Lords Sitting of 23 October 1995

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

Bosnia: British Casualties
Lord Boyd-Carpenter Lord Boyd-Carpenter asked Her Majesty's Government:
How many members of Her Majesty's forces have been killed and how many wounded in Bosnia.
The Parliamentary Under-Secretary of State, Ministry of Defence (Earl Howe): My Lords, 18 British service personnel have been killed and a further 38 have sustained serious injuries in the course of military operations in the former Yugoslavia.
Lord Boyd-Carpenter: My Lords, in the light of these figures, can my noble friend say whether Her Majesty's Government are reconsidering exposing our forces to all the risks and dangers in that unhappy country of Bosnia or whether perhaps we have expended enough by way of casualties in order to prop up generally a deplorable set-up?
Earl Howe: My Lords, I fully understand my noble friend's distress at the British casualties in Bosnia. The lives lost and injuries sustained are greatly to be regretted. But we should also look at what has been achieved in Bosnia. It is perhaps appropriate to recall the words of Mr. Douglas Hurd when he told the other place in a debate on 29th April 1993 that the Government's key aims in Bosnia were threefold: first, to prevent the conflict from spreading; secondly, to relieve suffering; and, thirdly, to provide a framework for a political solution. I believe that it is fair to say that we have successfully met those objectives. We have prevented the conflict from spreading into a wider Balkans war; we have significantly reduced the killing and made a major contribution to the relief of the humanitarian situation. We have also played a major role in the peace process. I believe that there are now better prospects for peace in Bosnia than at any time since the conflict began. That has resulted from patient diplomacy and determined military action, where the United Kingdom has been at the forefront.
Lord Mason of Barnsley: My Lords, when are we likely to withdraw?
Earl Howe: My Lords, we have always said that we shall remain in Bosnia as long as we can usefully contribute to the aims that I have outlined. As the noble Lord will be aware, there is now in prospect the talks in New York, followed by a further conference in London. After those discussions we shall be in a position to judge whether we wish to continue our contribution in some military way.
Lord Ironside: My Lords, although we all admire very much the excellent job our forces are doing in Bosnia, these figures are very distressing indeed. Can my noble friend give figures as regards casualties and fatalities for UNPROFOR as a whole?
Earl Howe: My Lords, I do not have detailed, up-to-date figures, but I am led to understand that casualties among the UNPROFOR troops are approximately in proportion to each country's contribution to that force. I also understand that our own casualties are lower than those suffered by the French.
Lord Craig of Radley: My Lords, are the Government concerned about the brittle nature of morale in some sections of the Armed Forces, particularly in the medical services, where it is epitomised by an excessively high outflow, poor recruiting and an acute shortage of senior consultants? Do the Government not recognise that an inability to provide medical care and treatment to our Armed Forces, particularly if they are injured, would not be to put Front Line First?
Earl Howe: My Lords, with respect to the noble and gallant Lord, I believe that the question he has asked falls slightly wide of that on the Order Paper. However, I can reassure him that the Government believe that the medical services available to our forces now and as a result of the re-organisation which is taking place will be sufficient to cater for their needs. In Bosnia there has been no shortage of medical attention and expertise available to our people.
Lord Mayhew: My Lords, I share the deep regrets expressed over the casualties, but would it not be true to say that not only have our Armed Forces behaved extremely well but, as the Minister said, they have had considerable effect, particularly at a critical moment in helping to free the Mount Igman route and raise the seige of Sarajevo?
Earl Howe: My Lords, I am most grateful to the noble Lord. I recall that he expressed concern about the Mount Igman route during the debate on the Defence Estimates last summer. We can be proud of what our troops have achieved to secure that route. I am sure that the House will join with me in praising the skill and professionalism of all our servicemen and women involved in operations in the former Yugoslavia.
Lord Molloy: My Lords, is the noble Earl aware that there are very many families in this country who have given of their best and have had to experience the news that their sons have been slain? Is he further aware that that is causing grave concern and a vast amount of unhappiness? Many of the relatives are not sure whether other nations in the United Nations should not be doing a bit more along these lines and following the examples set by our country.
Earl Howe: My Lords, I do not believe that we can ever underestimate the suffering of families who have lost relatives in Bosnia. Of course, it is extremely sad when we receive news, as we have today, that a further two serviceman have been injured, although I am pleased to say that those injuries are reported as being

887
light. I have already indicated to the noble Lord, Lord Mason, that the future make-up of the proposed implementation force is up for discussion. We shall seek to ensure that other nations, as well as our own, play a full part in that force.
Viscount Allenby of Megiddo: My Lords, can the Minister tell us the current financial deficit that is due to us from the United Nations?
Earl Howe: My Lords, although that question does not relate specifically to the Question on the Order Paper, from memory I can tell the noble Viscount that the cost of our operations so far in Bosnia is of the order of £224 million, of which we have received reimbursement from the United Nations of approximately £70 million.
Lord Williams of Elvel: My Lords, while joining the noble Earl in rightly paying tribute to the performance of our Armed Forces in Bosnia and in his expression of sympathy to the relatives of those who have suffered, to continue the questioning of the noble Viscount, may I ask the Minister again whether there is any reason why the United Nations has not reimbursed the United Kingdom Government for the total cost of the Bosnian operation?
Earl Howe: My Lords, as it is a matter of topical discussion in the press, I am sure that the noble Lord is aware that the United Nations is suffering from severe cash flow problems at present. We are concerned by those problems. It is important that they are addressed. Indeed, that is one of the matters which my right honourable friend the Prime Minister will address when he speaks to the United Nations today.

Channel Tunnel Rail Link: Claims for Blight
2.44 p.m.
Lord Clinton-Davis Lord Clinton-Davis asked Her Majesty's Government:
Why they have rejected the report of the House of Commons Select Committee on the Parliamentary Commissioner for Administration upholding the finding of maladministration by the commissioner against the Department of Transport concerning a number of claims for blight caused by the Channel Tunnel rail link, and whether they will review this decision.
The Parliamentary Under-Secretary of State, Department of Transport (Viscount Goschen): My Lords, the Government have not yet responded to the Select Committee's report, but we aim to do so shortly.
Lord Clinton-Davis: My Lords, does the Minister agree that it would be wholly unprecedented for a government to ignore both the ombudsman's recommendations and those of the Select Committee? Does he further agree that the Select Committee has made its position absolutely plain on this: that there is a finding of maladministration to be supported and that
888
the Government should act by granting compensation (in a very limited way) to those who have suffered the wrong? Does he also agree that Mr. Francis Maude, the then Financial Secretary to the Treasury, gave evidence in December 1991, saying:
"I am not aware of any circumstances in which [the Parliamentary Ombudsman's] recommendations have been ignored. This is the basis on which the Government has tended to work—and has, as far as I am aware, always worked—in that we do accept and implement the recommendations that are made"?
Does the Minister now agree that those people who have suffered from blight in this way are entitled to compensation?
Viscount Goschen: My Lords, we responded fully to the Parliamentary Commissioner's initial investigation and when giving evidence to the Select Committee on this subject. My right honourable friend the then Secretary of State for Transport and, indeed, the Permanent Secretary gave full evidence to the Committee as to why they thought that the charges of maladministration should be rejected. Beyond that, we are due to make a full and formal response to the Select Committee's report and I would not want to pre-empt that response.
Baroness Serota: My Lords, does not the Minister agree that the unique decision not to accept the Parliamentary Commissioner's report is quite astonishing? Does he also agree that it is urgent that the Government reconsider their findings on the matter so that those individuals who have suffered an injustice, according to the independent inquiry, should receive some form of compensation?
Viscount Goschen: My Lords, I have said that the Government gave full and specific reasons as to why they rejected the charges of maladministration concerning the issue of generalised blight. Beyond that, the question of a further response should be left to our full and formal response to the Select Committee which we hope to give shortly.
Lord Clinton-Davis: My Lords, does the Minister agree that in the past no government who have been criticised by the Parliamentary Commissioner have ignored the Select Committee's upholding of the commissioner's recommendations? Does he accept that? Does he accept that any departure from that would be utterly wrong?
Viscount Goschen: My Lords, I agree that we are in an unusual situation, but the noble Lord invites me to pre-empt our response to the Select Committee and I fear that I cannot do so.

First Secretary of State: Responsibilities
2.48 p.m.
Lord Peyton of Yeovil Lord Peyton of Yeovil asked Her Majesty's Government:
To what extent the First Secretary of State has the power to review the decisions of departmental Ministers.
The Lord Privy Seal (Viscount Cranborne): My Lords, to none.
Lord Peyton of Yeovil: My Lords, I congratulate my noble friend most sincerely on the brevity of that Answer. What judgment has been made of the usefulness of similar appointments in the past and, in so far as they have been considered useful, why they have not been repeated more often?
Viscount Cranborne: My Lords, I know that the constitutional and historical memory of my noble friend is almost without equal in your Lordships' House and I know that he will appreciate that the title of First Secretary of State appears to have reached occasional currency with the appointment to that office of his late right honourable friend R. A. Butler. However, the party opposite has also been responsible for similar appointments and no doubt both that party and Her Majesty's present Government have found the use of that office extremely to the point. On the office of Deputy Prime Minister, my noble friend will be at least as aware as I am of the precedents for that. No lesser luminaries than Sir Winston Churchill and the late lamented Lord Attlee both designated people to that important position.
Lord Allen of Abbeydale: My Lords, is the noble Viscount aware that The Times last week quoted a Whitehall spokesman as saying that Mr. Heseltine saw it as a prime function of his responsibilities to answer questions on the Government's relationship with their agencies? Does that mean that we should now be looking for an answer, when it eventually comes, to the First Secretary of State rather than to the Secretary of State for the Home Department to the question which has been puzzling so many of us; that is, the relationship between the Home Office and the Prison Service agency?
Viscount Cranborne: My Lords, I hope that your Lordships will forgive me if I express a certain degree of surprise that the noble Lord, Lord Allen, above all Members of your Lordships' House, should find himself in some difficulty on that question. The noble Lord will be at least as aware as I am that individual Secretaries of State are responsible and accountable to Parliament for the activities of the Next Steps agencies which have been established within their departments. I thought, if I may say so, that my right honourable friend the Home Secretary gave an extremely robust explanation of the constitutional position last week. I was delighted to be able to see that the honourable gentleman, the Opposition Shadow Home Secretary, took a salutary lesson in that regard.
Baroness Seear: My Lords, will the noble Viscount explain in that case the difference between the words "activity" and "operation"? He said that the Secretary of State was responsible for activities, is not that the same as operations?
Viscount Cranborne: My Lords, the noble Baroness tempts me rather wider than the Question asked by my noble friend. I would merely refer her to the full answers that my right honourable friend gave last week. I am sure that she will find them as satisfactory as I did.
Lord Richard: My Lords, I wonder whether the Leader of the House can help us. In Hansard of the other place on 16th October, the right honourable gentleman Sir David Steel asked the First Secretary of State, the President of the Board of Trade and the Deputy Prime Minister—that secular trinity: three in one and one in three—what were the department's priorities in Scotland. The answer came from the Chancellor of the Duchy of Lancaster who, I assume, is in some ways associated with the First Secretary, the President of the Board of Trade, and the Deputy Prime Minister. The answer was:
"As elsewhere in the United Kingdom, to promote the continuing improvement of public services and the deregulation and increased competitiveness of British industry".—[Official Report, Commons, 16/10/95; col. 17.]
What services is he responsible for, and how does he propose to improve them?
Viscount Cranborne: My Lords, I hesitate to quarrel with the noble Lord's theology. I was under the happy impression—perhaps he could correct me—that the present President of the Board of Trade is my right honourable friend the Member for Galloway and Upper Nithsdale. Therefore, I am somewhat at a loss to understand the connection the noble Lord has made in that respect. However, if I may gloss over that small degree of inexactitude, which I am sure had escaped his notice, the burden of the noble Lord's question was entirely pertinent. My right honourable friend the Member for Henley is responsible for a large number of matters, as my right honourable friend the Prime Minister has made clear, and as I have been able to make clear in a number of Written Answers in your Lordships' House. He gives general assistance to the Prime Minister; he has specific responsibility for the competitiveness agenda, the working of government and the presentation of their policies; he undertakes the chairmanship of a number of Cabinet Committees, as do a number of my right honourable friends; and he of course has ministerial responsibility for the Cabinet Office and the Office of Public Service in which he—the noble Lord is right—is assisted by my right honourable friend the Chancellor of the Duchy of Lancaster.
Perhaps I may refer the noble Lord particularly to that element of my right honourable friend's responsibilities which come under the general rubric of the competitiveness agenda. I hope that the noble Lord's interest in these matters will be directed towards the policy of his own party, which, above all, has shown in the past year at least that although it talks big on the subject of the competitiveness of British industry, virtually every policy to which it wishes to sign up will undermine that competitiveness and therefore our nation's prosperity.
Lord Callaghan of Cardiff: My Lords, is the noble Viscount aware that the appointment of a First Secretary has usually been to assuage injured pride or unfulfilled ambition, and that it has usually failed on both counts? Does he have any more optimism for this appointment?
Viscount Cranborne: My Lords, the noble Lord is, of course, infinitely better equipped than I am to talk about unfulfilled ambition in governments.
Lord Callaghan of Cardiff: My Lords, no, I fulfilled all mine.
Viscount Cranborne: My Lords, however I can only observe from my limited experience so far that my right honourable friend the Member for Henley has proved himself to be a team player of extraordinary effectiveness since his appointment to the office of First Secretary. I can therefore only conclude that my right honourable friend's sole objective is to serve in whatever capacity he is called.
Lord Richard: My Lords, the Lord Privy Seal is of course quite right. The pack has been shuffled so often that it is sometimes difficult to keep track of where the cards have immediately fallen. I am bound to say that when the noble Viscount corrected me on the trinity there is only one two-headed monster I can think of. If he would prefer Cerberus, that is entirely a matter for that side of the House. Could he perhaps answer the question I put to him? What public services is the First Secretary and Deputy Prime Minister responsible for improving?
Viscount Cranborne: My Lords, those public services which are the responsibility of the OPS, with which he and my right honourable friend the Chancellor of the Duchy of Lancaster are associated. At the risk of wearying your Lordships, I read a long list of the responsibilities that my right honourable friend has undertaken. In parenthesis, I am also extremely grateful to be told that Cerberus had only two heads. Perhaps my noble and learned friend Lord Hailsham will be able to correct me on this, but I understood that Cerberus had more than two heads.
Lord Hailsham of Saint Marylebone: My Lords, indeed he did.
Lord Bancroft: My Lords, is the noble Viscount aware that as an official I served two of the previous First Secretaries of State? One was Lord George-Brown, an engaging and tempestuous acquaintance, who failed to reach No. 10. The other was Lord Butler of Saffron Walden, a close and admired friend. Is the noble Viscount further aware that when the then Prime Minister appointed Lord Butler to the offices of First Secretary of State and Deputy Prime Minister, without the backing of a great department of state, it was widely believed, rightly or wrongly, that part of the intention was to impede his further progress to No. 10, and so it proved? In the light of those precedents, and the absence of departmental authority attached to Mr. Heseltine, will he confide in us the intention and reasoning lying behind the appointment of the present distinguished incumbent?
Viscount Cranborne: My Lords, I can think of many bodies in which I would less rather confide than your Lordships' House because I regard your Lordships' House as infinitely more discreet than a number of the bodies with which I am occasionally associated. However, in spite of the temptation to speculate, which the noble Lord lays before me, I would say merely that it is perfectly clear from the short but distinguished record which my right honourable friend has already laid before the nation in his capacity as First Secretary of
892
State and Deputy Prime Minister that he has an important function to fulfill and he is doing that with great distinction.

Hong Kong Legislative Council and China
3 p.m.
Lord Dubs Lord Dubs asked Her Majesty's Government:
What are the implications for relations with China following the recent elections to the Legislative Council in Hong Kong.
The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, prospects for co-operation with China over Hong Kong and more generally are improving all the time. The Legislative Council elections were an important step in the development of representative government in Hong Kong. We welcome both developments.
Lord Dubs: My Lords, I had the benefit of visiting Hong Kong a couple of weeks ago and I am fully aware that the issues relating to Hong Kong require more attention than is possible in answer to a Question today. Does the Minister agree that the results of the recent elections show that the people of Hong Kong want good relations with China and the ability to retain their democratic and free institutions and general structure? It is important that we recognise the fact that they have both those motives; and that the campaign to denigrate the Governor of Hong Kong, who I believe is doing an excellent job, should be resisted. Will the Government send a signal that they have full confidence in Chris Patten and the work that he is doing?
Baroness Chalker of Wallasey: My Lords, we welcome the fact that the noble Lord was able to visit Hong Kong. I expect to hear from him in detail about his visit. Secondly, I agree about the outcome of the election results. Yes, I believe that the people of Hong Kong want good relations with China while at the same time retaining their democratic rights and freedom of action. The results of the Hong Kong election reflect a broad cross-section of community interests. The pro-China candidates won 15 of the 60 seats in total.
I further agree with the noble Lord about the campaign that is being run against the excellent Governor of Hong Kong, Mr. Chris Patten. The Governor and the Hong Kong Government are continuing to play a fundamental role in the formulation of our policy towards Hong Kong. The proposals which we agreed during the visit of Mr. Qian Qichen here were drawn up in Hong Kong. There is no question of sidelining the governor, whose authority is very much enhanced as a result of the action that he has taken. I refer your Lordships to the policy address of 11th October. I hope that Members of this House will take the opportunity to meet with the governor while he is here this week to address the all-party group on Hong Kong.
Lord Avebury: My Lords, how can relations with China be compatible with the continuation of the democratic rights of the people of Hong Kong when the proposal of the Chinese Government is to abolish the LEGCO on day one of their administration? Will the Minister comment on the Chinese Government's recent criticism of the Bill of Rights which is enacted by LEGCO and which they have said they will also repeal on day one? How can that be compatible with China's undertaking to continue with the operation of the International Covenant on Civil and Political Rights in Hong Kong? Has the Minister anything further to say about the obligation that the Chinese Government should have undertaken, but which they have repudiated, to report on their performance under the international covenant? They are obliged to do that as part of that commitment.
Baroness Chalker of Wallasey: My Lords, the noble Lord, Lord Avebury, in his supplementary question goes further than I can do justice to in a Question and Answer session in your Lordships' House. We have heard some proposals from bodies such as the Preliminary Working Committee. That is an unusual body which does not necessarily express Chinese Government policy and is making proposals about which we rightly have real concern. We have expressed that concern to the senior Chinese representative of the Joint Liaison Group.
I understand the noble Lord's concern with human rights, but he must realise that it was agreed in the Joint Declaration and in Article 39 of the Basic Law that the international covenants will continue to apply to Hong Kong. We will be resolving some of those matters at the meeting which starts next week. As regards the other matters, I shall write in detail to the noble Lord.
Lord Stoddart of Swindon: My Lords, will the Minister say whether Her Majesty's Government agree with the proposal of the Governor of Hong Kong that an additional 3 million people should be given the right of entry to this country? If not, why not?
Baroness Chalker of Wallasey: My Lords, my right honourable friend Mr. Michael Howard has made quite clear that it would not be possible for so many people to come to this country. Most Hong Kong people would not need to come to this country. When the Governor of Hong Kong spoke he was repeating the policy of the Hong Kong Government. There was absolutely nothing new in his remarks.
Lord Wright of Richmond: My Lords, in asking the Minister a question about trade with China I should declare an association with several companies which are actively doing business in China. Is the Minister aware of some concern in British industry at the continued exclusion of China from the World Trade Organisation, with particular implications for China's treatment of intellectual property rights breaches? Do the Government support the inclusion of China into the WTO and will they take action to ensure that that occurs in appropriate circumstances?
Baroness Chalker of Wallasey: My Lords, that is certainly a matter with which we are dealing. We already have very large trade with China. I believe that
894
the United Kingdom is the largest European investor in China and we are building up trade relations all the time. It is surely something that must follow.

Criminal Procedure (Scotland) Bill [H.L.]
3.7 p.m.
Read a third time, and passed, and sent to the Commons.

Proceeds of Crime (Scotland) Bill [H.L.]
Read a third time, and passed, and sent to the Commons.
Criminal Law (Consolidation) (Scotland) Bill [H.L.]
Read a third time, and passed, and sent to the Commons.
Criminal Procedure (Consequential Provisions) (Scotland) Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

Atomic Energy Authority Bill
3.10 p.m.
Report received.
Clause 1 [Atomic Energy Authority to make schemes for transfer of property, rights and liabilities if so directed]:
Lord Peston Lord Peston moved Amendment No. 1:
Page 1, line 8, leave out ("or schemes").
The noble Lord said: My Lords, in moving this amendment I shall speak also to Amendments Nos. 2, 3 and 4. They are straightforward because, not surprisingly, we have already covered quite a lot of the ground.
The essence of the amendments is to amend the Bill as presented to your Lordships with a view to achieving what I think everybody who has looked at this matter agrees should happen, setting aside the whole question of privatisation of this part of the Atomic Energy Authority. That is not ground that I wish to go over again because it has been dealt with fully.
The question returns to one of form. As I say, everybody who has studied this matter, whether they are doubtful or enthusiastic about privatisation, argues on every ground imaginable—on grounds of economics, efficiency and business grounds—that this section of the AEA should be transferred to a single successor company; what one would call unitary privatisation.
That is not ruled out by the Bill but I believe that the reason it is not in the Bill is that the Government are a trifle afraid that there will not be a bidder for the thing as a whole and they wish to keep their options open. I have tabled these amendments on Report not to go over

895
the ground again but simply in the hope that the Government have something more to tell us about it, either about their intentions or something along those lines. I beg to move.
Lord Haskel: My Lords, my name is also attached to this group of amendments. I remind the Minister that during the passage of the Bill many noble Lords spoke of the value of synergy in this business. The noble Lord, Lord Sheffield, who has spent a lifetime in this industry, was particularly anxious to emphasise that point.
I remind the Minister that there are two documents in his own department which provide support for the amendment. First, there is a report on the technology foresight exercise which says that companies of this kind should remain as a single entity. The second document is about some research in his department which speaks of the advantages of concentrating shareholding in this kind of business. That research identifies the benefits of concentrated shareholding as more direct involvement, better monitoring, greater stability in decision taking, greater commitment and long-term investment.
I should like to raise one further point. At col. 15 in Committee, the Minister said that if AEA Technology could meet the ambitious targets it has set itself, then sale as a single, independent entity may well be achievable. As I understand it, the sales and profit targets have more or less been achieved but it includes some profits from disposals. Is the Minister satisfied with that performance? Is the Minister sure that a test lasting a few months can be a proper basis for that decision? If the performance is good, why sell the business? If the performance is not that good, why fragment the business because of short-term considerations? I support the amendments.
3.15 p.m.
Lord Ezra: My Lords, as the noble Lord, Lord Peston, said in introducing the amendments, this issue has been one of the main subjects of debate both at Second Reading and in Committee. AEA Technology has established itself as one of the leading international engineering and scientific consultancies. As a whole, it can achieve, as it already has, a great deal. Divided, broken up and sold in bits and pieces, as one financial adviser to the Government has suggested, it might realise perhaps greater short-term gains but the long-term loss would be considerable.
Therefore, I very much hope that in answering the points raised on these amendments, the noble and learned Lord will reassure us that the Government have thought again and agree that the organisation should be sold off as a whole.
The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie): My Lords, in responding to these amendments, perhaps I may take a few moments to set out the Government's position not only because this is probably the most important set of amendments with which we shall deal this afternoon but also because it may help to clear the way for our consideration of later amendments.
896
These amendments are designed to remove the Secretary of State's power to make more than one transfer scheme, and to ensure that property, rights and liabilities transferred under it go to a "successor company" as defined in the Bill. When we discussed these amendments in Committee, I explained that it was too early to make irrevocable decisions on the form and method of privatisation and that it was only prudent to keep our options open. I also suggested that the position might well be clearer in the autumn, since by then we would have a much better idea as to how AEA Technology was performing and how the various sale options might satisfy the Government's stated objectives for the sale.
I remind noble Lords that the Government first announced their intention to privatise AEA Technology in February 1994. Since then, they have consistently made it clear that decisions on the form of privatisation would be based on AEA Technology's performance in the market place, on the needs and requirements of customers and on the extent to which the various options enhance competition, help to improve UK competitiveness and maximise the overall return to the taxpayer. We have looked at the options with those considerations in mind and taken due note of the views expressed in the House and of the various representations which have been made to us.
Having done so, I can now tell the House that the Government have no intention of breaking up AEA Technology in advance of sale and will be aiming to sell the business as a single whole. I take it that in going forward on that basis, we shall enjoy the full support of the House.
That conclusion reflects the progress AEA Technology has made over the past 18 months in focusing its various activities and in improving the performance of the business as a whole. Management has rationalised the structure of the business, taken action to reduce overheads and improved its marketing and responsiveness to customer demands. As a result, AEA Technology is more competitive in its UK and international markets and more profitable.
Operating profits before interest and restructuring more than doubled in the year to March 1995. And for the six months to 30th September, both sales and profits are expected to be ahead of budget and substantially ahead of last year. Those results are a real tribute to the efforts of both management and staff. They provide a firm foundation from which, in the private sector, AEA Technology can make an even greater contribution to the economy, and to UK competitiveness.
I can also tell the House that, subject to the Bill completing its remaining stages in this House, the Secretary of State would propose to give a direction to the UKAEA under Clause 1(1) of the Bill to make a scheme providing for the early transfer of the activities of what now constitutes AEA Technology to a single successor company owned by the Secretary of State. No decisions have yet been taken about the method of sale as it is too early to say whether a flotation or a trade sale will offer better return to the taxpayer. As is normal

897
in situations of this kind, decisions will be taken in the light of market circumstances at the time and on the basis of securing best overall value for money.
With the two clear statements that I have made in responding to the amendments, I hope that noble Lords who have participated in the debate will feel reassured and that the noble Lord, Lord Peston, will feel able to withdraw the amendment.
Lord Peston: My Lords, I thank the noble and learned Lord for that very full reply. All noble Lords who have taken an interest in this matter will be gratified both by what he said and by the fact that what he said is in response to what noble Lords argued earlier. I understand also why we have had to wait this long for that statement because quite clearly, the additional information that has been made available makes the whole matter look much more sensible. I am not sure whether I ought to raise the following matter under this heading or under a later amendment on transfer schemes.
However, the one matter that troubles me a little is that, when all this happens—that is, assuming the passage of the Bill and the subsequent transfer schemes—because of the nature of the Bill we may never get the chance to look into the matter again. I do not know whether the noble and learned Lord can advise us on that aspect. I cannot see anything in the Bill under the transfer schemes which would mean that they would have to be placed before your Lordships, but I may have misunderstood that part of the legislation. There will obviously be one or two orders in connection with it, but I do not believe that the transfer scheme will be included therein. Is it reasonable for me to ask the Minister whether or not he can give me a reply on the matter today?
Lord Fraser of Carmyllie: My Lords, I shall respond briefly. I have indicated that the scheme will be made in terms of Clause 1(1) and that that will be allowed for. However, once the scheme has been made that will be an end to the matter. It is not a matter that will come before your Lordships' House again. However, as it meets exactly the objective set out by the noble Lord, I hope that he will agree that it is an appropriate way to go forward.
Lord Peston: My Lords, I thank the Minister for that response. I agree that it is an appropriate way to go forward. It is just that I know that noble Lords like to debate almost everything. Therefore, I should not sell the pass too quickly on such matters. My main point was to thank the Minister for his reply on behalf of the Government. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 2, 3 and 4 not moved.]
Lord Peston Lord Peston moved Amendment No. 5:
Page 2, line 4, at end insert—
("( ) No direction to make a transfer scheme shall be made before a period of one year has elapsed after the passing of this Act.").
The noble Lord said: My Lords, Amendment No. 5 has some logical connection with what we have just heard, but there is a little more to it. There are two difficulties that we have had in discussing the subject.
Obviously the Government will wish to get the best possible price for AEA Technology. They have a duty to the taxpayer to do so and they would certainly receive the support of your Lordships if that is the way they approach the matter. It is my view that one must get the very best price.
Assuming that the legislation is passed, although I believe that it would be in the interests of AEA Technology for the whole thing to go ahead as rapidly as possible, it would not necessarily be in the interests of the taxpayer if the whole business were hurried. There is obviously a balance to be made between the efficiency advantages of knowing where you are and the possible taxpayer advantages of taking your time about looking for the best bidder.
The reason for my concern about the latter is that, alongside what we are discussing here—but not entirely separate from it—is the whole question of the privatisation of nuclear power. It is not at all clear at what rate that will proceed. It may well be that we will simply wait for the gracious Speech to be informed. I wish to raise the point that a large part of the business in which AEA Technology will be engaged is, as I understand it, to do with the nuclear power industry. Until one knows what is happening in that respect, it is not obvious to any bidder what the value of the assets that he is bidding for will be. To put it at its mildest, there is a certain amount of market risk involved. Therefore, the point of raising the question of a possible delay, which I do not wish to push too strongly because I can see the arguments for not delaying once this goes through, would be to make the asset value as large as possible.
In raising the matter, it is my hope that the Minister will be able to place on the record what the Government's current view is on the matter. I believe that it would be too much to hope that the noble and learned Lord will tell us anything about the timetable for nuclear privatisation, but certainly any more light that he can throw on the matter would be extremely helpful. I beg to move.
Lord Fraser of Carmyllie: My Lords, I compliment the noble Lord yet again for his ingenuity in tabling an amendment in order to prise out of me information on a matter which, despite what he said, is not directly related to the privatisation proposal contained in the Bill; indeed, the purpose is essentially to draw from me what our plans are in relation to nuclear generators. I do not think that the noble Lord will be surprised when I tell him that I have little to add to what I said in July. Work towards a sale for nuclear generators in the course of the next year is proceeding to plan. Our proposals were fully debated last May following the publication of the nuclear review White Paper and the Government have no plans at present for a further debate.
So far as concerns AEA Technology, I have already made clear to your Lordships that the Secretary of State would propose, given the direction under Clause 1(1), making a scheme providing for the early transfer of the activities of what now constitutes AEA Technology to a single successor company owned by the Secretary of State. Both AEA Technology and the UKAEA Government Division are keen that the transfer should

899
take place as early as practicable so that they become independent legal entities able to deal with each other on a fully commercial basis. The proposed amendment would prevent that and produce renewed uncertainty for all concerned, not least the employees of both organisations. When the noble Lord said that he agreed that there were arguments which went both ways, I have no doubt that the prospect of a period of uncertainty for the employees was one of the factors that he had in mind.
I should point out that the sale of AEA Technology has no implications for the sale of the generators, except that AEA Technology may well be able to offer a wider range of competitively priced services once it is freed from the shackles of public-sector control. The generators are not dependent on AEA Technology, in the same way that AEA Technology is not beholden to them.
Last week I had the opportunity to visit Harwell and see something of the range of activities being undertaken. If the noble Lord has not done so himself, I commend it to him. I am sure that he will be hugely impressed by the real range of scientific expertise which is available. Indeed, some of that expertise has gone a long way from its early origins in supporting our nuclear industry.
Lord Peston: My Lords, I should like, first, to follow the Minister's final remarks. The Atomic Energy Authority has been one of the great triumphs of this country. Our contribution to nuclear science is something about which we can be extremely proud. I have not visited Harwell recently, but if I can find a break and if the pressures of being an Opposition spokesman are not too great, I shall try to follow the noble and learned Lord and visit the people involved. I usually watch such things completely open mouthed when I see what those people do and how bright they are. However, that is by the way.
Of course, I did not expect a great deal more from the Minister. However, I believe that I ought to point out en passant that we never really debated the nuclear power White Paper in your Lordships' House. Indeed, that was one of the things we all moaned about because there did not seem to be any way of persuading the usual channels to organise a debate. However, as the passing of the Electricity Act allows the privatisation of nuclear generators to take place without any more ado, in theory—and, possibly, in practice—we may not get a chance to debate that ever again. That is something that I complained about some time ago.
My main point is that it must surely still be true that the nuclear generators are important customers of AEA Technology. That aspect of the matter was on my mind. However, I fully appreciate that there are limits to what the Minister can say. I certainly have no desire that anything I say today should add to uncertainty in any way. Of course, the uncertainty of employees is of great importance. But we are discussing an asset which currently belongs to the nation. Even if I do not favour its privatisation, if one is to sell it I favour getting the
900
Largest possible price for it. That was partly what I had in mind. Having said that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
3.30 p.m.
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No.6:
After Clause 1, insert the following new clause—

AUTHORITY ASSISTANCE TOWARDS MANAGEMENT BUY-OUT
(" .—(1) If it appears to the Authority that any persons employed by the Authority, or by any subsidiary of the Authority, are taking steps towards—

(a) the submission of such a tender as is mentioned in Schedule 2 below; or

(b) the making of an offer for any part of the Authority's undertaking or for any shares of any subsidiary of the Authority;

the Authority may provide assistance to those persons for the purpose of defraying, in whole or in part, any expenses incurred or to be incurred by them for the purposes of the submission of the tender or the making of the offer.
(2) The Secretary of State may give the Authority directions with respect to the provision of financial assistance under this section.
(3) Without prejudice to the generality of subsection (2) above, any such direction may, in particular—

(a) specify a limit on the total amount of the financial assistance which may be provided under this section or on the amount, or the total amount, which may be so provided—

(i) in cases of any particular class or description in the direction; or

(ii) during any period or periods so specified; or

(b) require the provision of any such financial assistance by the Authority subject to conditions, including conditions as to repayment.").

The noble Lord said: My Lords, it will be for the convenience of the House if I speak also to Amendments Nos. 23 and 25. I do not intend to speak to Amendment No. 12 which goes much further. I see no point in pursuing that route. In moving the amendment I return essentially to the points that I raised on Second Reading and during the Committee stage of the Bill. I then referred to the fact that at Section 141 of the Railways Act 1993 the Government made specific provision to assist management-employee buy-outs. I hasten to add that I questioned whether that was in conformity with the competition rules of the Treaty of Rome. However, the Government said that I was wrong about that. Therefore I make the assumption that the Government are correct as a matter of law. If that is the case, it seems to me that for the sake of consistency—Ministers have frequently said how much they would welcome management-employee buy-outs in this connection—they should follow a similar route to that provided in the Railways Act. That is what I sought to do in the amendments. They may be deficient in some respect but I think that the Minister will concede that that is the effect of what we seek to provide.
When the matter was before the Committee on 17th July the Minister, after saying that he did not wish to be bound to follow a similar precedent, or to regard the Railways Act as a precedent—or indeed any other privatisation schemes for that matter—said, after I had intervened,

901
"I say to the noble Lord—and I hope that this will satisfy him—that I shall be prepared to examine the scope for offering assistance, which is somewhat in the nature of the language to which he made reference".—[Official Report, 17/7/95; col. 91.]
I do not think that that would be sufficient. If the Government found it necessary to make specific provision in relation to the privatisation of the railways for management-employee buy-outs, there seems to me no good reason why it should not be done with regard to this provision. It is not just a matter of giving a general approbation to the idea; it is a case of giving the management-employee buy-out team the wherewithal to go ahead with its submission. These matters are never easy to undertake; they involve some considerable element of cost. I suggest that the Government should have discretion. I do not say that they must act in this way, but that they may do so. They may give the authority directions with respect to the provision of financial assistance under the clause. Subsection (3) of the proposed new clause enables the Government to limit the amount of money that would be available for such assistance. It is desirable that that should be so.
I should have said that I shall not speak to Amendment No. 23. I do not propose to move Amendments Nos. 12 and 23. Amendment No. 25 follows on logically from Amendment No. 6. It follows a similar pattern to Section 141 of the Railways Act. I hope that the Government will respond affirmatively to this provision. I do not believe that it is sufficient simply to say, as they have said on numerous occasions, "We will do our best to encourage management-employee buy-outs". There has to be some substance to that. I have invited the Government to provide that substance in the form of this amendment. I beg to move.
Lord Haskel: My Lords, in supporting my noble friend Lord Clinton-Davis in these amendments I point this out to the Minister. The assistance which my noble friend suggests should be given could be recouped by the Government many times over. That is because the value put by the City on businesses which engage in research and provide technical services is usually low. A management-employee buy-out may well be the best sale route as the sense of partnership among the employees will give financial backers more confidence that the people in this "people business" will not then depart. I suggest to the Minister that the route proposed by my noble friend Lord Clinton-Davis could enable the Government to obtain the most money from the sale.
Lord Clinton-Davis: My Lords, I am obliged to my noble friend for his remarks. I forgot to refer to the amendment which deals with consultation. I do not ask the Government to say more about this issue as a matter of law. However, it is important that the Government give an undertaking that they will talk to the unions about employee participation in AEAT. It is important in terms of preserving the independence and integrity of AEAT. As my noble friend said, that will benefit the Government. I hope that the Minister will say something specific about consultation.
Lord Fraser of Carmyllie: My Lords, I am slightly baffled by the noble Lord's observations. I certainly understood that there was a set of amendments about
902
consultation, beginning with Amendment No. 8. If those were the amendments to which the noble Lord intended to refer, it may be better if I refer to them when we reach that separate group of amendments.
When we considered the matter at Committee stage, the noble Lord and I had a fairly lengthy exchange on the issue of management-employee buy-outs. At that point I hope that I satisfactorily assured the noble Lord that not only would the Government seriously consider any MEBO bid for the business, but that I should also be prepared to examine what scope the Government had to offer assistance to a MEBO. As I indicated at that time, I have considered the case of AEA Technology compared with that of the railways, to which the noble Lord has drawn my attention. While what he had to say about the railways was factually absolutely correct—I make no remark as regards any small defects that there may be in the drafting of his measure—the significant point is that the situation is rather different. I shall explain why I take that view.
Statutory provision was necessary in the case of the Railways Act because of the special circumstances of the BR sale, in particular the fact that BR itself was the vendor and the number of businesses being sold—some 80 to 90, which is in sharp contrast to what is being proposed in the measure we are discussing—meant that it was far easier for BR to offer financial assistance than for the Secretary of State to offer such assistance direct. As I have indicated, in the case of AEA Technology shares in the successor company will be held by the Secretary of State. The sale will therefore be made in the name of the Secretary of State. The relevant model is not therefore rail privatisation but the sale of British Coal's mining operations, where the relevant assistance to MEBOs wishing to bid was given by the Secretary of State. He already has powers to provide assistance to MEBOs. That is why there was no need for provisions in the Coal Industry Act along the lines of Section 141 of the Railways Act and why these amendments are similarly unnecessary. Even if the sale were ultimately undertaken by the authority, the assistance could still be made available by the Secretary of State under his existing powers.
Similarly, I can assure the House that any request for assistance from an AEAT management-employee consortium would be considered and appropriate assistance provided on the same basis as for other privatisations.
I should make it clear, however, that the assistance that is available is limited to the specific purpose of allowing staff to construct a business case before approaching financial institutions for support. It is not available for other purposes. Once bids have been made MEBOs must compete on an equal footing with other bidders.
I hope that with that brief explanation the noble Lord will accept that we are not trying to exclude assistance and that it will be available. I understand entirely the approach he has adopted in respect of the Railways Act, but I hope that he will be satisfied that a parallel with the Coal Industry Act is more apposite in the circumstances and the way in which we intend to proceed to privatisation.
Lord Haskel: My Lords, before the Minister sits down perhaps he can say whether, when he was at Harwell last week, the matter of a management—employee buy-out was discussed.
Lord Fraser of Carmyllie: My Lords, a wide range of matters were discussed, including what the attitude of employees and management might be. We did not sit down and have a discussion on the specific issue of a MEBO. However, I certainly took it from the discussions that I had that what I have said to your Lordships about the availability of assistance was something that should have been well known to the management, and I hope is now also well known to the employees.
Lord Clinton-Davis: My Lords, I am obliged to the Minister for that reply, which was forthcoming. It justified the position that we have taken during the course of these debates. If we had not raised the matter the issue would not have been aired. It is important from the point of view of management and employees who are interested in such a buy-out, which has been much encouraged not only by the Government but also by the Financial Times and others. It will have given them some comfort.
Perhaps the Minister would like to respond to this point. I do not know whether there is complete consistency of approach in relation to other privatisations. I do not know whether they all followed a similar pattern to that which the Minister described today in relation to the Coal Industry Act—which in substance is set out in the amendments—as well as in terms of the nature of the assistance that is to be provided. I hope that the answer will be in the affirmative, although there will obviously be some disparities in each particular instance.
The support that needs to be given relates to the preparation of a scheme of this kind: seeking professional advice, making sure that people understand the perils of engaging in a MEBO—and there are perils—and making sure that people have the right kind of professional advice to enable them to mount a serious competitive offer in relation to other tenders which might be forthcoming. Those are difficult matters. The Minister may wish to intervene on that point.
Lord Fraser of Carmyllie: My Lords, I had better restrict my observations to the coal industry where, as I indicated, the parallel seems to us to be apt, whereas a comparison with the privatisation of the railways is not apt. Over the whole range of privatisations, I cannot tell the noble Lord whether there were other specific provisions. However, my understanding is that in the case of British Rail the situation was unusual, and therefore specific provisions were made. As I said, even in that case it may not have been strictly necessary for special statutory provision to be made. However, I can indicate to your Lordships' House that in this set of circumstances no specific statutory provision is necessary because the Secretary of State already has sufficient powers to offer assistance during the preparatory stages. As the noble Lord indicated, that is the appropriate stage for assistance to be offered.
Lord Clinton-Davis: My Lords, there was no strict necessity to embark on the Railways Act at all, but that is another matter. I am grateful to the Minister. He has set
904
out the position to our reasonable satisfaction. I am satisfied that no specific power is required. My noble friends and I are also satisfied that the Government will give every opportunity and help to any MEBO in this particular regard. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
3.45 p.m.
Clause 2 [Powers of Secretary of State]:
[Amendment No. 7 not moved.]
Lord Peston Lord Peston moved Amendment No. 8:
Page 2, line 43, at end insert—
("( ) Before—

(a) giving a direction under subsection (1) above; or

(b) approving or declining to approve a transfer scheme; or

(c) modifying or making a transfer scheme;

the Secretary of State shall consult the trade unions and other bodies representing the employees of the Authority.").
The noble Lord said: My Lords, Amendment No. 8 is grouped with Amendments Nos. 13, 21 and 24. They all contain much the same general principle and they relate to some remarks made by my noble friends Lord Clinton-Davis and Lord Haskel with regard to the previous grouping.
It seems to me that in a matter of this kind it would be entirely reasonable for those who are concerned with changing the status of AEA Technology, and therefore changing the position in which the employees find themselves—namely, having been public servants in due course they will no longer be public servants—as a matter of good faith to consult the employees and their representatives.
It is not my view, and I do not believe that it is the view of the trade unions, that a veto power should be given to the employees. That would be most inappropriate. However, on the minimal grounds of fairness, I believe that your Lordships will agree that people who have devoted their lives to the industry—and we all agree that whatever value exists is largely attributable to them—should be asked for their views. I would go further. I believe that many will have an expert opinion on the matter which would be worth taking into account.
My noble friends and I present this matter to your Lordships in the form of an amendment to the Bill, because that is how we proceed. If you want to make a point you put down an amendment to a Bill in this way. However, the fundamental principle has nothing to do with whether or not the Bill is amended but the way in which the matter proceeds. The matter is not unrelated to the question which my noble friend Lord Haskel asked the Minister a few moments ago. I was not clear from his answer whether the Minister spoke to the employees and their representatives when he visited Harwell last week. I consider it appropriate that a member of the Government should talk to these people at some stage. It would also be appropriate for management, as distinct from employees, also to talk to the relevant people.
This is all part of the general question. The lives of a number of public servants are going to be drastically changed. As a minimum, they ought to be asked what they think and, more generally, they might be consulted on the

905
best way to proceed. The purpose of the group of amendments is to allow noble Lords to comment and the Minister to give us his views. I beg to move.
Lord Fraser of Carmyllie: My Lords, when we discussed almost identical amendments at Committee stage I gave an indication that this set of amendments would give trade unions and staff associations a veto. Perhaps I went too far in saying that, but it would give them an automatic right of consultation before the Secretary of State was able to exercise his powers in relation to transfer schemes and before either the Secretary of State or the authority could dispose of any of the securities in a successor company.
At the risk of repeating myself, our position remains that the final decision on the sale has to be made by the Government in the light of market circumstances at the time and in the best interests of AEA Technology as a business, its employees and the taxpayers. We could not accept a clause which might affect the ability to take that final decision. When we debated the amendments in Committee I believe the noble Lord, Lord Haskel, stressed that they were intended to ensure that best employment practices were carried out. He said that that was of particular importance in a "people" business such as AEA Technology and that the staff were carried along with the privatisation proposals. I entirely agree with both his propositions. All the privatisations that have taken place were of "people" businesses, in which that is pre-eminent.
I did not engage in the type of negotiation and discussion which the noble Lord, Lord Peston, described—and which he tried to discover—when I was at Harwell last week. However, I spoke to the chief executive and had displayed to me the wide range of consultation material that he and his chairman had undertaken in recent months. I can assure the noble Lord that it is as extensive an exercise in consultation as I have seen. My understanding is that it is by no means at an end and that the management intends to continue to consult with those whom it employs and to take them along with all that is being proposed. That seems to me to be the right way forward. With that reassurance, I hope that the noble Lord will appreciate what is being undertaken and will feel that he can withdraw the amendments.
Lord Peston: My Lords, I thank the Minister for his reply. I reiterate that I do not believe that it would be right, and in particular not constitutionally right, for there to be a veto. I am certain that the amendments do not give the workers, the employees or their representatives a veto. My judgment is not very different from that of the Minister that, to use his words which are better than mine, it would be good sense to carry one's employees along with one. I believe that that is what he said. The way to do that is to consult them and to have a meeting of minds. The Minister says that in his judgment that has been happening and in a way my amendments are unnecessary. Since he said that, and it is on the record, I assume that the people at AEA Technology can read and will read what he said, just as they might consider reading what I have said. I know that every word spoken on this side is read by them at all times!
906
However, this is a serious matter because, to return to my point on economics and finance, the productivity of the enterprise, and therefore its value in the market place, depends overwhelmingly on the employees believing that what is happening is correct and that they are properly valued. That is the whole point of the amendments and I do not believe that the Minister disagrees with me about that.
I am a little sorry to hear that he did not have a chat with those people and not even a drink with them, but I know how busy one can be. He may well visit Harwell again, but I am sorry that he did not speak to some of the employees. I have elucidated the substance of this group of amendments, as I wished, and, therefore, I have no difficulty in withdrawing the amendment.
Amendment, by leave, withdrawn.
Clause 3 [Supplementary provisions as to the Authority's powers]:
[Amendment No. 9 not moved.]
Lord Clinton-Davis Lord Clinton-Davis moved Amendment No. 10:
Leave out Clause 3.
The noble Lord said: My Lords, the purpose of Amendment No. 10 is to challenge Clause 3; we say that it should not stand part of the Bill. Clause 3 states:
"Without prejudice to any powers of the Authority apart from this section, the Authority shall have power to do anything which in their opinion is appropriate for the purpose of facilitating … any transfer effected or proposed to be effected under section 1 of this Act, or … the disposal of securities of a successor company".
I wish to put the matter in the correct context. Since 1954, when the UK Atomic Energy Authority was established, it was specifically given a wide range of powers. That was wholly appropriate because it was a large organisation undertaking research and development in terms of producing and using atomic energy and distributing information about atomic energy. It also later encapsulated in its work scientific research on subjects which were unconnected with atomic energy: for example, the treatment and disposal of waste, and trading in intellectual property.
When the Bill takes effect, the Government Division will remain as the UKAEA. It will employ about 2,000 people. The UKAEA Government Division Forward Plan 1995 to 2005 was agreed by the DTI in March this year. Its purposes were described in that document as:
"To complete the UKAEA nuclear mission, whilst rapidly reducing the annual cost to the UK taxpayer of Government Division, by:
Caring for and, at the appropriate time, safely dismantling active facilities no longer in use.
Disposing of radioactive waste in an environmentally acceptable way.
Making use of those UKAEA assets which cannot be disposed of, including live active facilities.
Always ensuring that the programme is carried out at lowest economic cost consistent with safety and environmental requirements and acceptable financial risks".
Clearly, if the Government are to go down that path then the UKAEA will not require as many powers as are currently enjoyed by that organisation. I wish to know whether the Government have any plans to rescind any such unnecessary powers, following privatisation. The Government would accept that it is unwise—I am not sure that they will accept it but we take the view that quangos should not have greater powers or greater

907
authority than they absolutely need. The UKAEA may be tempted to duplicate some of the work of the AEAT. That would represent unfair competition for the latter, because the UKAEA will be government funded. One also has to ask whether that might represent a potential collision with the provisions of the Treaty of Rome as regards state aids.
I could cite many powers and authorities but I shall merely mention the Acts under which they have been conferred: the Atomic Energy Authority Act 1954, the Science and Technology Act 1965. the Radiological Protection Act 1970, the Control of Pollution Act 1974 and the Atomic Energy Authority Act 1986. I should be happy to pass over to the Minister the specific references which I have just made by implication for his better understanding of the matter, although I am sure he is well briefed on the issues.
I wish to know whether the Government intend to review the powers needed by the UKAEA after privatisation. Will they put forward amendments to the provisions of the Acts to which I referred? Perhaps I may delicately pass to the Minister the specific sections to which I referred, if he needs them. I think they will enable him to see the point that I am making. I do not want to weary the House. If the Minister wants to ask me any questions about it, I am afraid that I shall have to ask him to hand back the document as I could not answer without reference to it. I have all the various enactments before me.
I raise this point by way of interrogation. It is important, so perhaps the Minister will be kind enough to deal with it. I beg to move.
4 p.m.
Lord Fraser of Carmyllie: My Lords, I listened carefully to what the noble Lord said. This provision may be widely drawn, but it is certainly not my understanding that it is intended, as it were, to extend the range of the powers of the authority, other than in relation to,
"any transfer effected or proposed to be effected under Section 1 of this Act".
Clause 3 would enable the authority to prepare a transfer scheme or dispose of securities in a successor company. In that respect it is analogous to the paving powers to be found in earlier privatisations. It merely puts beyond doubt the authority's power to take the necessary steps to organise itself in preparation for the making of a transfer scheme. Removing this clause would complicate and delay the process and lead to unnecessary administrative costs. I cannot see that anyone would consider that to be a desirable objective.
I hope therefore that the noble Lord will be satisfied as to the purpose of the clause. In view of his questions, however, let me go a little further. There are certainly no present plans to change the powers of the UKAEA as set out in the 1954 Act or any other statutory provisions. The clause deals with a scheme under Clause 1. As I am sure the noble Lord is well aware, the provisions of Clause 1(3) indicate the extent of the limitation on what can be transferred as part of the authority's responsibilities.
Lord Clinton-Davis: My Lords, with respect, the Minister has not dealt with the point that I raise as a matter of substance; namely, that in the light of the role that is to be undertaken by the UKAEA in the future it would seem to have powers greater than it needs. The Minister may wish to reflect upon that, and I should not complain about that at all. The point has perhaps not been made with sufficient clarity simply as a result of the amendment. I should like to hear from the Minister as to whether he is prepared to consider the issues that I raise before Third Reading, so that we know whether there is substance in my remarks. I feel that there is. We do, of course, have the right to move amendments. I do not say that we would wish to challenge the Government over this point; it would simply be a matter for explanation. In the light of my remarks, perhaps the Minister will indicate whether he is prepared to write to me so that I may consider the position afresh before that stage of the Bill.
Lord Fraser of Carmyllie: My Lords, with the leave of the House, I shall certainly reflect on what the noble Lord said; and I should be grateful if he would in turn reflect on my remarks. I certainly did not wish to convey that there was any other purpose behind this clause. It is not framed to achieve anything other than to ensure that the authority has sufficient powers to take the necessary steps to organise itself in preparation for making the transfer scheme.
In relation to the words in the clause,
"Without prejudice to any powers of the Authority apart from this section",
I sought to indicate that it may he that the authority would have sufficient powers without Clause 3. The process would, however, be far more cumbersome and would almost certainly require greater administrative costs. As I indicated, I do not consider that to be a desirable way to proceed. I shall certainly write to the noble Lord about this matter.
Lord Clinton-Davis: My Lords, I am grateful to the Minister. He will appreciate that this is a probing amendment. It was the only convenient way in which we could tease from the Minister the information that I sought at this stage of the Bill. On the basis that he and I will spend days and nights consuming each other's words to our mutual dissatisfaction, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 6 [Successor companies]:
[Amendment No. 11 not moved.]
Clause 7 [Disposal by Authority or Secretary of State of shares in successor companies]:
[Amendments Nos. 12 and 13 not moved.]
Clause 10 [Extinguishment of certain liabilities]:
Lord Peston Lord Peston moved Amendment No. 14:
Page 5, line 34, leave out ("except with the consent of the Treasury") and insert ("unless a draft of an order approving such an exercise of a power has been laid before both Houses of Parliament and approved by resolution of each House").
The noble Lord said: My Lords, this amendment is grouped with Amendment No. 15. They concern Clause 10, the rubric of which is:

909
"Extinguishment of certain liabilities".
I assume—again the noble and learned Lord may educate me on this matter—that the lines that I wish to leave out (page 5, lines 35 to 37) are there for technical reasons. One would always insert such lines. The only reason that I suggest they be taken out is in order to make my points about draft orders being placed before both Houses of Parliament.
I am always concerned when liabilities are "extinguished". It is another way of saying that the assets are being sold but the taxpayer still retains the liabilities. That is what "extinguishment of liabilities" means. Liabilities do not disappear. The Government are not passing an Act of Parliament stating that the liabilities do not exist any more. I take "extinguishment" to mean that the purchaser will not be subject to those liabilities and it is therefore a rather serious matter.
This has happened with other privatisation legislation. In my view, this question has not been sufficiently considered by both Houses of Parliament. I do not comment, now or on any other occasion, about the other place; but I am convinced that we in this place have not sufficiently considered these matters. In particular, in respect of other privatisations we have probably been a little lax in allowing liabilities to be extinguished and placed with the taxpayer when they should not have been. My reason for raising the matter is to place those views on record.
En passant, I have a general point to make about financial prudence which refers not only to this Bill but to all such Bills. If a company is privatised on fundamental grounds of prudent finance it is not, and would not be, right to use the proceeds of privatisation for the purposes of changing taxation. On any grounds of serious analysis of privatisation, the proceeds ought to be used for reducing the national debt. In other words, one merely exchanges one set of assets and liabilities for another.
One of the greatest mistakes of this Government over a good many years is that they have not proceeded with prudent finance in regard to privatisation. That point ought to have been made years ago and accepted. It applies to this privatisation, too, even though it will not yield a great deal of money. The correct approach is to say that this is an asset that should be sold, that it really belongs to the taxpayer, and that what the taxpayer requires is a reduction in the national debt, which is a liability in terms of paying interest, either long term or, in the case of consols, for ever and ever. The fundamental point that we need to consider is the extinguishment of liabilities and whether, when that sort of thing happens, this House ought to have a say. I beg to move.
Lord Ezra: My Lords, when the noble and learned Lord replies to the amendment, would he indicate whether, under Clause 10(2), where a limit is set on the aggregate amount of liabilities extinguished, the effect of that could in theory be that nothing at all is realised from the disposal of those assets and that the liabilities extinguished could equal the amount realised from their sale?
Lord Fraser of Carmyllie: My Lords, as currently drafted, Clause 10 enables debts of the authority to the National Loans Fund to be extinguished up to the value of the proceeds from the sale of AEA Technology, with the consent of Treasury and subject to a negative resolution by either House of Parliament. The clause is effectively drafted in a standard way, as found in other privatisations. The authority's debt is currently serviced largely by income earned from the commercial activities carried out by AEA Technology which are to he transferred by scheme. Some debt may also he transferred to the successor company. In addition, paragraph 11 of Schedule 2 permits the Secretary of State to make loans to a successor company while it remains publicly owned. Successor company debt may also be extinguished by order, again subject to a negative resolution.
Noble Lords may recall—I confess that I was not part of the process at the time—that my noble friend Lord Ferrers stated the Government's policy on the extinguishment of debt when the Bill was read for a second time. Perhaps I may recap. Authority debt extinguished will be matched by sale proceeds and, where successor company debt is extinguished, it will be either converted into debentures, repaid or offset against proceeds.
We have discussed a number of amendments designed to subject the actions of the Secretary of State to parliamentary scrutiny. But since any order extinguishing debt under this clause is already subject to parliamentary scrutiny, I suggest that the amendments have the quality of over-egging the pudding.
The clause only permits the extinguishment of authority loans up to the value of the proceeds. The answer to the question of the noble Lord, Lord Ezra, must, at least in theory, be yes, that could be the position. The proceeds will be paid to the Exchequer. The Exchequer will not be out of pocket because debt is written off rather than repaid from proceeds.
Provided that the calculations are done in present value terms—as stated at Second Reading, that is our firm intention—the net overall effect to the Exchequer will be the same. No one would suggest that the debt should not be repaid or written off against proceeds in that way. The Government's view is that Clause 10 provides the most effective mechanism for achieving that.
The debt transferred to, or incurred by, a successor company cannot be privatised. It will therefore either be converted into securities or extinguished. To the extent that the debt is not converted, there is no statutory restriction as to the amount which may be extinguished (as applies to authority debt) but an order to extinguish can only be made with Treasury consent. That consent will only be forthcoming in so far as proceeds cover the present value of the debt to be written off.
On more than one occasion I have indicated that we have no intention of privatising AEA Technology at any cost. But in the event that there was any reason to think otherwise, the control mechanisms placed on the Secretary of State by this clause already provide Parliament with the opportunity to bring him to task.

911
The noble Lord included in his remarks a set of more general observations about how these matters have been handled in previous privatisations. All I can say to him is that what has been done here is much the same as was done in previous cases. But this is not an appropriate moment for me to re-open that broader policy approach contained in earlier privatizations.
Lord Peston: My Lords, I thank the noble and learned Lord. I was being rather mischievous in discussing the general question of public finance at this stage but I have to take my chances when I spot them. I thought that the point of the noble Lord, Lord Ezra, was central. In due course we should like to know—the point he made—what actually happens. There is the theoretical point that the net sum could be zero. It turns out that it cannot be negative at least. However, one hopes that we shall not be anywhere near the zero end of the spectrum and that there will be a considerable net benefit to the Exchequer whatever else happens.
I am grateful for the noble and learned Lord's reassurance that there is still room for parliamentary scrutiny on some of these matters. In particular, subject to that reassurance, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 15 not moved.]
4.15 p.m.
Schedule 1 [Transfer schemes: supplementary provisions]:
Lord Haskel Lord Haskel moved Amendment No. 16.
Page 7, leave out lines 9 to 12.
The noble Lord said: My Lords, in moving this amendment I shall speak at the same time to Amendment No. 17. The purpose is to make sure that the Minister does not undervalue the assets of AEA Technology. My noble friend Lord Peston spoke earlier about that matter.
The main asset of AEA Technology is intellectual, and valuing intellectual property is very difficult and complicated. In fact, the intellectual properties are state assets and represent a considerable state investment in R&D. Therefore, it would seem sensible that before they are sold, some effort should be made to find out how much state money has gone into creating that intellectual property.
There is a widespread belief that the nation has been sold short on some privatisations by undervaluing the businesses. This amendment is designed to stop the Minister adding to that impression by assessing the cost. The Minister may not want to divulge the valuations but I am sure that he would want to know the costs of building up that intellectual property so that he has an approximate idea of the cost of what he is selling. I beg to move.
Lord Clinton-Davis: My Lords, before the Minister responds to the point made so effectively by my noble friend, I want to stress that we are dealing with an industry which is in a way sui generis. It has been conceded over and over again during our debates and
912
in discussions elsewhere that the essential asset of this industry lies in the skills and expertise of the employees. That being the case, whatever reservations the Government may have about the concept of worker-directors, or the whole argument in that respect, they do not bear analysis in relation to this particular industry.
That, I believe, is the essence of the case that we seek to make with this amendment. I hope that the Minister will give us not just comforting words but some substance in response to the point that was made by my noble friend when he moved the amendment.
Lord Fraser of Carmyllie: My Lords, the noble Lord said a little about the first amendment and the wording of lines 9 to 12 of Schedule 1. It follows that used in previous privatisation legislation where provision for a transfer scheme has been made. It removes any possible doubt that the property, rights and liabilities which are to be transferred can be defined generically as well as, or instead of, being itemised.
However, the noble Lord's more substantial point is to be found in relation to Amendment No. 17, which would require the Comptroller and Auditor General to examine and certify a valuation of the property, rights and liabilities to be transferred under the scheme and to lay a copy of that valuation before Parliament before a transfer scheme could come into force. I hope that at the time that the noble Lord tabled the amendment, he did not know that I would make my announcement in relation to the first amendment and that the transfer scheme is to a single successor company of all the shares owned by the Secretary of State. I hope he will appreciate that in some respects it will be an odd exercise for the Secretary of State to undertake that task when that is what he is doing. More broadly, I commend the noble Lord for his concern to ensure that the taxpayer is not shortchanged.
I hope that I have now made clear that as one of their main objectives in selling AEA Technology the Government have to secure value for money for the taxpayer. That is why we are not yet prepared to close off any sales options. It would seem inconsistent to ask us, as was being asked at one time, to do just that while at the same time taking the approach that the noble Lord takes in this amendment.
Perhaps I can offer three points to the noble Lord which may be of assistance in understanding our approach. First, as part of its ongoing responsibility for the audit of UKAEA, the Office of the Comptroller and Auditor General will wish to satisfy itself that the assets owned by UKAEA at the point the scheme was made are properly accounted for, either by remaining in UKAEA or being placed with the successor company. In that way nothing will fall between the cracks: assets will go with either the authority or the successor company.
Secondly, as I have already indicated, the making of a transfer scheme will not involve any assets leaving the public sector. The successor company will be owned by the Secretary of State. Thirdly, when it comes to the sale, the value of the assets in AEA Technology's balance sheet will be only one of the elements involved in determining

913
the level of proceeds and gauging whether it represents best value for money for the business. Certainly no useful purpose will be served by a special valuation exercise carried out several months in advance of the sale. The only result of that would be to introduce a further hurdle in the scheme-making and sale process and generate needless complexity, uncertainty and delay. AEA Technology will be valued primarily by reference to its current financial performance and also its future profitability. That valuation will reflect the current value of its IPR.
I hope that explains fully the position to the noble Lord and that he will appreciate that in a sense things have moved on from the time when he tabled the amendment, given the announcement I made as regards the first group of amendments.
Lord Haskel: My Lords, I thank the Minister for that response. I welcome the undertaking he gave at the beginning of the debate that there will be a unitary privatisation. However, I felt it would be useful to raise this point because when one is selling intellectual property it is often useful to know what the cost of it is. It is a difficult item to value and the major element in the sale is intellectual property. Having made that point, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 17 not moved.]
Lord Haskel Lord Haskel moved Amendment No. 18:
Page 7, line 34, at end insert—
("( ) A transfer scheme shall not provide for the transfer of the employer's rights or liabilities in any contract of employment to any person unless that person is a company whose articles of association require one or more of its directors to be a person appointed by the Secretary of State from amongst person appearing to the Secretary of State to have had wide experience in, and shown capacity in, the organisation of workers.").
The noble Lord said: My Lords, in moving Amendment No. 18, with the leave of the House I shall speak also to Amendment No. 19. As we have said before, this is a people business. The maintenance of good morale and employee relations is vital to its success, otherwise technical staff will leave or lose their creativity.
In other privatisations that aspect of managing the business has been rather poor. Because it is a people business we are particularly anxious that that should not be repeated in the privatisation of AEA Technology. The amendment goes back to the Atomic Energy Authority Act 1954, which gives the right to employees to have a representative on the board, and should help to maintain morale. At the same time, it is in keeping with the European directive on consultation. By including the amendment in the Bill, the Minister can demonstrate his European Union credentials. I beg to move.
Lord Fraser of Carmyllie: My Lords, I am sure noble Lords will agree with me that real worker involvement in, and commitment to, a business is desirable for any company. Companies should be encouraged to engage in a dialogue between management and employees. Indeed, many companies currently engage voluntarily in such activities. But the operative word in that sentence is "voluntarily".
914
The Government's general view is that the right people to manage the business are the management. While we welcome and encourage genuine, voluntary worker participation, we do not try to dictate to firms how they should run their affairs. Each has to develop the form of employee involvement best suited to it. We oppose the imposition of prescriptive, rigid structures which do not reflect the needs of the business and are not in the interests of either employers or employees.
That is a general proposition, but let me reiterate. The present management of AEA Technology is committed to a full programme of consultation and explanation to all employees through a range of mechanisms. AEA Technology is a people business and its people are its greatest asset. The present management fully recognises that; and so do we.
The Government believe that privatisation represents the best way forward for the business and its staff. I want AEA Technology to succeed in the private sector and I believe it will do so only if it has the freedom and flexibility to take advantage of the enormous opportunities in the market.
The board of a privatised AEA Technology will need to reflect the mix of skills and expertise necessary to manage a dynamic and forward looking company. It will want to involve its staff more directly in the development of the business. But how it does so is something best left to the company. It is not a matter for the Government, less still for statute.
While I appreciate the sentiments behind the tabling of these amendments, I believe that they can be dealt with on a voluntary, rather than a legislative, basis. That answer may not come entirely unexpectedly to the noble Lord, but I can assure him that the present management understands the real need and desirability of consultation.
Lord Haskel: My Lords, I thank the Minister for that reply and for putting on the record that support for employee involvement is complete. I accept that he is satisfied that the management is committed to employee involvement. This is perhaps not the place to discuss styles of management. The Minister did not reply to the point in relation to the European directive and that, too, may be a topic for another occasion. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 19 to 21 not moved.]
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 22:
Page 15, line 25, at end insert—
("Redundancy
.—(1) If any employee of the Authority is transferred to a new employer by a transfer scheme or otherwise and is declared redundant—

(a) the Authority's redundancy rules and benefits applicable to that employee at the date of the transfer shall apply unless the trade unions or other bodies representing the employees transferred by the transfer scheme have agreed to their modification for such employees; and

(b) the redundancy rules shall apply as if the Authority were the employer and all employees transferred from the Authority's employment by transfer schemes were employees of the Authority.

(2) This paragraph shall have effect for employees transferred on or after 1 March 1995.").
The noble Baroness said: My Lords, before moving Amendment No. 22 I should like to make a short statement, bearing in mind that this is the first opportunity I have had to do so. In view of a report which appeared in a Sunday newspaper I should like to assure the House that when I speak from this Dispatch Box I do so on behalf of the Labour Opposition and for nobody else. I am sure that that is well understood by the Minister and his colleagues.
Reverting to Amendment No. 22, at Committee stage I moved an amendment in rather similar terms to this. However, there is a slight extension to the wording here. I said at the time that I would look very carefully at what the Minister said and would consult with the unions of those most concerned. I welcome the assurances that the Minister then gave about the application of the TUPE regulations, but there are still some major concerns. It is for that reason that I am returning to the matter on Report.
The present amendment seeks to protect the redundancy rights of those transferred out, first, by preserving the UKAEA redundancy rules and, secondly, by dealing with redundancy across the whole current UKAEA and making the authority liable to employees for the payments. Backdating the matter to March 1995, as the new wording suggests, protects the 950 ex-Facilities Service Division employees and the seven sold to EMS Medical on 31st March. Therefore, there is an extension of the last amendment.
Many employees fear that there will be more redundancies after privatisation and that a new employer will force them to accept worse redundancy terms. Since privatisation of the authority's Facilities Service Division on 31st March, the new owners have already declared 150 redundancies of the 950 staff concerned. AEA Technology is, I am informed, making more than 400 redundant in order to meet a profit target of £21 million in 1995–96. As is now unfortunately so usual, private employers seek to make profits by cutting staff and making those who remain work harder and sometimes longer hours. A substantial proportion (25 out of 60) unresolved surplus staff at 10th August are scientists and engineers and the rest are administrators, mostly accountants. UKAEA is failing to apply its redundancy agreement by not reducing overtime, using contractors and recruiting.
The Minister may well repeat his assurance today about the application of TUPE. But the problem here is that TUPE regulations only protect at the point of transfer. The unions are worried about subsequent changes to terms. Even without changing the terms, the scope for redundancy is much greater with smaller, private firms because obviously there is less scope for redeployment. I am sure that the Minister recognises that there are deep and genuine concerns here. Even highly qualified people now often have difficulty, particularly after a certain age, in getting alternative employment. It may be quite a time before such people can be employed elsewhere. If their redundancy arises, it will do so directly from the plans of the Government and their privatisation intentions. It seems to me that
916
such staff are entitled to much greater assurances as to their future than might otherwise have been the case. I beg to move.
4.30 p.m.
Lord Fraser of Carmyllie: My Lords, when we discussed this issue in Committee, I assured the noble Baroness that AEA Technology employees will have all the protections in respect of redundancy provided by the TUPE regulations and that modifications to contractual redundancy rights will require the consent of the employees. As I understood her remarks, she accepts that that was a correct statement of the law. I am happy to repeat those assurances anyway.
This amendment not only has a wider, but also a retrospective effect. It would apply to all authority employees transferred to a new employer from 1st March 1995. In our view that is entirely inappropriate. The Bill is intended to deal with the privatisation of AEA Technology, and not with any other divestment that the authority may carry out under its existing powers. As regards the other divestments, the authority is in the same position as any other public enterprise. While we have stressed that this is "a people's business", I have heard no argument to justify treating authority staff differently from other public servants and indeed it would be inequitable to do so.
I am a little concerned that the noble Baroness, notwithstanding the assurance I gave her that TUPE would apply, should think that that might not be sufficient protection. TUPE ensures that employees join their new employer on the same terms and conditions as they left their old employer. The new employer has just the same rights as the old one; they can change an employee's terms and conditions of service with the employee's consent. That consent can either be given by each employee or, where there is a collective agreement, by the union on their behalf.
It is true that AEA Technology has already announced that some slimming down is likely to be necessary. The means by which it achieves that is a matter for the company. I know that it, intends to redeploy staff and also to use voluntary means to reduce numbers where that is considered appropriate. To provide for exception arrangements, as the noble Baroness's amendment would do, does not seem justified, particularly against the background of the very real security which is in any event provided for employees in law.
Baroness Turner of Camden: My Lords, I thank the Minister for that response. As I expected, he has referred again to the TUPE regulations. As I said in moving the amendment, the problem is that I understand the employees concerned and their unions still feel that those regulations, in the particular circumstances of the privatisation, do not really give them as much security as they would like. Therefore, they want the amendment that I have put before your Lordships this afternoon and the retrospective element included in subsection (2) of the amendment.
As I indicated, although it is true that the TUPE regulations apply at the point of transfer, so that the individuals concerned have at that time the full

917
protection of their existing contracts of employment, there is not that protection thereafter. Therefore, people who joined the service originally expecting a considerable degree of security of employment may very well lose it as a result of privatisation. It is for that reason that it was felt necessary to bring these amendments once more before your Lordships' House. However, I do not expect that any further assurances can be obtained from the Minister today. We have done our best to ensure that people are protected in the future. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 2 [Successor companies]:
[Amendments Nos. 23 to 25 not moved].
Schedule 4 [Pensions]:
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 26:
Page 29, line 3, leave out ("sub-paragraphs (2) and (4)") and insert ("sub-paragraph (2)").
The noble Baroness said: My Lords, I am returning to these amendments again, as I did with the previous amendments, in the light of the discussion we had in Committee. The group of amendments with which we are concerned here is to do with pension entitlement. The amendments provide for the rights of people to stay in a UKAEA scheme who are divested by that company other than under the transfer scheme provisions of the Bill. They make that arrangement retrospective.
We had a detailed discussion in Committee when the Minister strongly put the Government's view that in the event of privatisation people could not opt to remain in a Civil Service scheme but that TUPE required comparable—that is to say, not less favourable provisions—to be made in respect of pensions. On our side we strongly pressed the point that that did not automatically mean that pensions in payment, for example, would be index-linked. Indeed, the Minister confirmed that that might well not be so.
He stressed that a different mix of benefits might be provided. I have to say that, from the soundings we have taken, index-linking remains a very strong concern on the part of those not directly involved. I understand that it is envisaged that index-linking up to 5 per cent. per annum is likely to be offered in line with recent pension regulations. However, that does not protect pensions in times of high inflation, which we may hope we shall not see again but about which no one can be sure.
I have received details of the present arrangements from the unions concerned. As with public service schemes generally, they are good. In particular, the index-linking of pensions in payment is guaranteed. As I said at Committee, people often enter public service with the idea that such employment is likely to be steady and secure, with good pension arrangements including indexation. In return for that they will often sell their services more cheaply than they would otherwise do in the private sector. They are prepared, in a sense, to barter away immediate gain in return for added security. However, now in middle age when they may not find it so easy to secure a reasonably good alternative job, they discover that the security of their pension provision has
918
been put at risk through no fault of their own, but simply because of government policies in relation to privatisation.
I take the view that in those circumstances it is not appropriate for the Government simply to rely on the argument about what is usual in the private sector. There is an obligation to look after the long-term interests of the people who have been displaced from the public sector in which they had expected to spend their working lives. Unlike the Government, I do not despise those who seek security for themselves and their families as distinct from taking their chances in an increasingly uncertain private market. It seems to me that that is a responsible attitude to life rather than the reverse. If the Government rob people of that certainty, there is an obligation to compensate them in some way by taking appropriate steps to continue the safeguards as far as possible.
In Committee my noble friend Lord Clinton-Davis suggested to the Minister that he should look at what was done in relation to railway pensioners at the time of the Railways Act. I was involved in discussion of that legislation to some degree and my recollection is that in the end the Government made substantial concessions to railway pensioners, including the guarantee that the Government would stand behind the pensioners' entitlement. There is a section in that Act specifically to protect employees. I do not know whether the Minister has been able to think again about what was said in Committee, but I can assure him that the unions representing the workforce still feel strongly about the situation and it is in the light of that that we have tabled this series of amendments. I speak not only to Amendment No. 26, but to the other amendments in the group. I beg to move.
Lord Fraser of Carmyllie: My Lords, as is often the case when dealing with groups of amendments, the most interesting amendments may well be the last to be considered, such as Amendments Nos. 37 and 39. In advance of our consideration of those amendments, perhaps I may take this opportunity to explain how matters have moved on over the summer. It might be useful if I do so now rather than at a later stage.
It must clearly be wrong to suggest that a scheme without full index-linking cannot provide benefits comparable to the benefits currently received. There have been numerous occasions on which new schemes have been adjudged to be of comparable value to the old scheme although the new scheme does not guarantee full index-linking. I recognise the strength of feeling among employees about index-linked pensions. It was bearing that in mind and in the light of the further consideration given to the issue since the Bill was last before your Lordships that I am now able to go a little further than previously. The House may recall that in Committee I said that a fully index-linked scheme was not ruled out by the terms of the Bill. I can now say that not only is it not ruled out; it is one of the options that is being actively considered by AEA Technology as forming the basis of a new scheme for existing employees.

919
I believe that the House will understand why it would not be possible for me to give a commitment now that a fully index-linked scheme will be introduced. It is not within my gift. It will be for the employer company to make proposals—whether that is AEAT or a purchaser—on the form of the new scheme. The scheme would also be the subject of discussion and negotiation with the unions, taking into account the interests of employees and the welfare of the company. What is in the interests of the company must be in the interests of its employees as it is only with a fully competitive company that their jobs will be secured.
In addition, statutory consultation will be required under the terms of the Bill. It would not be right for me to prejudge the outcome of those consultations. I have given a commitment that they will be meaningful and I shall stick by it. I appreciate that those comments are slightly out of order, but as this is an important matter on which there has been some movement, and as I think that that is an important statement which the trade unions would like to hear, I have taken this opportunity to raise the matter now.
Returning to Amendments Nos. 26 to 32, we had a full discussion in Committee. We have no desire to do anything other than to ensure that employees who are transferred under the provisions of the Bill have their pension rights protected. That is why we have written on the face of the Bill statutory protection for employees to have a pension scheme which gives the same overall level of benefits as they currently enjoy. When employees are transferred from the public service (whether in privatisations or arising from contracting out) standard practice has been to end their membership of a public service scheme. Although I recognise that Amersham was an exception many years ago, I have to say that the practice of not being allowed to remain in a public service pension scheme is now consistently followed. We all want AEA Technology to compete effectively in the private sector. Ultimately, that is the only way in which jobs can be secured and their terms and conditions maintained.
We do not believe that it would he right for private sector employees to remain as members of a pension scheme which reflects the different circumstances of the public sector. That is no different from the practice in the private sector where schemes reflect the different circumstances of individual employers. The authority, as an employer, has devised its public service scheme to provide what it considers to he appropriate pensions for its employees. It is for the private sector employer to develop arrangements which are appropriate for its employees and the operation of its business. We see no reason why there should be an exception here.
The particular circumstances about which I was previously invited to comment—the invitation has been repeated today—relates to rail. Having considered the matter, it would appear that there is no parallel with the situation of AEA Technology. The rail industry already had a pension scheme in the private sector mould. That scheme could therefore be replicated in the private sector. That whole industry is moving to the private sector and the nature of the work means that there is
920
likely to be movement between the new companies. In that case, it was not unreasonable that the protection was given so that pension rights could accrue on the same basis while employees remain in the industry. The situation with AEA Technology is very different. The authority's pension scheme cannot be replicated in the private sector because it contains features which mean that the Inland Revenue would not grant it tax-exempt status; nor, as I have revealed, is it intended that there should be a plethora of companies between which employees can switch.
I apologise for taking a moment or two longer than usual to reply to a group of amendments, but I hope that what I have said sets the scene relating to the pension provisions which are the subject of the next group of amendments. I hope that with that explanation the noble Baroness will feel able to withdraw the amendment.
4.45 p.m.
Baroness Turner of Camden: My Lords, I thank the Minister very much for that statement which makes a considerable difference to the amendments that we have tabled. The Minister was right to say that the employees are very concerned about index-linking, a point that we have repeatedly made from this side of the House. I am very glad to have heard that statement from the Minister this afternoon. I am sure that employees in the industry will be glad to have had a statement to the effect that index-linking will be one of the options available under the new provisions. In those circumstances, it is certainly not my intention to proceed with the amendments this afternoon. To some extent what the Minister said deals with many of the issues that we had intended to cover under the heading "Pensions".
Lord Fraser of Carmyllie: My Lords, before the noble Baroness sits down, perhaps I may intervene. This is such an important matter that I cannot have any employees misunderstanding the position. Perhaps I may repeat what I said. I said in Committee that a fully index-linked scheme was not ruled out by the terms of the Bill. That was understood. What I am saying is that not only is that not ruled out now, but it is one of the options which is being actively considered by AEA Technology as forming the basis of a new scheme for existing employees. I cannot give a commitment because it is not within my gift to do so.
Baroness Turner of Camden: My Lords, we understand that the Minister cannot go further this afternoon. We are very grateful for that assurance. In the light of it, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 27 to 35 not moved.]
Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 36:
Page 30, line 16, at end insert ("except that, where any person consulted under the provisions of sub-paragraph (3) above is not satisfied with any proposals made by the Secretary of State in the course of such consultations, the Secretary of State shall not make a direction under this paragraph until that person is so satisfied unless that person has unreasonably withheld his satisfaction.").
The noble Baroness said: My Lords, I beg to move Amendment No. 36. The amendment refers to consultations and makes provision for anyone who is not satisfied to have arrangements withheld until he is satisfied. The amendment says that the person shall not unreasonably withhold satisfaction. The other amendments in the same grouping refer to consultation with the unions. This matter was discussed in Committee. Although I am very pleased with the statement that has already been made this afternoon, there is an issue about consultation and what is meant by "relevant unions". Last time round the Minister said that there would be consultation with the relevant unions. The concern is as to precisely what that means, who decides who are the relevant unions and matters of that kind. Those issues arise under the set of amendments which deal with consultation. Perhaps the Minister would be kind enough to respond.
Lord Fraser of Carmyllie: My Lords, I am happy to respond briefly to this important point. I hope that during Committee I gave a clear commitment that trade unions, or persons who under the provisions of the Bill represented employees, would be consulted. I am happy to repeat that commitment today. It may be helpful if I say that, in the light of the announcement on vesting that I made in relation to the first group of amendments, the department has already given some consideration to the drafting of a consultative document on the issue of a direction under paragraph 3 of the schedule. The noble Baroness may be interested to know that that draft document includes in the list of consultees all of the relevant trade unions.
Baroness Turner of Camden: My Lords, in the light of that statement I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 37 to 50 not moved.]
Lord Fraser of Carmyllie: My Lords, the progress of business has been highly satisfactory. I am delighted that we have been able to achieve such a measure of agreement. In the circumstances, we appear to have made greater progress than that anticipated by some who are otherwise very familiar with the workings of your Lordships' House. I fear that it has rather taken them by surprise. Unless I keep talking for an unnecessary and inelegant period of time, I believe I have no option but to beg to move that the House do adjourn during pleasure until five o'clock.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 4.53 to 5 p.m.]

Maghreb Countries' Relations with European Union: ECC Report
Lord Hunt of Tanworth Lord Hunt of Tanworth rose to move, That this House takes note of the Report of the European Communities Committee on Relations between the European Union and the Maghreb Countries (11th Report, HL Paper 58).
The noble Lord said: My Lords, I should perhaps begin by apologising to your Lordships for being taken unawares by the speed at which the previous debate concluded.
In moving the Motion standing in my name I should like to remind the House that next month the European Union is holding a major conference in Barcelona with its Mediterranean non-member neighbours. The purpose is to lay the foundation of a new Euro-Mediterranean partnership which will have political, economic and social dimensions, and for a number of reasons, the European Communities Committee of the House thought it right to look at that concept of partnership with particular reference to the Maghreb countries. It is their relationship with the EU which has largely set the pattern for articulating relations between Europe and the wider Mediterranean basin. They are leading recipients of financial assistance from the EU and from the European Investment Bank. They were the first among the countries on Europe's borders to press for a special relationship, and their interests have consistently coloured the Commission's policy towards the wider Mediterranean.
New association agreements were also under discussion with Morocco and Tunisia: and we had noted that at a time when Mediterranean issues were rising up the agenda of the EU, in this country there did not seem to be much interest in them, whereas the member states with borders on the southern Mediterranean had some very specific national interests to further, arising from geographical proximity, history and climate. We had noted also that the Commission seemed to be proposing greatly increased financial aid to the southern Mediterranean states at the expense of central and eastern Europe.
Having referred to what I call the special interests of the southern member states, I should, however, like to emphasise that Sub-Committee A, which prepared the report, needed little persuasion that it was in the interests of all the member countries of the EU for there to be stability on its southern as well as its eastern borders, and not just in the interest of those who might appear more directly threatened by illegal immigration or terrorism.
The importance of such stability is further underlined when it is remembered that the population on the southern shores of the Mediterranean is increasing so fast that by the early years of the next century two-thirds of the littoral population will be on the southern shore instead of, as at present, on the northern shore. We have however reservations about the best way to ensure that stability, and hope that the Government may bear those reservations in mind at the Barcelona conference.
Members of the committee visited Morocco and Tunisia, but we were not encouraged to go to Algeria, and our report does not deal with the internal situation there. We did, however, give a good deal of thought to the question of Islamic fundamentalism and to the likelihood of instability in Algeria spreading elsewhere in the region—the so-called domino effect. We took evidence from a wide spectrum of witnesses on that issue.
The first thing I should like to emphasise is the danger of applying the word "fundamentalism" as a kind of umbrella word of concern when talking about Islamic countries. In fact, they differ greatly, with, for example, most north Africans following the Sunni rite which does not have a hierarchical clergy, unlike the Shi'ite rite in Iran. More to the point, there is nothing wrong in people having a close attachment to their faith or in a close association between that faith and the state in which they live. For example, King Hassan is on record as saying:
"In Morocco we are fundamentalists and have been for 1200 years".
Nor is there anything in the Islamic religion which is a barrier to partnership with non-Islamic market economies. The danger arises when extremism takes over, and either the tenets of strict Islam are imposed by force or religion itself is used as a cloak for violence directed at political ends.
The consensus of our witnesses on that topic was that Algeria was a special case where political factors which have nothing to do with Islam have been the main cause of unrest and terrorism. That is not to minimise the seriousness of the Algerian situation or what appears to he the growing threat of Algerian inspired terrorism in France. It is however relevant to the likelihood of a domino effect elsewhere. Our witnesses thought that that was unlikely, and indeed instanced the comparative failure of the Arab Maghreb Union to show how different are the north African states.
We did not dissent from that somewhat reassuring view that the threat of widespread Islamic extremism in north Africa had been exaggerated, subject to one important caveat which meant we could not rule it out. That is that just as political factors unconnected with Islam have been at work in Algeria, so political factors could also drive instability and extremism elsewhere if there arose mass dissatisfaction with existing regimes because of internal economic conditions, democratic shortcomings, and, in particular, unemployment among the rapidly growing populations. That is why the purpose of the Barcelona conference is very relevant.
Our report was deliberately finalised in time for the Cannes Summit at the end of June, but reports of that meeting seemed to confirm our feeling that of the proposed three themes for Barcelona (the political security theme, the economic and financial theme, and the social and human theme) the economic and financial aspect deserves particular attention.
The other aspects are of course very important, but the most Barcelona seems likely to do on them is to adopt certain principles of neighbourly relations which, it is hoped, will be the start of a process of greater collaboration. In any case, we were clear that economic growth and prosperity are the key to stability in the region.
That does not however mean that a massive or indiscriminate increase in financial assistance to the Maghreb countries (or to the southern Mediterranean states generally) is the right answer. Clearly the Community's spending as a whole should not be increased beyond the agreed financial perspective and
924
any proposal for a significant diversion of aid from central and eastern Europe to north Africa would need careful weighing. Moreover the north African states are not poor by world standards. They are middle income countries which have already achieved an impressive measure of economic development. In the past few years both Morocco and Tunisia have enjoyed substantial rates of growth. Morocco had 10 per cent. last year and Tunisia has averaged 5 per cent. per annum since 1987. Both have done much to reform their economies with particular reference to their capital markets and trade regimes, and to embark on programmes of privatisation. Both need help to continue the modernisation of their economies and to maintain their economic health despite their rapidly growing population, but it is idle to suppose that the EU can just give them money to stop their people from emigrating. In our visits to Morocco and Tunisia the emphasis of almost everyone to whom we talked was on trade rather than aid.
The agreed long-term objective is of course a full free-trade area with the EU and that assumes particular importance when it is recognised that the EU accounts for 60 per cent. of Moroccan and 75 per cent. of Tunisian trade. It will, however, take time to achieve and, for example, Morocco and Tunisia will need a lengthy transitional period as they set about removing the tariff barriers which protect some of their uncompetitive industrial products.
In the medium term, we want to emphasise two points in particular. The first is agriculture where there are very strong feelings that the EU imposes unfair restrictions over the access, for example, of Moroccan tomatoes and Tunisian olive oil to the European market. It is argued that the EU has been liberal, for example, over the access of industrial products where the Maghreb countries are less competitive, and restrictive in discussions about the products that really matter to them, such as agriculture and fishing.
That feeling is all the stronger when it is remembered that the countries of north Africa are estimated to have lost around 600 million dollars-worth of trade a year as a result of the Uruguay Round. Help over agricultural products is absolutely crucial to them. We felt strongly that movement on agricultural access is the key to a successful Euro-Mediterranean partnership rather than aid and still less educational, cultural and social links.
Having said that, we recognise of course that the question of agricultural access to the EU is not an easy one. It raises the paradox that the member countries of the EU which are most at risk from instability in north Africa are also those which find it hardest to make the concessions that the Maghreb countries want. It is also relevant that a more liberal attitude would have considerable CAP costs as the CAP currently stands. But this is just another argument for further reform of the CAP, which enlargement to the East will require anyhow.
Having stressed the importance of trade, and in particular access for agricultural products, we accepted that there is a case for some moderate increase in financial assistance to the Maghreb countries. We have noted with approval that some rather extravagant earlier Commission proposals seem to have been scaled down

925
but we felt it important to stress that financial assistance should be more carefully targeted and more qualitatively evaluated than has often been the case under the current protocols. In particular, it should go to infrastructure investment to increase the attractiveness of the region for direct, private, foreign investment; and since these are middle income countries it should normally take the form of loans rather than grants.
The committee would like to thank the many witnesses, both in this country and in north Africa, who helped us with our inquiry. My personal thanks also go to the other members of Sub-Committee A and to our clerk, Mr. Tom Mohan. A special word of appreciation also goes to our specialist adviser, Mr. Jon Marks, whose detailed knowledge of the region was quite invaluable to us. Finally, I should like to thank the Government for their warm response to our report. I was particularly glad that the Government agree with the committee's view that:
"the Maghreb is a region where Britain could, and should do more".
I have referred already to the generally favourable impression which we formed of economic progress to date in Morocco and Tunisia. These achievements have laid the foundations for economic prosperity and we have no doubt that considerable opportunities for British business exist there. The United States and other European countries recognise these opportunities. Unfortunately, we were also struck by evidence of a widespread lack of knowledge and an incorrect feeling among British business not only that there are not the opportunities which exist but that these countries are still just a French preserve. That is untrue. Indeed, one of the things that struck us most in Morocco and Tunisia was the appetite for English language teaching, which the British Council is not always able to meet. More needs to be done to raise the awareness of British business not just to the economic opportunities there but also to the existing EU financial instruments which are under-used by our firms, and thus to increase the success rate of UK companies bidding for shares of EC-funded projects. We hope that in a small way our report on an area which has not hitherto been the subject of a Select Committee investigation in either House may help to stimulate such interest. I beg to move.
Moved, That this House takes note of the Report of the European Communities Committee on Relations between the European Union and the Maghreb Countries (11th Report, HL Paper 58).—(Lord Hunt of Tanworth.)
5.15 p.m.
Baroness O'Cathain: My Lords, as a member of Sub-Committee A, I welcome the opportunity to draw attention to the report of the Select Committee because I believe that it contributes a great deal to the knowledge of that area. The Maghreb is a most important area and is likely to become even more so. Today we are being given the opportunity to express our views on the issue as well as drawing the attention of Members of your Lordships' House to the opportunities and threats that we perceive exist in the relationship between the Maghreb and the EU.
926
At the outset, I would like to pay tribute to the noble Lord, Lord Hunt. Coincidentally, it is his birthday today and I offer my congratulations. He has guided us through a veritable quagmire of economic, statistical and political data and made sure that the members of his committee had every opportunity to obtain as much information as possible from the witnesses both here in London and in north Africa.
The Maghreb is not exactly top of everybody's mind when considering either the global international scene or the EU scene but perhaps we should recall that Yugoslavia and its constituent parts was not top of mind some very few years ago. I am not suggesting for one moment that the tragedy of the area which used to be called Yugoslavia is in any way likely to be repeated but rather, I think, reminding your Lordships that political, economic and social developments do not proceed at a uniform pace throughout the world. Today's tourist area can so easily become tomorrow's area of conflict or of great concern which impinges on us all.
Links between the United Kingdom and the Maghreb have never been as strong as, for example, links between the individual member states of the Maghreb and France, Spain, Portugal and Italy. But we need no reminding that we are fellow members of the EU along with France, Spain, Portugal and Italy and, as such, are not left unaffected if there is a movement within the EU towards increased involvement with the area.
The post-colonial development of the Maghreb countries has varied in pace but all of them have, and continue to have, raised expectations of a viable economic future. That is understandable because any examination of the structure of these countries shows that they have many and varied valuable resources which could and should be harnessed for the benefit of the indigenous population. And it is not only the raw material resources that are impressive; the emphasis on education has resulted in big advances in the level of education of the populations as a whole. The noble Lord, Lord Hunt, drew attention to the hunger for English language teaching.
But it is the very success of the education programme which causes me concern. As we have seen time and time again in various parts of the world, an emphasis on improved education, the goal of abolishing illiteracy and the aim to open higher education to an ever-increasing proportion of the population raises job expectations which cannot be met if there is insufficient investment in business activity. Time and time again we come up against the inability of 20th century man to grow investment in education and economic activity at a uniform pace.
There is another inability that occurs time and time again; namely, the inability of nations to overcome vested interests in the interests of their less advantaged friendly nation states. This is the case with the Maghreb. If in the course of taking evidence we heard once about tomatoes and olive oil we must have heard it dozens of times. The ever-recurring evils of the CAP were quoted time and time again. Yes, the southern EU states dearly wish for Morocco and Tunisia to thrive economically—but not at the cost of their agriculture. Of course, we can understand that. Of course it is a problem. Of course

927
the livelihood of farmers within the EU must be a consideration of us all. But there seems not a little hypocrisy in the actions of southern EU states calling upon the EU to help the Maghreb, yet roundly maintaining import controls against the produce of these countries, refusing to accept that by the strict imposition of such controls they are, in effect, worsening the situation of the Maghreb.
And there is another problem. Because of the sensitivity of any issue concerning the restriction of movement of peoples—particularly of refugees from undemocratic regimes—we seem to be loath to mention the fundamental problem which is almost universal throughout the world. I refer to the reluctance of countries to countenance widespread immigration. I fear that that is at the root of the demands within the EU for greater economic aid to the Maghreb. The southern EU states do not want and fear they cannot cope with, large-scale migration of people from the Maghreb to their country.
Just a few short weeks ago I had a long and rather heated discussion with an inhabitant of Montpellier who, quite rightly, pointed out the huge changes that had had to be made to that beautiful city in the past few decades to cope with the migration of Algerians and other nationals. He was not too happy to think that similar adjustments, construction projects for housing and job creation schemes would have to be undertaken in the future to accommodate the probable inflow of young Moroccans and young Tunisians searching for means to fulfil their raised economic and social expectations. That really is the nub of it all.
And what can be done about it? The classic response of the economist is the correct one: encourage greater wealth creation by freeing the economy from barriers to trade. Of course, that involves investment in infrastructure projects; inward investment in manufacturing enterprises; investment in training to improve technical skills; and export of know-how to the area. All of this sounds like a litany for UK involvement, but that is not the only solution.
Yes, there are great opportunities for this country in the Maghreb—opportunities which too few businesses seem to wish to take. I fear that it is much more attractive for UK businesses, and much easier, to deal with countries where English is the lingua franca. Our national aptitude in foreign languages still appears to be below what we might have expected following so many years of exhortation by business, industry, government and the education sector. There are, of course, notable exceptions and recent efforts have been made in terms of trade missions but I hope that this debate this evening achieves the acknowledgment that in the Maghreb there is a very big opportunity for the UK, not only to benefit from a growing economic area, but also genuinely to help less economically advanced nations.
The subject of the Select Committee report is not, of course, relations between the Maghreb and the UK but the Maghreb and the EU. We must prevail, yet once more, upon the other EU member states to consider most carefully the damage which could be, and almost
928
certainly will be, caused to the whole Mediterranean area if the CAP continues to militate so unfairly against the logical business of the Maghreb countries.
I was struck, only yesterday, by the number of geographical areas within just a few hours flying time from Heathrow where a peace process is being undertaken. We were asked in our church to pray for: the peace process in Northern Ireland; the peace process in Bosnia and other parts of the former Yugoslavia; and the peace process in the Middle East. I hope that we do not have to add a fourth area to that list; namely, the peace process in the North African states of the Maghreb. It is not, sadly, too far-fetched to suggest that if efforts are not made to meet the natural and understandable expectations of this region, there could be political instability leading to widespread conflict.
We are constantly being told by analytical journalists that we are no longer a great power, we no longer indeed have any power; this is not the time to refute that statement. What we still have—and in great measure—(certainly way above the proportionate size of our geographical area or the size of our population) is influence. We should seriously consider using our influence to assist the peoples of the Maghreb to reach their economic, social and political expectations in three positive ways. First, we should work even harder to gain universal acceptance within the EU that the CAP must be changed to allow greater access to EU markets for the producers of the non-EU Mediterranean and North African countries. Secondly, we should encourage even greater effort by UK business to invest in the Maghreb—particularly in the area of know-how. Thirdly, we should adopt a supportive stance to the aspirations of the Maghreb as it moves to more democratic structures.
As has already been said by the noble Lord, Lord Hunt of Tanworth, throwing money at the region—although the noble Lord expressed the matter more eloquently when he referred to massive or indiscriminate funding‹—which always seems to be the knee-jerk reaction to any problem, provided it is not our money, is not the answer. Debates such as this are not the answer either, but they draw attention to a situation which can be perceived as a threat. But in the well-worn phrase: there are no such things as problems, there are only opportunities. I believe that we have a great opportunity to influence the development of that area; to lessen the tension; and to encourage its economic progress.
Finally, I should like to thank the noble Lord, Lord Hunt, for giving us this opportunity to learn more about the area. I hope that this increase in knowledge can be used to good effect.
5.25 p.m.
Lord Bruce of Donington: My Lords, I too pay my tribute to the work done by Sub-Committee A on this particular subject under the distinguished chairmanship of the noble Lord, Lord Hunt. The arrangement of the agenda, the selection of witnesses, the hearing and in some cases cross-examination of witnesses finally

929
elicited a good deal of factual information which has been reproduced in the earlier sections of the report which we are debating this afternoon.
I shall seek to deal with only a limited aspect of the report; namely, the financial aspects and possibly also the United Kingdom's contributions from taxpayers' money into the various projects which have been suggested.
Initially I wondered why the proposals that were made by the Commission for aid to the non-member Mediterranean states, of which the Maghreb countries are only three, were actually made and what lay behind them. Was it that the Commission had undertaken its own researches into the real needs of the countries concerned or was there some other reason?
The Commission has been extremely frank in stating the main reasons for bringing forward the proposals which involve the expenditure of some millions of ecus and therefore pounds. I invite your Lordships to turn to paragraph 87 of the report at page 31 where the Commission's role in this is discussed. It says:
"The Commission's Communication",
that is in regard to the Maghreb,
"was drafted in response to a request from the Corfu European Council in June 1994. According to Mr. Wright of the Foreign and Commonwealth Office (FCO), the motivation behind the paper was that 'the EU and particularly the southern Member States have been keen to pay regard to their southern neighbours in the Mediterranean to balance the recent development of relations with central and east European countries"'.
That seems to me to be the prime motive behind the Commission's original proposals. I suggest that the quotation that I have just given underlines that fact. There was no particular zeal by the Commission itself to proceed ahead with a number of stated and described projects—none at all. Indeed, our own report mentions the absence of any real detail on how the Commission proposes to spend the money.
The question is one of balance. That surprises me somewhat because I should have thought that if the proposals envisaged the expenditure of money the Commission might, quite properly, have some regard to the normal canons of cost-effectiveness and value-for-money which are so warmly supported alike by Her Majesty's Government and Her Majesty's Opposition. But, no, nothing of the kind. That is reflected in the final conclusions of the committee at page 38 of the report which says that,
"it is no good offering money to the Maghreb States as a substitute for making the concessions, particularly over agricultural access, which [is what] they really need".
The committee goes on to say:
"Full free trade with the EU is a desirable goal for them but aside from the question of agricultural access it is clear that Morocco and Tunisia will need a lengthy transitional period in removing their tariff barriers on industrial goods".
It could not be clearer than that. The odd thing about it is that the proposals come at a time when the Government have been seriously worried on the whole question of the environmental issues in central and eastern Europe—the PHARE programme. If noble Lords refer to CM 3011 published in October of this year they will find that those extra demands for aid (for largely unspecified purposes)
930
have come at a time when the Government are seriously worried about the steps being taken in practical terms under the PHARE programme.
I should have thought that the reaction of the Government in such circumstances, rather than giving general support to what remains a fairly amorphous idea of the Commission for aid to the non-member states in the Mediterranean, would have been to concentrate their efforts in getting proper value for money and rendering real aid in the programmes to which they are already committed in the eastern states under the PHARE programme. It is far better to do something well first than to contribute or prejudice doing well in existing fields by going into other fields which are essentially of a dubious nature.
I could not agree more with the noble Baroness, Lady O'Cathain, on the question of the common agricultural policy. It was made quite clear in most of the evidence received by the committee that what was necessary in the Maghreb states—indeed, in Morocco and Tunisia in particular—was the ability to sell their produce in the European market. That is the principal, and most important, way of enhancing the structural and material fortunes of the peoples in those areas. Yet what has really happened is that the Commission itself is of course conscious of that defect and of the fact that the CAP is not playing fair by those Mediterranean countries and wants to offer some form of recompense by the provision of finance. That is really what it is all about.
I suggest that that is the wrong way to go about it. There should be a proper appraisal on what is really necessary to revive the economic fortunes and to increase the prosperity of those regions. As the noble Baroness said, that must include practical measures to eliminate some of the worst effects of the CAP on some of those countries as a principal way of contributing towards their future success. Then, after that, if money is to be spent—and there are quite large sums involved—it should be possible to assess the situation and give a closer idea of what the Commission thinks the money should be spent on. However, as the report says, that has not been done.
Since the report was published the European Community has issued another proposal on financial and technical measures to support the reform of economic and social structures in Mediterranean non-member states. Of course, they include states from the Maghreb countries, but go far wider than that; indeed, other countries include Egypt, Israel, Jordan, Lebanon, Malta, Syria, Turkey and the occupied territories in the West Bank. So a new, overall regulation has been brought forward on which the Government issued an explanatory memorandum—No. 9112/95 (COM.95) 204 final)—in which they say that the proposal is for a regulation in support of the "budget line (B7.410)" for financing the technical and financial co-operation requirements. The memorandum goes on to say that the Regulation proposes commitments of about £3.302 billion in order to be able to do so.
As we are discussing money and the budget line, I should like to refer to a relevant item in the European Community Budget for 1996. I refer the House to page 1061 of Volume 4 Section III of the Draft General Budget which deals with the Commission's budget for 1996. I should like to quote what is said in regard to the total

931
appropriation which in 1996 will amount to £204 million. In 1997 it will be £186 million, in 1998 it will be £130 million and in subsequent years it will be £146 million. The following is what is actually proposed:
"This appropriation is intended in particular to cover the financing to:

—support economic transition (by backing up the process of modernization and economic reconstruction of the Mediterranean non-member countries …

—achieve a better socio-economic balance (inter alia by contributing to the improvement of the social services, balanced and integrated rural development, the commitment of civil society to development, support for education and cultural exchanges, the strengthening of democracy and human rights and protection of the environment)".

Moreover, it is also for,
"the promotion of regional cooperation".
In essence:
"It also covers expenditure on studies, meetings of experts, conferences, congresses, information and publications directly linked with the achievement of the objective of the measure of which they form an integral part … Also charged to this article is expenditure on operations and other measures of a horizontal nature designed to enhance the profile or increase awareness of the European Union which are directly linked with the achievement of the objectives of the European Union's action in the Mediterranean non-member countries".
Indeed, I could go on. However, what is not said is what assessment has been made as regards the projects upon which the money will be spent. I ask your Lordships—and the House is already acquainted with my somewhat sceptical views—where's the beef? What will the money be spent on? The answer is that it will be spent, to a large extent, on propaganda. I do not believe that is the right way of going about it. It is proposed to proceed under Article 235 of the treaty. In order that we may be better acquainted with that, I remind your Lordships that Article 235 of the treaty states:
"If action by the Community should prove necessary to attain, in the course of the operation of the common market, one of the objectives of the Community and this Treaty has not provided the necessary powers, the Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament, take the appropriate measures".
I put this matter quite succinctly to the Government. What on earth have these proposals to do with the enhancement of the Common Market? Have they not more, as their objective, the enhancement of the powers of the European Commission itself; its ability to publicise itself; and its ever growing desire to appear, ahead of all the member states individually, as being the real power that is moving Europe? Your Lordships may think that that is rather a jaundiced view.
The House has done me the honour of listening to a number of my remarks in the past and the House may think that view is somewhat confined to me, and may be a little idiosyncratic. I think not. I think that on the basis of the evidence available to us these proposals have nothing at all to do with the purpose of the Common Market prescribed in Article 235 and that this House should look at them critically. The Government should examine these proposals in budget committee and in the Council of Foreign Ministers to see whether the expenditure that is so far proposed, of which we bear a large percentage, cannot be quite drastically reduced.
5.42 p.m.
Lord Dahrendorf: My Lords, in one respect at least I wish to associate myself entirely with the remarks of the noble Lord, Lord Bruce of Donington, and with those of the noble Baroness, Lady O'Cathain, and that is in the warm appreciation of the chairman of Sub-Committee A, the noble Lord, Lord Hunt of Tanworth, who has guided us with his customary calm, good humour and wisdom through a difficult subject. He has presented the report today in ways which require but few additional comments.
My brief comments have to do with four aspects of the relationship between the European Union and the Maghreb and Britain's interest in it. The first aspect is that we are here dealing in an important respect with European Union foreign policy; in other words, not with the Treaty of Rome but with the Treaty of Maastricht, and with the question of what exactly the interests of the European Union in foreign policy may be. My own view is that if and when it becomes fully apparent that economic and monetary union will either not happen, or will be seen not to contribute to European co-operation, foreign policy will gain in importance in the framework of European Union action. My view is also that no good case can be made for a European Union foreign policy which deals with the whole world, as it were. However, a good case can be made for an interest of the Union and its members in what one might call the "near abroad" of the European Union. This near abroad is not east central Europe. East central Europe, in my understanding, is an area of future membership, and, one would hope, membership at an early date. The near abroad is essentially two regions: the former Soviet Union and the Mediterranean. It is in these two areas that we have a massive common European interest, and it is for that reason that paragraph 94 of the report is so welcome when it states that we view what is proposed in the context of this interest.
My second comment concerns the problem itself. It is a familiar one but one cannot repeat it too often. Either we contribute to improving the conditions under which people live and work in the precarious countries around this European space or we shall suffer significantly from the pressure which is exercised by these people. I say "pressure" because we are not just, perhaps nowadays not even primarily, talking about immigration. We are talking as much—and, as we see in France, even more than we thought we would—about terrorism, crime and the pressure which small groups can exercise in the name of larger communities (although their communities have usually not been asked) on the members of the European Union. In my view, for reasons of simple interest we have to do everything we can to enable people to live and to prosper in peace in their countries. That is the motive for Europe to take an interest in its near abroad in the Mediterranean and most particularly in the Maghreb countries.
My third point is by now familiar but it is right that we should repeat it as often as we can. Supporting people in these countries is not primarily a matter of giving them money. There may be infrastructure projects which are of legitimate interest, for instance, to the European Investment Bank or to other institutions, and for which a case can be made once they have been properly

933
assessed—I entirely agree with that—but basically it is a question of enabling these countries to export what they can produce best. That means being prepared to import what they produce. As one who has never given up hope in the European Union and has therefore a much more positive view of that creature of post-war political effort than the noble Lord, Lord Bruce of Donington, I am nevertheless—I have to put it in strong language—fed up with having to apologise for what the European Union does when I talk to my friends and others. However, here is yet another example where those of us who are in favour of European co-operation based on interest have to apologise because what the Union and the Community have done so far is to insist that these countries open their markets to our industrial products while at the same time keeping our markets closed to their agricultural products. That simply will not do. I suspect that we will pay an enormous price if we go on acting in this way. That is another point which I see as the background to our report and the attempt to draw to your Lordships' attention an important area of European foreign policy.
I come to my fourth and final point. Let us make no mistake, the road to development is rocky. For all of these countries, as in the case of east central Europe and the former Soviet Union, development leads through a valley of tears and a very difficult phase. Let us not be simplistic about expectations of economic development. The initial phase of economic development is, for many people, one of uprooting, uncertainty and expectations which in many respects are not satisfied. It is in that period in particular that assistance and co-operation are needed.
In the committee we were pleased to see the progress made by Tunisia. We were left with the hope that Morocco, which is in a more difficult position, may find a way through that valley. We were not persuaded that there are yet convincing signs of a similar path forward for Algeria. One can hope that there will be a form of reverse positive domino effect and that successful countries will have a positively infectious effect on their less successful neighbours. However, there will be a considerable period in which intimate co-operation is one of the necessary conditions of progress. That is why Barcelona is important and why there is need for agreements which establish bodies for co-operation. We, in your Lordships' House, with the limited means at our disposal, should express support for progress in the Maghreb countries.
5.52 p.m.
Lord Chalfont: My Lords, I must begin by declaring an interest in the subject of the debate in that I am the only British member of the Academy of the Kingdom of Morocco, which was established by King Hassan in 1980 to study the issues and problems affecting the role of Morocco in the world. It is a body which consists in equal numbers of Moroccans—politicians, academics and scientists—and of foreigners. Some of the foreign members may be familiar to your Lordships' House. They include Dr. Kissinger from the United States, Anatoly Gromyko from Russia and Crown Prince Hassan of Jordan. The body also includes members from most Islamic countries, including Iraq, Tunisia, Turkey and Saudi Arabia. It meets in plenary session twice a year.
934
I mention the academy by way of introduction in some detail because at our last plenary meeting held in Lisbon in May this year the subject to which His Majesty the King invited us to address ourselves was the future of the European Union and the Mediterranean countries. With the valuable and indispensable help of our own Foreign and Commonwealth Office, I presented a paper at that plenary meeting. In the debate which followed the concerns of the people of the Maghreb countries were articulated in a way which impressed me enormously. As a result I have been placed in a position especially to recognise the quality and importance of the report which has been so impressively introduced in your Lordships' House today by my noble friend Lord Hunt of Tanworth.
I should like to join in the congratulations, which I am sure will be echoed throughout the House this evening, to my noble friend and his colleagues on Sub-Committee A on producing a most thorough and valuable report. It has contributed enormously to enlightenment and understanding of the problems of an area which is too frequently far from our minds in this country as we concentrate on more important aspects of what an earlier speaker called the near abroad, in other words the countries of eastern Europe.
Perhaps the most important contribution that the report has made is in the context of its observations and reflections on Islam, and especially in its emphasis upon the inaccurate and ill-informed use which is so prevalent in public debate and especially in the press of this country, of the word "fundamentalist", as though fundamentalism were in some way synonymous with terrorism, violence and extremism. To many Moslems and followers of the Islamic faith fundamentalism is nothing more sinister than a desire to establish the society in which they live and the government which governs them on the values and moral codes of Islam. It seems to me that there is nothing more sinister in that than there might be in a desire to establish a society based on Christian or Jewish values. That is what fundamentalism means to most Moslems and followers of Islam. As my noble friend Lord Hunt of Tanworth said, it has been pointed out by King Hassan of Morocco that Moroccans have been fundamentalists for 1,200 years. There is no connotation of political violence in the Islamic fundamentalism of the Moroccan monarch or his people.
I hope that what I have to say may go further than the confines of this noble House. The use of fundamentalism as a pejorative term synonymous with something undesirable causes great offence to many Moslems and many devoted and peaceful followers of the Islamic faith. There are, of course, terrorists and extremists from the world of Islam. However, as we all know, there are terrorists and extremists from the worlds of Christianity and Judaism also. We would do a service to the public debates on these issues if in future we were a little more accurate in our use of language and referred to people as terrorists and extremists if they are terrorists and extremists but did not refer to them as Islamic fundamentalists. That is patronising and offensive.
The fact that the term is used in a loose and ill-informed way is only a part of something much bigger. It is part of the dangerous gulf of suspicion and misunderstanding which is growing up between the whole world of Islam

935
and the West. Recently an American historian and analyst called Samuel Huntingdon wrote a serious and well-researched article in an American magazine in which he referred to the new clash of cultures and expressed the theory that with communism defeated and the Soviet empire in a state of disintegration the new threat to the security of the West was Islamic fundamentalism. As recently as last Thursday there was an article in The Times in which a member of the American Administration referred to the dangers of the domino effect of Moslem and Islamic fundamentalism spreading across the countries of North Africa.
The report of the Select Committee has made it clear that in the view of the committee—and it is a view with which I fundamentally agree—there is no such danger as the danger of the domino effect, or, if there is such a possibility, it is not an immediate danger. The committee considers that the dangers of Islamic fundamentalism creating conditions of instability and violence in the Maghreb countries of north Africa are remote. I agree entirely with the conclusion which the sub-committee has reached in that respect.
However, there is an important antithesis. As the report says, there is the danger of economic problems in the Maghreb countries which might provide a fertile ground for extremism if it should spread beyond the boundaries of Algeria, where at present its nucleus exists. It is there, I believe, that the critical and crucial importance of the policy of the European Union towards the Maghreb countries lies. The most important thing that the European Union can do now is to attempt to promote stability in the Maghreb countries by helping them to continue on the path of economic development which, in the case of Morocco and Tunisia, they have so successfully followed up to now.
For the last few moments of my intervention I should like to focus on Morocco which is the country that I know best. It is a constitutional monarchy. It is true that, as the report said, the king is at the centre of power; no one denies that. However, it is a constitutional monarchy with an elected national assembly. The king is a thoughtful, constructive and subtle political leader. There is in Morocco a history of religious tolerance; it has a thriving, flourishing and fully tolerated Jewish community. As the report points out, Maimonides and Pope Silvester III were entertained and welcomed at the University of Fès, the oldest university in the world. The significance of that is not to be overlooked. As I need hardly point out, Pope Silvester III was Christian, but what might not be equally well known is that Maimonides—perhaps my noble friend will forgive me for saying that in the report Maimonides has suffered from a severe case of printer's revenge because his name has been badly mangled! Maimonides was the Rabbi Moses Ben Maimon, the great Jewish philosopher of the 12th century, who spent time at the university of Fès in Morocco. He was welcomed there, as was Pope Silvester.
Those are both manifestations of the religious and political tolerance which characterises the political culture of Morocco. I discovered recently at the conference in Lisbon that Morocco urgently seeks closer
936
ties with the European Union. The King of Morocco—I think with some justification—regards his country as the junction point, the crossroads between Europe, Africa and the Arab world. As the report points out, there is a profound ignorance generally in the West about Morocco, and especially in this country where it is regarded as some kind of French chasse gardée because of the relatively brief time in which Morocco was a French colonial country.
There are great opportunities for British industry and business in Morocco. However, above all Morocco is a case history underlining the danger of regarding Islam as a great monolithic entity. Morocco is as different from Libya or Iran as Turkey is from Pakistan or Brunei; they are all Islamic countries. I suggest, therefore, that the United Kingdom should continue on its present twin-track, approaching a free trade area in the Maghreb as part of a European/Mediterranean partnership, but continuing to pursue its bilateral interests in the Maghreb, especially in Morocco. I know that the Government recognise that countries such as Morocco wish to diversify away from their traditional suppliers, especially from France. As the noble Lord, Lord Hunt of Tanworth, pointed out, there is an interest in acquiring the English language for business purposes. There have already been structural reforms and privatisation programmes in Morocco and there is great opportunity for our business and industry to prosper there.
Furthermore, the important final point I wish to make is that Britain shares with its European Union partners an interest in working to reduce the potential causes of instability in the Maghreb countries to the extent that any outsiders can, because it is largely a matter for the countries themselves—and the primary instruments of any influence that we can bring to bear in the area are economic because the root causes are economic. There is no direct security risk to Britain or to Europe in any military sense (although there are concerns about terrorism and the proliferation of weapons of mass destruction). But it is internal stability that counts and it is internal instability that would damage trading prospects, damage investment prospects and damage general political interests in the region. It is in that area that I believe that the European Union, with Britain at its heart, can play an important role.
I close by expressing the hope that later this evening we shall hear something about the line that Her Majesty's Government will be taking in the European Union as they prepare for the important conference in Barcelona next month.
6.5 p.m.
Lord Butterworth: My Lords, as a member of Sub-Committee A, I too would like to express my thanks to the noble Lord, Lord Hunt, for the skill and patience with which he guided us through evidence which was always useful and often most interesting. As he pointed out, the Union has been considering its relationship with the countries to the east and also those to the south—the whole Mediterranean region. As is emerging, different solutions are proposed. The eastern countries will eventually be offered full membership,

937
but the Moslem countries of the Mediterranean will, it is hoped, join some permanent economic relationship short of full membership. That is to say, apart from Cyprus and Malta.
Following our report, the European Council met at Cannes on 26th and 27th June. The presidency conclusions accept, to some extent, how important it is for the European Union to help the Mediterranean area. Perhaps I may quote those conclusions which specifically refer to,
"a Euro-Mediterranean area to be established on the basis of free trade and partnership in a maximum number of areas".
However, as often pointed out, we have to remember that the Maghreb countries have largely farming populations. Therefore, to be effective, the help that is given must be in the agricultural sector. As many people told us when we met them in Morocco and Tunisia, trade is more important than aid. It is therefore probably unfortunate that the presidency conclusions would seem to offer a quicker move to free trade in manufactured products while being hesitant about progress in the agricultural sector. I quote:
"Taking as a basis, traditional trade plans, and as far as the various agricultural policies allow"—
I emphasise that last phrase—
"trade in agricultural products would be progressively liberalised through reciprocal preferential access".
That does not suggest urgency. The Moroccans would say that they grow better tomatoes than anyone in Europe and the Tunisians maintain that their olive oil is the best in the world. But our report points out that it would be difficult for some member states of the Union to accept access of such agricultural products. Spain would resist the entry of an additional Moroccan tomato and Italy would not greet the entry of Tunisian olive oil with any pleasure at all unless, may be, it saw the opportunity of re-exporting it as Italian. In truth, as frequently pointed out this evening, the CAP is becoming more and more of an impediment to Europe's true economic progress.
Not only are the principles of the CAP at loggerheads with the free market assumptions on which the single market is based. Another of your Lordships' sub-committees has already pointed out to the House that the admission of the eastern European countries to full membership of the Union will require the most drastic amendment of the CAP. Now, a committee of this House finds that CAP considerations tend to impede the best help that the Union could give to the Maghreb countries and the kind of trade relationships those countries most desire.
The evidence of Mr. Nigel Varney of the Home Office is worth some attention. It gives further urgency to the need for imaginative assistance in the agricultural sector. He pointed out that Morocco is a large producer and exporter of cannabis. More than half of the cannabis seized in the United Kingdom originates in Morocco. In 1993, 63 per cent. of all cannabis resin seized in Europe came from Morocco. Moreover, a cannabis route having been opened, it is used for smuggling other drugs, m particular cocaine, brought into Morocco from South Africa and then smuggled into Europe.
938
In Morocco—a country of just over 26 million people—some 5 million, especially in the Rif region in the north of the country, are dependent in one way or another upon the cannabis trade. Clearly, it would be greatly to everyone's advantage to find alternative employment for those people. But converting to other crops will be a long and very expensive process: it takes time to grow other crops to the point where they become truly productive. In any case, growing drugs is much more profitable than growing more orthodox agricultural products. In short, it still has to be proved that the Union has the will to carry through the kind of agricultural development that is needed in Morocco and in the Maghreb more generally.
Finally, perhaps I may refer to a technical, though not unimportant, matter. Miss Marie-Christine Kerr, of Banque Paribas, explained to us how the successful financing of projects in Morocco and Tunisia requires regard to be paid to the policies of other governments. The viability of a contract often turns upon a government's willingness to make available mixed credits in a financing which that government are prepared to soften with aid.
Not all contracts with developing countries are eligible for mixed credits. Thus the so-called Helsinki accord, which came into force in 1992, laid down that OECD countries cannot apply mixed credits to projects that are in the themselves commercially viable, for instance, energy products, oil, gas, or indeed manufacturing projects. Mixed credits can, however, be supplied for projects that are not self-supporting. These are mostly in the important social sector, such as water and transport: roads, dams, and so on.
The problem arises because our Government have gone further than other developed countries. In pursuance of our policy of restricting aid to the poorest people in the poorest countries, we have taken a unilateral decision to withhold aid and mixed credits if the developing country concerned has a GDP per head of more than 700 dollars per annum. That rules out the possibility so far as this country is concerned of mixed credits in Morocco and Tunisia. Indeed, many other developing countries are caught in that trap. In the Mediterranean area alone, it applies to Turkey and Lebanon. And there are others throughout the world, such as Thailand and Colombia.
In Morocco and Tunisia, British contractors are often competing with those of France, Italy and Spain. Because those countries apply protocols or lines of mixed credits of considerable size, competition becomes very difficult. Sometimes the project may be supported from elsewhere, for example, the African development bank, or through EU or Arab money. But if no such multilateral aid is available, it is hard for British contractors to beat a 30 to 40 per cent. subsidy from a competitor country's government.
How much business does Britain lose because of its aid rule? Let us take the Mediterranean region alone. Morocco, Tunisia, Turkey and Lebanon are caught in the trap. Of course, it is always difficult to prove a negative. One responsible estimate that I have seen puts the figure for the loss at £100 million a year.

939
I hope that today the Minister may be able to help us with this problem. It seems to some of us that in Morocco and Tunisia the policy thrust of the DTI and that of the ODA do not fit well together. I suspect that many of us who have experience in developing countries are in favour of the general principle that, broadly, aid should go to the poorest people in the poorest countries. But do we need to apply the principle with such rigour that our contractors cannot compete with those of other OECD countries in respect of such projects as clean water, irrigation and health? That applies particularly in countries such as Tunisia and Morocco where broader European considerations make our participation desirable at a time when those countries wish to widen their economic and trade relationship beyond one of French predominance and forge a new Anglo-Saxon relationship.
6.19 p.m.
The Earl of Winchilsea and Nottingham: My Lords, in making a short contribution to this debate I do so at the risk of being accused of having a one-track mind. My subject, as some noble Lords will already have guessed, is the knotty question of the Western Sahara. It is indeed a knotty question. It is highly relevant to the future of the Maghreb region, since without a satisfactory solution it will simply be impossible for there to be a united Maghreb, however desirable that may be.
The report is flawed because it dismisses the problem of the Western Sahara in one small paragraph contained on page 16 and found in paragraph 40, sub-paragraph (c). Yet this problem of 20 years' standing is central to the establishment of the Maghreb region as a going concern. It appears to present one of the claimants to the territory—the Saharawis, represented by the Polisario Front—as illegitimate guerillas operating from camps in south-western Algeria. Saharawi people everywhere want the basic human right to live unmolested in their own country of the Western Sahara—not just the Polisario Front, which is another name for the Saharawi government in exile. The word "Polisario" itself can be misleading and is easy to exploit, conjuring up, as it does, images of a tottering old communist regime; whereas the truth is that the word derives from the geographical extremities of the old Spanish Sahara, whose boundaries were drawn up and agreed by the Berlin Treaty of 1884. That treaty set many of the boundaries of colonial Africa, most of which are still as we know them today. The word "Polisario" is derived from frente (Spanish for "Front")—Popular Liberation of the Saquit el Hamra and Rio de Oro, which are the two regions comprising the Western Sahara.
It is appropriate to go back a little in history, so that instead of a single paragraph in the report, barren of any explanation or background, your Lordships at least have a scanty understanding of why this problem exists and has done ever since 1975, when Spain began to withdraw from its colony. Spain began in earnest to colonise the area after exceedingly rich deposits of phosphates were discovered late in the 19th century.
940
Along with many other European colonial powers, Spain made little effort to benefit the local indigenous population. It must be said in fairness to Spain that that was often very difficult to do, even if the desire to do it had been present, because until the 1930s most Saharawi people led nomadic lives, following in their age-old traditions. It was not until towns and villages began to expand and acquired some status and reputation as growing commercial centres that those ancient habits started to change. Their eventual, near total demise was finally hastened by the drying up of wells and feeding grounds for the herds of camels and goats which used to follow set seasonal patterns throughout the nomadic year.
The indigenous population began settling in the expanding towns in ever-increasing numbers. They established all manner of businesses and commercial establishments. Many of them became entrepreneurs and the capital city, El Ayoun, became a free trade port, which greatly encouraged further commercial expansion.
Going along with that was a growing national movement which came to be known as the Polisario Front. It sought to achieve independence—as, indeed, every other colony in Africa seemed to be doing successfully at the time, although the Algerian struggle for independence from France turned out to be an exceptionally long and bloody one, with over 1 million dead on each side. By the mid-1970s, the struggle was beginning to take its toll on Spanish resolve to hold on to her colony. In 1975 she eventually withdrew, promising—this is a very important point to remember—the Saharawi people a UN-led referendum on their own future. That referendum has not taken place. At first it was blocked by Franco, who in 1975 was still causing havoc. Instead, a secret tripartite agreement was cooked up in Madrid. It divided up the former Spanish colony between Morocco and Mauritania, with Spain retaining a healthy interest in mineral extraction.
Morocco invaded from the north and Mauritania from the south. The Moroccans called it the "green march". It presented to the world a peaceful, civilian reoccupation of the territory taken from Morocco by the Treaty of Berlin, to which I have already referred. But also marching 10 miles away, hidden from the attention of the world's cameras, was the Moroccan army, armed to the teeth with equipment obtained from the West and occupying the region which was one of several claimed by Morocco. Those claims go back long before the Berlin Treaty. Indeed, Morocco still has outstanding territorial claims, which she has never withdrawn, against Algeria.
That invasion was particularly brutal. After the Western cameras and television crews had returned home, the Moroccan air force went into action, bombing the capital city, towns and villages, causing thousands of casualties and forcing the civilian inhabitants to flee into the open desert where they established makeshift refugee camps. Those, too, were bombed. So the only remaining solution was for the people to make for the sanctuary of neighbouring Algeria, over 700 miles away across a burning, empty, waterless desert. They did so

941
and have been existing ever since in four large camps, each containing around 50,000 people. Many more Saharawis escaped to other countries: Mali; Mauritania (which gave up its military struggle for the southern half of the Western Sahara in 1978); the Canary Islands; other parts of Algeria; and as far as Niger. Of course, many decided to remain voluntarily in the Western Sahara, hoping that they would be well treated by the Moroccan authorities. Others were either too old or too sick to make the long trek across the open desert. Altogether, Saharawis account for about 1 million people.
Since then, the Polisario Front has operated from the four camps around Tindouf in Algeria; and, yes, the Algerian Government, very nobly and at great cost, have supported it. They continue to do so. They do it because they believe in the Saharawi cause; because they could not let die in the desert all those people who had struggled across it seeking help. They do not do it, as some cynics would claim, because all that they really want is access to the Atlantic coast. If they wanted that, they could have had it years ago for the taking.
The referendum was originally promised for 1992, then 1994 and then 1995. The report states that the referendum has consistently been postponed because of issues such as who is entitled to vote. That was agreed, but it was at Moroccan insistence that a further 100,000 or so names were added to the list of those eligible. That was a blatant attempt to undermine the outcome and the Saharawis rightly ask "What is the point of holding a referendum if it is not a free and fair one?" Would your Lordships feel able to vote freely with a gun in your back?
The efforts of the UN Secretary-General to hold the referendum can at best be described as half-hearted. It is well known that he favours the Moroccan position. In short, from a Saharawi point of view, he has been a total disaster. Meanwhile, the Moroccans used the four-year ceasefire period to their advantage by strengthening their defensive wall and consolidating their positions along it. They have also been guilty of violating the ceasefire on over 300 occasions. But nobody says anything; nobody does anything; and even the UN personnel out there, supposedly to oversee the setting up of the referendum process, have been corrupted.
I was last in the refugee camps in February this year and I shall shortly visit them again as I am organising our fifth humanitarian convoy to the camps in November with supporters from all over the United Kingdom. In February they were near a state of despair about the lack of progress with the referendum. In my view, unless some concrete progress is made now, the ceasefire regrettably will become a memory and the Arab Maghreb union will become only a remote possibility.
I believe we must take a much more robust stand on issues like the one in the Western Sahara, and the European Community and the European Parliament is the place to do it. As the UN celebrates is 50th anniversary we would do well to stand up there as one of the five permanent members of its Security Council and urge more resolve and determination in getting this long-standing problem sorted out in a fair and just
942
manner instead of turning a blind eye and hoping that the problem will go away. If I know the Saharawis—and I do after 10 years of trying to help them with humanitarian supplies—they will never give up their rights; be they human rights, birthrights or civil rights.
It is surely in everyone's interests to work towards, find, and then implement, a fair solution; to expose and reject corrupt practices wherever they occur, especially when it involves UN personnel. That merely serves to further undermine the UN and causes people to lose faith in it as an organisation. We must achieve the opposite; we must restore people's faith and trust in the United Nations by making sure that it fulfils its world role without favour or bias. I hope that this is an issue that the European Union, along with the United Nations, will pursue and that an end to the dispute, satisfactory to both sides, will be found.
6.31 p.m.
Lord Thurlow: My Lords, I am sure your Lordships share my gratitude to the noble Earl, Lord Winchilsea & Nottingham, for bringing to our greater notice this so far obscure problem of the Western Sahara. It is a terrible story and a continuing tragedy. I am one of those who hoped that a referendum would provide the framework for a final solution that would be acceptable. I gather the prospects of the Polisario accepting the results of a referendum in favour of Morocco are not good. I doubt that an international initiative by the Security Council or otherwise is likely to be brought to bear at this stage, though possibly, if the referendum does not provide a solution to the problem, others will have to think again.
I am deeply grateful to Sub-Committee A for this remarkably clear and informative guidance on a problem about which many of us are far too ignorant. My interest in the Maghreb and the problems covered by the report stem to a great extent from my residence for periods of over 10 years in countries which have either a large Moslem majority or a large Moslem minority. I look therefore with keen interest and some apprehension at the spectre held out in front of us, especially by the media at present, of a possible upsurge of immigration from north African littorals into Europe. I am reassured by the well-balanced judgment of the committee that at least for the time being we need not be too alarmed by the prospects of infection of the north African littorals from Algeria.
Coming to the focus of the report, I naturally share the view that the direct concern of this country is economic, in two respects. As the noble Lord, Lord Bruce, again so eloquently reminded us, we need to do everything we can to ensure that we obtain value for money out of our substantial 16 per cent. contribution to whatever direct funds are channelled by the European Community into the Maghreb. As he again reminded us, we have grounds for great misgivings in relation to the way these enormous figures for recommended five-fold increases of the aid have been, if not plucked out of a hat, drawn in rather an arbitrary way in an effort to draw the balance with what we do or seek to do in Eastern

943
Europe. That is no way to produce recommendations for expenditure. No finance minister would countenance such procedures.
As the noble Lord, Lord Bruce, told us, we have learnt from experience. I have been involved in this aspect to some extent in previous sub-committee work. We know that the Commission's processes of monitoring and evaluation simply do not stand up to critical examination. The Commission cannot reasonably expect member states to put their hands in their pockets to the enormous extent recommended when they have already shown elsewhere—for instance, in relation to the structural funds—that they do not have the means of monitoring or assessing how the various supposedly worthy projects supported have worked out.
Inevitably the Commission's recommendations have been cut down. Only yesterday the finance ministers of the European Union endorsed a previous decision that the ceiling must be maintained; that new funds for north Africa cannot be found simply by waving a wand; they can be found only at the expense of something else—probably eastern Europe. As has been said, that would require serious consideration.
The second British economic interest is in the area of trade. Exciting prospects are held out in front of us for possible rapid continued expansion in Morocco, and Tunis in particular. The population is increasing by leaps and bounds; the GDP is increasing by 10 per cent. a year in Morocco and by a very high rate in Tunisia also. We would all wish the British exporter to get in on the act. But as has been pointed out, all kinds of difficulties exist, in history and in the problem of mixed credits, upon which the noble Lord, Lord Butterworth, expounded. If we are to enter this particular market, there must be a reasonably level playing field, and conditions in which our contractors can fairly tender. But we are told—and I believe it—that if everything works out well and if the Algerian cancer does not spread along the littoral, Morocco in particular could be the first African tiger and that would present great trading opportunities for us all, so I hope that we shall get in on the act.
Noble Lords have referred to the third substantial interest of this country: the general foreign policy interest of stability in the region. None of us should underrate that. Although reassured by the Select Committee's judgment on the immediate prospects of an increase in immigration, no one can deny that if things get progressively worse in Algeria, the dangers of the pressures to get out will increase, and Italy and Spain are in no position to administer controls which would be likely to withstand a flood. That is a long-term danger that we all share, and it brings us back to the root of the risk, which is the Algerian political situation.
Inevitably and rightly, the sub-committee did not seek to get involved in the Algerian political problem, but we are all increasingly alarmed. The French Government, we understand, are now doing their best to move towards some kind of bridge-building initiative. However, even if those efforts gradually succeed in the face of all the difficulties, if the FIS should be brought to participate in representative institutions, enormous
944
dangers and difficulties will still remain. It could all very easily go altogether wrong and eventually result in some kind of violent uprising which would bring the FIS into power in circumstances which would be likely to create great problems for European governments and for its own minority citizens. In those circumstances, there seems little doubt that there would be great pressure on the frontiers of the European Union. So we cannot too much discount the dangers.
There is little that we can do directly. The only role that is open to the United Kingdom is quiet diplomacy. We sympathise with the French and know of the appalling problems facing the French Government with regard to their own public opinion, with Le Pen aggravating everything as far as he can, bombs going off and the media making the most of it. So, we sympathise with the French Government and people, but profoundly hope that moderation will eventually come to the surface.
I should like most strongly to endorse the very clear comments of the noble Lord, Lord Chalfont, about the confusion of thought that dogs the whole issue of fundamentalism in Western perception. It is essential that a clear line should be drawn between Islamic extremism and terrorism and violence. They need have nothing to do with each other. The noble Lord, Lord Chalfont, quoted King Hassan. Morocco has been fundamentalist for 1,200 years, since the Koran. We know that throughout history Islam has provided a framework for a particular kind of rule of law within the Sharia, which is entirely different from our own concept of representative parliamentary democracy but which nevertheless has given, can give, and is likely to give North Africa a reasonable degree of accountable government in which governments have a high measure of responsibility to a rule of law of a different kind.
I should like to say a word about the problem of education in Morocco in particular because it has a relevance to, and a relationship with, the problem of how to educate an uneducated peasantry throughout the rest of Africa—and not only Africa. It is difficult to see how millions in uneducated communities can have their level of understanding raised, as is necessary for the labourforce of a potential tiger. I remind your Lordships that in addition to the conventional means of tackling education, agricultural education and social education, all of which are very commendable, there are new ways of accelerating education. There is an interesting example of that in South Africa where the problems in the townships have much in common with those facing North Africa.
Finally, as regards our perception of the nature of extremism and understanding of Islam, although the right reverend Prelate is no longer in his place, I should like to appeal to the churches to step up their own contribution. They make a considerable contribution and I know that they devote much research and study to this, but I think that in some ways the churches are better placed than any other body to help the general public, through their own communities, to develop a much greater understanding of the possibility of Christian

945
countries and Islamic countries living happily together side by side as they have in the past and trading together to their mutual profit.
6.49 p.m.
Lord Lucas of Chilworth: My Lords, before I address my remarks specifically to the excellent report that we are considering, perhaps I may comment on the contribution of the noble Earl, Lord Winchilsea and Nottingham. I say that because I am fairly near the bottom of the list of speakers and I should not like the noble Earl to feel that no one in your Lordships' House is sympathetic to the cause which he so energetically pursues, and has done for the past five or six years.
Perhaps I may draw the noble Earl's attention to a report of the two standing committees of the North Atlantic Assembly. Your Lordships will know that that assembly is one of parliamentarians of NATO countries. It is a report on Morocco. It comments on the annexation in 1978 by Morocco of the total area of Western Sahara. The report comments further that there was pressure from the United Nations, the Organisation of African Unity and from regional neighbours, Tunisia and Algeria, that Morocco and Polisario agree to negotiations. That was in 1988. The United Nations mission for the organisation of a referendum in Western Sahara began to deploy in the region in late 1991.
I hope that I misheard the noble Earl if he said that he was sorry that this mission had become corrupted. I hope that he did not mean that. He will also know that there is great difficulty in trying to identify the people who may quite properly engage in the referendum. As a result, in April of this year only about 45 per cent. of the potential voters had been identified on the Polisario side and only about 28 per cent. on the Moroccan side. So there is some great difficulty about the referendum taking place. The tentative date is January 1996 and that looks a little bleak.
The noble Earl will also know that none of the alliance member countries has recognised Morocco's sovereignty over the area. Therefore, there is an association taking some considerable interest in the area. The Civilian Affairs Committee of the North Atlantic Assembly sent a delegation to Morocco in 1993. The report states that it,
"was able to witness the scale of the Moroccan development effort in the towns of La5youne and Dakhla".
So he is not totally on his own in that regard.
I turn more properly to the report before us. As other noble Lords have said, it is a comprehensive report. It is to the usual and comprehensive standard which we have come to expect of our Select Committees on the European Community. I hope that the noble Lord, Lord Hunt, will not think it presumptuous of me if I congratulate both him and his members for this report. He said in his opening remarks that he was pleased that the report was in fact published in time for consideration at the June conference. It is perhaps timely also that this debate should take place against the background of the discussions at the United Nations on the 50th anniversary of that organisation.
946
I say that because I want to speak from the background of the North Atlantic Assembly. As some of your Lordships will recall, I am a UK delegate to that assembly and serve on the Civilian Affairs Committee. I am a member of the Sub-Committee on the Mediterranean Basin and chairman of the committee on the OSCE. As I understand from Radio 4, President Clinton said in his opening remarks to the assembly in New York that there were threats to our stability by virtue of terrorism, trafficking in drugs, armaments, migration and so on.
It is perhaps to this general threat to what we call democracy in the West that I address my remarks and read from the report before us. Paragraph 34 of the report comments on Mrs. Rimington's 1994 speech when she discussed the general security of our own country and the threat that came from some of the North African countries. I believe that that threat is equally apparent today and perhaps a little more so, because of the ability to transmit information and the proceeds of crime through modern technology, from nation to nation. I do not believe that that should be disregarded.
We in this country and in Western Europe have always recognised the importance of the central and eastern European countries to Europe. But for the Mediterranean-bordering countries of the European Union, the Mahgreb countries are equally important. As the noble Lord, Lord Thurlow, said in his remarks, they are particularly important for the United Kingdom whose foreign policy has to be directed to some extent to the stability of the area, which can affect the stability of our own country.
I turn momentarily to comment on one or two of the points contained in the opinion of the committee. Paragraph 94 discusses the European Union's external policies being dominated by central and eastern Europe. The report states further:
"Any discussion of EU external relations must now take account of the future enlargement of the Union".
There can be no disagreement with that remark if one accepts that full membership of the European Union is in fact and practice going to take place. The noble Lord, Lord Dahrendorf, hoped so, as did my noble friend Lord Butterworth. However, in the discussions in which I have taken part through the North Atlantic Assembly at least twice a year, there is some doubt as to whether that is going to be accomplished, certainly within the next 10 years or even within the next 20 years. One can observe a certain cooling of ardour for the wider enlargement of the Community expressed by some of the Eastern European countries.
I was rather taken by the remarks of Mr. George Joffe set out in paragraph 93 of the report. Your Lordships will recall that Mr. Joffe is deputy director of the School of Oriental & African Studies. He argued for a different approach to priorities. He said that he recognised the attractiveness of eastern Europe as a destination for investment and said that there were good arguments for "an equality of treatment" between Eastern Europe and the Mediterranean. That is one of the problems we will have to face. The countries of the

947
Mediterranean basin do not see equality as between themselves and our approach to central and eastern Europe.
Paragraph 98 of the report deals fairly extensively with the question of the rise of Islamic fundamentalism. I should like to underline the opening remarks of the noble Lord, Lord Hunt, and those of my noble friend Baroness O'Cathain, the noble Lord, Lord Bruce of Donington, and, in particular, the noble Lord, Lord Chalfont. They explained the difference in perception of Islamic fundamentalism. I agree with them and with the report that the threat is much exaggerated. If we could better understand that, we would be more able to give the kind of assistance outlined in the report to those countries which would be to our benefit as well. I refer in particular to the stability of the area.
Perhaps I may be a little pedantic. I just wonder why the committee said, in paragraph 112 on page 37:
"The Maghreb countries are worth helping".
That may be a rather infelicitous turn of phrase. I would have much preferred to see the word "necessary". It appears to me that we denigrate our responsibility and the worthwhileness of giving assistance, however it may be.
I doubt whether anybody can quarrel with the summary of conclusions in paragraph 115. The points made in (a) and (b) about stability and in the first part of (c) about the financial perspective of the Community seem to me to be of the greatest significance.
Others have spoken about the financial aspects. I do not wish to go further than to say that, against the background of I do not know how many billions shortfall in United Nations contributions—and contributions which will be asked for from western Europe and other nations—we cannot accept a bottomless pit. As the noble Lord, Lord Bruce of Donington, made abundantly clear (as he so frequently does), we have to ensure that the money is not wasted and that it is prioritised.
I turn finally to the North Atlantic Assembly, which is, so to speak, the parliamentary arm of NATO. It is disappointing that NATO did not have a Mediterranean policy until the 1994 summit. We would be a little naive to believe that our relations with the European Union, and its relations with the Maghreb countries, are settled in one neat little envelope. They are not. We have to consider our alliance partners through the NATO organisation, which is the only one that takes into account the influence of the North American countries. I hope that the Government take greater notice of the assembly's wish to look again at finding an OSCE equivalent for the Maghreb countries. If we can do that I think that jointly, with all the other interested organisations, we may take some small steps forward. Meanwhile, like the noble Lord, Lord Hunt, and other Members of your Lordships' House, I look forward to some positive results from the conference in Barcelona to be held at the end of next month. I believe that we deserve from that conference some sensible and practical solutions that can be embarked upon.
7.5 p.m.
Viscount Waverley: My Lords, the committee has deal with many issues and is to be congratulated. This is a most useful report that will be often cited. The regional opportunities available to British exports were emphasised. Figures show how meagre are the inroads that we in this country have made into the Maghreb region. I accept that our many friends there would like to see a strengthening of trading links with the United Kingdom. Her Majesty's Government have generally spared no effort in the area of export promotion. In response, the noble Lord, Lord Chesham, may be tempted to inform the House of the strategy towards the Maghreb.
When I consider misunderstandings that lead to conflict in our volatile world, I regret that Islam is high on the list. This is perturbing. The committee was unable to visit Algeria. That was understandable but regrettable. Since the affairs of that nation state could impact the region, I hope that I shall be excused a few remarks. The Algerian crisis is now well into its third year and real tension exists. The round of talks in Rome last November seemed to address many of the issues necessary for a meaningful dialogue to commence, not least the Front Islamique du Salut's acceptance of political pluralism. The then French Defence Minister, M. Leotard, even expressed the view that Rome constituted a,
"veritable charter for a democratic and reconciled Algeria [and] there is no military solution to the crisis."
To what extent is this the current French Administration's mediation approach towards Algeria? What is the current position of the Algerian Army? Are there signs of a more flexible and sympathetic stance? President Zeroual must be-encouraged to come to terms with the opposition parties in the spirit of the Rome platform. As with all disputes, it is the participants themselves who must want to resolve differences by seeking sustainable solutions through dialogue. However, I envisage a key facilitation role for the European Union. Perhaps the noble Lord would undertake to encourage the Commission to this end.
I return to the report. I note with interest and concern the remarks in paragraph 65 relating to access for agricultural products and the effect of the GATT Uruguay Round in regard to export losses. Certain Ministers—I do not include any of the Maghreb states in this observation—told me that, although their countries signed up for GATT, they had not, nor have, any firm understanding of the ramifications. Time does not allow more comment on this point, but I anticipate that this will be a major factor when negotiating a successor Lome agreement, for example. I accept that the Maghreb region is not a beneficiary under that convention.
The noble Lord, Lord Bruce of Donington, raised the question of agricultural access to the European Union. Broadly I agree with that, with one proviso. For example, the effect on the economies of ACP countries must be carefully considered so that access is balanced.
As has already been mentioned, I endorse fully paragraph 101 on page 35, that,
"the most useful thing the European Union can do to promote stability in the Maghreb countries is to facilitate their economic development".

949
Time must be devoted to carrying this philosophy into the hearts and minds of sceptic members of the Union and even beyond to countries such as the United States.
Perhaps I might return briefly in my concluding remarks to general issues relating to Islamism. Many in your Lordships' House will be familiar with the speech of His Royal Highness the Prince of Wales to the Oxford Centre for Islamic Studies. If not, I commend it. It is still discussed often in the Middle East. He reminded his audience that Moslems, Christians and Jews are all "peoples of the book". Yet distrust, even fear, persists. On the subject of Islam and the West he,
"believed wholeheartedly that the links between these two worlds matter more today than ever before, because the degree of misunderstanding between the Islamic and Western worlds remains dangerously high, and because the need for the two to live and work together in our increasingly interdependent world has never been greater".
His Royal Highness was and remains correct.
It is essential for all our sakes to refrain from demonising one another and to build friendship upon common heritage and interest. We must engage in dialogue in which Islam and the West listen to each other with sympathy and respect, otherwise I fear a drift towards conflict.
A key question is: what do we mean by Islam? We must differentiate between what is referred to as being fundamentalist as opposed to being extremist. My noble friends Lord Chalfont and Lord Thurlow touched upon that topic. I ask for understanding of firm believers of the Koran, but repudiate the violence, breaches of human rights and persecution associated with extremism in the name of Islam.
The Islamic faith is an ancient belief system embodying a code of conduct followed by many millions the world over. It deserves to be regarded by us with sympathetic and respectful understanding. One cannot overemphasise that this increasingly more accessible global village in which we live is all about pluralism.
7.12 p.m.
Lord Clinton-Davis: My Lords, it is always a pleasure to follow the noble Viscount. Like so many of your Lordships, he has touched upon the important distinction to be made between the fundamentalism and terrorism. I have recently returned from Saudi Arabia where that point was made to me most emphatically. One of the most significant features of the report is the stress it places on that extremely important matter.
I applaud also what the noble Viscount said when he reminded us that in the order of priorities that need to be addressed we should not forget the importance of the African, Caribbean and Pacific countries. That is a timely reminder because I did not see—I may be mistaken—a recognition of that in the report itself. That is a significant omission when one is dealing with the priority to be accorded to expenditure within the European Union.
Last Tuesday evening I had the pleasurable opportunity of having a long discussion with my former colleague President Jacques Delors, not, I know, a favourite of my noble friend Lord Bruce of Donington,
950
but interestingly enough in the course of that discussion he commented upon the quality of reports produced in this House on a variety of matters affecting the European Union. He recognised that they were often critical. He made no complaint about that, rather the reverse. He told me that as president he read those reports with interest, and, what is more, still does. So I believe that this report—we all pay tribute to the noble Lord, Lord Hunt, on chairing these important discussions—would not have disappointed the former president with its thorough appraisal of the issues in this critical area and the importance of determining the European Union's priorities in trying to ensure stability and prosperity around its borders.
There are very real problems affecting political, social, and economic instability in the Maghreb countries. There is more in some than in others, evidenced of course by the wave of terrorist attacks in France which have been taking place in recent weeks and months, and the huge dilemma that confronts us in relation to Algeria, in particular, where human rights are, unhappily, not respected properly over a very wide field.
No one can claim that the Government of Algeria are a democratic constitutional government. They are presenting the European Union with many problems, not least of course the French. It is right to say that the Maghreb countries are not the preserve of the French above all, but while in a broader context it is right to say that the interest of the Maghreb countries are tied up with those of the European Union as a whole—I shall come to that point later—the fact is that there are grave problems affecting the relationship of France and Algeria at the present time, as is evidenced by the decision of the French president to cancel his planned meetings with the Algerian leader.
In the light of what is happening in Algeria, should we think in terms of suspending aid to that country? Should we engage in a programme of economic boycott? Should we subtract Algeria from the dialogue that is to be embarked upon in Barcelona? I think not, but, having said that, we have to go on stressing the importance the European Union places on the recognition of human rights, because that goes to the heart of what the European Union has to stand for. We have to go on stressing the case for reform; for increased opportunities for pluralism; for a detailed scrutiny of human rights; and if we were to deflect ourselves from that purpose we should be doing ourselves an immense disservice.
One of the most important themes underlined in the report and in today's speeches has been the fact—this was emphasised by the noble Lord, Lord Hunt, and the noble Baroness, Lady O'Cathain—that the European Union is a dominant trading partner in all three of the Maghreb countries. So it is not just a French preserve. Opportunities exist for others, including ourselves, to promote trade. It is those three countries which have been the main beneficiaries of European Union aid, but they are just three of 11 countries (the Mediterranean non-Community countries) which are comprised of seven Arab countries—Algeria, Egypt, Jordan, Lebanon, Morocco, Syria and Tunisia—and four others—Cyprus,

951
Malta, Israel and Turkey. It follows that the European Union has immense interests in the area and itself should be able to exercise a corresponding influence.
My noble friend Lord Bruce of Donington made one of those thoughtful, controversial contributions to which we are used. I always like to listen to him, even though I do not always agree with him, as he well knows. Unquestionably, he studies his case with great care; it is his conclusions with which I do not always agree. He asked what possible interest, other than to make propaganda, can the European Commission have in this particular area. He went on to complain that the Commission wanted to acquire enhanced powers in this regard. I do not agree with that, although I found many of his other points most forceful.
The answer to that point was given by the noble Lord, Lord Dahrendorf, who held the important external affairs portfolio in the European Commission for some three years and long before I went there. The noble Lord is no apologist at the present time for activities involving the European Commission. He said that we either help or we shall be subjected to pressures from these areas. I am sure that the noble Lord is right in that reflection.
These countries border on the European Union. Stability is of primordial importance to the European Union. Terrorism, legal and illegal immigration are threats posed to a number of member states, most particularly those in the south of the European Union. The noble Baroness, Lady O'Cathain, complained that some of these countries were engaging in hypocritical attitudes because they were not prepared to make concessions, in particular in relation to agriculture, which were being demanded by the Maghreb countries. It is easy to make that charge but I am not sure that it is easy to sustain it. The charge of hypocrisy is serious, but I do not believe that it is right to overlook the fact that these countries have not been the main beneficiaries of access to manufactured products which the European Union has gained in the Maghreb countries. In the main, the industrialised areas have enjoyed that access. We must remember—and, indeed, we were recently reminded of it at the Conservative Party Conference and sometimes in not very beguiling terms—that all member states of the EU are democracies and must carry their electorates with them. If they perceive themselves to be at risk there is a penalty to be paid.
We must ask how the balance is to be achieved. How can they persuade their electorates to recognise that there is a paradox between failing to give access to the products which are so important to the Maghreb countries and their farming people and the difficulty which confronts them as regards their own electorates. I believe that we need to be a little more helpful. I very much admire the noble Baroness, Lady O'Cathain, as she knows, but I ask her with the greatest respect to reflect on the difficulty of that matter a little more.
Indeed, in many ways it is encapsulated by the problems in relation to fishing. Fishing always poses a huge problem for virtually every member state engaged in it. Morocco is demanding that Spanish and Portuguese boats which fish off its coasts should make
952
drastic cuts in their catches. It claims, I am sure with justification, that hundreds of thousands of jobs depend upon that. On the other hand, Spain has some 40,000 jobs at risk and it is facing a general election in the near future. There is always a general election taking place somewhere in the European Union and that does not altogether promote a careful reflection and an objective assessment of the policies that must be undertaken. Are we immune from that consideration?
The European Union's priorities in terms of loans and gifts have been demonstrated by providing twice as much to central and eastern Europe as to the countries on the southern and eastern shores of the Mediterranean, despite the fact that those countries have almost twice the population of the central and eastern European countries and that their populations are growing rapidly. Moreover, our trade surplus with the Mediterranean countries is twice that with the central and eastern European countries. Those fundamental problems must be confronted too. It is hoped that we will do so in a challenging way at the forthcoming Barcelona Conference.
In the wider perspective, deals which have been agreed or are in the pipeline are of great importance to the whole area. The European Union has agreed to increase aid for the period 1995–99 by 4.6 billion ecu. An association agreement has been signed with Tunisia and soon another will be signed; all that remains is to dot the "i's" and cross the "t's" with Israel. There has been an intention to undertake similar deals with Egypt, Morocco, Jordan and the Lebanon as rapidly as possible.
I am aware of the fact and I agree with the assertion that the report stresses the quality of financial aid that should be provided to help sustain the burgeoning economic development of the Maghreb countries. I am sure that my noble friend Lord Bruce of Donington was right in his comment. The noble Lord, Lord Thurlow, also referred to the inadequacy of some of the analysis in the application of that aid. It is not always the fault of the Commission because it does not always have the necessary resources to undertake the tasks imposed upon it.
We need to ensure that that aid is properly targeted, in particular in the provision of infrastructural support. I applaud what has been said about that. That matter goes to the heart of the economic advance of these countries and it goes to the heart of what we ought to be seeking to achieve in the European Union where infrastructural development has hardly reached the pitch that we need. How much more is required in these countries if they are to be areas of great attraction for investment from overseas? I concede that a formidable criticism has been mounted of the Commission as regards development of these ideas.
The report emphasises that mutuality of access to markets is the key to further economic progress and that a long transitional period in terms of removing trade barriers in industrial areas is required. I am sure that that too is a powerful recommendation. Unquestionably, the Maghreb countries face different challenges. Morocco has made substantial progress and recorded substantial growth in 1994. However, it would not be right to overlook the salient points made by the noble Earl, Lord

953
Winchilsea and Nottingham. In this complex tapestry of different interests and approaches in the Maghreb area there is the failure to respect human rights in the Western Sahara, which is a problem. It contrasts with an enlarging respect for human rights in other areas affected by Moroccan policy. There can be no doubt that King Hassan, a constitutional monarch of increasing influence, has played a significant part in helping to ease tensions in the Middle East, not just in the past two years but over many years, and in helping to promote dialogue between Israel and her Arab neighbours and, indeed, the Palestinians.
In Tunisia, extremism does not have the same deep roots as in Algeria. A powerful president is exercising strong political control but again there is a hope for an enlargement there of human rights.
As has been said over and over again, Algeria poses the most acute problem, not simply for the European Union but also in wider terms. The noble Lords, Lord Hunt and Lord Chalfont, referred to the fact that the domino effect may not be as significant as some commentators have suggested. I am not quite as willing as they are to put aside major threats of terrorism because I believe that they have enormous potential consequences for us all.
But of course, economic instability and unemployment must undermine political stability. Algeria cannot solve its problems—as its Government seem to think and to some extent they were supported by Mr. Pasqua in France—by eliminating its extreme Islamists. Cancellation of the elections three years ago tends to—I use the word in inverted commas—"legitimate" the use of violence against the government in the view of many Algerians. It is a very sad fact, but I think it is a fact nonetheless.
The fear of terrorism is mirrored by the fear of a government who have been responsible in many respects for a huge toll in terms of death and other casualties—1,000 casualties per month in that country. We cannot overlook that.
But there can be no doubt that solutions are very elusive. Can we place trust in the sincerity of the FIS in seeking to establish pluralism in Algeria? It is very easy to make the promise. Are its assertions realistic that it can influence the most radical armed Islamic group while it claims responsibility for so many barbaric terrorist acts? Can the Algerian Government be right to reject dialogue, and is terrorism sponsored on a substantial scale from outside, and from Iran in particular?
Those are some of the major problems to which I, frankly, do not know the answer. But they have been posed rightly in the report in an eloquent and elegant way. We are all involved in the interests of that area because they are our interests. To my mind, that is the most potent argument that has been used in this formidable report. Again, I compliment the noble Lord, Lord Hunt, and his colleagues on producing it.
7.33 p.m.
Lord Chesham: My Lords, I very much welcome the opportunity for this debate, provided by the committee's
954
report on the EU's relations with the Maghreb. This is an important and timely document on a subject which is of increasing interest, given the EU's current sharper focus on the Mediterranean region. The Government have taken careful note of the committee's conclusions, which are very much in line with our own thinking. Therefore, I shall repeat a number of points already made this evening because the Government agree with them and I shall try to keep my comments directed towards the committee's report.
The Maghreb is an area in which the UK has not traditionally had strong direct interests. But its potential for instability and the impact that this could have on the whole EU make it of substantial importance. The Maghreb is a region where Britain could, and should, do more, as the noble Lord, Lord Hunt, said. We believe the best approach is to work through the EU. In turn, EU assistance and the wider prosperity it generates can offer considerable opportunities for British business.
My noble friend Lord Butterworth drew attention to the limit of 700 dollars GNP per capita which UK policy imposes on support under the ACP provisions. I should point out that that policy aims to focus limited resources on the poorest countries. Therefore, UK firms have particularly good opportunities in those countries which somewhat offset the opportunities in the richer countries. However, we believe that UK firms have excellent opportunities to win business resulting from the EU financing for the Maghreb countries agreed at Cannes in June.
Since the committee published its report in May, we have seen a number of further developments in EU-Maghreb relations. In June the Cannes Council settled the difficult issue of EU grants to the Mediterranean over the period 1995 to 1999. In July a new agreement was signed with Tunisia. I look forward to a draft agreement with Morocco being initialled soon.
The Maghreb countries are an important part of the EU's wider Mediterranean initiative. Next month in Barcelona the Foreign Secretary will join his counterparts from the 15 EU countries and 12 Mediterranean neighbours, including Morocco, Tunisia and Algeria, for the Euro-Med conference. The conference should be the foundation for a new long-term relationship between the EU and the Mediterranean states, setting out future principles for political, economic and social co-operation.
I fully agree with the committee's view that stability in the region should be a priority for the EU. Indeed, stability and prosperity are in the interests of both the EU and the Mediterranean states. As regards north Africa, the threat should not be exaggerated. There is no direct security risk to Britain or to the EU in any military sense. But there are concerns about the proliferation of weapons of mass destruction, the real possibility of increased migration, and terrorism. That is illustrated by the despicable bomb attacks carried out recently by Algerian extremists in France. We are ever-vigilant to potential terrorist threats to Britain, and we are co-operating closely with the French authorities on these terrorist incidents.

955
As has been mentioned frequently, one aspect of political and economic instability is Islamic extremism. Much has been written and said recently in the popular and academic press about it. It is important to differentiate between Islam, which the British Government hold in the greatest respect, and Islamic extremism. We deplore any form of extremism which advocates the use of violence to achieve political ends.
The causes of extremism in the region vary from country to country. Economic problems have been a key factor. In the populous states of the northern and western Arab world, including in the Maghreb, economic distress is widespread. The combination of sluggish economic growth and rapid population growth has led to increasing pressure. An obvious sign is unemployment. Extremist groups benefit from this.
There are also social and political factors. With the spread of global information, expectations have risen and people are less tolerant of poverty and injustice. Where under-developed democratic systems exist, channels for dissent such as the role of opposition parties may be considered inadequate. Extremist groups are only too willing to fill the vacuum.
These are serious underlying problems which need to be addressed. However, circumstances vary between individual countries, and extremist groups tend to have national rather than supra-national identities. The rise of extremism in one country has implications for the stability of its neighbours. But the committee is right to conclude that talk of a "domino effect" from Algeria to its neighbours is unduly alarmist. The conflict in Algeria involving government forces and militant groups has not undermined the internal security of Tunisia or Morocco in any significant way. Both have embarked on economic restructuring programmes, which should enhance stability and pave the way for the further development of existing democratic political systems.
We share the committee's assessment that the most significant causes of instability in the region are economic problems and unemployment. That is why financial assistance and improved trade flows are a major plank of the EU's strategy.
In the medium term, improved trade will have a much greater impact than aid. That is why we welcome the new agreements with Tunisia and shortly, I hope, with Morocco. The agreements are a major step forward. They encompass not just removal of tariffs but also stronger commitments to prevent non-tariff barriers, align economic policies and improve intellectual property rights. These are gains for both sides. Companies will be able to do business in a more certain environment. That will help encourage investment in the region and transform those economies in the interests of both producers and consumers.
As the committee pointed out, it will take time for the Maghreb economies to introduce greater openness. That is why a long timetable of 10 years or so has been set out for dismantling specific tariffs. The long-term aim is a Euro-Mediterranean free trade area by the year 2010.
Of course, the Maghreb countries already enjoy a substantial degree of concessionary access to the EU's industrial markets. It is in the area of agricultural
956
products, as has been mentioned, where they have most potential for increased trade. The committee correctly identified the paradox that the southern EU member states with most to gain from improved stability also have most to lose from increased agricultural imports.
Mediterranean crops like fruit and vegetables from the Maghreb are in direct competition with the EU's southern producers. Those products currently receive less support under the CAP than products like milk, beef and cereals. So there is only limited Community assistance available to help EU growers affected by increased competition. Nevertheless, increasing Maghreb access would necessitate increased support under the common agricultural policy with obvious budgetary implications.
The UK has been at the forefront of those calling for improved market access for all goods. We share the ambitious long-term goal of a Euro-Med free trade area. We recognise that WTO rules require free trade areas to cover "substantially all trade" in order to avoid distortions. That means agriculture too. In the short term the Government will continue to argue for better agricultural market access. In the long term, we will seek to establish a free trade area which is WTO compatible.
In addition to improved trade flows, the EU is committed to a significant increase in financial support to the Mediterranean region. But the Government share the committee's view on the importance of keeping expenditure within the current financial perspective. The Cannes European Council agreed to a figure of 4.7 billion ecu for the Mediterranean region over five years, including the Maghreb. That was a substantial reduction on the Commission's unrealistic original proposal of 5.5 billion ecu.
We also share the committee's view that loans should be an important element of EU support. Under the current fourth financial protocol, around two-thirds of assistance is in loans. The amount of lending by the European Investment Bank to the Mediterranean region will depend on the EIB's future external lending capacity, which my right honourable friend the Chancellor of the Exchequer is discussing with other EU finance ministers in Brussels today. We will continue to try to improve the effectiveness of EC aid in the region by careful monitoring and, if necessary, by raising issues in the Council. It may have some conciliatory effect on the noble Lord, Lord Bruce of Donington, when he knows of the careful scrutiny that will be undertaken by the Government.
The committee is right to recommend that EU aid be sensibly targeted on infrastructure and economic co-operation to prepare the Maghreb for greater integration with the EU's economy. The integration of the Maghreb countries into the world economy is a long-standing objective of Britain's approach to the EU aid programme. British companies can and, I hope, will play a full part in that process. The DTI, through its range of export services and with other organisations such as the Committee for Middle East Trade, the Middle East Association, and the Arab-British Chamber of Commerce, is working actively. It aims to promote the commercial opportunities under EU aid including

957
use of the EC investment partners scheme to support joint ventures. The Euro-Mediterranean conference in Barcelona will provide a focus for a greater publicity effort towards UK firms.
The committee drew attention to a lack of awareness in British business of the opportunities in the Maghreb and a tendency among some companies to view the region as the natural preserve of other trading partners, notably France. These were issues that the committee explored particularly with the DTI's export promoter for the region. The DTI is working hard to identify and address some of those misconceptions. That work will continue and will be intensified in some areas, including the opportunities under aid. It is worth noting some encouraging signs. British firms have expanded their efforts considerably in the past few years. Visible exports to Tunisia were up 22 per cent. in 1994. We have seen strong growth in exports to Morocco this year which may well reach £200 million for the first time by the end of 1995.
The Government support moves towards the gradual establishment of a Euro-Med free trade area. That will enhance economic growth and prosperity and promote stability. But the two are inter-related as economic growth thrives best in a liberal political environment. The EU's Euro-Med partnership aims to promote good government and respect for human rights as well as good neighbourliness through an ongoing political dialogue. We look to the Barcelona conference to give a strong political steer to that initiative.
I express my support for the remarks made by my noble friend Lord Lucas of Chilworth to the noble Earl, Lord Winchilsea and Nottingham. The UK does support the current exercise under the auspices of the United Nations which has voted through a referendum on the future of the Western Sahara territory. The identification process is complicated and has been much delayed, but it is continuing.
The EU will play a key role in promoting economic and political stability in the Maghreb. The Government will work hard to ensure that the UK both contributes to and benefits from the challenges and opportunities in this increasingly dynamic region.
7.47 p.m.
Lord Hunt of Tanworth: My Lords, I should like to thank the Minister for his reply to the debate. I should also like to thank all those who have taken part in it and
958
contributed to what I believe was an interesting discussion. I was struck by three strands that seemed to come through almost all the speeches. First, there is the general agreement that one should not equate fundamentalism with extremism: there is a very clear distinction between the two. Secondly, there is the need for a radical reform of the common agricultural policy. Thirdly, there is the need for financial assistance to the region to be justified and properly targeted. In concentrating on limiting Community expenditure, with which I believe we all agree—and there is general agreement that the financial perspective must be maintained, and so on—I hope that, where there are EU instruments and where EU aid is available, British firms will get their fair crack of the whip. Indeed, we heard much evidence of uninterest or lack of knowledge. I was very glad to hear what the Minister said about the further steps which will now be taken.
I should like briefly to comment on two points upon which the report was criticised. I shall start first with the Western Sahara. We were not seeking to minimise the importance of this question in any way. What we were seeking to do in that paragraph was to say, "We are not dealing with it" because, having taken some evidence, particularly from Mr. George Joffe, we were convinced that we could not deal with it in two or three more paragraphs. It was rather like the matter of Algeria, where we agreed that it was an important matter but we were not dealing with it. That was the course we chose. However, we were not seeking to minimise the position.
If I understood the noble Lord, Lord Clinton-Davis, aright, I believe he was criticising us for not dealing with the priorities vis-à-vis the ACP countries. I accept that we did not mention that, but it was very much in our thinking and I believe it was implicit in what we said about aid to the Maghreb countries being to middle income countries and therefore taking the form of loans rather than grants. However, his point was certainly very much in our minds. I again thank noble Lords for the debate.
On Question, Motion agreed to.

River Calder (Welbeck Site) Bill [H.L.]
Bill withdrawn.
House adjourned at nine minutes before eight o'clock.