Lords Sitting of 7 February 1996

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

Lord Pilkington of Oxenford
The Reverend Canon Peter Pilkington, having been created Baron Pilkington of Oxenford, of West Dowlish in the County of Somerset, for life —Was, in his robes, introduced between the Lord Peyton of Yeovil and the Lord Runcie.
Lord Harris of Peckham
Sir Philip Charles Harris, Knight, having been created Baron Harris of Peckham, of Peckham in the London Borough of Southwark, for life —Was, in his robes, introduced between the Baroness Blatch and the Baroness Perry of Southwark.

Lloyd's of London
2.56 p.m.
Lord Spens Lord Spens asked Her Majesty's Government:
Whether any prosecutions for fraud are contemplated of Names' syndicate managers and underwriters at Lloyd's of London insurance market, as a result of the cumulative and anticipated losses of over £11,000 million of recent years and, if not, why not.
The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie): My Lords, allegations relating to one group of syndicates were recently investigated by the Serious Fraud Office and resulted in a decision in April 1994 that no proceedings were justified. The Director of the Serious Fraud Office is currently considering whether certain other matters referred to him warrant investigation.
Lord Spens: My Lords, I thank the Minister for that answer. Is he aware that the disaster at Lloyd's represents the single biggest enforced transfer of personal wealth this century? It was bigger than the party to the right of me has ever managed to achieve in 70 years. Is the noble and learned Lord further aware that one of the problems of criminality arises in that it is the outside Names of Lloyds who have made all the losses in principle? Rather than spending £40 million chasing the ghost of Robert Maxwell, would it not be better to spend that money investigating Lloyd's properly?
Lord Fraser of Carmyllie: My Lords, I am aware, as the whole House will be, of the extent of the losses that a large number of people have suffered in recent years. The task of the Serious Fraud Office is to
232
investigate and determine whether there is criminality. If certain tests are met then its task is to ensure that prosecutions are brought. I have indicated the attitude that the office has struck over that.
Where I do not agree with the noble Lord is that there should be yet a further investigation for a review of Lloyd's. There have been extensive reviews in the past and a number of lengthy judgments in the courts. While there are proposals of which the noble Lord will be aware —that is, the reconstruction and renewal plan —it seems to the Government that we should see the outcome of the changes that have been proposed before instituting any further review.
Lord Clark of Kempston: My Lords, will my noble and learned friend agree that the investigation of the Walker Committee, of which I was a member, looked into Lloyd's, particularly the LMX spiral? The committee's recommendations were unanimously accepted by Lloyd's Council. The remedies suggested by that committee have been implemented. Surely there is no reason that there should be another in-depth investigation.
Lord Fraser of Carmyllie: Yes, my Lords, significant changes have already been made. I repeat what we said in our reply to the Treasury Select Committee. We agree that the regulatory framework should be reviewed at some time in the light of the committee's findings, but we would not consider this time to be appropriate.
Lord Peston: My Lords, as an outsider in this wheeling and dealing, I find it all sounds a little complacent. Is the noble and learned Lord saying that £11 billion —assuming that that figure is in the right ballpark —can simply disappear and one shrugs it off and leaves it? Is there no misbehaviour involved? Is that the Government's view or is it like a will-o'-the-wisp and no one can find it? As an outsider, I find it amazing, because £11 billion is not tuppence ha'penny. Is there no interest in what happened to the money?
Lord Fraser of Carmyllie: My Lords, I recognise that there have been substantial losses. I do not believe that I offered any agreement to the figure suggested to me. However, we must be clear that the Serious Fraud Office is concerned to determine whether there has been any criminality in those who acted within Lloyd's. Similarly, a number of large claims have been made which would indicate that there has been breach of contract, negligence and various other errors which have been addressed in civil law. Most recently, a very large claim was brought before the English courts. I would rather not comment on it because I understand that it will possibly be subject to an appeal.
Lord Marlesford: My Lords, as a victim of Lloyd's with open syndicates, may I ask my noble and learned friend whether he is satisfied that Lloyd's has been wholly frank with the DTI as to the assets it has to cover its solvency? Over the past two years, Lloyd's has asked a large number of the many thousands of resigned Names to provide very large additional sums —in many cases individually over £100.000 —to augment their

233
deposits to cover their solvency. In many cases, those sums have not been paid —I am not talking about payment of called losses but about the augmentation of deposits at Lloyd's —and no attempt has been made to collect them. Is my noble friend entirely satisfied that Lloyd's is solvent?
Lord Fraser of Carmyllie: My Lords, some of the detail that my noble friend provides is new to me. However, the documentation required by the Insurance Companies Act demonstrating that Lloyd's met the solvency requirements for the year ending December 1994 were received last summer. They indicate that at that time Lloyd's met the solvency requirements. The returns for the year ending 1995 are, however, not due until the summer and therefore I cannot offer a complete answer with regard to the position last year. I have no reason to believe one way or another that the adequacy of the solvency requirements will not be met.
Lord Monkswell: My Lords, bearing in mind that prosecutions for fraud have taken place in virtually every other field of financial services, can the Government give the House some explanation as to why syndicate managers and underwriters at Lloyd's are not subject to prosecution for fraud? Has it to do with the people involved, the complexities of the arrangements, or lack of ability on the part of the prosecutors?
Lord Fraser of Carmyllie: My Lords, the Serious Fraud Office suffers the accusation from time to time that it prosecutes people where there are no criminal charges. By a rather curious turnabout it now seems that it is accused of not prosecuting when it should.
The Serious Fraud Office will prosecute on the basis of a sound case in criminal law. In one case in which it prosecuted the defendants were not convicted. There is another prosecution outstanding, but those charged are, I regret to say, at present beyond the reach of our extradition arrangements.
Earl Alexander of Tunis: My Lords, in view of the fact that a recent court judgment found that the deputy chairman of Lloyd's had deliberately concealed information from his syndicate Names, are the Government aware that many people, including myself, are very anxious to see some form of inquiry launched into the entire Lloyd's market?
Lord Fraser of Carmyllie: My Lords, my understanding of the position is that Lloyd's has already announced that it is considering whether any disciplinary action should be taken in the light of the judgment to which I referred some moments ago. The Department of Trade and Industry is also scrutinising the self-same judgment to determine whether there are any issues that need to be considered under the Insurance Companies Act. However, I understand that an appeal is pending and therefore I repeat that it would not be appropriate for me to comment further.

Public Libraries: Local Authority Obligations
3.5 p.m.
Lord Jenkins of Putney Lord Jenkins of Putney asked Her Majesty's Government:
Whether all local authorities are fulfilling their statutory bookfund obligations to public libraries under the Public Libraries and Museums Act 1964, and what action they are taking in respect of those which are not.
Baroness Trumpington: My Lords, the 1964 Public Libraries and Museums Act refers to the "keeping of adequate stocks". On 31st March 1994, English public libraries held 105 million books; that is, 2.2 books for every person in the country.
During the current financial year officials have, however, looked carefully at a number of authorities to ensure that their service complies with the legislation. No intervention by the Secretary of State has been necessary, but the Department of National Heritage will continue to monitor changes in service provision.
Lord Jenkins of Putney: My Lords, the House will be glad to receive that assurance as we have reason to have pride in the public library service of our country. However, is the Minister aware that if present tendencies continue —namely, a gradual decline in local government support for libraries, and gross variation between one authority and another —we shall have less cause for pride? Is it not time for the department to take a broad look at the situation to see precisely what is happening?
Baroness Trumpington: My Lords, the library service is one of the most popular, indeed loved, services in the entire country. The Government take their statutory responsibilities towards public libraries very seriously. We shall continue to monitor the quality of the service through the professional library advisers in the Department of National Heritage, and to draw on the expertise and experience of the advisory council on libraries.
Baroness David: My Lords, does the Minister really think that 2.2 hooks per person is adequate?
Baroness Trumpington: My Lords, it is too much for some people!
Lord Donoughue: My Lords, will the Minister agree that the problem in the library service derives from the long-standing squeeze on local authority expenditure that has led to cuts in book purchasing in virtually every authority? Is she aware that last year seven major authorities cut library spending by over 20 percent., and a dozen are forecast to cut branches in the coming year? Will the Minister help the House by stating how the Secretary of State defines the comprehensive service that is statutorily required? As seven authorities were reported to the department for breaching that comprehensive service, especially Somerset, will she amplify the reply she began and tell the House the

235
Secretary of State's decision in regard to those authorities that are in breach of a comprehensive service, however defined?
Baroness Trumpington: My Lords, that is a heck of a long question, and may need a heck of a long answer. Ministers have to ensure that authorities meet their statutory obligations. They have full powers to intervene where they have reason to believe that library authorities are failing to meet those duties. Those powers have never been used. There are wide disparities in levels of book provision per person across the country. Some authorities spend less than £1 and others nearly £6. While some book funds have decreased over a 10-year period, there are examples of substantial increases. So the pattern is spread over a very wide area. I could continue but I think I should bore the House.
Lord Donoughue: My Lords, long questions give the Minister a good chance to find the page!
I mentioned Somerset, the subject of a specific reference to the Secretary of State for failure to provide the service required. Is the Minister able to tell the House the Secretary of State's conclusion in that specific case?
Baroness Trumpington: My Lords, discussions between the Department of National Heritage and Somerset County Council are continuing. One of the subjects is next year's bookfund but as the conversations are continuing, I have no information to give the noble Lord.
Lord Skelmersdale: My Lords, as Somerset has been mentioned, does my noble friend recall that Somerset is an authority under Liberal Democrat control? It has chosen to spend in excess of £3 million on a new library in Taunton which opened only last month. Is it any wonder that there is no money left to spend on books?
Baroness Trumpington: My Lords, as I said, the conversations are continuing. I must tell my noble friend, however, that building a new library involves capital expenditure which does not come out of the same purse as books. Books come out of current expenditure.
Lord Jenkins of Putney: My Lords, having regard to the general decline over the whole period, despite bright spots here and there, does the noble Baroness agree that it is high time for her right honourable friend to take a general look at the situation from the department itself? Will she make that recommendation to him? May we hope that some general government action on a declining situation will be taken so that it can be reversed and we can return again to what we should have?
Baroness Trumpington: My Lords, apart from the fact that the noble Lord got the Secretary of State's sex wrong, the Secretary of State has no powers to interfere in the day-to-day management of the public library service.
Lady Kinloss: My Lords, can the Minister say whether mobile libraries are included and will not be cut? Will she accept that they are very popular with the elderly and mothers with small children?
Baroness Trumpington: My Lords, I agree that they are very popular and it is up to local authorities.

Mobile Telephones: Use in Public Places
3.12 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
Whether they will encourage the formulation of a code of conduct for the use of mobile telephones in public places.
Lord Fraser of Carmyllie: My Lords, while that is an intriguing suggestion, the Government doubt how efficaciously manners can be regulated.
Lord Campbell of Croy: My Lords, I am grateful to my noble and learned friend for his reply. Is he aware that several such telephones used in a restricted place can become a serious public nuisance? They may be necessary in the modern, competitive business world but should not special areas be designated for their use —for example, on trains, where passengers suffer unduly and especially when voices arc raised to a shout when passing through tunnels?
Lord Fraser of Carmyllie: My Lords, I have no doubt that the suggestion made by my noble friend meets with considerable approval from many noble Lords. Many of us have suffered the intolerable situation on trains and elsewhere of having to listen to extremely boring ends of conversations. It would be polite for people not to engage in such phonecalls at maximum pitch and it might be desirable if trains, restaurants and other places introduced some arrangements of their own. I am certainly aware of one airline which, within its lounge, provides a particular area in which people can use their mobile phones. I have no doubt that if that suggestion were followed by others, it would meet with widespread approval.
Baroness Nicol: My Lords, does the Minister consider motorways to be a public place in the context of this Question? On two separate occasions I have had the unfortunate experience of following down the motorway someone who was driving at 60 miles an hour in the centre lane while making telephone calls, causing several hundred cars to pull out into the fast lane to try to overtake, rather than undercut in the empty inner lane. Can the Minister find some way of approaching that problem?
Lord Fraser of Carmyllie: My Lords, there is not a specific offence of using a mobile phone while driving a motor vehicle. But there are circumstances in which use of a mobile phone might result in prosecution.
Lord Beloff: My Lords, does my noble and learned friend agree that mobile telephones are not for purposes of communication but to enhance the prestige of those who carry them and make it apparent that they are upwardly mobile? Would Her Majesty's Government care to consider offering such people some kind of decoration which they could wear to

237
indicate that they are qualified yuppies, without their having to bore the rest of the public with their conversations, alleged or imaginary?
Lord Fraser of Carmyllie: My Lords, my noble friend strikes a clear chord with many of your Lordships. He makes an intriguing suggestion but, again, I doubt whether it is a matter that the Government could hope to regulate. It might disturb him to know that there are around 5.5 million people in the country now with mobile telephones. It would be a horrible situation if they were all to use them in public places at the same time.
Lord Stoddart of Swindon: My Lords, regarding the use of mobile phones on trains and the nuisance caused to passengers, does the noble and learned Lord agree that it would be possible, as has already been suggested, to have a separate carriage for mobile phone users? Perhaps, at the same time, those responsible could be persuaded to reintroduce smoking compartments where they could very well be?
Lord Fraser of Carmyllie: I hope that the soon to be successful operators of the privatised railways will take on board the noble Lord's suggestion, coming, as it does, from such an eminent source.
Lord Peston: My Lords, is the noble and learned Lord aware how glad I am to hear that the Government will not become involved in teaching manners to people with mobile phones or with anything else? My heart sank when I first heard the Question. What is there about mobile phones that so upsets people? Perfectly normal people seem to go absolutely crackers at the mere mention of a mobile phone. I hasten to add that I do not have one. If there is a problem, could not separate places be created, approximately one yard square, in which people could use their mobile phones? Such places used to he called phone-boxes.
Lord Fraser of Carmyllie: My Lords, I feel that it would be desirable if in trains, restaurants and other public places special areas were to be set aside. But I am not sure that it is a matter that the Government should seek to regulate. I am surprised that the noble Lord is unique in not finding overhearing phonecalls on mobiles extremely irritating, not only because they are usually conducted at an extraordinary volume but also because the conversations engaged in are extremely tedious.
Lord Peston: My Lords, will the noble and learned Lord allow me to mention that my problem is that I find most of the conversations that I overhear extremely irritating and tedious? So far as I am concerned there is nothing unique about the mobile phone.
Lord Fraser of Carmyllie: My Lords, I do not agree. I can think of remarks overheard on the top deck of a bus which could be brilliant opening lines for a novel. I have not heard anything on a mobile phone that would have prompted my imagination.
Lord Campbell of Croy: My Lords, is my noble and learned friend aware that the practice is not confined to
238
yuppies? One complaint that has come to me was about a prominent member of the Shadow Cabinet who telephoned on a train almost continuously between London and Edinburgh. The only light relief for the passengers, who were forced to overhear, came from his loud suggestions as to what the Labour Party should do about Arthur Scargill.
Lord Fraser of Carmyllie: My Lords, I do not feel that the noble Lord should boast of his good fortune in overhearing an interesting conversation. It certainly does not square with the general experience of the rest of us.
Lord Richard: My Lords, is the Minister aware that that particular problem is likely to be of importance only until the next General Election? After that, the members of the Shadow Cabinet will be in ministerial cars.
Lord Fraser of Carmyllie: My Lords, I am intrigued to hear that we have at long last a solemn manifesto commitment that there will be no use of the railways by those who aspire to be members of the next government.
Lord Winston: My Lords, is the Minister aware that for some people a mobile phone is an essential method of communication and is highly desirable? Any time that the noble Lord, Lord Campbell of Croy, wants to borrow a mobile telephone, he has only to ask.
Lord Fraser of Carmyllie: My Lords, as regards the matter of manners, which was raised by the original Question, I believe that there are issues. The noble Lord is absolutely right. The mobile phone is of great assistance to all manner of people. I know that a number of organisations have particularly encouraged women travelling alone on motorways to carry a mobile phone. One can think of many other instances in which the mobile phone is indeed of significant advantage.

The Railways: Waiting Rooms
3.19 p.m.
Baroness Castle of Blackburn Baroness Castle of Blackburn asked Her Majesty's Government:
Whether they will amend the Passenger's Charter to guarantee adequate waiting room accommodation for railway passengers on every manned railway station.
The Parliamentary Under-Secretary of State, Department of Transport (Viscount Goschen): My Lords, it is for passenger service operators to decide what to include in their Passenger's Charter. But under their franchise agreements operators will be contractually required to provide weather-proof waiting accommodation or other adequate shelter.
Baroness Castle of Blackburn: But is the Minister saying that the Government are not prepared to include in the Passenger's Charter the right of rail passengers to have the comfort and necessary shelter of a railway waiting room? Is he not aware that there are rumours of certain of the bidders for railway franchises declaring that they will close down all the waiting rooms on a certain line? Therefore, is it not clear that if, as the Government claim,

239
the privatised rail companies are not to be allowed to increase prices above inflation or to cut services, the only way that they can provide a dividend for their shareholders is by shedding jobs, and that means shedding some of the comforts which have to be manned on these stations?
Viscount Goschen: My Lords, the way that the new operators will be able to increase their businesses is by attracting more people onto the railways. We believe that by providing better facilities, not only on the trains but also at the stations, they will succeed in attracting more people onto the railways. It is in their very commercial interest to do so. However, the new arrangements do provide more protection under the franchise agreement than exists at the moment for British Rail.
Lord Hailsham of Saint Marylebone: My Lords, in order to be politically correct, would it not be right to refer to these railway stations as being personed rather than manned?
Viscount Goschen: Quite possibly, my Lords, but I do not believe it is an issue which Her Majesty's Government have given detailed examination.
Lord Dean of Beswick: My Lords, is the Minister aware that in the inclement weather of yesterday hundreds of railway passengers were marooned on stations in terrible conditions and that only the minimum of waiting accommodation was available and in some cases none at all? Is it not about time that the Government turned their attention to this issue? Is he aware that Stockport station outside Manchester has seen little, if any, improvement over a great number of years?
Viscount Goschen: My Lords, I am glad that the noble Lord is looking forward, as I am, to the wholesale privatisation of the railways. This is the biggest structural change we have seen in the railways. We believe that great benefit will come to passengers, at stations as well as on the track.
Lord Clinton-Davis: My Lords, is the Minister aware that his hallucinations about the success of privatisation do not coincide very well with the events of the past couple of days, with two major allegations of fraud involving franchisees? Will he reply to my noble friend Lady Castle, who said that there was a case where, despite what the noble Viscount said, a franchisee has either said that he does not intend to provide waiting accommodation or has already taken action in that regard?
Viscount Goschen: My Lords, I have explained that under the franchise agreements there are requirements and new protections which do not exist at the moment that will come to bear under the franchising process. If the House really wants to know about franchising it just has to look at what has happened with the two franchises that have been successfully let. We have now seen real commitments to increasing the provision of services on stations. Indeed, one of the franchisees has included the issue of stations in its agreement with the franchising director.
Lord Clinton-Davis: My Lords, as the Minister has chosen not to reply to the point that I made which was
240
raised by my noble friend Lady Castle, will he comment on this point? Is it right that a franchisee has already indicated that waiting accommodation is to be shut down? If that is right, what action is to be taken in relation to the contractual arrangements that have been made with that franchisee?
Viscount Goschen: My Lords, the noble Lord has clearly not been listening. I have answered the noble Baroness in detail and I have answered the noble Lord in detail. The franchise agreement specifies requirements upon the operator to whom the franchise is let. There is provision in the detail of the Act and the franchising director is bound to take that up with the operator. That adequately covers this point. As franchises come to be let, the franchising director has to be satisfied that these requirements are met. These are new provisions. They did not exist under British Rail. We shall therefore see better stations. One has only to look at what has happened with the two new franchises that have been let, with the commitments to capital investment in the stations, to see what will happen under privatisation.
Lord Monkswell: My Lords, will the Government clarify something for me? Travelling on the railway one sees stations with signs on them saying "This station is owned by Railtrack". My understanding is that Railtrack encompasses all the infrastructure of the railway while the operators arc to run the trains on the tracks. From the Minister's answers, it seems that that is not a correct understanding. Can the Minister explain where the dividing line comes? Does Railtrack, the provider of the infrastructure, have to provide the platforms or the stations? What is the operator's responsibility and what is Railtrack' s responsibility?
Viscount Goschen: My Lords, Railtrack owns the stations. They are leased to the operators.

Business of the House: Debates this Day
The Lord Privy Seal (Viscount Cranborne): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the debates on the Motions in the names of the Baroness Turner of Camden and the Lord Judd set down for this day shall each be limited to 2½ hours.—(Viscount Cranborne.)
On Question, Motion agreed to.

Business
Lord Chesham: My Lords, I should like to say a word about today's debates standing in the names of the noble Baroness, Lady Turner of Camden, and the noble Lord, Lord Judd. In the first debate, other than the mover, Front-Bench spokesmen and the Minister replying, speakers will be limited to 11 minutes and in the second debate eight minutes. I should remind your

241
Lordships that, if any noble Lord were to speak at greater length, he would be doing so at the expense of subsequent speakers in the debate. I might also remind your Lordships that, when the digital clock shows 11 minutes, the full 11 minutes have elapsed and the speaker is already trespassing on the time of others.

Financial Services: Employment
3.27 p.m.
Baroness Turner of Camden Baroness Turner of Camden rose to call attention to the changing patterns of employment in the financial services industries, with consequent lack of security, and the wider social effects of this development; and to move for Papers.
The noble Baroness said: My Lords, my Motion seeks to draw attention to the changing patterns of employment in the financial services sector and the social consequences of such changes.
In the 1980s we became used, wrongly in my opinion, to redundancies occurring in manufacturing industry. Certain areas of the country which had previously been dominated by heavy engineering and manufacturing became devastated as factory after factory reduced the labour force or sometimes closed altogether. Many parts of the country still bear the marks of that experience, with long-term unemployment affecting in particular the male population.
There was a view at the time that the service sector, particularly financial services, would be able to take up the slack, so to speak, in the employment market, that jobs could or would be found for people displaced by the decline of our manufacturing base. For a short time, towards the end of the 1980s and the beginning of this decade, it really seemed that this might be so. However, that has not happened.
Very severe employment problems are now arising in financial services. Of course, everywhere nowadays we hear references to "flexible working". To listen to some people, notably those speaking for some employers and also sometimes government spokespersons, this seems to be a wholly beneficial development. It is a way, so they say, of making the best use of resources, something of benefit to both employers and employees in an increasingly competitive environment. To others, those mostly concerned with employees —unions and organisations concerned with social and personnel questions —it can signify something very different. They watch with horror and concern what they see as an increasing fragmentation of the labour market, bringing with it a growing sense of insecurity.
In the financial services sector, that involves people who hitherto have felt reasonably secure in their employment. Those changes have come about relatively quickly. In addition, they have been due to the impact of technology and increasing globalisation of world markets. But there is also no doubt that they have been enormously stimulated and encouraged by government policy over the past decade or so.
Governments elected after the last war, whether they were Labour or Conservative, had a strong commitment to policies designed to ensure full employment, at least as an objective. That was because that particular generation of politicians and electorate had very powerful memories of the slump years immediately preceding the war. Those were the years of mass unemployment, hunger marches and the kind of social conditions described by George Orwell in The Road to Wigan Pier.
For 30 years following the war unemployment was not a problem. If someone lost one job it was possible for them to obtain another quite quickly. A Labour administration introduced the Redundancy Payments Act. The thinking behind that was that it would meet needs for a short period pending the obtaining of other employment. It was unthinkable that a middle-aged man with experience and qualifications might be facing a future with no work at all. We even had a brief period when we had earnings-related unemployment pay —again introduced by a Labour government, but ended in the early years of Mrs. Thatcher's first administration. That was based on the assumption that periods of unemployment would be short-lived and be succeeded by full-time, continuous employment.
I need hardly say that all that has changed. According to recent figures from the former Department of Employment, 9.7 million people —38 per cent. of all UK workers —are working part time, in temporary employment, are self-employed (somewhat insecurely in many cases) or on government training schemes. That is an increase of 1.25 million since 1986. The proportion of men who are part of the flexible workforce has risen from 18 per cent. in 1981 to 27 percent., whereas among women it has remained relatively stable.
According to the Labour Force Survey, the main reason for working part time is that the employees concerned do not want to work full time. That is surely the situation for many women with domestic and childcare commitments. But a significant number of men employed part time said that they would prefer full-time work, but could not find it. There is thus a feeling among many employees that part-time work is a transient experience and that when the opportunity arises they will go for the traditional type of employment —full time, secure and with employment benefit packages like pension provision.
Those changes are having a marked effect upon the financial services sector —an important sector of the economy, as I am sure your Lordships will agree, both as a contributor to the UK's economic performance and as a major employer of labour. The importance of London, for example, as a world provider of financial services cannot be too heavily emphasised. But many of the large institutions have redeployed outside of the City in the past decade, so employment in that sector is not just a matter for London and the South East. The industry employs nearly 1 million people; it provides 18 per cent. of gross domestic product and insurance companies and pension funds own over 50 per cent. of UK companies.
There is no doubt that some employers in the sector welcome the changes that have taken place, which arc often seen as irreversible. We shall never go hack, we are told, to the days of a job for life. But there are clearly some negative effects, even for employers, whatever short-term benefits they may perceive. There is the loyalty factor. Many long-established companies and institutions like banks have hitherto relied heavily on loyalty which comes from a commitment on the employer's side to providing security and good conditions of work and to which employees have in the past responded by their own commitment to the company or institution. In the past, it has not been unusual, for example, for several generations of the same family to work for the same company or institution. In addition to work, much of the employee's social life was bound up with the company. Many employees met their marriage partners at work and some of the larger companies have always provided sports and social clubs for employees, all of which had the effect of binding employees closer to the company.
An employee starting work with such an institution may well expect, subject to reasonable performance, to make a career involving gradual progression and though the pay was, generally speaking, not wonderful except at senior levels, there would be an assisted mortgage scheme and a non-contributory pension. In return, the employee was expected to commit himself or herself to the company and many were happy to do so.
A great deal of that loyalty can no longer he counted upon, particularly in situations where there has been what is euphemistically called "downsizing" —a polite way of describing redundancies, increasingly common at middle-management level, and where the replacements, if appointed, are given short-term contracts rather than contracts of the more traditional kind. Those remaining after such an exercise themselves suffer a sense of deep insecurity. They may find themselves having to work much harder or at a faster pace in order to make up for the staff who leave. As a result there has been increasing stress among senior members of staff. Some firms are undertaking stress counselling in order to deal with that recently identified problem. All that has had a spin-off into society generally.
The people working in the industries identified in the Motion are, in the main, from families and backgrounds which are often deeply conservative in both the social and political use of that term. They have been used to and, indeed, highly value a sense of stability in their lives. When they become unemployed it is a deeply shaming experience. If they remain in employment after downsizing, they experience deep feelings of stress and alienation. Certainly there will be no return of the feel-good factor until a sense of stability returns to their lives.
We have only recently begun to realise just how much of our social fabric and the institutions which keep it going have depended upon the notion that the majority of the population will always have continuous, secure employment. The whole concept of the present Government's property-owning democracy is based upon the notion that the householder will be able to take
244
out a mortgage and continue to make repayments over a long period. Obviously he or she cannot do that if employment is temporary, short term or liable to be terminated. The Government are bent upon encouraging people to take out private insurance to cover risks which have hitherto been regarded as provided by the state welfare system. But private insurance is not always available, unless the individual seeking it can demonstrate some degree of financial stability.
There has been a dramatic decline in life insurance policies sold recently. There has been a marked growth across the spectrum of forms of work that arc not tenured —in other words, the employee does not hold the job long enough to qualify for forms of protection such as the right to employment security because he or she does not spend two years in continuous employment. Seventy per cent. of new jobs are for 16 hours a week or less. Job vacancies in the jobcentres are now largely for temporary or part-time work, according to January figures from the employment services.
It has been prophesied that by the year 2000, unless things change, tenured employment of the traditional kind will be a minority form of employment. A letter I received from one of the unions catering for hank employees stated,
"The finance sector is going through the equivalent of the industrial revolution, only much more quickly. Job security is a thing of the past; temporary and agency staff very much characterise the present. We are deeply concerned and anything you can do to highlight this situation would be greatly appreciated".
And, of course, there are continuing redundancies. Yesterday Scottish Widows announced 600 redundancies in Scotland, and that all adds to the general sense of insecurity.
The question is: what should be done about those developments? The destabilising effect upon society generally is now widely recognised. Is this fragmentation of employment —showing up starkly in the financial services industry, but already applying in other areas and also a feature of other industries —inevitable? How shall we cope with it?
First, no one on this side of the House believes that there are easy solutions. The new technologies exist and will continue to develop. Indeed, we should seek to use them to the benefit of consumers generally. We cannot turn the clock back 20 or 30 years. We have to find a way of coping with such developments without producing a society in which, as one economist put it, 30 per cent. of the population is unemployed or unemployable; 30 per cent. is in insecure or temporary employment and 40 per cent. in continuous, high-skilled "core" employment. That is the 30:30:40 scenario. Clearly such a development would be socially divisive and the minority in secure employment may find themselves feeling insecure in other ways.
Training obviously plays a major part in getting people back into core employment. I shall not deal with that in detail in my contribution as some of my colleagues may wish to do so. But clearly a great deal more needs to he done to improve educational and skill levels. However, training by itself may not solve the

245
problems. The growth of part-time work in the service sector where employers are often seeking female staff —and not paying them very well where they can get away with it —together with widespread age discrimination, which does take place, can mean that well-qualified older male workers find employment prospects increasingly poor. Clearly much more needs to be done to improve pay and conditions for part-time workers. European directives are pushing us in the direction of ensuring that terms and conditions of employment are, pro rata, the same as those for full-time employees doing the same work.
However, I believe that there is a case for re-examining whether the new flexibility is in the long run to the total advantage of employers. It tends to undermine feelings of self-worth and esteem among workforces since no one likes to feel that he or she is expendable. There are the negative social effects to which I have referred. In financial services, in particular, the customer likes to feel that the institution with which he or she is dealing does have some stability and this is undermined if the employees with whom they deal are constantly changing as they come to the end of short-term contracts. The senior officials of a major bank recently said to me that this was beginning to be recognised.
I also believe that it should be possible to construct alternative policies which would arrest the development of a society in which only a minority has security and the remainder has to cope with varying degrees of disadvantage and insecurity. But that will mean turning away from the philosophies and the policies which have dominated government thinking since 1979. It means adopting a positive attitude aimed at employment creation and doing this in conjunction with our partners in Europe, based upon a philosophy that acknowledges social concerns and is not purely market oriented.
When the Government come to reply, I hope that the Minister will not trot out the tired old mantra about the social chapter. He knows as well as I do that it is simply a set of general principles and that the only directive that has emerged from it has been in relation to works councils, which although it does not bind the UK, is nevertheless being operated on a voluntary basis by a number of British firms. Neither is there the slightest evidence that a minimum wage would prevent job creation. Japanese companies investing and manufacturing here have already indicated that they have no difficulty with it.
We shall not deal with the problems to which I have referred, and which in truth are part of the general problem of employment towards the end of this century, by attempting to reduce the living standards and expectations of a large part of the population. I await with interest the Minister's response. My Lords, I beg to move for Papers.
3.42 p.m.
Lord Stewartby: My Lords, we are all grateful to the noble Baroness for giving us an opportunity to debate
246
this subject. I must compliment her on the amount that she managed to squeeze into her 15 minutes, which she did most elegantly.
I should begin by declaring an interest as a director of a bank, but it is only rather peripheral to today's subject under discussion because the bank concerned has most of its employees in Asia and Africa and not in this country. But it has given me a considerable insight into what has been happening in the financial sector in this country in recent years. There is no doubt that this sector has been a great success. It is a matter of national pride that the City of London occupies such an important role in European and global financial matters. Although I do not have up-to-date figures available, I believe that the percentage of GDP which the noble Baroness quoted —approaching 20 per cent. from financial services —is very much higher than the percentage of the working population in that sector. Therefore, it is a very vital one.
What slightly worried me about what the noble Baroness said was that much of it appeared to be a statement of regret for the passing of an old order. I share that feeling of regret in many respects. We do not want to see people facing insecurity of employment, and difficulty in obtaining employment, which they can reasonably expect will continue for many years. But the difficulty that poses is that unless our financial sector responds to developments internationally and accepts the implications of technological revolution —for it is no less than a revolution —we shall lose competitiveness and our financial sector, which has managed to obtain so much international business to the great advantage of this country's economy, would lose out on its relative position.
If one just considers some of the developments which have taken place, such as ATMs, telephone banking, Internet, video conferencing and that kind of thing, they are bound to disrupt working arrangements which have seemed for generations to be settled. However uncomfortable we may find these developments, we have to accept that there is a degree of inevitability about them and try to find the right kind of responses. Those responses will come partly from the companies themselves; from the attitudes of employees and would-be employees. Also, there will be an impact on our education and training systems because the kind of working life that people will be facing in the financial sector, and many others, over the next generation, will be profoundly different from those which faced us a generation ago. It is not comfortable, but we need to respond to it.
Unfortunately, the pace of change is, if anything, accelerating. Ten years ago I had the task of putting together the Building Societies Act 1986. At that time I remember discussions in the Treasury as to whether it was possible to construct an Act which was likely to last for 10 years in view of the pace of change in the market place. It is exactly 10 years now since that Act was introduced and I think it did serve well. It is fairly remarkable that it has managed to last that long. I am not at all surprised that new legislation is now in the offing because it is certainly needed in view of the changes which have come about.

247
There has been a structural change. As well as within individual companies, the activities of building societies and banks have moved closer together. The same is true of insurance and investment. Foreign companies, German banks and many others, have been buying into the City, and the internationalising of our financial markets has proceeded apace.
The noble Baroness referred to the fact that that happened earlier in the industrial sector, and that is right. Prior to that it happened in the agricultural sector. The difference about the financial sector is that it is so much more geographically concentrated. It is not, as she said, by any means entirely confined to the City of London or indeed only to the major centres because of the movement out of town to other locations. Nevertheless, it is very concentrated. It poses very significant problems both for employees and employers in managing this process of change.
I shall not take up the defensive political points which the noble Baroness made about minimum wages, the social chapter and so on, but it would be helpful if her party could be a little more precise about what kind of employment ideas it believes are appropriate to this fast-changing situation. My own view is that we need to maintain and improve our competitiveness and get our education and training more closely aligned with the needs of employment —not just the old-fashioned idea of the needs of employment, but employment in the new forms which it is beginning to take.
There is a requirement for a different type of approach. Many of the more routine tasks of a clerical nature, particularly in record-keeping, have been taken over by computers and so on. That is at the heart of the problem of the financial sector. In my view, although the noble Baroness expressed a longing for the old days when public policy could be described as full employment, if we were to allow that to be interpreted nowadays as a wish to sustain the status quo, with the inevitable consequences of over-manning, we would be deluding ourselves. I am certainly not accusing the noble Baroness of that, but when one considers such matters after a period of such rapid change there is a temptation to feel that there must be some brakes that could be applied to slow down the whole process. However, I rather doubt that.
In addition to technology and competition, I should like to mention regulation. I am a member of the Securities and Investments Board, a public body which comes in for a fair amount of public comment, not always of a flattering nature. The SIB and associated bodies have tried to do the serious job of ensuring that the financial markets are properly organised and that those who are in those markets behave correctly. I think that there is now possibly a danger of too much regulation rather than too little. If the regulations become too much of a straitjacket, too cumbersome and too mechanical, that can suppress a lot of beneficial business activity.
That brings me to the point made by the noble Baroness about life assurance. Some terrible things were done a few years ago when many pensions and life policies were mis-sold, and those who were responsible
248
need to make amends. However, if the consequence of the regime and processes which arc applied are such that they dissuade many in the population not to make the kind of savings which are in their own interests, the pendulum may have swung a little too far.
Whenever there has been such a fundamental change, the whole process of redundancy becomes rather stark for groups of people. I agree with the noble Baroness that words such as "down-sizing" and "outplacement" are euphemisms for what is a very unhappy experience for those individuals who suffer them. However, I do not believe that the noble Baroness should he too hard on those employers who have tried to introduce training and new retraining schemes and to provide more flexibility in their employment. That is part of the response which employers need to make.
I know that one of the major high street banks has been introducing work experience for 16 to 18 year-olds to give them some taste, before they finish their formal education, of what today's world of work is likely to require from them. That is beneficial, especially as I understand that it can be done in conjunction with the local education authority and the schools.
We shall have to adopt such new approaches if we are to face up to the fact that the changes in the financial sector are not likely to be reversed. They will probably continue and may even accelerate. The financial sector has been a very important part of this country's economy for many years. I hope that it can retain that leadership internationally. I believe that it can and that it will do so if it remains competitive even if that brings in its train difficult decisions for employers and employees.
3.53 p.m.
Lord Haskel: My Lords, the major financial services industry used to be one of the most secure areas of work. People did have a job for life and would encourage their children and grandchildren to enter banking and insurance companies. There was a recognised career path which enabled people to feel secure and to plan ahead.
As my noble friend Lady Turner told us, all that has now changed. I am most grateful to my noble friend for the opportunity to debate the change. The financial services sector has experienced big fluctuations in employment. It has experienced new technology, deregulation, competition and changes of ownership. All that has led to a casualised and pressurised workforce.
The impact of new technology on the industry has been enormous. Not only have computers and data bases replaced many of the old clerical jobs, but the new communications systems also mean that people need to be in their offices far less. There used to be a time when a new technology could mature within a company or an industry so that people could feel comfortable with it before putting it into effect. As the noble Lord, Lord Stewartby, told us, today there is no time for that. So as technologies change, the people operating the old technology move out, and those skilled in the new technology move in. There is little recruitment for training, just wholesale change. From the employer's

249
point of view, it is best to have those specialist people on short-term contracts or employed through agencies to facilitate a rapid turnover.
A second reason for insecurity is the new style of management. No longer do we have the old-style generalist bank manager or insurance manager who would advise on everything from your overdraft, to operating your business, or making a will. Today "focus" is in fashion, so the new style of management is built around specialist products. There is one specialist who will advise you on your overdraft, another on your mortgage. another on your will. Organised that way, the business depends less on personal relationships and more on specialist knowledge. That development tends to upset career progression, again leading to more insecurity.
A third reason for insecurity is the many recent changes in ownership. That has disturbed the usual recruitment and career patterns because new owners need to rationalise and merge operations. In addition, building societies become banks, which means that shareholder value becomes the top priority. That produces other pressures which add to the insecurity. As a result, we now have an industry where an estimated 64 per cent. of people have no employment rights; where short-term contracts and employment through agencies are becoming the norm, and insecurity is endemic.
That insecurity operates at all levels in the industry, from the boardroom to the messenger. It is a fact of life. How Mr. Ian Lang, the President of the Board of Trade, could say to the CBI last November that job insecurity was only a "state of mind" beggars the imagination. Perhaps he had in mind the different ways in which that insecurity is rewarded. At the top of the tree, it is rewarded by high salaries, generous share options, insurance and comfortable pensions. By contrast, insecurity is rewarded lower down the ladder with low pay, no share options, no insurance and no pensions.
How do the Government react to all that? They welcome it. They say that it provides flexibility of employment which, in turn, removes people from dependency on the state. The opposite is, of course, true. The insecurity makes people more dependent on the state. What is more, without insisting on minimum conditions at work, the Government encourage bad employers to use the benefits system to subsidise low wages and low investment.
Of course, the better companies have now realised that all that impacts badly on customer care. They realise that the pendulum of fashion may have swung too far one way. The better companies are more perceptive than the Government and realise that flexibility at work is not just ease of hiring and firing. Flexibility to become more competitive means a different attitude by employees. That kind of flexibility means working flexible hours, adapting to new technology, learning new systems and methods, discarding old ideas, and understanding the need to be competitive and to work more effectively. Better employers also understand that they will not achieve that flexibility by rewarding it with insecurity.
250
I agree with my noble friend Lady Turner that we cannot put the clock back, but what has been the Government's response to that change? Do they try to balance a fair society with an efficient economy? No. The Government's response is the jobseeker's allowance, which does nothing for the unemployed. All it does is tackle the claimant counts.
Fortunately, better firms realise that although they have to work in a competitive environment, human beings are not a tradable commodity. While they want to have the benefits of casual employment, they want also to motivate their staff, keep morale high, and be a fair employer so that they can attract the best people to their companies. They need the economic benefit of casual employment, but they need also to satisfy their customers. They need their employees to perform well, and they also need their commitment and loyalty.
The way to achieve that is not by taking away the rights of workers, as encouraged by the Government, but to turn insecurity into security. So, the better firms do give employees employment rights, even though they can fire them the following day. They will also give them a feeling of security and reduce the fear of change by offering training for employability. Labour's University for Industry is designed to do precisely that.
What is the effect if we do not give people more security? My noble friend Lady Turner told us. Living on poverty wages, in conditions of permanent stress and insecurity, has a dreadful effect on society. As the hours of work in which a decent wage can be earned grow longer and longer and more uncertain, so there will be more and more stress on family life. It is no accident that more and more child rearing has fallen on single women. That insecurity leads to people living on income support and resorting to the black economy. That affects everything from the housing market to social security spending, and damages the growth prospects of the entire economy.
Indeed, in his November Budget Mr. Clarke predicted that the economy would grow by 3 per cent. driven largely by a surge in consumer spending. Who are those consumers upon whom Mr. Clarke is depending? Why, the very insecure, low paid people we are discussing in this debate.
4.2 p.m.
Lord Boardman: My Lords, let me first declare an interest, as I am a former chairman of one of the major high street banks and a member of its pension fund. I shall confine my remarks to banking because that is the part of the financial services industry about which I know most.
I accept, as in the terms of the Motion, that there has been a considerable change in the pattern of employment in the financial services industries. However, I am surprised that the noble Baroness chose the financial services, because the arguments that she and the noble Lord. Lord Haskel, put forward seemed to put the financial services in the position of being the good boys. They are doing so many of the things that they urge should be done. I shall develop some of those points later.

251
The whole pattern of employment has changed substantially. I regret some of that as did my noble friend Lord Stewartby. I remember being taken as a boy by my father into the local bank. He would talk over the counter to the manager and the transactions were entered in manuscript into the bank ledgers. It was all very comfortable and friendly, and, I think, secure. But that could not last. Technology overtook all that.
My noble friend Lord Stewartby referred to present methods which cut out the need for any man or woman power: the computers, records are stored at a distance, and, without being touched by human hand, they can be recalled by the touch of a button, and so forth. That of course does away with a great amount of human effort. Cash can be obtained by using a card in the high street. There is no need to go to a counter where someone counts out the money and dishes it out. All those changes have made a tremendous difference to patterns of employment.
Alongside that, there has been a vast increase in bank usage, both in the huge increase of customers in the banking sector and in the variety of services offered by an industry which originally may have been looked upon as mainly taking and giving cash.
A few years ago —no doubt it has changed today —if all the cheques that went on one day into the bank of which I was chairman were placed one on top of the other, they would reach three times the height of the NatWest Tower. Each one of those cheques had to be handled three times. That shows the size of the task. No doubt in the years since I recorded that event, things have changed. There are more credit cards and other forms of cash transfer which may well have reduced that total. Yet the total number of people employed in the major clearing banks has varied very little.
In 1984 the major clearing banks employed about 290,000 people. Today I believe there are about 285,000 employed, despite the vast increase in the usage by customers and the variety of services. There have been fluctuations. The numbers have increased and they have decreased as a result of changes made.
The noble Baroness was unfortunately critical of part-time workers. Part-time workers are of great value in banking. Part-time working is also valuable to those who do it. A typical example is the good lady who mans the cash till. Those hours fit in conveniently with school hours. It is convenient for a mother to have that part-time job at a cash till and then be able to collect her children from school. Part-time work is one of the great assets that the financial services industry can and does supply.
I think noble Lords will find that the clearing banks in general have been pace-setters for many of the best employment practices, whether it be with regard to maternity leave, cr éches and that kind of thing; and in training. The noble Baroness referred to training. I doubt whether there is any industry that has spent more per head on training than banking. Tens of millions of pounds a year are spent on various training courses run by the clearing banks. The aim is to give all members of staff at every level an opportunity to raise themselves to a higher level and to greater opportunities in the
252
future; and, at the same time, to provide members of staff with good, well-paid jobs in a social and environmental setting that suits them. Banks cannot and should not be criticised with regard to training.
There is of course one change that has been made to which the noble Baroness rightly and understandably referred: for a long time a job in a bank was looked upon as a job from cradle to grave. Someone joined the bank when they left school and left it when they retired on a pension. That had advantages and disadvantages. It had the advantage of providing staff security and loyalty, something to which the noble Baroness referred. But it limited somewhat the capacity to introduce into banking people at a level and at ages at which they could compete with that system. The change was often resented by members of staff who felt that that operated against their interests.
There have been redundancies in the past year or two resulting from mergers and the recession, but primarily from new technology. Yet I should be surprised if those redundancies cause much unemployment, because they have been dealt with mainly by early retirement and voluntary redundancy.
Bank staff receive training during their employment and banks have been devoted to helping to find new employment for those whom they have to make redundant. Therefore, I imagine that hank staff find it easier to find another job than those from other industries. I accept that for the person concerned unemployment is 100 per cent. I do not seek to say that we can welcome any unemployment. Of course, we dislike it. Furthermore, it is probably more painful for a person who is the only one to be made redundant in an office than it would he if he were one of, say, 1,000 people to lose their jobs because the factory has closed. However, I should be surprised if the number of redundancies in the banks has led to much of an increase in the unemployment register. Those people are very unemployable. Many operations have extended into banking operations —for instance, General Motors and Virgin —and they welcome trained banking staff to help them in their expansion.
The noble Baroness referred to figures which she had received from BIFU. I see that she nods in agreement. I believe that members of BIFU who leave a hank and take a job with, say, Virgin, will not then be members of BIFU and BIFU will report them as leaving banking and becoming unemployed. I believe that only a small number of people who are made redundant from banking remain unemployed for any length of time.
Problems have arisen in industries which have put off changing and have not been prepared to change. They delayed change until eventually everything closed down and they went bust. However, the financial services industries have been willing to change and to lead change. They have promoted many of the vital services that are now copied throughout the world. They have devoted themselves to creating and deploying new technology and they have faced increased competition from abroad. As a result, there is no doubt that London is the leading financial centre of Europe and probably of much of the world.

253
No industry has taken more account of the social requirements of the few of its staff whom it has been necessary to make redundant. The financial services industries have a record of which they can be proud.
4.13 p.m.
Lord Monkswell: My Lords, we are indebted to the noble Baroness, Lady Turner of Camden, for introducing the debate so admirably. I had thought that one of the issues Members opposite would raise would be the introduction of new technology causing reductions in employment requirements. I was right. It has been one of the themes of the debate. However, the suggestion that the introduction of new technology has affected the financial services industries only during the past few years and not during the past 20, 30, 50 and 70 years is ingenuous.
We must recognise the changing pattern of demand for financial services. For various reasons, during the 1980s there was an explosion of demand in the industries. That was partly due to the liberalisation regime introduced by the Thatcher government and partly due to other factors. A demand for employees was generated and that brought security of employment which was not experienced by other citizens in the UK.
The noble Baroness referred to the problems in manufacturing industry. I had experience of the front line, so to speak, during the 1980s and I know that local authority employment was subject to the same attack. The health service also has been subjected to similar changing patterns of employment. As patterns of employment have changed during the past 15 years there has been the underlying reality of mass unemployment. We need look back only to the 1960s to realise that the situation can be different. At that time full employment was the objective of both Conservative and Labour governments. The restructuring of the electricity industry, led by the noble Lord, Lord Weinstock, caused a massive shedding of jobs. I remember 2,000 people in south London being made redundant virtually overnight. However, relatively soon afterwards they received their redundancy payments, courtesy of a Labour Government, and found alternative employment. That has not been the case during the past 15 years.
The financial services industries have to a certain extent been immune from such experiences. It is interesting to look at the products of those industries; perhaps I may give an example. About 22 years ago my wife took out a mortgage to buy our first home. Only building societies and local authorities were offering mortgages and only two types were available, endowment or repayment. That was it —two suppliers and two products. What is the case today? At the end of last year I went to my local building society to apply for a mortgage. I was amazed by the variety of options available. The matter was so complicated that I said, "I want the same kind of mortgage I had 20 years ago, a straight repayment mortgage". They said, "All right, we know what you are talking about. We will give you that".
254
I suspect that today in the financial services industries, instead of people being offered the bread and butter they need to survive they are being offered cake. We know that during the French Revolution Marie Antoinette said, "Let them eat cake". That was totally inadequate at the time. I suspect that we are reaching a very similar situation today.
How do we deal with the problems caused by the changing patterns of employment in the financial services industries? My noble friend Lady Turner gave some very convincing explanations for the problems. She highlighted the importance of full employment. I reiterate that.
Employees in the financial services industries have skills which are in demand in our society. Generally speaking, they are numerate, and they have administrative skills. One interesting development over the past few years has been the creation of the Child Support Agency. Whether one agrees with the merits or otherwise of the agency, two matters are evident. First, there .appears to be a political consensus that it, or something like it, will carry on; secondly, it seems almost totally incapable of operating with a bare minimum of administrative efficiency. The House of Commons Select Committee report last year suggested that the agency achieved something like a 30 per cent. success rate in relation to its administration. That has now improved. According to the latest report, it has something like a 48 per cent. success rate. An organisation which gets wrong over half its basic administrative tasks cannot be said to be functioning effectively. There are employees in the financial services industries who have skills available which could be deployed. It is interesting to note that the agency was staffed, as was described to me, straight out of the jobcentres. The Civil Service recruitment agency was not employed for the task. Now the Government talk about privatising that agency.
A sensible government, looking at the problems, looking for solutions and using the resources available, could have redeployed people from the financial services industries into the agency.
Apart from individual examples of government action which could be taken, right across the political spectrum we need to readopt the consensus that existed for 30 years after the war; namely, that the object of government policy and social, political and economic policy is the maintenance of full employment. Until we readopt that consensus which served this country so well, not only will the people in the financial services industries suffer the problems of insecure employment but so too will everyone else.
4.24 p.m.
The Earl of Clanwilliam: My Lords, the noble Baroness, Lady Turner of Camden, has introduced a very important debate on the financial services industry. I note that the Motion refers to it in the plural and, indeed, there are several sectors of the financial services industry. The sector which everyone thinks about is the City, which is the major producer of benefit to our GDP. But I must thank the noble Baroness for her very sensitive speech in

255
looking for support to find solutions to the intractable problems of unemployment in the industry. In the plurality of the word "industries", I believe that the Motion refers less to the boardroom and managers than perhaps to the foot soldiers in the industry.
Indeed, there has been a revolution in the financial services industry brought about by the arrival of a new breed of suppliers of services which were traditionally offered almost exclusively by life assurance companies. Deregulation has given new opportunities to the bancassurers and building societies which are competing for business generated by the introduction of new products such as TESSAs, PEPs, personal pensions and the favourable tax treatment for unit trusts, for which we must all be very grateful to the present Government.
The effect of deregulation has been to widen the scene for businesses which previously offered those services through intermediaries. They are now able to offer them themselves. Therefore, there may be an argument that increased activity and opportunities should cancel out any potential loss of employment. Indeed, it seems that that has been the case.
Of course, the foot soldiers are busy with the smaller investors rather than the man who goes direct to Lloyd's to insure his £500,000 house. They are rather dealing with the people who are trying to spend a few pounds per month investing for the future. Those are the people who are most at risk. Of course, there is a contrast. The Starred Question today dealt with a matter in which many millions of pounds were involved. It is the smaller people who are offering insurance who are most at risk.
The fact that bancassurers and building societies are merging is another example of how traditional businesses which offered security for life to their staff and employees subject, perhaps, to only a number of years of honest and true service, have now had to trim their conditions and rewards for service in the face of competition. On top of that, the mutual life assurance companies are reforming as plcs and in turn merging with banks and building societies. Meanwhile, those new financial products lend themselves to modern technology. In spite of that, employment is expanding due to the increased opportunities in marketing presented by those products.
Additionally, those products used to sell well in the old inflationary environment where it was seen that everything rose slightly ahead of high inflation. The Government have now managed, against all the odds, as we can see from the serious state of our colleagues in Europe, to lower inflation and keep it lower. That means that there is perhaps less excitement in the thrill of investment. Indeed, the bonuses from some of the with-profits policies are rapidly being withdrawn in the face of failure to keep up with the promises which they made in the past.
Nevertheless, the basic need for savings and investment remains. The increase in marketing opportunities have been overtaken by the range of new suppliers all using modern technology. At the same time, those products require sophisticated selling techniques by well-trained staff. As my noble friend Lord Boardman said, enormous sums have been spent
256
by the industry on training staff. That adds additional overheads and costs to the products that are sold and that in turn reduces the amount of profit that can be made.
With the greatest respect to the noble Baroness, Lady Turner of Camden, who I know holds an important position on the PIA, I suggest that the rigorous requirements of the regulator are so comprehensive that it may be that three or four visits have to be made by a salesman before completing a transaction.
I took the opportunity to visit the office of a friend of mine who works in the industry as an agent of a life assurance company. He is a very respectable gentleman with an MA degree from Oxford and 40 years' experience in the industry. He has 26 pages of —there is only one word for it; it begins with "b" —which he has to complete. It is an impossible job.
No one is arguing that this protection of the potential investor or client is unnecessary. It is just that the requirements are so time consuming that the investor may become bored while the adviser finds little financial reward to compensate him. Indeed, my noble friend Lord Stewartby suggested that over-regulation could become counter-productive. No matter how much electronic wizardry is employed, the papers have to be completed and signed and I wonder whether there could be a degree of acceptance of long-term and blameless record that would allow experienced advisers to operate with less supervision. Good regulation is not necessarily related to ever bigger rule books. Indeed, is not Brussels the perfect example of that?
It is the crook who needs to be discovered before he starts selling. Your ordinary adviser may be no financial wizard, as is the smooth talking crook, but he is basically honest and genuinely wishes to help.
I congratulate the Government on the extension of choice in offering the ordinary citizen such a wide range of investment opportunities and ask them to press on with the good work especially towards those 10 million employees and self-employed people who have no pension prospect other than the state provision. Perhaps there will then be less concern for the wider social effects that we all wish to relieve.
4.31 p.m.
Baroness Lockwood: My Lords, the debate today targets the financial services industries in particular, but the same trends and social consequences apply right across industry as a whole. To my mind, this is the root cause of the absence of the so-called feel good factor in our society today.
Social Trends states that part-time work for both men and women over the past decade has increased. Over that same period full time jobs for men have declined by 3 per cent. whereas 1.5 million more women were working in 1994 than in 1984. Those are considerable changes in the make-up of the workforce. Table 4.16 of Social Trends indicates that three-quarters of a million men and four and three-quarter million women work part time. In addition, it also indicates that 20 per cent. of full-time and 17 per cent. of part-time male workers work some kind of flexible work pattern; 30.2 per cent.

257
of full-time women and 35.5 per cent. of part-time women work some kind of flexible work pattern. This is completely different from the picture 10 years ago.
It is a trend which continues. For example, the Institute for Employment Research in a recent forecast up to the year 2001 portrays a labour market undergoing long-term restructuring with shifts to services and white collar work with most jobs created going to women, mainly part time and often on low rates of pay.
In her opening speech, my noble friend Lady Turner referred to some of the reasons for that change in the structure of the labour market. Changing social patterns have led to women's increasing participation in the labour market. This is now widely accepted as being a permanent feature of the labour market and clearly has had an effect on its structure. I regret to say that it has not always had an effect on the culture of the labour market.
The emergence of new technologies —most speakers have referred to them —have certainly revolutionised our methods and speed of working. The technological revolution, as the noble Lord, Lord Stewartby, termed it, should have been a great boon to our economy. Ten years ago we were anticipating this effect. The great debate at that time was as regards how people would use their new leisure time, and what educational facilities were needed to help us use that time more effectively. Somehow that has not happened. Instead, recession has overtaken us and despite the technological revolution GDP is growing very slowly. The extra leisure that we have has become enforced leisure through higher unemployment. Restructuring is taking place in companies often without consideration of the social consequences. Women's growing participation in the labour market has been seen as an opportunity to reduce labour costs.
This picture is reflected across the board and in the financial sector. The financial sector was one of the sectors which was growing at quite a fast rate until 1990. Traditionally it was regarded as a male sector and one of great stability, as a number of speakers have already indicated. Banking certainly offered security par excellence and the bank manager was a pillar of the local community. All that is now different. Banks employ more women than men and often on a part-time basis. But other changes have taken place in the past five years when the growth stopped. Jobs have been considerably reduced. In fact one in every five jobs in banks has been lost. The noble Lord, Lord Boardman, said that that has not led to a great increase in unemployment or even in redundancies because of the policies that the banks were following to facilitate that. Nevertheless, it means a total reduction in the number of jobs available in banking and therefore fewer opportunities for employees in the future.
Some noble Lords may be surprised at my tone in speaking about the increasing number of women in employment. I normally speak in support of it; I certainly do so today. However, we have to take
258
account of a number of caveats. I accept the advantages of new technologies. They must be encouraged. But they must also be managed, and managed in the interests of the community as a whole as well as of the individual companies. I accept that because of their lifestyle many women need or prefer to work part time or to have some flexible working arrangement. Again, that is to be accepted. What is not acceptable is that women should be exploited and used as a source of cheap labour. I have always advocated pro rata terms and conditions for part-time workers with access to training and promotion. The prospects for that should exist, but it is not what the majority of part-time women workers achieve today.
Women have had to pursue their rights through individual cases in tribunals and in the courts. Case after case has established indirect discrimination against women because over 80 per cent. of part-time workers are women. Those cases have been taken under our own legislation —the Sex Discrimination Act —as well as under European legislation. Regrettably, they have sometimes had to be taken against the Government. Despite their avowed commitment to equal opportunity policies between the sexes, the Government have refused to extend rights to part-time women workers because, as they say, it would deter companies from creating new part-time jobs.
However, the Policy Studies Institute, in a cost benefit analysis of giving part-timers pay rates, pension rights, sick pay, holidays and other benefits equal to those in full-time employment, indicates that the cost would be "marginal" —that is, 0.5 per cent. of the national pay bill which, incidentally, is less than is paid to company directors in perks and expenses. The analysis goes on to indicate that even that cost could be partly offset by productivity gains through part-timers becoming more committed and loyal to their company because of the fairer policies.
The TUC estimates that only four out of 10 part-time workers get the same hourly rates as full-time workers doing the same job. Around 2.5 million part-time workers earn less than the national insurance threshold which, in turn, affects their rights to statutory sick, maternity and retirement pay. Recent research by the Equal Opportunities Commission indicates that flexibility and restructuring works more in the interests of companies than of women employees. That operates even in some of the more progressive banking systems, as one of the case studies indicates.
It seems to me that the Government have a number of policies which are in conflict with one another, as my noble friend Lord Haskel implied. Their policies create more jobs, usually at the bottom end of the market —that is, part-time and low-paid. In turn, those jobs, together with continued redundancies, put pressure on social security payments. That then means that their policies to reduce government expenditure are defeated. Equally, their employment and social security policies conflict with their equal opportunity policies.
I believe that we need a fresh approach to facilitating industrial change, to creating new jobs and to educating and training members of the workforce so that they can be flexible in the best application of that term.
4.44 p.m.
Viscount Chelmsford: My Lords. I see the financial services employment scene as something of a paradox. We hear endless reports of job losses, not very much about new jobs and nothing at all about new company start-ups. We are in a position where our old financial services —not our new ones —are under attack both domestically and internationally; that is to say, banks, insurance, the Stock Exchange and those kinds of industries. There arc problems due to less manpower because of technology and there are those dreaded words such as "downsizing" and "outsourcing", restructuring; and, indeed, there is a tax on head office staff and on middle management.
Yet, Canary Wharf is now 75 per cent. full. Indeed, we were in the City the other day and we found the new LUC (the London Underwriting Centre) building 90 per cent. full. Prime space in the City seems to he full. We already have talk about Canary Wharf phase 2, and the City of London is gearing up looking for more prime sites to compete against it. There is something of a paradox there.
Let us go back a little and look at the employment scene from a different direction. In 1982, John Naisbitt wrote Mega Trends and pointed out that US agriculture had once employed one-third of the American workforce in 1900. However, by the time he wrote his hook in 1982, the percentage had reduced to 3 per cent. Moreover, US industry, going through the industrial revolution, was doing the same thing. That was followed by the information revolution which led, in turn, to leisure and services. He also pointed out that each of those ages gets shorter. He did not say why, but I suspect that that was because the pace of technology goes ever faster.
Mr. Naisbitt also pointed out another quite interesting factor; namely, that the USA's job creation rate had moved from 93,000 per annum in 1950 up to 600,000 per annum in 1982. He attributed that to the strategic resource now being information. He said that information industries were brain intensive, not capital intensive. I believe that we would probably say today that they were both. But, interestingly, he made no mention of the USA infrastructure which allows new business to flourish or of the risk culture in the states which encourages them to do so. I believe that we still have much to learn from the USA.
I turn now to 1994 when Delors wrote the White Paper Growth Competitiveness and Employment. He started with the famous question: Why this White Paper? —the sole and only reason is unemployment. He pointed out that the EU' s competitive position relative to the USA and Japan had worsened and that its growth rate had dropped from 4 per cent. to 2.5 per cent. per annum. Of course, at 2.5 per cent. per annum, that is, at best, a standstill. Countries like Singapore and Malaysia are growing steadily at rates of 8 per cent. and 10 per cent. He called for lifelong education and training and for greater flexibility in business. Indeed, we have already heard mention of that word.
It is interesting to note that Delors did not actually call for flexibility in government. His critics said that the EU was overburdened with regulation and that
260
employers were overburdened with employment costs in the form of taxes and that that discouraged job creation. We have quite a good example at present in the UK, as has already been mentioned, of the life assurance industry. Whatever its past sins, it has suddenly had to take on board a heavy burden of new regulation; a massive focus on review of past transactions; over-complex rules about how to sell a policy, although I am happy to tell my noble friend that the PIA told us only the other day that it was working on that aspect; and, of course, the resultant bad press. It is hardly surprising that the profits of the life assurance industry are down and that job creation is not exactly encouraging in that part of the financial services.
It seems that the first law of financial service regulation is that one quadruples the amount of paperwork that one makes and the second law is that you give it to those innocents whom you are trying to protect. Regulation definitely depresses job creation. Regulators do not work themselves out of a job despite all the good intentions of some of them to do so.
I turn now to a different aspect; namely, what is the unemployment rate? It is certainly not what the official figures suggest. We have already heard several times about contract jobs, part-time employment, temporary employment and about those who run several jobs at once and work from home by, perhaps, teleworking. All those activities are not fully accounted for in the statistics that we receive.
Let us consider, for example, some of the parliamentary special advisers whom I am sure many of us know. They work for several employers, both personal and corporate, at the same time and probably do more than the standard nine to five Monday to Friday job. But where are they in the employment statistics? Incidentally, although I cannot remember where I heard it, I was definitely told that Holland had increased its employment by 30 per cent. over an eight-year period through the use of temporary and part-time working.
Earlier I mentioned the indirect costs which governments can and do add to employment costs. Germany currently carries the highest indirect costs. I have some interesting labour statistics for 1994 which are worth quoting. They relate to costs per hour in US dollars averaged, I presume, over all work, not only the financial services. Those costs were: West Germany, 25 dollars; France and the USA, 16 dollars; the UK, 13 dollars; South Korea, 5 dollars; Indonesia, 0.3 dollars.
Asians make highly disciplined clerical workers. At least five years ago UK financial service companies started examining to what extent they could transfer clerical work to Asian countries. Presumably they are moving forward to see how much of their clerical accounting can be handled in those countries. If they do not they may not hold their business, given the cost differentials that I mentioned.
Does that mean that we have to drive down our own labour costs? I do not think so. However, I believe that it means that we have to be much more inventive. We need more innovation and more products which require

261
skills that other nations do not yet possess. It also means that we should be very circumspect about awarding ourselves too much pay.
Other nations in Asia with lower costs of living have also learned those clerical skills and that efficiency. Therefore we have to watch the situation carefully. UK job losses in the financial sector arising out of processing, as a result of changes in both technology and labour cost differentials, seem to me to be inevitable over time. It is interesting to learn that the Coopers' report forecasts a 30 per cent. reduction in the financial services industry over the next 10 years. I imagine that that is a major area that has been considered.
It is several years since Charles Handy warned us that the employment changes which have already been mentioned would cause a major shift in employee loyalty. He did not see the concept of a job for life continuing. I am a member of probably the last generation to have one. He said that an employee's first loyalty would be to himself, his second to his trade and his third to his employer. Interestingly, that has been the case for a number of years in one trade which no one has mentioned, that of the information technology professional. A professional in information technology can start his career in, for example, paper manufacture, move on later to the Stock Exchange and end up in the National Health Service. He is doing the same job and his pay relates to that of other information technology professionals, not to the disciplines in which he has worked. It is a paradox that despite the fact that he generates his own pay it is the computer industry which is currently starved of applicants with relevant skills. That brings us back to training.
Perhaps I may summarise the points that I have mentioned which I believe assist employment. Information industries are brain intensive and thus lead to innovation. There is a need to foster a risk culture in which success is rewarded, not envied. There is a need for life long education and training. There must be a supportive infrastructure for easy business start-ups. There must be no government taxation on jobs. There should be the least possible regulation, combined with tough laws, after the event, on monopolies and misdeeds. There must he better measurement of employment to cater for modern jobs, and a concentration on areas where we have excellence and can command our own job rates.
In my view the most important of those is freedom from regulation. I am prejudiced, because I spent my career bringing insurance from a highly regulated American insurance market to a then very free UK insurance market. That counted. Today, in the insurance market, and it is entirely our own fault, the shackles of regulation fall heavily on us at the very time when the USA is progressively deregulating insurance. Without doubt that affects not only employment in insurance in the UK but also UK invisible earnings, because insurance is a major earner for us. Incidentally, brokers —of whom I was one —bring in in excess of £1 billion a year, each year. to this country.
262
Perhaps I may end by mentioning a report, which no one else has mentioned but which I believe is very significant, issued by the Royal Society of Arts called Tomorrow's Company. The report said that tomorrow's company has:
"A new adaptability based on flexible working; commitment to organisational and individual learning —a job is a contract and not a fundamental right; creativity and teamwork —innovation is a team game; people working across multiple technologies; openness on future job cuts and help re. new skills; the will to create opportunities for minorities and to help employees to develop their own enterprises: the will to use the intellectual resources of all".
I hope that those are some of the ways in which we may he able to improve employment, not only in the financial sector but everywhere.
4.54 p.m.
Lord Desai: My Lords, I owe an apology to the House and also to my noble friend for not being in my place when she opened the debate. I had told her that I might find it difficult to be present, and so it proved.
Being the last speaker I am in the happy situation of not having to repeat what has already been said. We have been over the ground thoroughly and heard some very interesting speeches.
Perhaps I may say in response to the noble Viscount, Lord Chelmsford, that I believe that it is right to emphasise that we are witnessing a change within the financial sector in the form of a decline in the old products industries and perhaps also in the new products industries. The old products were in large firms with lots of employees and the new products are generated largely by self employment and small firms. Some of the shrinkage in the financial sector could be accounted for by those gross changes, which are different from the net changes that we have observed.
It is interesting that for a long time we used to make a distinction between manufacturing and services. We thought that manufacturing was solid and production-based while services were protected. We have to think of tradable manufacturing and tradable services. The financial services sector, especially in the UK, has become part of the tradable sector which faces global competition, partly due to the Big Bang and partly due to the various technological changes that we have observed.
Manufacturing and financial services have gone through the same cycle whereby productivity and competitiveness are required merely to stay in the same place and not lose jobs. Competitiveness does not create new jobs in manufacturing; it minimises the loss of jobs. It is essential to be productive because that generates wealth. We are observing that while more output may be produced in manufacturing the number of people is shrinking. For the first time in more than 100 or 200 years we are in a position where wealth creation no longer runs in parallel with job creation. Wealth-creating sectors are not generating jobs. Under the old-fashioned labour theory of value we somehow expect that wealth will be created by hands and brains. We have to learn to think anew in that respect. All those services —not merely financial services —which are subject to

263
competition, especially to open entry from abroad, or subject to technological revolution will have the characteristic of creating wealth but not jobs.
That will mean that those who survive in this sector will either have insecure jobs or, if they have secure jobs, highly paid jobs. Therefore, in manufacturing and the tradable services sector we shall end up with highly paid people, but few of them.
The problem is what we as a society do about that. What are the social consequences? That was a question: raised by my noble friend. One interesting consequence of competitiveness in the financial services industry has been that at the same time as more people are using banks and financial services and fewer people are employed in those sectors there is a great deal more consumer dissatisfaction with financial services on the part of small firms and of people who use banking and retail services.
Despite all we hear about competition, bank charges have increased. I shall be more explicit. I have never understood why that is the case but perhaps previously bank charges were hidden by the fact that I had non-interest-bearing deposits. Now I receive the interest on the one hand and have bank charges on the other.
Something that I am sure will arise out of market forces and our response to them is that people will need intermediaries in order to obtain better services from banks. One of these days people will have to learn how they can get better service out of banks. It has almost become a specialist job. We all know of the recent case of the people who took a loan from the bank, tried to sue the bank for bad advice and then were sued in return. Obviously, taking a loan from a bank is a specialised activity and no longer as free of problems as it used to be. Perhaps there will be specialists to tell one how to deal with banks.
There might be some job creation where banks concentrate on products rather than on a package of total services, as my noble friend Lord Haskel pointed out. If banks are into selling products rather than services, people will have to buy some of the services elsewhere. I do not believe that that will create many jobs but there will he a growing sector with consumer complaints and the need for consumer help in dealing with financial services.
Far more interesting is that we will have to face up to the issue of where the jobs will come from. That is riot the issue today; we are not dealing with the general question of where the jobs will be found. However, we must be clear about this. Not only will jobs not arise easily from the financial services sector but —I agree with most noble Lords who have spoken this afternoon —there is no way in which we can artificially create jobs in such a sector. That would not be right and it would certainly not be the way we shall have to take.
Given that the nature of the financial services sector is changing as new products are added, perhaps we ought to have a better notion of the changing structure of employment. That is not just the total number but, for example, how many people are self-employed rather than employed, how many people are full time or part time, what we include in the financial services sector
264
and what we exclude. In management consultancy the number of firms has grown while the traditional financial services area has shrunk. Consultants are much more brain-intensive, with more face-to-face work. They do not sell a single product, but rather a complex combination of products and services.
Our future lies with people who will sell face-to-face services which cannot easily be automated. Once upon a time banking used to do so, but that is no longer the case. If the underwriter gives a face-to-face service, that kind of job will grow.
I believe that we face the problem of a shrinking financial sector in job terms but a growing financial sector in terms of wealth. We will have to learn to manage our non-tradable sector so that we can create jobs in it; transferring some of the surplus created in the tradable sector in order to make jobs for people such as teachers, nurses or retail sales people. Whoever they are, we shall have to create jobs in the non-tradable sector where the nature of competition is low and product innovation moves more slowly than before.
There is no easy answer and no political party has the inside track on one. Despite everything we can do on labour market flexibility, competitiveness and so on, at most such devices slow down the rate of job loss. They do not positively create new jobs. We do not know how to create new jobs positively.
5.5 p.m.
Lord Rochester: My Lords, like other noble Lords I am grateful to the noble Baroness, Lady Turner, for having initiated the debate. I have no personal experience of the financial services industries other than dealings with branches of my bank and building society. However, for nearly 30 years I had the good fortune to work securely for ICI. The changing patterns of employment to which the noble Baroness's Motion refers are also to be seen to a degree in manufacturing industry.
The debate takes us to the heart of employment problems generally and the effects they have on the cohesion of society. Our dilemma stems from the development of both new technology and flexible working. Many of the ways in which that is taking place have been instanced; part-time and temporary employment, the use of short-term contracts, movement from job to job to meet changing economic conditions, and so on. I share the concern expressed about the effects of those developments. People who remain in the same employment —many in posts carrying great responsibility —are suffering the stress of having to work longer hours in place of those who have been made redundant. There is the insecurity occasioned by the fear of so-called downsizing, mergers, takeovers and, in the financial services among other things, the disturbing consequences of building societies being turned into banks. There is also the unwillingness of people to take on long-term housing and insurance commitments and in many cases the inability of householders to move because they are caught in the trap of negative equity.

265
There are all those and other difficulties. However, I wish to make clear that I am among those who believe that there is no going back. The overriding need for us to compete in a global market means that flexible working must be accepted. The question is how best, in the short term, the social effects can be mitigated and, in the longer term, the number of people in employment maximised thus avoiding the horrors of a society such as that portrayed in a recent "Panorama" programme. In it the haves retreat behind their guarded laager and the have-nots live in penury outside.
In looking for remedies, I wish to concentrate on three matters. I speak in trepidation because I am far from being an economist. There is need for a thoroughgoing review of our national insurance and benefits system. As the noble Baroness, Lady Turner, reminded us, in the economy as a whole it appears that only about 40 per cent. of the workforce now enjoy tenure of full-time employment or secure self-employment. Another 30 per cent. are insecurely self-employed or are part-time or casual workers, while the bottom 30 per cent. are either working for very low wages or are idle.
As Mr. Will Hutton points out in his book, The State We're In, while a labour market of this divisive kind may seem rational for firms cutting costs or for a government trying to curb inflation, its wider economic and social impact has been disastrous in increasing inequality and poverty and necessitating inflated public spending on the welfare state. It is high time to strike a balance between the competing demands of flexible employment and security by moving towards the concept of a minimum family income, however small it may at first have to be. That would do away with the present rigid division between benefits and earnings and help to ensure that people are no longer discouraged from entering the labour market. To the extent that there are now influential people in all three political parties thinking along these lines, there may even be hope that the necessary action can be taken on a co-operative basis.
Secondly, the advantages of retaining flexibility in the labour market need to be balanced by reducing the adverse impact on part-time staff of insecurity and sometimes exploitation. That could he done by bringing their employment conditions increasingly into line with those of full-time tenured employees. Until now, the Government have insisted that that would have the effect of pushing up costs to business, leading either to price rises or to compensatory job cuts.
However, as the noble Baroness, Lady Lockwood, told us, a recent analysis by the Policy Studies Institute concluded that the effect on employment would be broadly neutral and that any extra cost would be minimal. It needs to be set against other expensive aspects of employment, such as turnover and the need to attract employees of better quality and to enhance their motivation and commitment to the job.
Already, according to a survey carried out by the Institute of Personnel and Development, as many as 84 per cent. of UK employers offer part-timers holiday
266
and pension benefits similar to those of full-time staff. It seems therefore that the practice makes sound economic sense and should now have general application.
Thirdly, in education and training, I welcome the Government's decision last year to co-ordinate responsibility for the two functions in a single department. My noble friend Lord Dahrendorf suggested in a debate last June that individual learning accounts should be established to be financed by employers, individuals, and where necessary the taxpayer. That would enable people, in the course of their working lives, to draw on their accounts when they needed training to improve their job opportunities or change their career. It would fulfil the purpose of providing learning and re-training on a life-long basis. A recent newspaper article mentioned that the possibility of introducing such accounts, which is now being examined, I understand, by both the Government and the Labour Party, had encountered some criticism on the grounds that people who are unemployed, self-employed or on low incomes might find themselves excluded. I do not see why that should be so if there was a contribution from the state. Even if that were not forthcoming, it is not a convincing reason for withholding such arrangements from others, including no doubt people working and seeking employment in the financial services.
At the risk of incurring the displeasure of the noble Lord, Lord Henley, for daring to advocate that the taxpayer might be further involved in such transactions, let me reiterate that my party does not shrink from the prospect of adding a penny to the standard rate of income tax if that proves necessary to finance education and training, among other times, after school leaving age. The great advantage of money so spent is that it would be investment in wealth creation and the production of future income, not expenditure on consumption.
The same may be said of investment in the infrastructure. It would give renewed hope of employment to some of the thousands of engineering and construction workers now out of work and it would have a beneficial effect, if only indirectly, on people employed in the financial services. Sadly, that cannot be said of some of the unproductive schemes, however well-intentioned, that are sometimes put forward as a means of keeping people in work. That is because, in the last resort, they fail to meet the overriding need to improve competitiveness.
My only other point may seem a little surprising coming from these Benches rather than those of Labour. A few weeks ago I had the pleasure, along with others, of exchanging views in informal surroundings with the general secretary of the TUC and leaders of major trade unions. I was pleased to find how much common ground there was between us in confronting and looking for solutions to employment problems.
Following events culminating in the winter of discontent in 1979, the Government were right to deal, by means of legislation, with some of the worst abuses of power practised by the unions. Although on these

267
Benches we supported much of that early legislation,I have not ceased to believe in the need for trade unions and in the ultimate right of employees, if necessary, to take collective action within the law against unscrupulous employers.
I said earlier that there were grounds for hope that some of the problems discussed today could be handled in a co-operative way. To that end, I should like to think that the Government are willing, not to return to the corporatism of the 1970s, but to search for solutions genuinely and to involve and seek the support of what I believe is now a more responsible trade union movement. I say that because in my experience of the management of change in industry, decisions are more likely to find acceptance with individuals and groups of people if they are taken after consultation with those who will be affected by them.
5.16 p.m.
Lord McCarthy: My Lords, the debate has been very interesting and informative. I thank the noble Baroness for tabling an extremely useful Motion. To recall its words she talks not just of the financial services industries analysing the transformation in conditions of employment in those industries. She asks us also to consider the wider social effects. I want to concentrate on those effects and try to summarise some of the points made on this side of the House. We have been very much together. I also want to refer to points which I do not believe have been contradicted or, for the most part, disagreed with by the three speakers on the other side. Once again, we have a fair degree of agreement.
A question was raised by the noble Earl, Lord Clanwilliam, about the extent to which there is a decline in employment in the financial services. I looked to see what information I could find in Labour Market Trends, the re-named Department of Employment Gazette. It suggested that in general terms financial services have declined from about 1.1 million, however measured, to about 1 million over the past 12 months, a rate of decline overall of something in the region of 8 per cent. If my memory serves me aright —I may be wrong —that trend has existed since the peak period of the early 1990s. So we have seen a gradual decline in overall employment in the sector.
But the significant point emphasised by the noble Baroness is not so much the overall decline but the change in composition. That is the transformation —the change from employment of males to employment of women, the change in the sexual composition and the change in employment tenure and the change from full-time to part-time working, and from life-time, or assumed life-time, employment to short-term contracts. In the financial services the transformation is not simply represented by the loss in numbers, although that continues. It is represented in the terms of employment, the nature of employment, and the kind of people who are increasingly becoming "typical" employees.
We talk these days of atypical employment. In labour economics that means employment that is not full-time and not life-time. But it is time to change. For life-time employment is not typical employment but atypical
268
employment. It is the unusual person who takes a job and stays there for the rest of his or her working life or assumes they will. They may leave when they want to to get better employment. It is the atypical person who works full-time. As we see increasingly, the majority of people in the workplace are not in that privileged category. The 40 per cent. or so who are privileged must come increasingly to be regarded as the atypical, lucky devils who have managed to continue in that way.
What is so awful is that as a result everything comes to them. They are the people whose real earnings have increased by 50 per cent. or more since 1979. They are the people who have profit-sharing and bonus options. And if they have profit-related pay they probably designed the scheme themselves. They are the people who have rolling contracts so that if their employment is severed, they have nice compensation agreements. They are the fat cats.
Of course, there may be some fairly thin cats. Perhaps not all Members of the House heard the other day that the chief executive of NAHAT was asked about the chief executives of trusts who now earn on average about £90,000 a year. He was asked whether such people were fat cats. He pointed out that most of them have contracts only lasting a year and that 25 per cent. of them were not reappointed last year. You may think that this is a crazy way to run an industry. However, they may be fat cats but they do not have job stability or job security. And below there are the much larger group who are marginalised and insecure. Below them again are the unemployed.
As has been said by all speakers on this side of the House, no one feels that all this is the fault of the Government. I want to stress that. Also, no one says that the situation is unique and peculiar to this country. In so far as we know the causes of the move away from full-time and life-time employment, they are very close to the kind of reasons mentioned by the noble Lord, Lord Desai.
First, there has been a growth of global product markets to a point where they have virtually destroyed the existence of protected, insulated labour markets. There are no longer any protected insulated labour markets. Secondly, as has been said, there has been a shift in the capital:labour ratio which, in this country alone, has destroyed 4 million manual workers' jobs since 1979, most of them semi-skilled and unskilled. Thirdly —the crux of the matter —we are beginning to see analogous (not identical) developments in finance, accountancy and service industries where the same thing is happening to large numbers of clerical workers whose promotion and security prospects are in decline.
The fourth and final reason —I mention it only because it is there, not because I have a solution —is the failure of world capitalism. We live in a capitalist world. And world capitalism since the early 1970s has failed to obtain in overall terms anything like the growth rates of the 1950s and 1960s. When those four points are put together, one sees that the problem is not the Government's fault. But it is a problem the Government seem to do nothing about. I do not believe one can find a statement from a responsible government Minister expressing any sense of regret. The

269
Government do not seem to feel sorry that a major change of considerable disadvantage to a large number of citizens in this country has occurred as a result of the 40-30-30 division. They talk all the time as though it is an unqualified good thing. Of course, they do not like unemployment. But I do not recall a Minister in any way regretting a change in the conditions of the labour force which has meant superiority moving towards the employer and the isolation of those who are doing well from those who are not. The Minister today cannot stop the process. Of course, he cannot. He might as well try to stop Friday. But he might say something about the consequences for millions of citizens. I should like to mention a few of the things he might do.
The Government have encouraged the process towards part-time working. It is calculated that in the social security services, the Civil Service, local government, with the contracting-out provisions, the Post Office and Telecom, before privatisation, government policy has destroyed some 750,000 full-time jobs. The pace of casualisation and part-time working in those services has been more rapid than anywhere else. The Government could stop and think whether they want to continue at precisely that pace in the future.
Secondly, there is the most obvious example of all. What about the two-year rule? What possible justification can there be now for a situation in which only 36 per cent. of workers in employment are covered by unfair dismissal provisions? The original intention of the six-month rule —it was not a two-year rule except at the very beginning and that was caseload —was to make a distinction between the period in which people were working and the period when they were trying to find their way into the job, in other words a period of probation. For six months there were to be no unfair dismissal rights. After six months one had unfair dismissal rights because at that point the employer could decide whether or not he would dismiss the employee.
But what is the rationale of a two-year rule? Why should it be there when we know that 90 per cent. of people with short-term contracts cannot possibly qualify for any of the rights that follow from the two-year rule? The Government know that very soon, when the Seymour-Smith case goes forward, they may very well be told —as they have been told in the Court of appeal already —that the two-year rule is discriminatory anyway on grounds of sex discrimination. Why cannot the Government say that, in the light of what has happened and in view of the insecurity that affects 30 per cent. of the labour force, the two-year rule is an anomaly and unjustifiable and that they will anticipate the House of Lords or the European Court of Justice and get rid of it? I ask the Government tonight to defend that rule in the light of what we know about those to whom it applies.
Finally, I make no apology for coming back to the question of job creation. It is clear that, short of a miracle of a kind we cannot foresee, a considerable number of our citizens will find themselves, after their third short-term job on two days a week, on the dole and receiving benefit. After a while they will find that
270
they are six months or seven months on the dole or perhaps two years. At that point all the evidence suggests that it will be extremely difficult, if not impossible, for those people to return to the labour force. Certainly, they will not get back among the favoured 40 per cent.
On two separate occasions I have asked the Minister to tell me what has happened to the very modest proposals that the Chancellor of the Exchequer said he intended to introduce two years ago for workshare —a £60 maximum two-year subsidy for additional workers taken off the two-year waiting list. An IMS study last year showed that it had produced only 40 per cent. dead weight and six out of 10 positive results. In this case the Government are saving money on unemployment benefit by putting people into work via workshare. Why cannot the Government introduce the scheme on a wider scale? Frankly, all I receive is prevarication. I am tired of one pilot scheme after another. There have been three years of pilot schemes. When will the Government put workshare into more general application and see whether it takes people off the long-term unemployment register.
Secondly, I have asked the Government about the national insurance holiday which the Chancellor of the Exchequer announced the year before last as an immediate solution. It has not yet been introduced, but we are told that it will be in April this year. I should like to ask a precise question. The last time I asked the Minister gave an answer I could not work out. He told me that it would remove 130,000 from the register and would cost £50 million. If so, it would be an extraordinarily cheap scheme. It would cost the Treasury around £7 a week for each person off the register. How can that be effective when we are told that the workshare scheme, which gives far more money, is not effective? On that basis I do not believe that the Government's job creation programme makes sense.
We on this side of the House have put together a series of measures which could begin the change that is needed. The Government should at least face it. We are moving into an economy of part-time, short service, casualised labour. That is becoming the typical form of employment. Do not the Government regret that? Cannot they do something about it?
5.30 p.m.
The Minister of State, Department for Education and Employment (Lord Henley): My Lords, I agree with the noble Lord, Lord McCarthy, that we have had a fascinating debate and, as always in this House, a wealth of experience has been placed before us. The noble Baroness, Lady Turner, who introduced the debate, as always brought her trade union perspective to it. We had a wealth of experience on equal opportunities matters from a former chairman of the Equal Opportunities Commission, the noble Baroness, Lady Lockwood. From the groves of academe we had the noble Lords, Lord McCarthy and Lord Desai. For real practical hands-on experience of the financial services sector, from my side of the House, we heard from my noble friends Lord Boardman, Lord Stewartby and Lord Chelmsford.

271
There were other interventions. The noble Lords, Lord Haskel and Lord Rochester, both spoke with considerable experience of the manufacturing sector, which went through similar changes a short time ago. I am grateful to the noble Lord, Lord Rochester, for the warm welcome he gave to the merger of the Department for Education with the Department of Employment. That is a merger that has gone very well and we are still awaiting such a welcome from the party opposite.
As always the noble Lord, Lord Rochester, stressed the commitment of his party to the spending of that extra penny of income tax on education and training. I note that commitment as we have noted it many times. However, I suspect that that extra penny has been spent many times over in the dreams of the party of the noble Lord, Lord Rochester, and I would be interested to know on exactly what it is to be spent. Perhaps they will inform us in the future.
We then had the intervention of the noble Lord, Lord Monkswell, for which again I am grateful. With his universality of wisdom he will offer the benefit of his wisdom to this House on three separate occasions this afternoon, as well as speaking on two of the Questions earlier today. We are all deeply grateful for the depth and vision that the noble Lord brings to our deliberations. However, perhaps I can correct him on one small matter, in case his expertise misleads Members who listened to his welcome contributions. I can assure him that the numbers employed in health activities, unlike the impression he gave, have increased from 1.2 million in the early 1980s to nearly 1.5 million today.
Lord Monkswell: My Lords, I thank the Minister for giving way. The point I was trying to make related to the instability and insecurity of employment in the National Health Service, rather than to a reduction in the figures.
Lord Henley: My Lords, the noble Lord will know that anyone who is properly qualified in the medical world will have few problems in finding a new job should they wish to move round. My figures show a dramatic increase in health activity and come from a booklet referred to by the noble Lord, Lord McCarthy, Labour Market Trends, incorporating the Employment Gazette, about which the noble Lord wrote to me some time ago. He asked whether we could guarantee its continued existence after the merger and I am pleased to say that it is still in existence. Indeed, we all seem to be clutching a copy.
We have a proud tradition in banking and the financial services sector generally in this country. It employs a considerable number of people —920,000, up from 750,000 in the early 1980s. As the noble Lord, Lord McCarthy, made clear, that is down from its peak of a little over 1 million some time around 1990. The figures appear on page S12 of the Employment Gazette. I believe they are perfectly clear and find it surprising that the noble Lord, Lord McCarthy, found them difficult to identify.
The financial services sector employs a large number of people. It is a key sector —as all speakers made clear —for our prosperity as a nation but, like many
272
others, it is undergoing radical structural change. Quite rightly several speakers drew attention to the effect on jobs brought about by the changes in the financial sector and the uncertainty that changing patterns of work can bring. But it is important to put that issue into its proper context.
Britain's economy is doing very well indeed, despite what one may think when listening to the speeches of noble Lords opposite. I suspect that they were influenced by thoughts of Will Hutton and his so-called "seminal" book. The economy is doing well. Our economic policies are delivering sustainable growth. low inflation and rising prosperity. We are in the fourth year of an economic recovery which is the strongest of any major country in the European Union. Output is nearly 6 per cent. above its previous peak. Growth is steady and strong —2 per cent. this year —and inflation has stayed low. Further, taxes and interest rates have been cut and mortgage rates are the lowest for a generation. Living standards are rising and, with unemployment continuing to fall, more and more people are benefiting. Unemployment was down again last month to a four-year record low. We have growing numbers of successful companies and rising numbers of people in work.
Britain's place as a key financial sector is assured. London is one of the three leading international centres in the world and the largest in Europe. We should remember that, though a predominance of work in the financial services industry is in the South East, it is not only the South East that benefits. Many jobs exist in other parts of the country and many new jobs are appearing throughout the country. One only needs to look at the size of the financial sector in cities such as Leeds and Edinburgh to know how well they are doing.
What sets London apart is the size of its international business. According to the Bank of England, average daily foreign exchange dealings in London are 464 billion dollars —almost 60 per cent. higher than in 1992. London's turnover far exceeds that of New York and Tokyo, with signs that its lead is increasing. Net overseas earnings of the United Kingdom financial sector were a record £20.4 billion in 1994, as the noble Baroness, Lady Turner, assured us. I can add that that is up nearly 30 per cent. on the previous year.
Our strong competitive position has not come easily. It has meant that financial institutions have had to keep up with changes in technology and world markets. The high street has not been immune to that change. It has meant the loss of some jobs just as some jobs were gained, particularly in the 1980s as we saw the size of the sector rise to a little over 1 million from 750,000. It has now dropped to 920,000. But that change could not have been avoided and to try to do so would have meant flying in the face of economic common sense, as my noble friend Lord Stewartby made clear.
The sector is highly competitive on an international scale and to take steps to keep staffing levels artificially high in the short term risks losing more jobs over time. There has obviously been a technology revolution in banking practice. The innovations which have made available 24-hour cash machines, telephone banking and

273
the like have made the whole of the banking industry less reliant on people. But the benefits of automation and computerisation are enormous. Quite apart from the increased level of service for personal account customers, a more efficient and effective banking sector is of immeasurable benefit to industry and commerce.
There has been a revolution in the shopping patterns and the social habits of the population. The days when a bank could get away with opening its doors at 9.30 a.m. and closing them at 3.30 p.m. five days a week are long gone. Customers demand access to their cash 24 hours a day and automatic cash machines are the best way to deliver that service. One should recognise that new technology does not always destroy jobs. Most people would accept that that would be a Luddite view. We know that new technology can in the long term very often create new jobs and with them create new wealth and prosperity.
The dramatic growth in 24-hour telephone banking has untapped a huge latent demand for more flexible banking. The 400 new jobs last year and the 300 to come this year at First Direct in Leeds and the 425 at the Co-operative Bank in Stockport are proof that not all is doom and gloom in the financial sector, as the noble Baroness and some of her colleagues seem to imply. As I said earlier, that also seems to show that not all the new jobs necessarily need to be focused in London and the South East.
For some the transition has been painful. No one likes to hear of people losing their jobs but it is clear that overmanning and over-capacity have been features of the United Kingdom banking in the past. That has been true in the past of all industry and much of the service sector. The stark truth is that for the way we live today there are possibly too many banks and building societies on the high street chasing too little business. They are expensive to run and take up valuable resources —people and capital. It is therefore likely that there will be further job losses, as many of the banks have made clear.
However, as my noble friends Lord Stewartby and Lord Boardman pointed out, that is not to say that the banks themselves are not doing a great deal more to assist in the training of their employees. For example, Barclays Bank is spending some £300 million on training over the next five years. My noble friend Lord Stewartby mentioned the bank's imaginative involvement in work experience. I particularly welcome that as something from which many 16 and 18 year-olds could very much benefit. It is regrettable that that has very often been interpreted by the party opposite as a form of exploitation. There is a real commitment by banks to training their employees and to ensuring suitable opportunities for appropriate career development.
It is much more effective for the banking industry and the economy as a whole for the industry to restructure on sensible lines. In that way we will all benefit. The firms, the industries and the countries which prosper are the ones which see change coming and grasp the opportunities it brings. They are the ones in which new jobs are created as old ones disappear. That is the
274
answer to job security —not artificially to attempt to preserve jobs through subsidies, protectionism or regulation. All that achieves is to postpone the evil day. The jobs would go anyway and because such firms fall further behind in the technological race, when collapse comes it is often total. Instead of some jobs going, all may be lost.
Industry is also reliant on a good financial sector. It provides support when it is needed most. That in turn leads to jobs. So it makes no sense just to look at the raw figures for job losses in the banking and finance sectors, or even at the job gains in innovative companies such as Direct Line. To get the full picture one must look at Britain's total industrial performance. As I said earlier, the facts are that the economy is growing healthily, the number of jobs has been rising steadily and unemployment has been falling —and falling now for some 28 months consecutively.
Much was made about the position of the growth in part-time employment. The noble Baroness, Lady Turner, was right to say that part-time employment has increased. In the banking sector it is up by some 2 per cent. However, as my noble friend Lord Boardman made clear, most people who work part-time do so because it suits their work patterns. It is what they particularly want to do. A survey of a year or two ago —I forget exactly when so I cannot cite the reference off-hand —concluded that only 14 per cent. of people who work part time do so because they cannot find a full-time job. There are many people for whom part-time work is the appropriate work because it is appropriate for their individual circumstances.
We should not regret the growth in part-time work. It is one of the reasons why so many women in this country have been able to take on work. It is one of the reasons why there has been a growth in female participation. The noble Baroness, Lady Lockwood, accepts that and now accepts, I think, that the amount of part-time work is higher than in virtually all other EC countries. We would accept, as the noble Baroness made clear, that this change is probably a permanent one. But, as she also made clear, it brings changes to which we have to adapt. I do not accept that it has happened as a means of attempting to reduce costs. Again, as the noble Baroness will know, there has been a considerable narrowing over the years of the differentials between average rates of pay for women and average rates of pay for men. Now there is the narrowest gap ever and I imagine that the trend will continue over the years. I certainly accept that the higher participation in part-time work is one of the strengths of the deregulated labour market in this country and one of those of which we ought to be proud.
In the fact that we are seeing unemployment coming down, we are certainly bucking the European trend. In France, the unemployment total has just passed 3 million. In Italy, unemployment is rocketing, and young people in particular are suffering badly. Even in Germany, unemployment is also rising fast. I rather resent the accusations of the noble Lord, Lord Haskel, and others, that the Government do not do anything to assist. I could, as I have done on a number of occasions, recite the vast number of programmes which my department. the

275
Department for Education and Employment, puts on offer both by way of assisting training and job search. It provides something of the order of 1.5 million opportunities a year for those out of work to assist them in their search for work or to assist them in training. The difference between us and the party opposite is that I do not see it as a job the Government can do. The Government cannot create jobs. What we can do is create the right economic environment in which jobs will be created. At least I seem to be getting some recognition of that from the noble Lord, Lord Desai.
In passing, perhaps I may say a little, in providing figures in comparison between us and the other labour markets, about the regional variations within this country.
Lord McCarthy: My Lords, I hope the noble Lord will answer my two questions about work sharing and the NIS subsidy.
Lord Henley: My Lords, I shall not be addressing those issues on this occasion but the noble Lord can be assured that, where appropriate, I shall be writing to noble Lords. However, if the noble Lord will allow me, in the short time I have available I shall deal with my speech in my own way.
For the benefit of the noble Lord I was going to tell him a little about regional variations in unemployment patterns in this country compared with other countries. He may find it of edification in terms of assisting him in knowledge about just how our deregulated labour market is operating. I can assure him that regional variations between the best region and the worst region in the United Kingdom are of the order of 7.2 per cent. If he goes to the more regulated economies of Germany, Spain or Italy he will find the figures in those countries are of the order of 14 per cent., 12 per cent. and 17 per cent. Those impose enormous strains on the country as they create much greater differences in levels of unemployment between one section and another.
We believe that one of the key ingredients for our success is that lightness of touch in our labour market. We are tough where it matters—in equal opportunities legislation, about which the noble Baroness, Lady Lockwood, feels so strongly; on health and safety requirements and on unfair dismissal rules. But we do not interfere when we do not have to. That means businesses themselves can get on with running their companies in the most effective way. The result is that we have seen more jobs and a fall in unemployment.
What we have not seen, as noble Lords opposite seem to imply, is a massive growth in levels of temporary employment. I can assure the noble Lord that the proportion of workers in this country in what is described as temporary employment is a mere 6.3 per cent. If the noble Lord, Lord McCarthy, goes to those countries with the much more regulated economies and regulated labour markets which he is seeking, in Germany he will find the figure to be 10.2 per cent., in France 10.9 per cent. and in Spain, where they have the unfair dismissal rules which he would like where even for large-scale redundancies
276
you have to go to the Minister to seek his permission, the figure is a massive 33.6 per cent. So no one will give you a job if they think they are going to be tied down.
Lord McCarthy: My Lords, has the noble Lord got the trend figures?
Lord Henley: My Lords, I have not. Those are the current figures. He will find that we have a much lower rate of temporary employment than the other countries.
Lord McCarthy: My Lords, but they have always been the same.
Lord Henley: My Lords, in the regulated economy of the sort which the noble Lord so admires, where there are unfair dismissal rules of the kind that he seeks, we find that in Spain the figure is 32.6 per cent. because no one will be given a permanent job because they cannot be got rid of. A de-regulated labour market creates jobs, but the regulated market of the kind which the noble Lord likes would not. Over 7 million jobs now become vacant every year. As I believe everyone accepts, no one can be guaranteed the same job for life. But in a successful economy, with a de-regulated labour market, people can face the prospect of a job change with more confidence than in the highly regulated economies which the noble Lord and his friends look to so frequently.
I can assure my own noble friends and the House that, unlike the party opposite, we aim to ensure that the labour market, and in particular the financial services sector, remain free of the excessive regulation that noble Lords opposite seek.
5.51 p.m.
Baroness Turner of Camden: My Lords, there is insufficient time to reply to all the points made by the Minister in response to this debate. I shall confine myself simply to thanking noble Lords on all sides of the House who have participated in the debate. There seems to be general agreement that we have some case when we talk about the lack of security in financial services employment. I repeat again what I was told in a letter from the union for Barclays Bank staff:
"Job security is a thing of the past; temporary and agency staff very much characterise the present".
I would also like to emphasise that as far as I am concerned—and I am sure that I speak for my noble friends—we want to see a successful financial services sector. Indeed, many of the members of my union work in it. Obviously, we wish to see the kind of successful environment that will provide good and continuous employment for them. I am also vice-chairman of the All-Party Parliamentary Group on Financial Services. I am glad that two members of that group on the other side of the House participated in the debate. We believe that the financial services sector is important, but we also feel that we are right to express our concerns about the feelings of staff working in this industry.
I am rather disappointed at the Minister's complacent approach in response to the many points made from this side of the House. Nobody is suggesting that there are

277
easy solutions and neither are we suggesting on this side of the House that one can go back 20 or 30 years to the situation as it once was.
On our side of the House we would like to see a little more acknowledgement of the fact that there are problems here; that the lack of security felt by people not only in this particularly important sector, but in the services sector generally, will have, and is having, a spin-off with certain social effects which I am sure the Government will not find very conducive to their success at the next election. These are people who hitherto have been mainly Conservative supporters, but they have had their faith in the system very badly shaken as a result of their employment experiences.
As regards the references to regulations, it is true that I am chairman of the PIA Ombudsman Council and therefore have some concern about regulation generally. I believe that a regulatory framework is necessary because of the public disquiet about certain things that have gone wrong in the investment sector. I also believe that there is a need to ensure that we have the right amount of regulation. One should not over-regulate because I agree that that can put a burden on employees and employers in the industry. That is something which the regulatory mechanisms are taking on board. I repeat my thanks to everyone who has participated in this extremely interesting debate. I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Overseas Development Administration
5.55 p.m.
Lord Judd Lord Judd rose to call attention to the future viability of the Overseas Development Administration in the light of the Fundamental Expenditure Review and the cuts in overseas aid announced in the last Budget; and to move for Papers.
The noble Lord said: My Lords, we are particularly grateful to the Minister for having made a special overnight journey from Southern Africa to be with us. We hope that she is not too exhausted.
Let there be no misunderstanding about the effectiveness and potential of sound overseas aid policies. In a powerful paragraph (4.10) the Overseas Development Administration's own Fundamental Expenditure Review spells out the evidence: post Second World War Europe, the East Asian Tigers, South Asia, Latin America and part of Africa —the record has been impressive.
In my own years of work with humanitarian agencies, I have seen for myself the countless community-level, aid-assisted success stories ranging from the farmers in Burkina Faso building walls to retain the scanty rainfall to irrigate their fields; the war victims of Mozambique seeking seed and tools to start growing their own food again; the brave women in the slums of Manila running their own community health service; the Indian villagers fighting for the environment and their own well-being with re-afforestation programmes; or the Peruvian
278
villagers effectively battling to build the river-retaining walls to prevent the flash-flooding which has repeatedly destroyed their villages.
Still today, while we celebrate multi-million pound lottery prizes, 800 million men, women and children go to bed hungry every night; 1.3 billion live below the poverty line and 35,000 children die every day from preventable diseases. Is that a world we are prepared to tolerate as we enter the new millennium? These stark statistics do not begin adequately to convey the sheer human misery of such poverty.
The central case for aid remains the basic recognition of human interdependence, the fulfilment to be found in belonging in solidarity and the moral imperative of responding to need. In the words of Nelson Mandela,
"Our common humanity transcends the oceans and all national boundaries … Let it never be asked of any of us —what did we do when we knew another was oppressed".
Most especially, let it never be asked of a Britain which still aspires to global leadership, as one of only five permanent members of the United Nations Security Council.
The positive spirit of the British people is well demonstrated in their generous response to emergency appeals by voluntary agencies and it is confirmed in opinion polls. In a Harris poll undertaken only last Autumn, 81 per cent. of those questioned agreed that richer nations had a special responsibility to help poorer nations.
But let us not pretend that giving aid is not also in our own best material national interest. As the review makes plain, aid promotes British trade and investment by increasing prosperity and stability. It generates income for the many British firms or organisations which deliver aid or provide goods and services used in the aid programme; and of course it enhances Britain's reputation and strengthens her influence in the world.
But if we interpret self-interest in the broadest sense of the term, the case for aid is even stronger. Many of the current threats we face, such as environmental degradation, mass migration, the spread of AIDS, the increase in drug trafficking, the eruption of intra-state conflicts, international terrorism and crime, are problems which require global and not national solutions. In the face of such threats, isolationist policies make no sense at all and in each case judicious use of development assistance, coupled with a strengthened commitment to the conflict resolution and pro-active diplomacy, for which the review so rightly calls, could have a crucial role to play.
Here I must declare an interest in view of my professional work with Saferworld and my role as a trustee of International Alert. Of course, accelerated debt relief, not least multilateral, is also an imperative.
We welcome the review's suggestion that ODA's over-arching goal should be,
"to improve the quality of life and reduce poverty and suffering in poor countries".
That puts poverty reduction at the heart of the ODA's. programme.
We note that beneath this goal the review recommends a new hierarchy of aims for ODA, the first of which is,
"to encourage sound development policies, efficient markets and good government".
But if "sound development" really means unquestioning compliance with IMF and World Bank structural adjustment programmes, I think that that is something that we should question. Of course, adjustment is often essential —there is no doubt about it —but for millions of people in Africa and Latin America such programmes have exacerbated poverty and suffering. After a decade of adjustment, economic and human indicators in many sub-Saharan African countries are worse than they were 10 years ago. If that represents "sound development", it is difficult to see how it contributes to the overall goal of reducing poverty.
The second suggested aim in the review is,
"to help people to achieve better health, education and opportunity, particularly for women".
I would have thought that that should come first: the rest is how we make it possible. What could be more important than delivering basic social services —primary education, healthcare, access to clean water and sanitation —to people living in poverty? However, although the review was completed only four months after the World Summit for Social Development in Copenhagen, it makes no reference to agreements signed up to at that summit, such as the 20:20 compact which was endorsed, albeit on a voluntary basis. Does the Minister accept the suggested target of 20 per cent. of development assistance to be spent on basic social services? If she does, what steps is her department taking to meet the target? Why are we still at barely half the target level?
With regard to the review's third suggested aim, which is
"to enhance productive capacity and to conserve the environment",
I simply point out that the two do not necessarily go together. It is perfectly possible to enhance productive capacity by chopping down trees, but frequently that is not very good for the environment.
The fourth aim is,
"to promote international policies for sustainable development and to enhance the effectiveness of multilateral institutions".
It is, frankly, disappointing that the review does not contain an honest evaluation of what should be the split between multilateral and bilateral aid; instead discussion is curtailed by the confines of a total budget which is shrinking at a time when the relentless increase in contributions to the European Union is putting a squeeze on the bilateral programme. Indeed, the review suggests that the ODA may be able to protect its bilateral programme only by cutting its voluntary contributions to multilateral agencies. Those proposals appear to be made on a fairly arbitrary basis with little regard to the quality of the aid provided. The review concedes that both the United Nations development programme and UNICEF are doing a reasonably good job and making a significant contribution, but then amazingly concludes that UK contributions to both agencies could be cut.
Multilateralism has a great deal in its favour. It is less likely to he tied to other questionable political or economic agendas. It avoids the disruption of competing bilateral programmes, but much of it nevertheless needs reform. How do we increase our influence for reform at the same time as withdrawing from our commitments? It is just not convincing. By contrast, conditional positive financial engagement could be a powerful lever.
The review recommends that the ODA should target 85 per cent. of bilateral aid on 20 of the poorest countries, all of which would be in sub-Saharan Africa and South Asia. The ODA would then prepare "graduation strategies" for countries in Latin America, the Caribbean, the Pacific and South-East Asia, and maintain what it refers to as a meaningful aid relationship through the British Partnership Scheme.
It is true that in some parts of the world economic growth has led to rapid improvements in per capita gross national product, but the fruits of economic growth have not been evenly distributed. Brazil is now classified as an "upper middle income country", but it is still a country where 32 million people go hungry. The United Nations Development Programme's Human Development Report calculates that, while southern Brazil has a human development index rating which would give it a ranking of 27th, along with Luxembourg, the north-east region of the country would score somewhere in between Bolivia (ranked only 113th) and Gabon (114th).
In the face of growing inequality, is it not simplistic to suggest that the best way to reduce poverty is simply to give money to poor countries? The net result of the review's proposal would be swingeing cuts in aid to Latin America and the Caribbean. The withdrawal of British aid from those regions would signal an end to Britain's global role in development co-operation, traditionally one of our strengths as an aid donor.
But we must be candid about what the driving force behind such cuts really is. The ODA presents them as a drive towards greater effectiveness. But we all know that they are in reality a drive towards a smaller aid budget. Last November, the total aid budget was cut by 5.4 per cent. Now, I know what the Minister will probably tell us. She will tell us that, despite this, Britain will continue to have the fifth largest aid programme in the world: true, in terms of volume; false, in terms of aid as a percentage of GNP, our national wealth. Against that far more significant measure of commitment, we ranked only 14th with little Finland in 1994.
In relation to the bilateral programme, it seems even more sophistry is on offer from the Minister and from her Government. The formulation of words in the ODA's budget press release and the Chancellor's speech are so ingenious that I hope your Lordships will indulge me by allowing me to read them out:
"In a tight public spending round, the planned allocation for bilateral aid is likely to be little changed from that set out in last year's Departmental Report".
Ah! we can all give a sigh of relief; the bilateral programme is going to be protected. Until, of course, we consult last year's departmental report and look at the planning allocations for 1996–97. These reveal that

281
bilateral aid is scheduled to fall from £1,065 million in 1995–96 to £963 million in 1996–97, a fall of £102 million or 9.6 per cent. in real terms.
The Minister will no doubt tell us that private investment is also key to development. We agree. We need far more of it. But private investment has been concentrated on a few rapidly industrialising countries. Worldwide, 80 billion US dollars were invested in developing countries in 1994, but 80 per cent. went to 10 countries (40 per cent. to China alone). Sub-Saharan Africa enjoys few benefits from private investment; in 1993 it got just 3 per cent. of such global investment.
While debt relief—not least multilateral—and private investment are vital, they can never be substitutes for aid. In paragraph 5.24 the review questions whether the current level of aid is sufficient to allow the ODA to fulfil its purpose, and that was before last November's cuts. When the Labour Government left office in 1979, aid as a percentage of GNP was 0.51 per cent. and rising. After 17 years of Conservative government, it is now down to 0.31 per cent. and falling. The review predicts that aid as a percentage of GNP will fall to 0.26 per cent. by 1997–98—and remember, that was before last year's cuts. Now it will fall even lower.
By the time this Government leave office, it seems likely that aid as a percentage of GNP will have halved during their period in office and the noble Baroness will have presided over the culmination of that halving. For such a decent and widely respected person as we all know the Minister to be, it must be a painful truth, but it is one that must be faced. Her colleagues love to have her benign countenance and genuine concern at their disposal, but repeatedly they cynically sell her short. There is now real anxiety as to whether the Government have any strategy at all for their aid programme. If they have, the sooner they bring it to the House the better.
As we look forward, I underline the undertakings given by my honourable friends Joan Lestor and George Foulkes in another place last week. The Labour Government will transform the ODA into a full department of state with its own Secretary of State to put development issues at the heart of government policy where they belong, and in the first year of government we will start to reverse the decline in aid spending. We endorse the United Nations Social Summit proposal for a 20:20 compact, with donors allocating 20 per cent. of their development assistance, and the governments of developing countries allocating 20 per cent. of their public expenditure, to basic social needs programmes.
Under Labour, all aid programmes will be audited systematically for their impact on the poor as well as on women, children and the environment. We shall introduce greater consultation and involvement of local communities in the design, implementation and evaluation of development programmes. In government we shall press for improvements to EU aid and development programmes, particularly in relation to poverty focus, participation and accountability. We shall seek better harmonisation of EU development policy
282
with the bilateral programmes of member states, and greater consistency between aid, trade, agriculture and economic reform policies of the EU.
We shall do all that, and much more besides, because of the scale of the challenge which remains, to which we have no alternative but to respond if we are to be true to the values we hold dear. We shall also do it because the cornerstone of our approach to government overall will be positive social responsibility as the means to strengthen at home and across the world the community to which we all belong. In all that, the words of John Donne will be our guide:
"No man is an island entire of itself…Any man's death diminishes me because I am involved in mankind; and therefore never send to ask for whom the bell tolls; it tolls for thee".
My Lords, I beg to move for Papers.
6.11 p.m.
Lord Soulsby of Swaffham Prior: My Lords, the House will be grateful to the noble Lord, Lord Judd, for initiating a debate on a subject which must be of concern to many noble Lords—overseas aid, third world development, and sustainable production within a global environment. We are all aware of the noble Lord's knowledge of that sphere and work in it over the years.
After decades of increasing development aid, often mediated by political motivation and considerations, from the 1950s to the 1990s, in 1993 there was a drop in global aid of 6 per cent. Now, I read that the ODA's overseas aid is 0.29 per cent. of total GNP. An increasing share of that decreasing pie is directed towards emergency aid, and rightly so. However, one must note that the pie is not an ever-expanding pie. There are now, of course, some new claimants for the pie—Eastern Europe and the countries of the former Soviet Union. There was a time when they sent aid to the developing world, but they do not do so now; and 12 per cent. of the ODA's funds go in that direction.
The UK has every right to be proud of the ODA's efforts. Although we are not in the lead position in proportion of GNP allocated to overseas aid—I understand that it is about 5 per cent. and that we are 12th behind Finland, according to the noble Lord—it is greater than that of the USA. Nevertheless, large sums are devoted to overseas aid. Although we may not be in the lead position in the amount of money or proportion of GNP allocated, we are probably in the lead position in terms of the focus of the aid, its administration, and the competence and dedication of the personnel.
My association with the ODA has been over many years in several continents, connected largely with livestock development. I make no excuse for concentrating tonight on that aspect of the subject, because of the shortage of time. Livestock development plays an especially important role in human livelihoods in the developing world and in the poorest countries. The animals do not just produce food by conversion of some of the poorest quality cellulose to high quality protein (meat and milk), alleviating the hunger and misery referred to by the noble Lord, they also provide the motive power (the draught power) to pull ploughs, to transport produce, and to do a variety of other tasks. They are especially important in the third world.

283
Animals still provide 50 per cent. of the motive energy in agriculture, despite the great developments in the internal combustion engine and the like. In Tanzania, for example, 250,000 donkeys haul 56,000 tonnes of cargo daily. It is interesting to note that the women of Tanzania prefer the donkeys while the men prefer the oxen and the cattle. There may he something to learn from that. Without such motive power in those various countries, the small farmer's ability to farm and to produce food for their families is affected seriously. It is not only obvious disease and malnutrition that is the problem, but the chronic and sub-chronic form of ill health.
Research on those animals is important. Research is needed to improve food and the draught ability of the animals because they are important for survival. It is research that one might call "downstream" or strategic. It is not the type of research that is funded by the normal research bodies in this country such as the research councils, the Wellcome Trust. It is research that must be underpinned by the ODA. If the ODA does not fund it, it is unlikely to be done. If it is not done, new developments are not brought to the attention of the developing world.
In the UK there is one institute (the Centre for Tropical Veterinary Medicine) in Edinburgh, where the ODA has provided funding to do such work, as my noble friend the Minister is well aware. She has visited that institute on numerous occasions. The funding of that institute will decrease by 30 per cent. That will clearly have a decided effect on its ability lo undertake training and the type of research that I have described. That research may not be done.
That reduction in funding may well have a wider effect than merely a lack of research into and understanding of disease control. It will, as the noble Lord said, reduce the UK's influence overseas on livestock development. It will reduce the UK's input into trade and reform of agriculture and research. With the new wealth-producing technologies such as biotechnology, it will reduce the UK's ability to play an important role in the development of livestock and other forms of agriculture.
I am fearful that the UK will not share in such developments while other countries will. Obviously, hard decisions must be made in the future, but I trust that agriculture and livestock development will be regarded as areas of particular importance and will be, to some extent, safeguarded.
As a final comment, the director general of the FAO in celebration of the 50th anniversary of that UN organisation launched what he has called the "new green revolution". Dr. Jacques Diouf has said that he intends to:
"intervene where the needs are greatest and the agricultural sector most vulnerable".
I hope that I have sketched some of the problems. He went on to say that governments need to act with determination. I hope and trust that Her Majesty's Government will ever do so.
6.20 p.m.
Lord Wallace of Saltaire: My Lords, I read the Fundamental Expenditure Review with interest, although occasionally with some difficulty. I hope that the Minister shares some of my scepticism about current management jargon and techniques within the Civil Service. She may recall that my wife used to teach in the Civil Service College three generations of management jargon ago. It has become worse since then. I was a little involved in attempts to introduce into the Foreign and Commonwealth Office a strategic objective review. I recall the then head of the FCO security department responding that the objective of his department was to prevent the outbreak of nuclear conflict throughout the world and in that it had been 100 per cent. successful during the previous year.
Therefore, I am not entirely sure that the management by objectives principles outlined in the report are exactly appropriate to overseas aid. However, I would argue that some of the statements made in Chapter 3, and in particular at paragraph 3.11, suggest that the Minister might be encouraged to argue the case for an integrated overseas budget rather than for the separation of defence, foreign policy and ODA into separate contenders. If it is the case that peace-keeping using armed forces, preventive diplomacy and aid interventions targeted in particular on institutions which are key to the functioning of civil society is precisely the way we should be going forward—and in the part of the world with which I am most concerned, the former Soviet Union and central and eastern Europe, that is exactly what we need—we should be thinking of aid expenditure and military expenditure under the same overall head. I venture to suggest that it might be easier to defend the ODA budget in that overall context.
When I read the motivations for aid, I was surprised to see such little attention paid to the environmental dimension both on moral grounds and as a national interest. Poor countries waste their land and their resources. What we have seen in Ethiopia, what we have seen in the reduction of forest cover in India and the whole progress of desertification in Africa demonstrates the extent to which poor countries damage their environment and therefore ours, too. I am sure that it would gain increasing popular support even in this country by stressing that dimension.
If we are talking about national interest it is also increasingly clear that overseas development assistance is important in migration terms. I have some experience of looking at man struggling through central and eastern Europe during the past three or four years. One sees desperate people from the Middle East, the Punjab and Africa trying to get into Europe. There are no jobs for many of them at home, and it is hardly surprising that illegal immigration—economic migration, as we put it—comes from the countries which have least opportunities at home.
As regards bilateral aid, I agree with the Fundamental Expenditure Review that concentration is correct in the circumstances. It gains the most impact on the countries concerned. I also agree that graduation is desirable; but I disagree with the noble Lord, Lord Judd, about Brazil.

285
Brazil has an extremely inegalitarian society. The wealth of some of the diplomats one meets occasionally at conferences on overseas aid suggests that they could spare a little for the poorer people in their own country. We have a case for supporting non-governmental organisations working in north-east Brazil but solving the problems of countries which should be solving their own problems is not a high priority for our bilateral trade programme. Furthermore, I believe that the funding out of ATP is politically desirable, in particular from countries such as Malaysia for reasons which I am sure the Minister will recall. Niche funding, strengthening the kind of activities which the know-how fund as I have seen does extremely well, is precisely the way we should be going forward. There should be joint funding wherever possible both with other governments and non-governmental organisations. I have seen the European Union multilateral aid programmes and in that area the EU works extremely effectively. It is often much more cost efficient to do things together rather than country by country. EU multilateral aid to southern Africa, central America and the Mediterranean is increasingly important in terms of security and migration; and now increasingly it is of vital importance to central Europe and the former Soviet Union.
Perhaps I may declare a certain interest as I work with the Open Society Foundations and am employed part-time by the Central European University. One might say that the Open Society Foundations are indirectly funded by the British Government since much of the money which George Soros put into them came out of various forms of international speculation, including some against the pound. At present we are the largest single set of foundations funding technical assistance and education and training in central Europe and the former Soviet Union. Plenty of emergency assistance is needed in those areas and much more will be needed in Bosnia, the Caucasus, Tajikistan, if and when the conflict ends, and in Moldavia now the conflict appears to be finished.
Some of those countries are extremely poor. Countries in the Caucasus and in central Asia will need a great deal of assistance if they are to make a successful transition from socialism under the Soviet Union to market economies. I was puzzled by the statement at paragraph 10.11 which states,
"The UK has neither the strongest historical associations nor size of programme in the… CEE/FSU to be very effective in influencing recipient governments, other donors or UK interest groups".
No one else has either, apart from Russia. We have as good a chance of influencing them as anyone else. What is being done through the know-how fund is extremely valuable. I support the suggestion in the review that this should all be under the ODA's overall direction as in many cases they are poor countries in severe need of development assistance. I hope that the Minister will push that through in unhappy collaboration with some of her colleagues who, I dare say, may resist.
6.23 p.m.
The Lord Bishop of Lincoln: My Lords, I am grateful to the noble Lord, Lord Judd, for the
286
opportunity to debate this matter, which is clearly significant, not to say life giving. The first and principal justification for aid must be that we who live in a society that is relatively secure and prosperous and largely free from fear have a moral obligation to those who are not so fortunate and who are insecure, poor and afraid. I believe that that moral obligation is inescapable. It cannot be avoided. It determines in a quite fundamental way the kind of life that we seek to create, the quality of life to which we aspire and the nature of the society in which we want to live.
It will be rightly said that there are very poor people in our own communities and we should care for them too; that a growing number of people in Britain are becoming insecure; and that in certain parts of our country, many people are afraid, even physically afraid. That, too, is an issue we cannot duck. Although it is not the subject of the debate, we are called to look at it just as hard because, like the other, our response will determine the character of our society. I say that there is no difference in our duty to assist, whether those who are in acute insecurity are here or overseas. That is why, as leaders of our churches, we remain so critical of the reasoning that underpins the Asylum Bill as well as of its content.
I wish to make two main points in support of overseas aid. Other noble Lords are much more able than I to address the technical issues. I simply wish to add my voice to those who argue that aid is justified, first, by the level of need in the poorest countries and, secondly, by the evidence that it works.
One in every five human beings in the world still lives in acute poverty—that is more than 1 billion people. Nearly 800 million people, as we have heard, are still short of food and 500 million are chronically malnourished. Many millions die every year from infectious and treatable diseases such as diarrhoea, malaria and tuberculosis. In the developing world there are more than 13 million refugees.
Those are just a few statistics and it is difficult to respond feelingly to such numbers. But we have all seen from numerous television reports from various countries the acute suffering experienced by people in Rwanda, the Sudan and Angola. Those people are caught up in a violent crisis over which they have no control. We remember orphans and elderly refugees dying of hunger and exhaustion. Equally, we have seen the ordinary misery that very many poor people experience day by day as they attempt to grind out a living with virtually no resources available to help them to do so. They have no land, capital or education on which to build.
The scale and extent of poverty and need in the poorest countries which we have all seen and can all feel with a little imagination is starkly greater than in our own country. It seems to me that that is the unanswerable justification for increasing, or at the very least maintaining in real terms, the value of our overseas aid.
In addition, aid works. Too often that is forgotten. There are positive statistics, too, to set alongside those that I have given. In the past 30 years life expectancy has increased by one-third in the developing world.

287
Primary school attendance has increased by nearly two-thirds. The infant mortality rate has halved. Basic immunisation saves the lives of some 3 million children per year. Food production per capita has risen by 10 per cent. in the last decade. All that is tangible progress, measurable in lives and well being and benefiting millions living on our planet.
Of course, aid is not the only cause of that progress. Indeed, on its own aid can resolve few of the problems associated with poverty. Fair trade, education, investment, human rights and good government are among other elements which must contribute. But equally, it would be a grave mistake to think that aid can he omitted from the list of interventions that must be made to reduce poverty. The noble Lord, Lord Judd, has already drawn attention to sub-Saharan Africa and the need to continue aid to an enormous degree to that particular area.
We shall continue to debate directions of aid policy and how to improve its efficiency and focus and, indeed, how our responsibilities at home should be set alongside our responsibilities abroad. But let us not forget that the fundamental issue is the obligation upon us to assist those who, through no choice of their own, have been born poor and who cannot, by any action that is open to them, improve their condition without the help of others.
Our overseas aid programme has become smaller as a result of the decisions made in the last Budget. I believe that we have become a little smaller ourselves in consequence. The £124 million that has been cut from the aid budget is not a large sum when set alongside the other expenditures that we make in this country. It amounts to three roll-over jackpots in the National Lottery. But for those who live in near or absolute poverty, the assistance that it represents is a lifeline that we should not sever. Therefore, I hope that when next year's Budget is announced, the Government will reverse their decision and restore the real value of our overseas aid.
6.35 p.m.
Lord Shepherd: My Lords, my noble friend Lord Judd asked me to speak in this debate. I asked him to provide me with some up-dated information and I have been inundated. However, much of the information that I received, I now find that he has already covered in his brilliant speech.
There is no question about the challenges and the need for aid. I used to believe that trade was more important than aid. In some cases at least that is true. I see the tremendous changes that have taken place in South-East Asia. But there are other reasons for that. Except for South Africa perhaps, those countries will not be able to emerge as what are called tigers of South-East Asia.
In his Motion, the noble Lord refers to the viability of the ODA. I should like to approach that in terms of the future of the ODA. As I understand it, the difficulty is that in recent years there has been a flat plateau of money available for overseas aid. From reading the report, it seems to me that we must anticipate further cuts. But it was at the Edinburgh council meeting of
288
heads of state that the decision was made to increase the aid programme to include Asia and in particular the countries of eastern and central Europe. That is all to be welcomed. But for the ODA, with its flat budget availability, it has meant that the bilateral aid is just being contained and is now under very considerable threat.
I had a terrible thought and wondered whether we should look towards multilateral aid as the sole vehicle for distributing our aid. I reached the conclusion that bilateral aid is an essential part of multilateral aid. The knowledge and experience which the ODA has acquired over the years, plus the dedication of those who work there—and the noble Baroness herself represents that dedication—in itself contributes to the knowledge and experience of the multilateral organisations. Therefore, unless we maintain, support and develop our bilateral aid, there will be a cost in terms of our multilateral contribution. Therefore, I reject my first terrible thought. I have reached the conclusion that we must choose a blend of the two.
At what stage would the ODA cease to be a viable organisation as it is now? It is true that it is part of the Foreign Office but it is an identifiable organisation. When I became Minister of State at the Commonwealth Office, I was in the rump of the Colonial Office. I remember the anxiety, which was proven to a degree, caused by the loss of the Colonial Office experience. I remember when looking for a Governor of Hong Kong that we had nobody from the old Colonial Office who had experience of running colonies who was able to take it on. Fortunately, we found the noble Lord, Lord MacLehose, who was outstanding in every respect. But if we were to lose the experience, knowledge and dedication of the ODA organisation, our contribution would indeed be parlous.
The noble Lord, Lord Judd, referred to our own failure, in a sense, to support overseas aid. It is true, and we must admit it, that almost every developed country has failed, some even more disastrously than ourselves, to maintain its overseas aid contribution. The costs of any project undertaken continue to rise. Unless the budget for bilateral aid is maintained and developed, the contribution that we make will continue to be less and less effective.
I agree with some parts of the report of the review body. However, it seemed to me to be an orderly retreat from the battlefield. It was not going to be caught out; it had a plan to retreat. I do not believe that that is the way in which a Minister can win battles with the Treasury. We need to be infinitely more positive.
My noble friend may be critical of me. However, whatever contributions we make to multilateral organisations, we have to maintain the highest possible level of funding—and certainly today's level—in bilateral aid whatever the consequences as regards multilateral aid. If we see that level declining, the future of the ODA, with all its knowledge and experience, is lost.
The right reverend Prelate referred to the Lottery. If we were to take an extra percentage or two—the Treasury already take that—in order to finance overseas

289
aid, I wonder what the reaction of ordinary people would be. I have a son who collects regularly for Save the Children at railway stations. He is amazed at the money he receives from the ordinary men and women who pass through those stations. The question could be asked, "Would you agree to 1 per cent. or 2 per cent. of the Lottery being syphoned off without allowing the Government to reduce funding because they are gaining new money?" That money could be treated in a new way—perhaps to help organisations which act in an agency capacity for the ODA. That is one way in which one could find new finances in these rather straitened times. It is a thought that I give to the noble Baroness. I believe that noble Lords would be surprised at the reaction of the people who put their pound in the till in the hope of winning the jackpot.
6.43 p.m.
The Earl of Sandwich: My Lords, I thank the noble Lord, Lord Judd, for introducing the debate. The Fundamental Expenditure Review gives both Houses another opportunity to comment on our aid programme. It also gives me the chance to say one or two nice things about the ODA which I know it appreciates at this time of restructuring and buffeting. I should perhaps also declare an interest. Anyone who has sheltered in NGO glasshouses occasionally reinforced by government grants has to be careful not to throw too many stones.
First, I welcome the openness and co-operative spirit of the FER. It is a management plan which also expresses the ODA's commitment to a new definition of aid and new policy objectives and it shows a willingness to share those with ordinary mortals. This may be part of a new vogue for transparency but it is refreshing to those of us who remember over many years how hallowed the corridors of Victoria Street have sometimes been.
I also welcome the co-operation which takes place at a policy level between the ODA and some of the voluntary aid agencies, especially on the regional desks, but also more and more between senior officials. Preparations for last year's Beijing Summit was a good example. While other areas of government go in for public relations and print, ODA staff tend to be more concerned with getting proper practical messages over to the people who need to receive them, many of them in the voluntary sector. If anything, ODA could do more for public education, but I shall return to that later.
Unfortunately, one of the messages that the ODA has been trying to get over is about cuts. I shall not add much to what has been said about the quantity of aid except to say that it is deplorable that the Treasury has allowed the aid budget to fall so low over the years. It is not for want of trying by the Minister who has been a champion of the developing nations, as have been some Conservative Members who also deplore the cuts. But I feel sympathy with the overseas beneficiaries who have seen British aid slipping away from them. Only this week a small organisation with which I am connected in Asia received one of those letters of apology from ODA. While being grateful for the support that we have received in the past, I cannot help feeling sorry that, but
290
for Britain's own economic state, many more children overseas would be receiving education and primary healthcare.
We are told that Britain is in such a sorry state that it cannot sustain even the present bilateral aid programme which has already been cut back. Only last week the Minister of State said in a debate in another place that the Government still hold to the 0.7 per cent. for official aid. He stated:
"We are at 0.3 per cent. and diminishing … because we are ensuring that our economy is strong enough for us to achieve the target in time".
In other words Reculer, pour mieux sauter. Yet the Government continually reassure us that the economy under their guidance is strengthening all the time. We may be entering an election period, but how can they have it both ways? I believe that the Government are genuinely proud of the aid programme. The question is whether enough time really remains for them in this Parliament to stop the slide and begin the reascent. Is it possible that to make up for the money they would be giving in official aid the public would, in their wisdom, decide to give more through the voluntary sector, as the noble Lord, Lord Shepherd, remarked? I know that some voluntary giving is based on that idea. But it would be a degrading experience for a government committed to doubling aid. The voluntary agencies themselves are hard pressed. Honourable Members in another place praised the work of the British NGOs. Their success suggests they deserve more support, not less, at a time of retrenchment.
I know that the Minister has given many assurances about the NGOs. She will be well aware of the research by the Overseas Development Institute published by OUP last month based on 16 case studies in India and Africa. It is the most thorough evaluation conducted into NGO development programmes, and supported by ODA for that reason. It broadly confirms that, despite the acknowledged difficulties of implementing aid, British NGOs are highly professional and effective channels of development.
I welcome the increase in the joint funding scheme. But there have also been cuts and knock-on effects in other areas of NGO programmes. I wonder whether ODA could not make new on-the-ground commitments to NGO development and contract out more of its existing programmes to NGOs, as it does more readily with emergency programmes. There is little doubt that in areas like Andhra Pradesh and Orissa, for example, where ODA is becoming heavily involved in health and education, more could be left to Indian and international NGOs which would reduce the management costs. Is there room for more collaboration here? I would welcome a response from the Minister.
As to the concentration of aid recommended in the review, it is an old game well known inside and outside the ODA which takes up staff time and, if taken too literally, can end in tears. Spending not 73 per cent. but 85 per cent. of bilateral aid in only 20 countries may be aiming too high. It is laudable to focus attention on some countries and areas of the world, but no aid policy should be devised which excludes any country or area

291
which meets the basic criteria. The most important policy is one which allows access to a deserving group in any part of the world.
I am pleased to see that the Government remain committed to women's development in the review's headline objectives. Knowing the vital importance of education, health and income-generation projects specifically designed for women, I hope that the ODA in its smaller print continues to recognise the critical role of those projects in its portfolio.
I should like to have seen some clear statement about development education in the UK—that is, the building of public awareness of our overseas aid programmes and of the more urgent needs of developing countries. That could have a much greater impact in this country. There is some urgency about it if the Government genuinely want to revive the position of aid within public expenditure. The review refers to the importance of raising the international profile of British aid, which is important, but I am not convinced that the Government are taking development education as seriously as the other political parties. I hope that that can be the subject of a debate in itself.
Finally, I note that economic reform and "good government" are at the top of ODA's list of priorities. When consulting NGOs on country strategies, I hope that ODA will also listen to their views on the sometimes crippling effects of new economic policies on the poorest sections.
In welcoming the review, I conclude with a reminder to the Government; namely, that there is strong support for overseas aid among all parties and throughout the country—not for the aid which goes into large prestige projects or even British products, which can also be important, but the aid which meets the needs of people who do not have access to cars and electricity but who desperately need proper healthcare and better access to education. If the ODA can get that message over, it will surely be a benefit to any government at the next election.
6.52 p.m.
Lord Grenfell: My Lords, I, too, am most grateful to my noble friend Lord Judd for initiating today's debate. It is both timely and necessary. The ODA's Fundamental Expenditure Review has set some alarm bells ringing. It seems sadly to me to signal something of a loss of heart. The review, coupled with the November announcement of the Chancellor of the Exchequer of a further 6 per cent. cut in the total aid budget can only heighten our concern.
I should like, first, to declare two related interests: one past and one current. Last November, I retired after some 30 years at the World Bank which, as noble Lords know, is an institution dedicated to assisting economic and social advancement in the developing world. It was a great privilege to have served in that organisation. My current and second interest to declare is the fact that, for five days a month, I assist the World Bank in strengthening its relations and joint activities with the Council of Europe and the Inter-Parliamentary Union, both of which are doing invaluable work in the
292
promotion of democratic values and institutions and respect for human rights in countries in which the World Bank itself is most active in the economic and social sectors.
I have just three points to make. The first is about perceptions of overseas aid and its potential. Noble Lords who have already spoken in the debate have mentioned, and sometimes quantified, the huge challenge of fighting global poverty. Perhaps I may quantify a little more. Over the past 30 years, incomes in countries with the richest 20 per cent. of the world's population grew nearly three times faster than in those countries with the poorest 20 per cent. and the gap is still widening. Nearly 8 million children in the developing world die each year from diseases linked to dirty water and air pollution; 50 million children are mentally or physically impaired due to inadequate nutrition; 130 million children—80 per cent. of them girls—are denied the opportunity to go to school; 140 million people are unemployed and almost I billion are underemployed to the extent that they cannot earn enough to feed their families. The terrifying prospect is that 3 billion more people will be added to the world's population in the next 40 years, of whom 90 per cent. will be born in the developing countries.
The real challenge facing aid-donor governments as they set their spending priorities can he put this way. A child born today in one of the poorest countries is more likely to be malnourished than to go to primary school and is more likely to die before the age of five than enter a secondary school. That is the challenge. So what is the response? Do we throw up our hands in horror and say that it is all beyond our means to put right and that the scale of the problems is too great? Do we talk defeatedly of pouring good money after bad? Fortunately that is the view of only a few misguided people.
However, too many people still overlook how much has already been achieved. The more conscious we are of those achievements, the more conscious we ought to be of the absurdity of permitting our aid budgets to decline as a percentage of our national wealth. Perhaps I may add to the list of achievements offered to the House a few moments ago by the right reverend Prelate. Adult literacy has risen from around 40 per cent. to nearly 70 per cent. since 1960; the share of households with access to clean water has nearly doubled; the average per capita incomes in poor countries have also doubled; indeed, in some eastern Asian nations they have quintupled. More and more developing countries have become integrated into the global economy and many have joined the ranks of what we call the emerging markets. Therefore, real progress can he measured in the fact that a child born today in the developing world is half as likely to die before the age of five as a child born a generation ago; is twice as likely to learn to read; and can expect more than twice the standard of living.
However, let us give credit where it is due. The peoples of the developing world have been the principal agents of their own progress; but, let us also remember that development assistance has played a crucial role in that progress. For example, 40 years ago, South Korea

293
was labelled as a "basket case" country which was wholly dependent on external assistance. Today it is a thriving, industrialised country with a per capita income of over 8,000 dollars, which is twice that of Mexico, well ahead of that in Greece and catching up with that of Portugal. South Korea could not have done that without concessional assistance at the time that it was needed and in sufficient quantities. We should not dismiss the possibility that what Korea has achieved can eventually happen in Africa, given the right assistance.
The second of my three points reinforces what my noble friend Lord Judd said earlier. We must not fall into the trap of believing that private capital can assume the full burden of supplying the capital needs of the developing countries. Much is made these days of the fact that private sector capital flows into the developing countries are running at about 150 billion dollars a year, which is three times as much as that from international institutions. But, as my noble friend pointed out, 80 per cent. goes to only 12 countries. Certainly private capital has a growing role to play, especially in infrastructure financing. But the private sector cannot and will not meet all the needs of the poor countries, particularly the social sectors. That is why falling aid budgets, especially concessional finance, must alarm us.
The latter brings me to my third and final point. During two of my assignments at the World Bank I came into quite close contact with Britain's development assistance programme. At the OECD I attended a number of the Development Assistance Committee reviews of the UK's aid programme. Although other member countries did not pull their punches in criticising certain aspects of Britain's aid programme, especially on aid tying—and I welcome the FER's recommendation about that—Britain usually scored quite high on the quality of its programme, if not on its quantity. If the quality is to remain a hallmark of the aid programme, I suggest that. for a start, there is an urgent need, as my noble friend said, to respect the commitment made at Copenhagen to the 20:20 compact as only 10.5 per cent. of our bilateral aid was spent on the social sectors in 1994–95.
As to quantity, I have only this to say. It cannot be a matter of much pride to the Government—or, indeed, to any of us—that Britain is so low in the league table of per capita income spent on aid, with the FBR predicting a fall to 0.26 per cent. in 1997–98—a calculation which even predates the announcement of the Chancellor of the Exchequer of further cuts.
I confess that I am not much wedded to the setting of time-bound targets with unrealistic objectives. I spent seven years at the UN in New York as the World Bank's representative and witnessed targets of every kind being set by the General Assembly with impossible timeframes and hopelessly over-ambitious objectives. Those lead only to shattered objectives and bitter recriminations.
294
I believe that we on this side of the House arc quite right to speak of a commitment by a future Labour government to begin reversing the trend in the first year in office. We shall, after all, be starting from the lowest foothills, looking up at a very high mountain.
High quantity and high quality of aid are not mutually exclusive. Past Labour Governments have proved that. A high quantity, high quality aid programme is the hallmark of a government which truly understands the meaning of global solidarity with the world's underprivileged people. The future viability of the Overseas Development Administration depends on those responsible for our aid programme being committed to its growth and not resigned to its decline.
7 p.m.
Lord Winston: My Lords, as a new and junior Member of this House I rise with some trepidation to speak in this debate, which I regard as singularly important. I do so partly out of a sense of its importance and partly because my noble friend Lord Judd twisted my arm.
It seems almost churlish to criticise our past record with regard to overseas aid, which in some respects and at least on paper appears to be remarkable and much better than those of many other developed countries. The UK's role has been pivotal and of the utmost importance in many respects. I have always taken pride in that, and wish to congratulate the noble Baroness, Lady Chalker, on her achievement, which is extraordinarily important and recognised throughout the world. I should also like to commiserate with her on the way the Treasury has cut her budget and therefore her effectiveness.
I should perhaps declare an interest in that for some years, 15 to 20 years ago, I was scientific adviser to the WHO and also to the International Planned Parenthood Federation. It is on those matters that I should like to speak.
This debate covers a crucial issue. In my view it is certainly the most important issue which has been debated since I took my seat. It is an irony that yesterday we saw a full House when we discussed sport on television, a subject which attracted everyone's attention. It is a sad reflection on our priorities that today this debate is not taken more seriously.
When we review the issues concerning the ODA we face the most serious crisis of our generation. We leave a legacy which imperils our children. That is what I want to talk about.
Above all, we have a problem of world overpopulation. It is that aspect of aid that I want to address. I should like to take India as an example, because I visit the country quite often. A year ago our gross domestic product was about 16,200 dollars per capita while in India it was 280 dollars per capita. That is a 58-fold differential. In Bombay over 1 million people live on the street. They are conceived there, they breastfeed there, they copulate there, they sleep there and they die there. Among the 10 million population of Delhi there are people who have inadequate or no electricity and inadequate water supplies.

295
In 1972 the world population was approximately 3.5 billion: in 1984 it was 4.7 billion. By the year 2000 it will be approximately 6 billion, and by the year 2025 it will be around 8 billion. Those are the best estimates that are available. In general I have found that people who work in fertility research have tended to underestimate the rise in population. Therefore, those figures are fairly conservative. Our children will inherit a world with double the present population.
The worst scenario is in the most poverty-stricken, resource depleted and undeveloped countries of southern Asia, Africa and Latin America. How can they, already bulging at the seams, cope with a two- to five-fold increase in that population? The higher the birthrate the less chance there is of economic progress.
It is not merely a matter of mass contraception. One cannot simply throw the condom, the birth control pill or sterilisation at those populations. We know very well from a great deal of research that the way to control population is by improving hygiene and education. The drive to population growth is due primarily to infant mortality. The higher the infant mortality the greater the drive to increase family size, because in a poor country one's children are one's insurance in old age. I met a woman in Bangladesh who looked 65 but was only 35. She had not had a menstrual, period since the age of 15 because she had been continually reproducing, and child after child had died. That is a common scenario. It is not an exaggeration. I also remember a man outside his hut in an Indian village who said that he was a rich man because he had eight children and would be safe in his old age.
When we look at the British experience of birth control we see that population control was not due to the condom, the contraceptive pill or Marie Stopes. None of them had the slightest effect. It was the water closet and the power of sanitation in the Industrial Revolution which achieved that.
I want to make three or four points briefly, because time is short. First, as the right reverend Prelate said, we face a moral perspective. We are not an island. This issue affects us. Basic social necessities are denied to more than 1 billion people. We in the West live at a far higher level than fellow humans elsewhere. We consume far more of the world's resources. Our prosperity, and indeed this House with its glories, has been built partly on their contribution. Our gain is effectively their loss.
My second point concerns the principle of self-interest. Conditions in the third world threaten our environment and, even more, future generations of the human race irreparably. We have global warming; consumption of essential food and mineral resources; consumption of energy; destruction of many species, plants and animals; the risk of political instability and even war; but, above all, overpopulation which brings those risks ever closer.
As has been mentioned, the other point concerning self interest is that by providing benefits to those countries, for example through the offices of the British Council and education, we gain huge invisible benefits.
296
Thirdly, other speakers have not mentioned that the cuts in our aid budget provide excuses for other countries to follow suit. Look at the United States. Her gross national product exceeds those of Japan, West Germany, France, the United Kingdom, Italy, Spain, Holland, Sweden and Portugal put together. The United Nations' target was 0.7 per cent. of gross national product. The EC as a whole gives 0.4 per cent.; the UK currently gives 0.31 per cent., and that is falling; and the United States gives 0.15 per cent.—half of the percentage of gross national product that we give. Governments must work together. We need to explain to other governments that this is a vital need. We need to work simultaneously and urgently on all fronts.
What is the effect of shutting off the tap? I shall take one example, immunisation. The Minister in another place said that immunisation is one of the most cost-effective means available for improving human health. That is true. However, here is a cruel irony. I remember going to a camp in India where there were five year-old children none of whom was as big as my own three year-old in physical stature. An aid worker said to me, "If we had not immunised these children they would not he alive". Are we to dump such children because we are no longer able to provide aid?
I am sorry to say this, but I feel that I must. The overseas aid budget has been cut not because of a famine in Birmingham, an outbreak of typhoid in Tyneside, or an earthquake in Edinburgh; it has been cut because the Government want to reduce taxation in order to win a general election.
7.10 p.m.
Viscount Waverley: My Lords, we must find sustainable solutions to the short and long-term difficulties facing Africa. I should like to ask this evening whether it is time for a rethink on the problem and an attempt to halt the dependency on aid. On 24th January, during a debate on the proposed free trade area of the Americas, I drew attention to the principles of the 1994 Miami Summit. The Department of Trade and Industry was responding to a Motion in the name of the noble Viscount, Lord Montgomery. I believe that the principles are as relevant to this evening's Motion as they were then.
What lessons might be drawn from the agreed principles? Could those principles be adapted to Africa's advantage? I wonder whether I might be allowed briefly to repeat them. I said that the wide-ranging proposals are,
"intended to encompass not only the promotion of prosperity, through economic integration … but [contain] also specific measures for the eradication of poverty and discrimination through improved access to education and health care".
I continued:
"The strengthening of the role of women in political, social and economic life; the guarantee of sustainable development and conservation of the natural environment; support for democracy, migrant workers' rights, eradication of corruption, money laundering and a volunteer corps of people to tackle natural disasters, for development needs and emergencies, are also part of the package designed to integrate … the [American] hemisphere".—[Official Report, 24/1/96; col. 1052.]

297
Could not Africa be linked with the European Union in a similar way? Continuous aid is not the answer.
7.11 p.m.
Lord Desai: My Lords, I was rather surprised at the brevity of the noble Viscount's speech, but one advantage of speaking late is that almost everything that needs to be said on the subject has been said. Consequently, I shall not repeat it but try to follow an interesting train of thought. Yesterday the Chancellor of the Exchequer came to the London School of Economics on the 5th anniversary of the foundation of the Centre for Economic Performance. He made a powerful speech to the effect that an efficient economy needs good social support. He was arguing for a good welfare state as a necessary counterpart of a flexible, modern competitive economy in a globalised world. The noble Baroness should read the speech and remind the Chancellor that if he believes that for the UK perhaps he ought to believe it for the rest of the world.
One has to put the argument for aid not only on moral grounds, or that we somehow owe a debt to the poor countries, but also on the ground that the combination of efficiency and good welfare is an optimum combination. One is not sustainable without the other.
I also commiserate with the noble Baroness on having to read a document like the review which is an appalling piece of work. I do not know how anyone is paid to produce documents like it, but I presume that they are. I missed one simple proposition in the review. When in the 1950s we started on development people believed that interesting units of economic analysis were countries: rich countries and poor countries. Rich countries give money to poor countries and that is how poor countries will become rich countries. Much good development has come about, as was emphasised by the right reverend Prelate and my noble friend Lord Grenfell; and the index in the human development report last year demonstrated that many countries have progressed. However, we are now at a stage where there needs to be greater differentiation in development.
I wish to put a paradox. Aid is not electorally popular. I know that my noble friend said that a Harris poll showed that X per cent. of people like aid but by and large aid is not electorally a high priority on the agenda, unlike the crown jewels of British sport. That is why there are so few people present today compared with yesterday. Our debate today will not make headlines in The Times and the Guardian tomorrow.
Why is aid not popular while on the other hand humanitarian assistance is? People have now accepted the principle that if there is an earthquake, a famine, a refugee problem, we ought to do something about it. British people, through both public money and private charity, are willing to put their hands in their pockets and do something. The reason is that it is no longer possible to sustain the idea that there are rich countries and poor countries, rich people and poor people, differentially distributed around the world. There are more poor people and fewer rich people in the poor
298
countries and more rich people than poor people in the rich countries. The British taxpayers are probably willing to give money where it is directly seen to help people. They will no longer find giving to countries X, Y and Z a sustainable proposition.
That leads us to consider that money should be increased as a proportion of GNP. I take that to be axiomatic, I do not wish to labour it. Rather than focus on the country or regional perspective, as the Fundamental Expenditure Review does, taking money out of Latin America and putting it in sub-Saharan Africa, we ought to ask where the real problems are in the world economy. They are probably not definable at a country level but certain communities and certain programmes, like clean water, immunisation or the education of women, are a priority. If there are priority areas scattered round the world, we could find out where they are and direct money to those causes. We could demonstrate to the taxpayer what we are doing and that every pound spent helps poor people. That is what people are willing to spend money on and it would enhance the effectiveness of our aid.
It is hard to see anything in the report at all, but I do not see in it a clear redirection of our development efforts in that way. We must concentrate in each country on the priority areas where aid can be effective. We must avoid areas where it will only be either neutral or positively harmful.
I have said it to the noble Baroness on other occasions. We ought to have a purchaser-provider split in aid. Governments are good purchasers of aid but not good providers. The recipient host governments are also not good providers of aid. I know that the noble Baroness does it anyway, but aid should be directed more and more through NGOs, either local or international. I should like to see a public competition such as we have in the universities for research money. People bid for projects and say: "I know a corner of Guatemala where £50,000 would make a difference". We ought to award money in that way and then the effectiveness of the aid projects could be monitored and examined. It would have more impact than saying: "Let's find the regions". That route will lead us into diplomatic nonsense. Aid will become mixed up with other foreign policy objectives, military objectives. The history of the Cold War is that if aid is blamed it is because it was mixed up with diplomatic, military and other objectives which should not have been part of it. Now, after the Cold War, we are ready to rethink the problem. The feeling is that the money of poor people here should not go to rich people there. Until that suspicion is removed, and unless we can take dramatic, direct and effective action, there will be a political problem in arguing the case for aid.
7.20 p.m.
Lord Monkswell: My Lords, as is usual on this subject we have had a fascinating debate, admirably introduced by my noble friend Lord Judd. Also as usual, the House will not be surprised if I take a slightly different tack from that of a number of other speakers. I hate the very concept of aid. I associate aid with the beggars that we see on the streets and with the concept

299
of charity—the idea of Lady Bountiful going round the serfs and handing out a few groats here and there to the peasants. Expressed in that way, I suspect that the vast majority of people in this country would also hate it.
An examination of the experience of our own country might give us some inkling of how we might develop. There are two problems. One is the lack of volume of aid; and as we heard from a number of speakers it is being reduced. The other is that aid is inefficiently distributed. There are national governments around the world spending aid money; there is a whole panoply of NGOs spending money. With all those organisations each contributing a little to the pot, how efficiently will the money be spent? I repeat: there is an absolute lack of volume.
The example I intended to give of this country and the development of our own society related to the position of old people at the turn of the century. There was no pension provision. The relatively well-off would be able to make savings in order to keep themselves in their old age. But for the vast majority of working people, once they ceased to earn their own living, they were destitute; and there were various mechanisms available to alleviate that destitution—whether in the form of charity from the lady of the manor or the workhouse. Again, there were effectively two problems: first, the lack of amount of provision; secondly, it was inefficiently distributed.
As a result of popular demand—pressure from trade unions, friendly societies and the Churches—the situation was revolutionised by the advent of the old-age pension. It was hailed as Lloyd George's achievement. However, from the background to its introduction we see that he responded to popular pressure. There was an amazing popular campaign to ensure the provision of decent conditions for those who could no longer provide for themselves. I hope that such an example might develop out of aid; out of the charitable context.
After the war, popular feeling was translated into the 0.7 per cent. of GDP that was available for disbursement to poorer countries. I do not think any other country has achieved that, and this country is now going backwards. A rather similar analogy might be that of rich people being livid on receipt of an income demand—for that is effectively what it is—and those rich people turning round and saying, "I don't really want to pay all that money in income tax. I'll only pay a bit of it". If, overtly, we had that situation in this country, there would quite rightly be popular outrage. (The fact that it goes on at the moment, with income tax for the very rich almost a voluntary matter, is another subject for debate.) That is effectively the situation now on a world scale.
If we could rekindle that popular consensus and demand an agreement that rich countries should pay a proper amount of income tax, perhaps we could develop a mechanism for the disbursement of that "world taxation" on a sensible and rational basis. In that way old-age pensions could be paid to people in poorer countries who at present do not receive an old-age pension; unemployment benefit could be paid to people in poorer countries who are unemployed.
300
That is only the revenue side. If we examine the capital side, we see the example of Joseph Chamberlain, the Conservative city father of Birmingham, who engaged in municipal enterprise. His is not the only example. Municipalities up and down the country built the capital infrastructure, the sewerage and water systems for instance that provide the basis for our very high standard of living in this country even today. Investment was made for the community by the community over a 100 years ago. It still pays dividends today.
We might think of the world as a global village. Our neighbours, our parents, or our sons and daughters may travel around the world. Why should they not have decent water and roads wherever they go? If they live there for a period, why should they not have decent housing? Why should we effectively penalise ourselves by not investing in the kind of capital infrastructure that provides the very basis of the civilisation that we enjoy? Why should we not expect such an infrastructure to be in place anywhere in the world that we happen to be?
I hope that my brief remarks will contribute to the debate. I hope that we can find a way of effectively getting rid of aid.
7.27 p.m.
Earl Attlee: My Lords, I too am grateful to the noble Lord, Lord Judd, for introducing a debate on this subject. I do not intend to delay the House very long, but it would be peculiar if I did not make a few observations based on my experience of ODA. I spent most of last year running an NGO called British Direct Aid in Rwanda as an implementing partner of the UNHCR. That logistic operation was originally mounted in August 1994, immediately after the end of the devastating war. To that extent, I have a past interest to declare.
Looking through our files, it is obvious to me that ODA was fundamental in providing the finance that facilitated deployment in a matter of two or three weeks from start to finish. Fortunately, ODA understands how important logistics are to a large aid operation. When I arrived in theatre in January 1995 ODA was one of the most talked about and respected organisations in the region. According to some analyses of aid donation I have seen, ODA is second only to the EU itself in terms of the size of contribution. But it is to the speed and efficiency with which ODA operates that I pay tribute.
Sometimes funding is not forthcoming. That may be due to the budgetary problems we are discussing tonight. On the other hand, the proposed project may not be appropriate to the policy laid down by the Minister. But the point is that ODA will straightaway say that it is sorry but cannot help.
Some noble Lords, particularly the noble Earl, Lord Sandwich, spoke of the problem of concentration of effort in certain countries. But the advantage of concentration of effort is that significant progress can be made in the countries where ODA is active. If the effort is spread thinly to many countries, the result may be negligible. Even worse is the risk of serious errors owing to lack of knowledge of the recipient country.

301
I appreciate that my comments and experience relate to emergency aid rather than development aid. It would be nice if the need for emergency aid could be reduced, especially that due to war. As to the matters in question, I can do no more than say how valuable is ODA's contribution to development aid and disaster relief. Whether anyone can do better than the noble Baroness and her department remains to be seen.
7.31 p.m.
Lord Redesdale: My Lords, I thank the noble Lord, Lord Judd, for initiating the debate, and the Minister for being present. I must admit that the noble Lord's passionate speech dredged up some of the only lines of Shakespeare I know:
"Once more unto the breach, dear friends".
That line will strike a chord with most noble Lords present. I especially welcome back the Minister from her trips to Africa. She has undertaken extremely valuable work in Sierra Leone and Tanzania. Her efforts on good governance show the leading role she takes in that area. On a personal note, I hope that she did not have to take Lariam while she was there. It has been hitting the papers recently. When I monitored the elections in Tanzania, I was put on Lariam and it did have psychological side-effects. I became incredibly paranoid about malaria, though perhaps I was not so badly affected as another election monitor who passed out during a meal. I have a feeling that the effects were still with me when the debate began. I became ODA spokesman for the Liberal Democrats over two years ago and I wondered whether there has been a debate in which anything other than aid cuts has been debated, having done a little research, I find that I am not paranoid since every debate has touched on that issue.
The Fundamental Expenditure Review has to be looked at in its proper context. It is a framework for decline in the operational capacity of the ODA. I realise that the review was written before the cuts took place. However, it will be the guiding force under which the cuts are implemented. I shall not dwell on the nature of the cuts. Many noble Lords and the right reverend Prelate covered the issue comprehensively. We all understand the effects of the cuts. I wish to look at some specific points raised by the review itself.
As my noble friend Lord Wallace— I welcome him to our debates on aid— pointed out, one of the most depressing facts is that the review is such a weighty document. Unlike the noble Lord, Lord Desai, I would not completely write it off. In such a large document there are bound to be some points with which one agrees. I shall pick out the positive points. I believe there are some.
The goal of improving the quality of life and reducing poverty and suffering in poor countries has to be one of the highlights of the document. I personally feel that the ODA is most serious in putting as its chief objective poverty reduction. Another positive aspect is that the review recommends that the Overseas Development Administration should take on a wider role in development policy, influencing other Whitehall
302
departments such as the Treasury and DTI. I was rather interested in that because I do not see how anyone can influence the Treasury.
I return to a point raised earlier about the use of the military in emergency relief. I am taking part in discussions on the Reserve Forces Bill. Will the Minister give some indication of how she sees an increased role for the military and the expense involved as against use of non-governmental organisations.
The review recommends that the United Kingdom should contribute to the untying of aid by making a unilateral statement in a multilateral forum. I look forward to that statement. Many noble Lords have dwelt on the role of NGOs. The review expresses the view that the NGOs should be consulted in drawing up this country's strategy plans. I thoroughly agree with that, especially when looking at some of the excellent work done by many NGOs in Africa. The section of the review on the joint funding scheme makes clear that the ODA recognises NGOs not just as a contractor but as a partner in development. The idea of continuing to adopt a hands-off approach, minimising its interference in co-funded projects should be looked at carefully.
There are areas in which I do not agree with the review. The view that the best form of expenditure is that pursued through economic liberalisation is a double-edged sword. Many noble Lords have studied the effect of structural adjustment programmes and trade liberalisation without proper thought to the social safety net. They will realise that although it is an aim that we should try to achieve, it is not without its dangers.
Another area which I feel is not adequately examined is the balance between multilateral and bilateral aid. The noble Lord, Lord Shepherd, spoke about the need to maintain the bilateral budget. The proposed cuts in voluntary contributions to UN agencies should not be arbitrary. They should be examined very carefully. There should be cuts only in institutions which do not produce the best results.
I am surprised, like the noble Lord, Lord Grenfell, that the 20:20 compact agreed at Copenhagen was not included in the review. I am also disappointed to see the separate commitment to women dropped as an aim, considering the recent Beijing Conference. As 80 per cent. of displaced persons and refugees are women and children, that can perhaps be reinstated as one of the major objectives.
As the noble Lord, Lord Judd, pointed out, the aim of increasing productivity and conserving the environment has an appeal. Both concepts were put into the same sentence to save on the number of objectives. Productivity and the environment do not usually sit hand in hand. I realise that by protecting the environment one would have to look carefully at the major cause of destruction— usually the growth in an economy. However, I have a feeling that they could have been separated.
The review concentrates on 20 countries to which 85 per cent. of our bilateral budget is directed. We must give most money to the poorest countries. The Minister will be looking carefully at how to protect the most valuable projects in other countries, especially to enable

303
us to meet our commitments to the environment and family planning. But if we go too far down that line we may end up throwing the baby out with the bathwater.
The idea that national interests have a large role to play in relation to aid is realistic. I agree that aid should be higher up the political agenda and that not to recognise the role of the ODA in promoting Britain abroad would be a mistake. Some noble Lords mentioned the private investor. One of the main problems with private investment is that without a government body such as the ODA taking a lead role and making sure that the environment is safe for private investors they will be thin on the ground. Considering that national interest is one of the priorities, the cuts in the British Council, which may destroy that institution, are puzzling. I hope the Minister can give an assurance that the British Council will be protected.
The debate has shown that there is a degree of interest in aid and that the ODA has a role to play. I hope that in the future, when and if the noble Lord, Lord Judd, can come up with the money to increase the aid budget, I shall be able to stand up and shout that for once the ODA contribution is not being cut.
7.42 p.m.
Lord Rea: My Lords, my noble friend Lord Judd tabled this debate to draw attention to the ODA's Fundamental Expenditure Review and the further reduction in its budget arising from the November Budget. The Fundamental Expenditure Review tries hard, as other noble Lords pointed out, to accomplish a difficult task; that is, to both justify and argue the case for ODA's existence and at the same time cut its coat to fit its increasingly skimpy bolt of cloth.
It is a worthy, though wordy document and is full of details. There are over 200 acronyms in the glossary. I was surprised to find that I knew what 58 stood for. Above all disciplines, overseas development is riddled with acronyms. Possibly somebody will be able to explain to me what "cascading and iteration" means in terms of running an organisation.
It is interesting to read, on page 25, in regard to the right level of the aid budget,
"It is, however, questionable whether the present level is high enough to meet the Government's targets, particularly in maintaining the share of aid going through bilateral channels and in continuing to be seen to shoulder"—
"to be seen" rather than just "to shoulder"—
"our share of the global burden".
I suggest that the word "questionable" in "Yes, Minister" language is a powerful expression of opinion from within a government department. The document states clearly both the moral and national interest cases for the continuation of a substantial aid programme. It says,
"There is no intrinsic conflict between the moral and national interest motivations",
but that,
"For all developed country governments, the moral motivation was probably stronger twenty to thirty years ago than today".
304
That is possibly true. There was a more democratic feel to the governments of the world just after 1945 and in the past 20 years things have become a little more selfish. That may be true of governments, but I do not believe it is true of people.
A number of noble Lords mentioned the Harris Poll last autumn showing that 79 per cent. of people felt that the aid budget should be increased or at least not reduced. Perhaps in contradiction to my noble friend Lord Desai I believe that there are votes in development aid and especially if they target the poorest people in the world. This is perhaps not the place to examine the administrative changes advocated by the FER in great detail. But, as the noble Lord, Lord Redesdale, said, there is a subtle policy shift to overall development, especially economic reforms, rather than the main focus being on poverty reduction. That seems to indicate support for the International Monetary Fund and the World Bank's structural adjustment programmes which, as the noble Baroness knows full well, have had the effect in many countries of increasing poverty. As the noble Lord, Lord Redesdale, said, they are a double-edged weapon.
I am aware that the World Bank says that it is trying to avoid the worst aspects of structural adjustment. We await evidence of that in the future and I shall be delighted to see more evidence of World Bank loans to support human investment and the social sector.
While talking about the World Bank, it would be helpful if the noble Baroness could tell us the Government's plans for the next IDA replenishment. Are we following the lead of the United States? It severely cut its contributions to the last, 10th, replenishment. Or are we, together with other countries, going to make good the deficit? Labour, if elected, will improve the links between Parliament and our representatives in the hank. There will be opportunities in both Houses at least annually to debate the workings of the bank. At present, I suggest that the bank is too remote from government and from Parliament.
What else does Labour propose for ODA? My noble friend and other noble Lords have stated clearly that in the first year of office a Labour Government will start to reverse the decline in overseas expenditure; we will try to ensure that aid is truly directed to the poorest in any country. We are unhappy about the plan in the Fundamental Expenditure Review to concentrate 85 per cent. of aid on 20 countries. There are poor people in all societies and one of the features of the economy as it has developed in all countries under the current monetarist market approach over the past 15 years, is that inequalities both between and within countries have widened.
Aid must surely be targeted at people; it must invest in human capital. That means, as many noble Lords have pointed out, clean water; sewage systems for cities; schools for all, particularly girls; training for employment opportunities; loans for small businesses and farmers; and help for primary and secondary health care and family planning. Although my noble friend Lord Winston rightly said that this depends on economic development and education, there is still a need for modern contraceptive supplies.

305
The Government are very much to be congratulated on expanding the joint funding scheme, in which NGOs close to the ground are supported in their work. The noble Baroness herself took a special part in that. That should be continued. It is efficient and less likely to lead to a misuse of funds, even though there have been some slightly unwelcome stories recently. It is surely wrong, as other noble Lords have said, to cut our aid to the multilateral agencies which have a discretionary contribution, especially if they are doing very good work. Private financial flows must be used if we can possibly harness them to human, social investment. But I should like to see more of this before I believe we can rely on it in any big way. There is very little private finance going to sub-Saharan Africa. There is a huge need for development assistance there before private flows start to come in. At present more is going out from Africa in debt repayment than new private investment is coming in.
In the minute that is left to me I cannot give more than a brief indication of how Labour will change the Overseas Development Administration. We shall be developing and setting out in detail our agenda over the next few months. But it is certain, as my noble friend pointed out, that we shall transform the ODA into a full Department of State again, with a ministerial seat in the Cabinet, where we should very much have liked to have seen the noble Baroness during the past few years.
Rebuilding Britain's aid programme will be an uphill, though very rewarding, task after the decline of the past 16 years. By allowing this decline the Government have failed to play as full a part as they should in the biggest task in the world today— to lift a fifth to a quarter of the world's population out of grinding, degrading poverty. By not fully engaging in that task— and we have special skills there, as many noble Lords have pointed out, going unused— we have shot ourselves in the foot by allowing environmental degradation, as the noble Lord, Lord Wallace, suggested, by failing to develop export markets and by failing to reduce the flows of millions of refugees and economic migrants.
7.53 p.m.
The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, this has been an excellent opportunity for a debate on the aid programme and I thank the noble Lord, Lord Judd, for providing the occasion. I noted the noble Lord's wording in the Labour Party's Motion. I also noted carefully everything he said today, much of which we have heard before. I have no doubt that we shall probably hear it again. I have no doubt, too, that he will continue to approach, with his colleagues, the whole question of aid in a sympathetic manner but lacking a certain management reality— something of which the Minister in charge always has to be conscious. I hope that whatever happens to the aid budget it will grow. I shall come back to that point. But I also tell the noble Lord that it needs a good deal of managing when one is operational in more than 160 countries, when one is working with more than 150 NGOs, and
306
when one is seeking to get the best value for money not only for the British taxpayer, whose money one is using, but also for all the recipients who so desperately need our help.
Some of the remarks in the debate have been almost simplistic. However, I am not here to attack the noble Lord. I shall try to respond to the debate. Perhaps I may assure him right at the beginning that there is not and never was any doubt about the future viability of the aid programme or of the department. That is absolute nonsense. Of course I should like to have seen the department with a full seat in the Cabinet. But he knows that I have had from three successive Secretaries of State nothing but support. It is true that we have our battles with the Treasury, and so, should he ever be in government, will he. It will not be so easy to do the things he and his colleague in the Commons have been promising tonight. He will find out perhaps, but I hope not too soon, just what a task it is to manage the whole of this area.
What is necessary in all management is from time to time to refocus our efforts and to review what we do and how we do it. We did it in 1990–91. We carried out a similar and important review in 1995–96. I believe that is right and proper because of the need to maintain value for money and to keep up with the changing development patterns around the world. We have to note what others are doing— the countries themselves which have been the recipients as well as the other donors. We have to try to work in partnership so that the total given worldwide is far more than the sum of the parts.
Perhaps I may say to the noble Lord that while this has been an interesting debate the FER is a much deeper thing than I think he understands. But I shall be happy to talk to him further about the FER and about the senior management review because I think that is worth doing. I also know how much I owe to the officials in the department. I am grateful to my noble friend Lord Soulsby of Swaffham Prior, to the noble Earl, Lord Sandwich, and to many other noble Lords for their kind comments about the department's work and about me personally. It carries out excellent work.
I turn now to the Fundamental Expenditure Review. It was thorough; it was certainly wide-ranging; and it involved consultation with many of our principal partners. We discussed with enormous numbers of people how aid should be delivered. We discussed the best ways of doing things before the report was written. The report was deposited in the Library of the House back in December. Copies are available from the ODA for anyone who wants to read it in detail—or perhaps I should say reread it. We have also received many comments over recent weeks which are most welcome. Last month the Foreign Secretary and I held useful discussions with chief executives of the major development non-governmental organisations. Today I should like to take this opportunity to set out some of our responses to the key recommendations.
Perhaps I may say to the noble Lord, Lord Redesdale, that this is not a framework for decline. This is a management tool. While the noble Lord,

307
Lord Wallace of Saltaire, may be tired of the changing language of management review, I think he knows that in the real world it has to go on. Management is about priorities. That is why we have narrowed down to four key aims in the FER. The most important first confirmation from the FER was the continuing need for the UK to provide substantial flows of concessional aid. It also recommended that the ODA should retain responsibility for bilateral and multilateral aid. I might have thrown out the FER if it had not done so. But we strongly agree with both, recommendations because they underpin the Government's commitment to remain a major donor.
It was important that the review should recommend the clarification of the purpose of the aid programme by a better definition of its basic purpose and aims. That is why we have agreed with the revised mission statement, to which the noble Lord, Lord Judd, referred supportively. The ODA's overriding purpose is to improve the quality of life for people in poorer countries by continuing our contribution to sustainable development and reducing poverty and suffering.
I shall not go through the four subsidiary aims except to say this. The noble Lord, Lord Judd, seemed to think that there was some specific meaning that the second aim to help people to achieve better education and health and to widen opportunities, particularly for women, should be second in the list. There is no particular order— sound development, efficient markets and good government are essential if any of these countries are going to provide all the things that they need for their people.
The full mission statement is in the departmental report which will be published next month. I believe that that will advance understanding of what we are trying to do. I shall answer a Parliamentary Question, which will be repeated in another place, covering the Government's response to any comments that have been received on the FER.
One of the key recommendations of the FER was that the ODA's country programme resources should be more concentrated in order to enhance impact. The noble Lord, Lord Wallace of Saltaire, supported that. We certainly agree that that must happen and more clearly. The noble Lord, Lord Desai, seemed to be rather against the mechanism that we use for managing country programmes. By concentrating a larger proportion of the bilateral resources on the countries which need them most, I hope that we can be more effective than we are today because in that way we can have more impact. But to do that effectively we have to work on a country-by-country basis simply as a tool of managing the resources.
It is right, too, that wider national interests should be taken account of. But I can assure your Lordships that there will be no sudden changes. I believe that many of your Lordships know already that the 20 largest recipients accounted for about 69 per cent. of the planned country programme expenditure in the last financial year and on current plans we expect that proportion to increase to about 73 per cent. by 1998–99. This is a gradual process, but an important one because it is there to enhance the effectiveness of all we do.
308
The list of the largest recipients may not be exactly the same from year to year, but the concentration on the poorer countries in Africa and Asia and in particular the Commonwealth ones, will continue. The key decision criteria for achieving this further concentration will be the relative need for aid, our capacity to deliver it effectively and efficiently, whether directly ourselves or through NGOs or other means. We must be able to have a real development impact and to influence others in the development community to work likewise. The Commonwealth countries will certainly he helped by this. The last two criteria are particularly relevant, including our British national interest, given our shared experience and our Commonwealth ties. As the noble Lord, Lord Shepherd, has often said, we have always regarded our Commonwealth connections to be an asset. We certainly have a significant influence and interest in the countries that I have just seen—Tanzania, Swaziland and South Africa. That significant influence, interest and investment in their futures will continue.
At the same time as avoiding disruptive changes to our development assistance, we must sharpen our focus on the activities which contribute directly to achieving the aims. The Fundamental Expenditure Review made a number of sensible recommendations which will enhance the strategic planning process. Better corporate and business planning has already begun. We are strengthening the important links in all cases between the objectives and the resources of all kinds that we can use to achieve them. We are making an increasing contribution through multilateral aid. It is a fact of life that in a world where regional groups are becoming ever more common, whether they be recipient groups or donor groups, we must improve the multilateral performance, as the noble Lord, Lord Shepherd, said. I welcome the fact that the FER recommended strengthening our role in the multilateral organisations; improving linkages with our bilateral aid and securing better value.
Perhaps I may say something here about the multilateral-bilateral split. Government policy aims to achieve a satisfactory balance between bilateral and multilateral aid, both of which have their place. Until recently about 40 per cent. of the total resources was spent multilaterally. The exact figure varies from year to year. Because of the increase in funds being put through the European Union, in the last full financial year about 50 per cent. was spent multilaterally and 50 per cent. bilaterally. That process will indeed continue because in the current financial year I believe that we shall end up with multilateral contributions exceeding bilateral contributions for the first time.
I say this to the noble Lord, Lord Judd, and to others who have mentioned this issue. Because we are putting more aid through the European Union that does not mean that it is necessarily less effective. We have to work to make it more effective and that is exactly what we are doing by seconding members of ODA to the European Union to work on their programmes; by encouraging the European Union to use British NGOs who have a first-class reputation in the delivery of aid,

309
and by influencing the policy discussions of the working groups as regards how the aid is spent through the European Union.
Many believe, as the noble Lord, Lord Shepherd, said, that bilateral aid seems to be more effective than multilateral aid. That depends on the form of assistance and the objectives. It is true that we can obviously more closely target aid and that is good for Britain because that aid is identified as British. But there are useful roles for the multilateral agencies to co-ordinate assistance. Sometimes they can exercise more leverage in support of an important objective such as economic reform.
That brings me to say a special word about the World Bank. Since Jim Wolfensohn took over as president last June, he made clear his intention to carry forward the reorientation of the bank. I believe that is very important because a large amount of donor resources go through the bank. In particular he has endorsed poverty reduction as the bank's overriding objective and indeed that is the very reason for its existence. That is absolutely right. He has always underlined that he has much to learn about the bank, its mission, and its clients. So it was no accident that his first visit in an intensive programme was to Africa whose development challenges he considers to be the bank's highest priority. The bank's performance will be judged by the impact of the work in its field. We are firmly committed to working with Jim Wolfensohn on this agenda.
I was extremely interested in the comments made by the noble Lord, Lord Grenfell, when he spoke of the work that the bank has done and the role that concessional assistance has played. How right he was to refer to a graduation strategy which has been advanced by the work of the World Bank. He particularly mentioned Korea.
I believe that it is very important to realise that the World Bank is only as operational as the extent of its resources. In answer to the question from the noble Lord, Lord Rea, about the replenishment of IDA, he is well aware that IDA 11 discussions are being conducted under very difficult circumstances. That is predominantly because of US budgetary constraints, their arrears to IDA 10 and the uncertainties about their intentions for IDA 11. We have no doubt that IDA must be provided with the resources to continue its leadership role in support of poverty reduction, sound economic management and sustainable development. We are working actively with other donors to maintain a strong IDA and to ensure a satisfactory outcome to the current replenishment negotiations. We cannot predict the shape of the final package but I believe that we can play a very important role. Next month I shall be going to talk with the World Bank again about how we can strengthen its effectiveness as well as get the best possible deal out of what is available.
We have accepted most of the FER recommendations. We shall continue to have the lead policy and financial responsibility for those multilateral programmes which are a charge to the aid budget. We shall reinforce our efforts to improve the quality and focus of programmes managed by multilateral organisations. That will include
310
not only working with the multilateral agencies, but also reforming UN agencies as well as continuing work in Brussels.
I have made it absolutely clear that UK membership of UN agencies will be assessed in the light of progress with reform. We shall continue to press for reforms, but we shall also continue to fund the good agencies, such as UNICEF and many others which have done such fundamental work. I have been much saddened by the false comments that have been made about our funding of the worthwhile UN agencies, the funding of which we are not cutting, but are maintaining and trying to enhance where they have programmes which fit in with the priorities that we have set.
Many recommendations in the FER concern internal management processes. I do not have the time to go into them tonight, except to say that all have a common purpose: to enhance the effectiveness of the ODA, to increase its impact and to obtain better value for money. The majority have already been accepted and are already being implemented. They are a continuum of what we were doing before.
Much has been said about aid volume, as well as aid targeting. I realise the anxiety that is shared on all sides of the House that this is the first year in which there has been a reduction, but we remain the fifth largest donor in the world and have a better record of delivery than many others who spend much more money but far less effectively. After this year the overall budget will increase by £47 million to £2.2 billion in 1997–98 and by another £69 million to almost £2.3 billion in 1998–99. Our twin goals remain the retention of a substantial and effective programme and an even more effective British role in ensuring that multilateral aid is well spent.
We are not alone in having had to consider the restraints on public expenditure. There is no G7 donor which is not finding it difficult to move towards the targets that it would like to meet. Our contribution is still more than the average for all donors in the OECD. We still maintain that the UN target of 0.7 per cent. is the correct target, but we cannot set down the timetable for meeting it. If the noble Lord, Lord Judd, is ever in government, I think that he will find it difficult to change the pattern which has now evolved in many countries, not just our own. The noble Lord may already know that Italy's aid expenditure fell by 36 per cent. last year; ours rose last year. Canada is reducing its aid by over 20 per cent. The United States, which still provides only 0.15 per cent. of its GNP as aid compared with our 0.31 per cent., is reducing its programme still further. We have avoided cuts of similar magnitude but we have to get even better value out of what we have because volume is not the only issue.
When the noble Lord, Lord Rea, spoke about the further reductions in the ODA budget, I wondered whether he had considered the year-by-year figures since 1987 which show that it has been growing slowly. I believe that the noble Lord overlooked the fact that our reduction in this year's budget is entirely due to the reduced estimates for EC spending— that has been the case for the majority of the reduction.

311
I must make several other comments. The noble Earl, Lord Sandwich, talked about NGOs. We have made it a policy over recent years to ensure that the NGO method of delivery should be enhanced wherever it is practical to do so. The funding of NGOs has risen from £65 million in 1989–90 to £185 million in the last full financial year. The joint funding scheme will receive another rise in the next financial year which will help it in its work. Our support to the volunteer-sending agencies has also increased substantially over recent years. We intend to continue to work through the NGOs where they best deliver the programmes to which we are committed.
The noble Lord, Lord Judd, asked me about the 20:20 target because he was concerned about social spending and the poverty focus. I think that I told him at the time that the conclusion of the social summit was accepted by us all, but the conclusion left open whether any developing country and donor might wish to draw up a specific programme. We need to have mutual commitment for any of this to work. I am not aware of any case in which we have been asked by a recipient for a commitment since the summit because in many cases we are spending more than that.
The noble Lord, Lord Grenfell, talked about spending on basic needs. It is true that if you ignore all emergency aid, which is absolutely vital to such countries, you end up with 10.4 per cent. of our budget being spent on basic needs. However, the real proportion is 27.1 per cent. when one includes sanitation and all the things that we have done to benefit such countries, not only in emergencies, but in work that continues after an emergency. Therefore, the true figure is much higher than that quoted.
We shall continue to work on population matters. I was delighted to hear the speech of the noble Lord, Lord Winston, which was one of the most effective and moving speeches of the debate. I am glad to tell your Lordships tonight that although in July 1994 I felt that we could commit only about £100 million for population and reproductive health activities in 1994–95 and have about 50 new projects, we have achieved £184 million being committed to that work with 112 new projects being supported. The noble Lord will thus see that I have total sympathy with what he was saying about family planning and how it can help the lives of not only women, but the whole family and society.
Other points have been made concerning UN organisations. I touched on them briefly just now and said that we would ensure that the good agencies continue to be funded. We have not made any decision to leave any UN agency. In fact, we have just announced our 1996 contribution to UNDP and UNICEF. Those programmes will not be cut, but will be maintained at a similar level to last year.
The noble Lord, Lord Redesdale, commented on the British Council. In my absence my noble friend Lord Chesham answered a debate on that a few days ago. We have no intention of doing to the British Council all the things that have been threatened, but it is right that the British Council should not he reliant solely on the taxpayer. At a time of resource constraint,
312
it is inevitable that reductions must apply to all. We believe that they can be sensibly managed and the Secretary of State has been talking today with the British Council about how they can be managed.
I have been asked a number of other questions about how the ODA will influence the DTI and the Treasury. A debate like this helps particularly when it is well-focused. As the noble Lord, Lord Shepherd, said— others have said this on many occasionsߞwe need to improve development education. The noble Earl, Lord Sandwich, also referred to that. Development education among all sectors of the community is very necessary.
The noble Lord, Lord Redesdale, asked about the Reserve Forces Bill. I cannot go into that in detail, but as an honorary colonel I know that there is a very real TA role in terms of developing the work of the forces with the relief organisations. I cannot speak too highly of the Royal Logistic Corps, 9 Supply Regiment, which was operational in Angola at the beginning of the deployment last summer. Its work has been much heralded by the UN as a model of its kind. There will be more such work. There is no question about the value of military expertise in certain relief situations. The Reserve Forces Bill will give access to that expertise, which is a very good thing.
I have described the quality of our bilateral programme and our increased efforts to ensure that multilateral aid is well co-ordinated. I share the wish for greater spending on long-term development. I have already put in train the suggestion which the noble Lord, Lord Shepherd, made about the possible use of lottery funds in the future.
I am glad that there is widespread support in all parts of the House for a strong aid programme that makes a real contribution toward reducing poverty in the poorest countries, and that aid should go to the countries where it can do the most good. Of course it is not perfect. No programme is. I have sought to respond constructively to the debate, but I have to say to the noble Lord, Lord Judd, that criticism without costed alternatives is not helpful, just as in another place last week the Opposition failed to give any real detail of how they will achieve all their worthy aims. It is well acknowledged here that we do a good job with what we have. We intend to do an even better job in the future.
8.20 p.m.
Lord Judd: My Lords, first, I thank everyone who has participated in the debate. I am sure that all who have participated would also want to thank those responsible for drafting the Fundamental Expenditure Review, which was an extremely interesting and stimulating document. We may not have agreed with everything in it, but it has given us a great deal of food for thought. We look forward to the Government's response next month, and to continuing the debate.
Perhaps I may say to the noble Baroness— she knows this— that I am second to none in my admiration for her and her commitment, but she can do better than come to this House and lecture us on the need for responsibility towards management when her officials arc burning the

313
midnight oil, grappling all the time with a reducing budget and increased commitments, as indeed the review itself has underlined. She knows that, and it is not good enough for her to protest that somehow the efficiency of her department removes any responsibility for the vicious cuts that are being made in the programme.
In concluding the debate, perhaps I may make three observations. First, what has come clearly from the debate is that we need to look more at the balance between bilateral and multilateral programmes. It is not an issue of either or, but the balance. As my noble friend Lord Shepherd said so powerfully, we need the bilateral programme as the basis of experience to contribute well into the multilateral programme.
Another point which came out strongly in the debate is that we must decide— with great respect, the speech of the noble Lord, Lord Wallace, was extremely interesting, but there is a difference between poor countries and poverty— whether or not the aid programme is about poverty; because if it is about poverty, that introduces some new demands which are not necessarily covered by a country-oriented approach. I agree wholeheartedly with the Minister that the speech on population by my noble friend Lord Winston, was tremendously important. But the Minister knows—she heard his arguments—that if population is to be tackled effectively, it is in the context of effective economic and social development. Therefore a reducing aid programme undermines the battle for population strategy itself.
It has been a great debate. I thank all who participated. At this hour, I beg leave to withdraw the Motion for Papers.
Motion for Papers, by leave, withdrawn.

Community Representation Bill [H.L.]
8.22 p.m.
Lord Sandys: My Lords, I beg to move that this Bill be now read a second time.
I should declare an interest as the High Steward of Kidderminster, an office which has no remuneration but, nevertheless, involves an interest in one context which of course is the Charter Trustee Towns with which the Bill is concerned.
The hour is late. We have had two substantial debates, and so I am sure it will be the wish of your Lordships to have as speedy, satisfactory, and well-informed a debate as we are now focusing no longer on the scene abroad but on England.
This short Bill, which consists of only two clauses and a citation, is, potentially at least, a means of improving the quality of democratic local government which is threatened by the proliferation of ever larger unitary authorities. I shall open my brief remarks with a philosophical prologue: if the first duty of government is to govern, coupled with it is a second duty to seek to
314
reconcile the range of conflicting interests. It is here that we should review the context of the reform of local government for quite a long period.
To achieve some perspective, perhaps I may invite noble Lords to retrace the events of local government reform back to May 1966 when the late Lord Redcliffe-Maud was appointed chairman of the Royal Commission. In October of that year, the County Councils' Association submitted its written evidence which contained the following proposal:
"A local authority should not be so large that its members lose the sense of participation in community affairs; in other words, the concept of democracy must continue to be one of the primary considerations in the examination of local government organisation and the closest possible links must be preserved between the electorate and the authority".
I read that in 1966 when I was both a parish councillor and a Member of your Lordships' House. I re-read it the other day when I returned to the archives to see how things stood. That sentence encapsulates better than almost anything I could find what this is about.
The commission readily acknowledge the need for local councils. In the short version of the report (Cmnd. 4039) it tells us:
"Our first firm conclusion was that any new pattern of democratic government must include elected 'local councils', not to provide services, but to promote and watch over the particular interests of communities in city, town, and village throughout England".
The main report (Cmnd. 4040) went further. At paragraph 320 it continued:
"The local council, elected for each town and parish, and charged with responsibility for making known the views and interests of its people, will be an essential link between the public and the main authority. The authority must consult the local council on any matter of importance to the council's area, as some county councils now consult district and parish councils. There must he consultation not only on the preparation of development plans and major proposals for new development, where it should be axiomatic that no decision is ever made until the local council's views have been considered".
Having reported so fully and emphatically on the need for local councils in the reformed structure of local government in 1969, there was a curious turn of events. Those familiar with the history of what took place will remember a series of events. Perhaps I may pass the signposts swiftly and indicate what they were. There was of course the Derek Senior minority report— an important document— to the Redcliffe-Maud Commission. There was the Baines Committee appointed by the Secretary of State to examine the minority report and the main report. There was the Secretary of State's own compromise known as the Walker compromise which led to the Local Government Bill 1972 which later became the Act.
Section 246 of that Act established one of the most anomalous of bodies— a body to which in the town of Kidderminster I belong— the Charter Trustee Towns. Where the area of a city or borough did not become a parish, it became instead a body corporate by the name of Charter Trustees of the city or town, as the case may be. Noble Lords will appreciate that charter trustees have no local government functions. Their sole purpose is annually to elect a mayor and deputy mayor. They exist within the context of the appointment of the

315
mayoralty and the upholding of civic traditions. In many cases such mayoralties have ancient foundations, having been established for over 700 years.
There are 22 charter trustee bodies which were set up in 1974, and three such towns are now constituted as new parishes following the recent local government review. On the whole—I stress this—requests for such representation have been refused. A classic example is Salisbury.
Often the absence of a parish council contrasts with a neighbouring parished community in a different local government district. Such comparisons perpetuate an anomalous principle and deny equality of representation. Thirty-six metropolitan districts are all unparished. Non-metropolitan areas include such celebrated and well-known towns as the city of Plymouth, with a population of 252,000; the city of Bristol, with a population of 374,000; and the city of Derby, with a population of 217,000. That bears heavily on the argument behind the Bill. All are large ancient boroughs and towns of considerable foundation and history and proud, long traditions which are seeking parishing or parish representation.
The Bill has two aims. The first is to provide a fair, democratic and accountable way for unparished urban communities to gain parity with their rural neighbours, or their urban neighbours on the other side of the boundary, through an open system of petitioning for the creation of a new parish. It would require at least 10 per cent. of the local government electors of the proposed parish to present a petition to the Local Government Commission asking for a new parish to be created. Conversely, those opposing such a move would have to provide a counter-petition signed by an identical number of local government electors. If the petition asking for a new parish were not opposed, the Secretary of State for the Environment would have to constitute the new parish within a year.
The second aim is to permit Charter Trustee cities and towns, which comprise 22 historic communities which have kept their mayors but which have no local government powers, through a petition submitted by at least 10 per cent. of the community's local government electors which asks that the city or town be made a parish. On that being done, and with the agreement of the Charter Trustee body, the Secretary of State would have to constitute a new parish.
The Bill does not seek to impose a parish council on the people of an unparished area against their will. It is a democratic and voluntary process which I believe to be important. Today many urban communities continue to be denied true local representation when areas a short distance away have or are being promised parish or town councils. The Bill sets out to remedy that situation.
In welcoming later speakers in the debate I wish to welcome in particular the right reverend Prelate the Bishop of Worcester. I attended his enthronement as long ago as May 1982. I remember his address from the chancel steps of Worcester Cathedral in which he said to the large congregation, "Will you follow me to Dudley?". Dudley represents a substantial part of the urban fringe of his diocese to the north. That was not
316
only an invitation but a challenge and a realisation of the importance of the urban part of his diocese. We look forward to his speech, in particular his intimate knowledge of the area in the north of his diocese and in the Midlands.
While the review continues under the auspices of the Boundary Commission, which is warmly welcomed, some progress is being made. I readily acknowledge that. I also wish to acknowledge the support given by those who have drafted the Bill so carefully and conscientiously. I greatly appreciate the letter which I received from the noble Earl, Lord Ferrers, in regard to the background. A number of speakers are to follow me and I do not wish to delay them. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(Lord Sandys.)
8.35 p.m.
The Lord Bishop of Worcester: My Lords, I congratulate the noble Lord, Lord Sandys, for introducing the Bill. I support its Second Reading because I believe that my diocese of Worcester demonstrates in microcosm the need which in macrocosm is nationwide.
Kidderminster, an historic and industrial town, the place of the great Richard Baxter's ministry and the home of Roland Hill, the originator of the penny post, has only a Charter Mayor and Charter Trustees with solely ceremonial duties. There is not so much as a local council to decide upon or to activate the care of the town war memorial and many other local issues.
Nor is there any justice when nearby Stourport-on-Severn and Bewdley are parished and Kidderminster, which is three times as large with 57,000 people, is unparished. Halesowen including Cradley (population of 58,000) has no council but the nearby large village of Romsley has a council. Stourbridge, including Amblecote, Lye and Wollescote (population 56,000) are unparished and so also are Netherton, Brierley Hill, Coseley, Quarry Bank, Gornal, Wordsley, Kingswinford and Sedgley. I could go on, but time will not allow. Suffice it to say that 600,000 people living in the old county of Worcester, which is my diocese, are disenfranchised at the civil parish level.
I beg Her Majesty's Government not to stonewall local people who seek the creation of a parish. It cannot be right that historic cities and towns and other established urban communities continue to be denied truly local representation. Is it not true that that which is local is real? Do we not want a nation which is at ease with itself? Do we not want a nation where civic pride is restored and violence is removed from our streets? Does not the principle of subsidiarity imply that local issues are best addressed by local people in Norfolk, in Worcestershire or in the Black Country? We have now adapted to local government reforms. It is not likely that war will break out between parish councils and the new superior unitary authorities. That might have been true in 1977 but not now that we arc older and wiser. Furthermore, the best criterion for the parishing of a town is surely the expressed desire of its electorate.

317
I do not believe that we shall have the one nation that we desire if we go all out for centrism and neglect the freedom of local people to express themselves over local issues. I hope that the Bill will be sent on its way to the Committee stage. I believe that it is concerned with quintessential democracy. Perhaps I may quote a couple of sentences from the Redcliffe-Maud Report:
"Our conclusion that local councils must be part of the new system is unanimous. We do not see them as having statutory responsibility for any local government service: but we do see them as contributing a vital element to democratic local government".
I believe that the passage of this Bill is being watched by large numbers of people. It would strike a blow in favour of a participatory national policy and the involvement of many in the good order of their communities and, therefore, of the nation as a whole. I am glad to support the Second Reading of this Bill.
8.40 p.m.
Lord Mottistone: My Lords, I too welcome this Bill and congratulate my noble friend Lord Sandys on introducing it. It is interesting that his approach and that of the right reverend Prelate is somewhat different from mine, but the Bill seems to satisfy both.
It is much supported in principle by the Isle of Wight Council, the Isle of Wight Association of Parish and Town Councils and by the National Association of Local Councils. When I became president of the Isle of Wight Association of Parish and Town Councils about 15 years ago, the Isle of Wight was the most emparished county in England, and I think it probably still is, with the whole of one of its districts having parish and town councils and several such councils in the other district.
Until the passing of the 1992 Local Government Act, the creation of new parish councils was very simple if the community wanted it and the district council agreed. The executive powers given in Sections 9 to 12 of the 1972 Act are largely in the hands of the district with the Secretary of State having overseeing powers over the necessary order which would have to be laid. I have gathered as a vice-president of the National Association of Local Councils that that system has produced an excellent bottom layer of local government. Indeed, in my own experience, not only in the Isle of Wight but particularly there, I have nothing but praise for the parish and town councils. They do a wonderful job in feeding just that link between the next stage and the ordinary electors. Therefore, it is terribly important to realise that there is really no point in making it difficult to form parish councils when they are wanted by the local people.
However, from the point of view of the local people, the 1992 Act was, I suspect inadvertently, a disaster in relation to the expansion of parish councils. Sections 13 and 14(3)(f) and (g) and paragraphs 8, 9 and 10 of Schedule 3 of the 1992 Act took all the powers for establishing a new parish and town council away from the local people and gave them to the local government commission, thus imposing unexpected and inordinate delays. For example, in the Isle of Wight we have wished for some months— over a year really— to have
318
no further delay in establishing a town council for East Cowes. That is wanted by the local people and supported by the Isle of Wight Council which, as a unitary authority, has replaced the county council and the two district councils. There is no need for delay except for the dead hand of the 1992 Act. Therefore, we greatly support the principle of this Bill. I hope that with any amendment which the Minister might care to ask to be added to it, and with subsequent government support, it can be speedily handled by this House and pressed on through another place without delay. I strongly support the Bill.
8.45 p.m.
Lord Monkswell: My Lords, in rising to support this Second Reading, perhaps I may explain something of my background and why I have reached some of my thinking about the situation and what some of the results might be.
I was very interested in the remarks of the noble Lord, Lord Sandys, who mentioned that Plymouth was unparished because, prior to 1832, it did not have a Member of Parliament. I am very proud that my ancestor, the father of the first Lord Monkswell, was the first MP for Plymouth.
Bringing the House a little more up to date, I can report also that in my youth my father was a member of the Halstead Urban District Council in Essex and for a short period was also a county councillor in Essex. Coming even closer to modern times, I served as a member of the Manchester City Council for five years until 1994. This House will appreciate that the modern metropolitan district council is very far removed from the size of a parish council.
My experience as a metropolitan district councillor suggested to me that there is grave problems in not having a tier of democracy below that. Manchester has something like half a million souls and stretches 15 miles in a north-south direction and two or three miles in an east-west direction. It was very easy for a decision that affected the local community in one part of the city to be made by people who did not know the local area. The lack of parish councils resulted in, I suspect, a significant number of wrong decisions being made.
I am a passionate believer in the need for what I would describe as a multi-layered democracy. The situation that we have seen over the past 15 years of eroding tiers of government, whether it he the metropolitan counties or the county councils in some areas of England, has been a very retrograde step. By passing the Second Reading of this Bill and getting the Bill on to the statute book, I hope that we might redress the balance.
Something that I particularly appreciate and endorse about the Bill is the fact that it enables change from the bottom up. It enables people in their own communities to come together to make a decision and they will have a democratic structure. That is at total variance with the way in which local government reorganisation has been conducted during the past 50 years. Following Royal Commissions and Cabinet decisions, local government

319
has been determined from the centre. It is a very powerful argument in favour of this Bill that it enables building from the bottom upwards.
Perhaps I may look at some of the measures that parish council might take. I have made a list of practical steps that I used to be faced with as a councillor of a metropolitan district. Those decisions would be made by the town hall some distance both geographically and democratically from the point of effect of the local community; for example, the design of traffic calming schemes. It is quite interesting how those schemes can affect local people in their communities but if the decision is taken at the town hall many miles away that may interfere with the smooth running of the community. Perhaps I may mention also small planning applications, the management of local primary schools, the management of community centres. All those matters are very sensitive to the local community and decisions about them are best made at local level.
We need to recognise also that without giving parish councils the ability to spend what may be small sums of money, the community, through its democracy, will not have the mechanism to do what a community should be able to do. The noble Lord, Lord Sandys, mentioned the maintenance of a war memorial. That is the sort of action that should be taken by the local community coming together through democracy to look after what is important to it. From these Benches, I warmly welcome the Bill and heartily hope that it will receive a Second Reading.
8.50 p.m.
Baroness Macleod of Borve: My Lords, the hour is late, and I shall not keep your Lordships long. As a fellow member of Worcestershire from which my noble friend Lord Sandys and the right reverend Prelate the Bishop of Worcester come, I wish to associate myself with the Bill. Not only is the measure important now, hut, according to the Sunday press, it may be even more important in the future. Reference has not been made to a Sunday newspaper article which stated that in the year 2016 there may be 27 large new towns within England. If one has large new towns, one has to have people to govern them and to organise at grass roots level. Parishes will be there to do just that.
The Bill has been widely welcomed by those who believe, as I do, in democratic local government. Worcestershire is one of the better counties for parishes. Perhaps I may say that it is one of the luckier counties. There are only 10,200 parishes in England at present. I hope that more will be created as a result of asking the Secretary of State to authorise them.
The noble Lord, Lord Sandys, and I had the pleasure of meeting many years ago Lord Redcliffe-Maud, that wise counsellor who produced that excellent report. He said many wise things. Most of us will have read the report and I shall not go into it in detail. He emphasised the point that the local people should not only be elected but represented. Their voices should be heard on the higher district councils, county councils, or whatever those bodies will be called in the future.
320
The noble Lord, Lord Monkswell, enumerated some of the jobs which voluntary people organise in their parishes. I rang my local office in Buckinghamshire. In my parish we are given £2,500 per year by the district council. People work quite hard, voluntarily, within the precept that has been allowed. They help with the roads or with the police. They try to organise the Neighbourhood Watch Scheme— sometimes they are successful— which in the countryside can sometimes be invaluable. More importantly, they are asked by the district council for advice on local planning. Local planning can be absolutely disastrous and managed badly by people from afar.
I shall say no more except that, unfortunately, today the voluntary organisation in the parish had a sad duty. The pond was iced over and the parish council was asked to see where the local foxes had eaten all the ducks.
8.55 p.m.
Baroness Hamwee: My Lords, I join with other noble Lords in welcoming the Bill. I thank the noble Lord, Lord Sandys, for introducing it. I declare an interest as a member of a London borough council but not, sadly, as a parish councillor. I believe that one reason for the subject of politics being in such low esteem is its remoteness from those to whom it should be closest. I may not be the only Member in this Chamber tonight who has been involved in more than one election campaign where campaigning has been based on such slogans as, "We shall stop this area being regarded as the forgotten part of the borough." It is possible to run large election campaigns in many places, all claiming, with some success, but also with some truth, that they are forgotten parts of the borough.
It is a truism—I have come across it on many occasions—that people generally like the services their local councils provide. They approve of them and have things to say about them. However, they dislike the authority that delivers those services. They do not know the names of their councillors. They do not understand their councillors' roles. A message on my answerphone today was from someone who clearly considered that I should be on duty at eleven o'clock in the morning taking calls about local problems. There is an expectation that councillors will be readily available. Indeed we should be, but it is not always possible.
People do not always vote. The turnout in local elections is variable. I come from an area where the voting figure is over 60 per cent. However, all noble Lords will know of examples where the figure is much lower. I believe that local people do not identify with the local authority, as the right reverend Prelate said. We talk about being involved in our communities. Communities do not come in standard sizes or as standard packages. Indeed, many of us may be members of more than one community at any one time. Certainly, the more local the representation the better able is the authority to act in its most important role— that of community leader.
In England we have the largest local authorities in Europe. Before the local government review, districts and metropolitan areas had to review the need for parishes

321
every 10 years. That gave an opportunity for communities to have their views recognised. I understand that the boundary commission, albeit somewhat slowly, quite often tended to approve proposed new parishes. However, under the Local Government Commission controls there is no duty to review except at the time of the review of the principal councils. Perhaps the Minister, or the noble Lord, Lord Sandys, can confirm that whereas about 50 or 70 new parish councils were created each year under the old process there have been only 30 in the past three years.
Some matters of detail in the Bill deserve scrutiny in the sense of, I hope, helpful criticism at later stages. I refer to the mechanisms for consultation; the comparative proportions; and the two figures of 10 per cent. If there were 70 per cent. in favour—I pluck a figure from the air—should the 10 per cent. be treated in the same way as with 10 per cent. in favour?
I daresay that the Government will have something to say about the provision in the Bill regarding going straight from the result of the local process to the Secretary of State making an order thereby bypassing consideration by either this or the other place. Bearing in mind the convolutions experienced as a result of the local government review in which the commission made recommendations with which the Secretary of State did not necessarily agree I can see a good deal of sense in the Bill's proposals. However, I have no doubt that that is an issue upon which we shall have to spend time at a later stage. I say all that subject to what I very much believe; namely, that people should be represented as they choose. The noble Lord, Lord Mottistone, says there is no point in making the creation of parishes difficult. That goes absolutely to the heart of the matter. The noble Lord, Lord Monkswell, talked about the "bottom up" approach. Again, that must be right.
The unsatisfactory nature of the current position is perhaps best exemplified by the position of charter trustees. To have recognised the desirability of carrying forward an historical local identity but only for ceremonial purposes seems almost to encapsulate the irony and the dilemma.
As a Londoner, I feel that I must mention it. I checked with a gentleman whom I believe to be one of the authors of the Bill. My understanding is that the legislation extends to London; perhaps the noble Lord, Lord Sandys, will be able to confirm that. London is woefully unparished. For the sake of completeness, I would not like it to be thought that having parishes lets the principal council off the hook. Quite independently, the principal council has obligations to consult and to ensure that it understands all views which come from every part of each community it represents and serves. Parishes play an enormous part in the democratic process. Democracy must be an inclusive, not exclusive, process. Obviously, accountability demands a system which encourages the participation of the electorate. I showed the Bill to a colleague whose comment was, "This is a good thing." We support the Bill.
9.2 p.m.
Lord McIntosh of Haringey: My Lords, my credentials for participating in this evening's debate do not go back as far as those of my noble friend Lord Monkswell; nor, indeed, are they as up-to-date as those of current members of either parish or other councils. I suppose the furthest back that I can go is to say that I went to school in High Wycombe, which is one of the charter trustee towns. I believe that it had a borough council of its own, although it was probably an urban district council.
Since that time, I have been passionately in support of local democracy, which is what the Bill is about. I spent a number of years between 1963 and 1983 as a member of larger local authorities, ending up as a member of the largest of all; namely, the Greater London Council. But, in between times, I was very much involved in the neighbourhood council movement. My noble friend Lord Young of Dartington who founded the Association for Neighbourhood Councils carried out its first survey in my area of London— Hornsey— in 1970. He proved convincingly that, when one asks people where they live it transpires that they live in relatively small communities. Such communities can vary from less than 1,000 to a population of several thousand in London.
People in Hornsey, which has now been subsumed into Haringey, did not say that they lived in Hornsey or Haringey; they said that they lived in Muswell Hill, Highgate, Crouch End or wherever. At the time, it seemed to me to be rational that one should shape one's local government to fit what people thought was their community so that they could have an opportunity to devote themselves to that community. Therefore, when I was asked to be chairman of the Association for Neighbourhood Councils in 1974, I gladly took on that duty. I continued with it until 1980, arguing all the time that the urban parts of England were the only areas of Great Britain which were denied the opportunity to have parish councils.
Parish councils exist almost everywhere in rural areas in England. Of course, under subsequent legislation, Scotland and Wales will have their own community councils in addition to the more formal structure of local government. However, it is the towns and cities of England which are deprived of that opportunity and of all the advantages which have been so eloquently expressed by speakers in this evening's debate. We argued both with Labour and Conservative Governments on the issue. I have to say that there were satraps of large local government in the Labour Party just as strongly as in the Conservative Party. They behaved just as badly in denying the right of local people to put up any opposition to their own often very autocratic behaviour. So this is not a particularly party matter.
We did not succeed in getting any significant change to the very restrictive conditions under the parish review procedure after the Local Government Act 1972. As a result, in the period between the 1972 and 1992 Acts, the creation of parishes in urban parts of cities and towns of England was negligible. There was a procedure

323
for it, but it was one that was so complicated, so much dependent on existing local government and, indeed, of overcoming the resistance of central government that it did not really work.
Following that, I introduced an urban parishes Bill in this House in 1984 which would have gone much further in its effect than the Bill that we are now considering. With the same sort of threshold of approval for a proposition to be put forward and a rather different threshold for objections to be presented, it would have provided for urban parishes in any part of the towns and cities of England where people wanted them. The present Bill is most severely restricted to the 22 charter towns. I believe that that is wise under the circumstances because the opposition of the Government in 1984 to our urban parishes Bill was quite severe at the outset, although I believe that it was tempered as the debate continued.
The result is that all these years after Redcliffe-Maud, and more than a century after the last fundamental upheaval which created local government in this country, there are still large parts of England which do not have truly local government. For the reasons that have been expressed by every speaker— from the example given by my noble friend Lord Monkswell and the ducks mentioned by the noble Baroness, Lady Macleod—we desperately need this ultimate proof of our belief in subsidiarity.
I hope that the Minister will not say in reply that there is the possibility of dealing with the problem under the provisions of the Local Government Commission, because the noble Baroness has shown how ineffective that machinery is. I hope that he will say that this is a measure which is restrictive in its application, reflects the needs and demands of local people and can only he implemented if there is a considerable groundswell of opinion in favour of local democracy. I hope that he will say that the Government will not object to the Bill passing through this House and will also find time for it in another place. In that event, we shall have made a small but real step towards local democracy.
9.9 p.m.
The Minister of State, Department of the Environment (Earl Ferrers): My Lords, my noble friend's Bill has the great merit of being a short one. That is a great advantage. Your Lordships almost to a man—and indeed also to a woman, although we must not he deflected by such niceties—have championed the virtues of the parish.
The noble Lord, Lord McIntosh of Haringey, has not changed from the times when I sat opposite him on home affairs matters when he used to say that he hoped that I would say this and that I would not say the other. He has done exactly the same today. I shall not tell him whether I intend to accede to what he wishes. He will have to wait to find out.
My noble friend's Bill has the virtue of reflecting the importance that the Government attach to parishes. That was explained in the rural White Paper. Today's debate has also been the vehicle for what must be a somewhat questionable record of the noble Lord, Lord Monkswell.
324
He has spoken in every debate and on two of the four Questions today. He must be a veritable polymath. However, I understand and share a certain affinity and sympathy with him. If the proposals in the speech made this evening by the leader of his party were ever to come to fruition, both he and I, as hereditary Peers, would be vaporised. I can quite understand the noble Lord, Lord Monkswell, wanting to make the best he can of the short time he thinks is available. However, the noble Lord need not worry too much because that little fantasy will not come to pass. Therefore, he will still he able to engage us with his speeches on almost every occasion of the day's business.
Following the local government review, the Government accepted the recommendations of the Local Government Commission for the creation of 32 new parishes. I see that the noble Lord, Lord McIntosh of Haringey, is informing his noble friend Lord Monkswell of what his leader said. The poor noble Lord, Lord Monkswell, did not know. I can tell him that the Labour Party intends to get rid of all hereditary Peers if it were ever to come to power. It will not; so we shall not be got rid of.
Lord Monkswell: My Lords, I thank the Minister for giving way. The idea of disenfranchising hereditary Peers has been on the table for some time. I am on record as welcoming the leader of my party offering to give me back my rights to vote and stand for Parliament. I hope that that right might also be extended to our colleagues who are life Peers.
Earl Ferrers: My Lords, the noble Lord, Lord Monkswell, seems to have forgotten that he had that right and could have divested himself of his peerage when he first inherited it if he wished. He evidently decided not to do so and preferred to be a Member of the House of Lords rather than chance his arm, and probably lose it, trying to become a Member of the House of Commons. However, let us leave that subject because it is a slight diversion.
Lord McIntosh of Haringey: It certainly is.
Earl Ferrers: The noble Lord, Lord McIntosh, cannot complain if his party leader makes provocative remarks and then someone objects to them.
The Government are in favour of parishes. I can assure the right reverend Prelate the Bishop of Worcester that the Government do not, as he put it, intend to stonewall on the creation of new parishes. I do not know where he got that idea, but I can assure him that it is an incorrect assessment. We have not stonewalled and do not intend to.
It is curious that Worcestershire is so well represented today by the right reverend Prelate and my noble friends Lord Sandys and Lady Macleod. I wonder what goes on in Worcestershire that does not happen elsewhere. We welcome the broad intention of my noble friend's Bill to give local people a louder voice in calling for a new parish to be established. That is something which is missing in existing legislation.

325
The Local Government Act 1992 removed the provisions which were in the 1972 Act permitting districts to instigate parish reviews. Instead, the 1992 Act gave the Local Government Commission the duty of carrying out reviews when it was directed to do so by the Secretary of State. That system has not worked well.
Lord Mottistone: Hurray! It is splendid to hear my noble friend stating, as a Minister, that the system has not worked well. It has worked terribly badly.
Earl Ferrers: To have such support from behind me is enormously gratifying. I wish that my noble friend had said "Hurray" when I made my observations about the future composition of the House of Lords. He preferred to keep quiet. However, I have at least one supporter; that is good.
To reintroduce the old 1972 provisions would not be satisfactory. They did not make adequate provision for those cases where districts failed to instigate reviews. I am bound to tell my noble friend Lord Sandys that we find a fundamental difficulty in the way the Bill is drafted. It affects both parts of the new schedule which the Bill would insert into the Local Government Act 1972.
We have no blueprint for the composition and size of parishes. There is no reason why they should not develop differently in different areas, if that is what people want. It is, though, the Government's view that parishes should not be so large that they dominate the district in which they are located. That is a recipe for confusion and a likely cause of dispute. It particularly applies to charter trustee towns, of which my noble friend, as High Steward of Kidderminster, has direct and deep experience. Several of the charter trustee towns are more than half the size of their respective districts.
Fixed and immovable procedures are also undesirable. They can be misused. It is possible to imagine circumstances in which the creation of a parish is not desired for its own sake but simply because the possible creation of such a parish can be a useful ploy in a wider dispute.
The process of obtaining signatures for a petition is not always beyond criticism. A petition can, of course, be the result of a careful explanation of the proposal to each individual and it can be the result of detailed consideration. But we can all think of cases in which the opposite would be true. I am also apprehensive, in a general way, about what might be called "a war of petitions" whereby one petition can be given to the commission saying: "We want this." Another petition can be presented to the commission saying, "We don't want that" and the commission would then have to act as an undignified referee. That is not the most enlightened way of considering changes to local government.
The noble Baroness, Lady Hamwee, suggested that Her Majesty's Government might have views on the way in which the feelings of potential parishes were conveyed. She hit the nail on the head. We have several views on it. We need to construct a better process which, as the noble Baroness said, will create a role for the
326
districts not to obstruct but to assist. As she rightly said, consultation must be inclusive not exclusive. There must be a process which will allow the Secretary of State to have his own discretion in decisions, seeking advice from the Local Government Commission if he wishes to do so.
The Secretary of State would, of course, be obliged to use this discretion reasonably. I think that he has already demonstrated that that can be done under the existing procedures for creating parishes. For example, he has accepted the case for creating a number of sizeable parishes in former charter trustee areas which were created following the 1974 reorganisation.
In order to assist potential petitioners, we propose to revise the guidance on the size of new parishes which is contained in a circular drawn up in 1977. In particular, we are considering whether we should give more weight to the relationship between a potential parish area and the district in which it exists, rather than simply setting an absolute upper limit on what should be the size of parishes.
I hope that my noble friend will be good enough to take these comments in the spirit in which they are made. I believe that it would be good to allow for popular opinion to initiate a process leading to a new parish council, but the method of initiation proposed in the Bill is inadequate. I hope that my noble friend will consider the suggestions which I have made and will be able to reflect on the matter.
Lord McIntosh of Haringey: My Lords, I am most grateful to the Minister for allowing me to intervene. His suggestions to the noble Lord, Lord Sandys, are very positive and helpful. If the noble Lord wishes to seek the assistance of officials in his department, might such help be available to him?
Earl Ferrers: Yes, my Lords, I am entirely at my noble friend's disposal. We like the idea of the creation of parishes, but the Bill as presently drafted excludes the Secretary of State in a way that would be undesirable and would enable parishes to follow their own momentum. If my noble friend wishes to seek any help, I shall be more than happy to give it to him.
That said, I am so glad that the noble Lord, Lord McIntosh, thought that I was being helpful. It took him the whole of my speech to realise that, but I was actually trying to be helpful. I hope that my noble friend will choose to consider those points for his Bill.
9.20 p.m.
Lord Sandys: My Lords, I greatly appreciate all the contributions to this debate. My noble friend Lord Mottistone put his finger on the heart of the matter; namely, that support must spring from the grass roots.
We are concerned with a disparity of representation. It should be emphasised to my noble friend the Minister that there are thought to be over 35.5 million subjects of Her Majesty who are not enfranchised at the local level. I am advised that that figure is correct. I am further advised that it covers the whole of England.

327
I shall have to take advice in seeking a correct response to the question posed by the noble Baroness, Lady Hamwee, as to whether only 30 parishes were created in recent years, and the status of London. The noble Baroness will know, as I do, that the Redcliffe-Maud report excluded London entirely. But the government of London has subsequently changed. Therefore there may well be an enabling procedure whereby parishes may be created in London. I do not know at the present time.
Turning to the difficulties that are presented and the very receptive manner in which my noble friend the Minister replied, it would be extraordinarily valuable if
328
we could establish an opportunity to discuss the content of the Bill, recognising that there are limits to which the Government may seek to go at this present stage, but that they may be persuaded by argument and proposal at a later stage.
I thank all who participated in the debate. I commend the Bill to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.
House adjourned at twenty-four minutes past nine o'clock.