points made in the debate, in particular to some of those made by the noble Lord, Lord Gallacher. I shall read Hansard and write to the noble Lord if there is anything further I need to say.
Your Lordships' committees enjoy an excellent, unrivalled reputation in the EU. This report's thorough and effective analysis of the beef and veal regime will, we trust, prove to be a stimulus for change and a point of reference for years to come.
5.30 p.m.
Lord Middleton: My Lords, I am grateful to all noble Lords who have contributed to the debate on the report and I am grateful to the noble Lord, Lord Lucas, for his reply.
There appears to be agreement with the committee's general conclusion that the beef regime is expensive and now is the right time for a further review before surpluses begin to build up again. I was grateful to the Minister of Agriculture, Fisheries and Food for assuring us in his response to our report that the Government will continue to press the point with the Commission and with other member states. It is very important that the pressure is maintained.
The noble Lord, Lord Gallacher, referred to BSE. I did not refer to it when I spoke for the sake of brevity and because I thought that the noble Lord, Lord Lucas, would refer to it, as indeed he did. Perhaps I may add my own inexpert comment that the control measures insisted upon by the ministry are probably more than adequate provided they are properly carried out. It is in everyone's interest that the greatest care is taken that the BSE measures are rigorously supervised and enforced.
As we said in our 1991 report on CAP reform, governments in the member states must recognise that perpetuation of protectionism in agriculture is neither in the interests of society as a whole nor of the taxpayers and consumers who fund the CAP.
On Question, Motion agreed to.

Vienna Document 1994 (Privileges and Immunities) Order 1995
5.32 p.m.
Lord Chesham Lord Chesham rose to move, That the draft order laid before the House on 16th October be approved [29th Report (1994–95) from the Joint Committee].
The noble Lord said: My Lords, the purpose of this order is to confer privileges and immunities on observers, inspectors, evaluators and auxiliary personnel in accordance with the provisions of the 1994 Vienna Document of the Negotiations on Confidence and Security Building Measures. The Vienna Document 1994, which was adopted on 28th November 1994,
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integrates a new set of confidence and security building measures. These build on those adopted in the earlier Vienna Document 1992, which it supersedes and with which your Lordships will be familiar.
Agreement by the 53 states of the Organisation for Security and Cooperation in Europe to the provisions of the Vienna Document 1994 is a welcome enhancement of military transparency and predictability throughout Europe. It has a particular role to play in reducing the risk of confrontation and tension.
A necessary component in any arms control regime is the ability to monitor compliance with the regime's obligations. In the case of the Vienna Document 1994, this is done by means of observations, evaluations and short-notice on-site challenge inspections carried out by representatives of individual OSCE states. The document requires that those certain persons mentioned previously are granted during their mission privileges and immunities in accordance with the Vienna Convention on Diplomatic Relations.
The number of missions to the United Kingdom is not very high. We are liable to receive up to three inspections and two evaluation visits a year. Observations are by invitation and are linked to the size of military exercises, demonstrations of new types of military equipment and visits to combat air-bases.
This order is necessary for the United Kingdom to give effect in domestic law to these provisions on privileges and immunities. The order is being made under Section 1(2) of the Arms Control and Disarmament (Privileges and Immunities) Act 1988. I beg to move.
Moved, That the draft order laid before the House on 16th October be approved [29th Report (1994–95) from the Joint Committee].—(Lord Chesham.)
Lord Graham of Edmonton: My Lords, I apologise on behalf of my noble friend Lady Blackstone who, unfortunately, is unable to be present. However, she has authorised me to say that we on these Benches give the order a friendly welcome.
We recognise that the order is in pursuance of other major decisions. The Minister's explanation put some flesh on its bones and explained why it is being put forward and what it is hoped it will achieve. It relates to confidence-building measures during a time of change in regimes throughout Europe and the world, and it is important that everything is done to strengthen the confidence that one nation has in another.
I noted in particular the use of the word "transparency". That is the vogue word used to describe making something clear, seeing clearly and understanding what is going on. Obviously, the purport of the order is to be welcomed and it is in that spirit that we welcome it.
On Question, Motion agreed to.
House adjourned at twenty-four minutes before six o'clock.