Lords Sitting of 24 January 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 Chichester.

Mathematics and Science: Teacher Recruitment
Lord Dormand of Easington Lord Dormand of Easington asked Her Majesty's Government:
What action they are taking to deal with the shortage of teachers of mathematics and science.
The Minister of State, Department for Education and Employment (Lord Henley): My Lords, there is no overall shortage of teachers in these subjects, nor within teaching nationally. Vacancy rates are at an all-time low. However, mathematics and science are priority subjects for the teacher recruitment work of the Teacher Training Agency, in recognition of the greater difficulty in attracting teacher training students in these subjects and the planned growth in intakes over the next few years.
Lord Dormand of Easington: My Lords, that is indeed a strange Answer considering that the Teacher Training Agency has recently stated that there is a fall of 21 per cent. in the number of graduates applying for the teaching of mathematics and 41 per cent. fewer for the teaching of physics. Despite what the Minister has said, does he agree that while all subjects are important, mathematics and science are particularly important for this country for progress and competitiveness? Have the Government received any representation from the TTA about what it says is a very substantial shortage?
Lord Henley: My Lords, the noble Lord should listen to my Answer slightly more carefully. I said that there was no shortage at present but that we are not complacent about the future. That is why we have set some very demanding targets. With the demographic changes, partly within the teaching profession but also in the growth of the number of children coming forward in the next few years, it is obvious that we are going to need many more teachers in those subjects and in other subjects generally. I did stress that there has been a fall in recruitment and that again is something we are concerned about. We are in discussion with the Teacher Training Agency, which has a number of initiatives in order to try to improve the numbers and to improve recruitment of teachers, particularly in maths and science.
Lord Wallace of Saltaire: My Lords, is the Minister aware of the immense problem of teaching maths in primary schools? In secondary schools we have a number of well-qualified maths teachers but I have heard many primary school teachers described as "mathsphobic". Is the Minister aware that the number
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of primary school teachers with the TCSE in maths is very low? Are there plans to tackle this immensely important problem?
Lord Henley: My Lords, that we do have concerns as regards primary and secondary schools is fairly clear. As I made clear at the beginning, there is not a shortage at the moment. There is a reasonable number of maths and science teachers. According to the most recent survey, there are about 38,000 teachers with maths qualifications within schools, but only 62 per cent. of them are actually teaching the subject. I suspect that that is a matter which the schools themselves can address to make sure that the right people are teaching the right subject.
Lord Gisborough: My Lords, did my noble friend see the article in the Sunday Telegraph 10 days ago where it was shown that at least one maths teacher was appointed for ethnic and political correctness reasons rather than because of having experience of mathematics? Does he agree that that can hardly be conducive to properly teaching people mathematics?
Lord Henley: My Lords, I very much hope that the political correctness that we see in a number of local authorities does not extend to appointments on such grounds. Obviously we hope that if schools or local education authorities were seeking maths teachers they would seek teachers with the appropriate qualifications.
Lord Morris of Castle Morris: My Lords, can the Minister explain to the House the division of responsibility as it now obtains between Her Majesty's Government and the Teacher Training Agency for the tasks of, first, forecasting and, secondly, providing new ITT places in mathematics and science?
Lord Henley: My Lords, we make various forecasts of the changes that are likely to happen both, as I stress, in the number of children and in the structure of the teaching profession. The noble Lord will know that there are quite a number of teachers coming up to retirement at the moment and therefore recruiting poses certain problems for the future. That is why we have increased the target for recruiting and asked the Teacher Training Agency to look at various means by which it can encourage more people into the teaching profession, whether as late entrants or whatever, especially in certain priority subjects such as mathematics and science.
Lord Beloff: My Lords, does my noble friend agree that mathematics is a subject which is innate in some people but rather less so in others? Is that not a very good reason for extending selective schooling in order to find more of those who have that innate ability?
Lord Henley: My Lords, I totally agree with my noble friend. I suspect that we on this side of the House are united in our belief that there is nothing wrong with selection and a great deal to be said for parental choice.

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My noble friend will be aware that there are divisions to some extent, if I may put it mildly, within the party opposite.
Lord Dormand of Easington: My Lords, can the Minister give more information about what he described as the initiatives being taken at the moment? Presumably they are being taken in conjunction with the Teacher Training Agency. Will the Minister also bear in mind that whatever the initiatives are, there is quite a time lag between convincing pupils to take a mathematics course at university, followed by teacher training, and their arrival at a school?
Lord Henley: My Lords, the Teacher Training Agency is promoting a number of initiatives, including a project for taster and returner courses targeted on shortage subjects and under-represented groups in the profession. It is promoting Teaching as a Profession, which is a programme set up in September 1995. It is having discussions with specialised maths and science organisations. I could go on. The simple fact is that there is no one easy solution to the problem which is coming in the future. That is why the Teacher Training Agency is pursuing a raft of different courses.
Lord Clark of Kempston: My Lords, does my noble friend agree that there seems to be a shortage of maths teachers within the party to which the noble Lord, Lord Dormand, belongs in so far as, as yet, the mathematicians of his party have been unable to cost the programme that it is offering to the general public?
Lord Henley: My Lords, my noble friend makes a valid point.
Lord Avebury: My Lords, is it not clear from the results at GCSE A-level which have been published recently as between one school and one local authority area and another that there is a wide difference between the quality of teaching in these respective schools? In those circumstances, has not the supply of mathematics teachers been maintained by lowering standards?
Lord Henley: My Lords, the noble Lord is right to point to the wide range of standards that exist within LEAs and within schools. That is one of the reasons we introduced the performance tables. They have done more than virtually anything else to raise standards. Interestingly, if I may briefly make a political point, they were opposed at the time by the party opposite and, I believe, the noble Lord's party as well.
Lord Annan: My Lords, is it not the case that what matters is not so much the quantity of teachers, which I gather is satisfactory, but their quality? What schemes do the Government have for retraining teachers who are already teaching mathematics and science, sometimes, if I may so put it, very inadequately because of the fact that they have been conversions from arts subjects and have been more or less drafted in to teach mathematics and science?
Lord Henley: My Lords, as I think I made clear earlier, it is a fact that there are quite a number of maths
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teachers who are not teaching maths subjects. It is obviously right that schools should ensure that people are teaching the subjects they are trained to teach. I can also confirm that money is available for in-service training and, where necessary, teachers can be given refresher courses of one kind or another to improve their skills.

Vehicles for the Disabled: VAT Rating
2.45 p.m.
Viscount Ingleby Viscount Ingleby asked Her Majesty's Government:
Whether it remains their policy that VAT should not be charged on motor vehicles designed for disabled people when purchased by a disabled person for his or her own use or by an organisation serving the needs of disabled people.
The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, before I answer the Question perhaps I may congratulate the noble Viscount on his return to us and wish him every success.
Noble Lords: Hear, hear!
Lord Mackay of Ardbrecknish: My Lords, it remains the Government's policy to retain the present VAT reliefs relating to motor vehicles for disabled people. Those include relief for vehicles specially designed for use by disabled people, and vehicles supplied either to charities providing care or medical or surgical treatment, or to certain other eligible bodies which pay for the goods wholly from voluntary contributions or charitable funds.
Viscount Ingleby: My Lords, that being so, why is VAT at present payable on the Venturer, described as a cross-country wheelchair designed for disabled people?
Lord Mackay of Ardbrecknish: My Lords, the question of defining what is eligible for relief is quite difficult. There are, so to speak, two hurdles over which a vehicle must jump, if I may use that expression, in order to obtain zero rating. First, it has to be a motor vehicle as defined. Off-road vehicles are not regarded as motor vehicles. Secondly, it must be able to carry people who are seated in wheelchairs. It is for those reasons—principally for the first reason—that the off-road vehicle, which I know the noble Viscount uses with such success, is not considered eligible for zero rating.
Lord Ashley of Stoke: My Lords, judging from that answer, is there not a case for reconsidering the criteria for help for exemption from VAT? One criterion should be that if it helps disabled people and cannot be exploited by others there should be exemption. The point raised by the noble Viscount is surely within that category.
Lord Mackay of Ardbrecknish: My Lords, I very much appreciate the use to which some people can put an off-road vehicle, especially if they are interested in carrying out pursuits in the countryside. However, with

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regard to the law on zero rating, the position is that the vehicle must, as I said, obey these two criteria. It must be a motor vehicle as defined—that really means a road vehicle—and it must also be able to carry disabled people, either as passengers or drivers, in their wheelchairs. I am afraid that the vehicle in which the noble Viscount, Lord Ingleby, is interested does not obey either of those criteria.
Lord Boyd-Carpenter: My Lords, is not the defect of the tax called VAT that it falls on all kinds of areas where it is desirable that there should be expenditure and falls heavily on them? Is that not an inherent defect of VAT?
Lord Mackay of Ardbrecknish: My Lords, I do not think that Question Time is quite the time, especially on this rather narrow issue, to discuss the merits of direct or indirect taxation. I know that many of us on this side feel strongly that there are considerable merits in indirect taxation; taxation, that is, on people's expenditure. If one is to make exceptions to VAT—by zero rating or exemption—it has to be done on very tight grounds. Otherwise we would go back to the old sport which, as some of your Lordships will remember, we had on purchase tax.
Lord Monkswell: My Lords, can the Minister say what action would be required to ensure that zero rate of VAT on the particular vehicle referred to can be levied? Does it require primary legislation, secondary legislation, or could it be done by Inland Revenue regulation?
Lord Mackay of Ardbrecknish: My Lords, I regret to tell the noble Lord that the question of extending zero rating is a good deal more complicated even than the choice of school to which you send your child. One cannot extend zero rating in this country or any other European country because that would be a breach of the sixth VAT directive.
Lord Tebbit: My Lords, is my noble friend aware that, although he is a very popular Minister, the reply that he gave is a very unpopular one? Does he agree that the vehicle in question was developed specifically for disabled people and was developed in order that disabled people could enjoy the open countryside in the same way as those of us who are on two legs are privileged to do? Was it not developed for that purpose with the aid of a grant from British Telecom, that being a condition of its development? Will he accept that it must surely be possible to change those regulations, so that a vehicle designed for disabled people—which it clearly is—should qualify for zero rating whatever the bureaucrats in the Treasury or Brussels say?
Lord Mackay of Ardbrecknish: My Lords, it is easy enough for my noble friend now to talk about regulations in that way. I do not suppose that he thought about them like that when he had to carry such responsibilities, though carried jointly so far as concerns the Treasury. The point I want to make is that in the advertising for the vehicle, though its value for people who are disabled is mentioned, the pictures of the
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vehicle lead me to believe that it is not specially adapted to allow people in wheelchairs to use it, be carried in it or drive it. That is one of the fundamental conditions which a vehicle has to pass before it can be considered eligible for zero rating. If someone were to buy the vehicle and adapt it in order to carry a wheelchair, the adaptations for that vehicle—or any other vehicle for that matter—would in fact fall to be zero rated.
Lord Peston: My Lords, I do not want to intervene on the question of the noble Lord's popularity. However, I find his answers puzzling. It seems to me that the points that have been made nearly cover the definition. Is the Minister not willing at least to go hack to his right honourable friend the Chancellor of the Exchequer and say that this vehicle is clearly for disabled people, as the noble Lord, Lord Tebbit, said? Will he accept that it is not a matter of the modification being free of VAT but that the vehicle ought to be free from VAT? It seems to me that the House would like him to say that we ought to look at this matter, given the arguments that have been put forward.
Lord Mackay of Ardbrecknish: My Lords, I looked very carefully at this matter when I studied the Question and indeed the Answer. I come back to the point I made. It is certainly not a road vehicle—nobody argues about that. But a second point is that, while it may be a very good vehicle for a disabled person, it is certainly not exclusively designed for a disabled person and any reading of the advertising material would certainly draw me to that conclusion. My last point, which I make again, is that in order to fall within the definitions, which have to be drawn in order to keep the area moderately tight so far as concerns taxation, the unit should carry someone in a wheelchair, which is one of the fundamental definitions that allow for zero rating.
Viscount Ingleby: My Lords, may I suggest to the Minister that he listen to the makers, to whom I have spoken? They tell me quite plainly that it is possible to adapt this machine to carry a disabled person in a wheelchair.
Lord Mackay of Ardbrecknish: My Lords, if a vehicle were to be adapted to take a wheelchair in situ, certainly the adaptations upon it would be zero rated for VAT purposes. It does not get us away from the first Question, which is that it still would not be a road vehicle and so the whole vehicle would not be zero rated.
Baroness Darcy (de Knayth): My Lords, perhaps I may narrow down the question put by the noble Lord, Lord Boyd-Carpenter. Is there not a case for at least zero rating all equipment supplied to organisations which supply welfare services under the Value Added Tax Act l 994—I believe that it is Part II of Schedule 9?
Lord Mackay of Ardbrecknish: My Lords, the noble Baroness takes me a good deal wider than the original Question. There are a considerable number of VAT helps and advantages for disabled people. indeed, the total cost of the various zero rating advantages that are available for disabled people comes to something

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like £150 million a year. So there are some considerable advantages already on many of the goods bought for disabled people and, as I said about motor vehicles, for the alterations that are made to a motor vehicle to enable it to carry a disabled person.

Organophosphate Sheep Dips: Health Checks
2.56 p.m.
The Countess of Mar The Countess of Mar asked Her Majesty's Government:
Whether they will arrange for comprehensive medical examinations by competent consultants of all those individuals suffering chronic ill health which they believe is caused by exposure to organophosphate sheep dips on the same basis as the examinations offered to members of Her Majesty's forces who served in Operation Granby.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Cumberlege): No, my Lords. Anyone suffering chronic ill health which they ascribe to exposure to organophosphate sheep dips should consult their general practitioner. The general practitioner can refer them to a consultant with experience in the diagnosis and treatment of illness caused by exposure to chemicals.
The Countess of Mar: My Lords, the noble Baroness is well aware of my battle to have these people looked at. In view of the fact that the use of organophosphates for sheep dip was, to all intents and purposes, compulsory between 1975 and 1992 and that most of the people affected were affected during that period, does she feel that it is only fair that they should be seen by a group of consultants who can deal with all of them? Does she believe that it would help in the clinical side of the research? I know that there is an epidemiological study which is due to report in 1999. Does she agree that we also need some clinical evidence so that the methods of diagnosis can be assessed more easily?
Baroness Cumberlege: My Lords, the first port of call for anybody who is ill is the GP, unless it is an emergency. We believe that the same system should apply to these people: first, they should see their GP and if he feels that further investigation is needed, they can be referred to a consultant.
Baroness Jay of Paddington: My Lords, does the Minister recall that when the noble Countess last raised this Question in this House about six months ago, the inadequacy of GP referrals was mentioned? In response to a question from me, the Minister on that occasion said that the problem with extra-contractual referrals for those cases was minimal. Has she now reconsidered that position in the light of the evidence that there are more
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and more people who need this type of specific treatment and just do not receive it through the GP system?
Baroness Cumberlege: My Lords, I have not reconsidered it because we do not believe there is a problem in consultants refusing to see people with that condition who have been referred by a GP.
Earl Baldwin of Bewdley: My Lords, does the Minister agree that it is high time that the whole area of environmental medicine was taken more seriously? Will she accept that there is a marked reluctance on behalf of the Government and the medical profession to come to grips with the human health implications of an increasingly polluted environment?
Baroness Cumberlege: My Lords, increasingly government departments are working more closely together on this matter, particularly the Department of Health and the Department of the Environment. There are now a number of joint committees with experts on them to look at this particular issue.
The Countess of Mar: My Lords, is the Minister aware that there are still tremendous problems with people obtaining a diagnosis from their GPs? Because the Department of Health does not recognise chronic organophosphate poisoning as a medical condition, GPs are reluctant to diagnose it. Therefore, patients who are ill do not receive the right treatment, are given drugs to which they react very strangely and flounder about in the wilderness. Will she please once more look at this subject and do something about it?
Baroness Cumberlege: My Lords, we shall continually look at this subject. Indeed, the Chief Medical Officer wrote to all doctors in England in 1991 to draw their attention to this matter and did so again, with the chief executive of the Veterinary Medicines Directorate, in June 1993. An article was written by the Chief Medical Officer in October 1995 and published in his update. The update is delivered to every GP, so that every doctor in the country would have seen it. Also, the noble Countess may be interested to know that the booklet, Pesticide Poisoning Notes, about which I know she was concerned and which was out of date, is being revised at the moment and will be published very shortly.
The Countess of Mar: My Lords, I am sorry to have to come back to the noble Baroness, but all those communications have been about the acute effects of organophosphate poisoning, not the chronic effects. Please will the noble Baroness look once again at the plight of those people who believe that they are suffering from the chronic effects of OP poisoning?
Baroness Cumberlege: My Lords, I do not believe that those reports concentrated solely on the acute effects of OP poisoning. I believe that some covered chronic illness also.
Earl Russell: My Lords, does the education of doctors include any training in how to recognise the effects of OP poisoning and, if so, how long has it done so?
Baroness Cumberlege: My Lords, the curriculum is very much a matter for the profession. Indeed, we rely

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on its views—and especially on the views of the General Medical Council and the Royal Colleges. I do not know the detail, but I shall write to the noble Earl with it if he would like me to do so.

The Post Office: Future
3 p.m.
Lord Ezra Lord Ezra asked Her Majesty's Government:
What are their plans for the future of the Post Office.
The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie): My Lords, the Government's plans for the future of the Post Office were set out in a Statement in another place on 11th May 1995 by the President of the Board of Trade.
Lord Ezra: My Lords, in giving that Answer, has the noble and learned Lord read that Statement carefully recently? Among the criteria set for the greater commercial operation of the Post Office was included the comment that the amount of money that the Government would recover in the form of a negative EFL (external financing limit) would be about half of its post-tax profits, whereas in the event after the last Budget that was doubled and as a result the Post Office has now announced that it may well have to raise the cost of postage stamps despite being a highly profitable organisation. This matter was raised in a Question by the noble Lord, Lord Haskel, on 18th December.
Does the noble and learned Lord further recall that in a television interview on 7th January, on being asked whether the Government had any further plans for the privatisation of the Post Office, the Prime Minister said that the matter was under serious consideration and that it could well be included in the next manifesto? In all those circumstances, is the noble and learned Lord surprised that the Financial Times, a much respected and objective newspaper, wrote in a leading article that the Government's treatment of the Post Office was a textbook case of how not to manage a public enterprise?
Lord Fraser of Carmyllie: My Lords, I have indeed recently looked at the Statement to which I referred in my Answer. I am sure that the noble Lord will recollect that in making that Statement the Deputy Prime Minister, with the caution that is his hallmark, began the paragraph on external financing limits by saying:
"Although no responsible Government could undertake to ring-fence the Post Office entirely from the pressures on public spending, I am prepared to agree that in future we shall aim to set the EFL at about half the Post Office's forecast post-tax profit".— [Official Report, Commons, 11/5/95; co1.885.]
In the circumstances of a very difficult public expenditure round, that external financing limit was indeed raised to something like £298 million to be paid over. That is a significant sum. However, those who object to that sum being required of the Post Office should indicate where they would find that money for public expenditure generally. Would they increase taxes or make further cuts in public expenditure?
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I am impressed that the noble Lord should rise so early on a Sunday morning to listen to the Prime Minister. What he actually said was that further consideration would be given to privatisation proposals in preparing the election manifesto. He was as worth listening to on that occasion as he was yesterday afternoon.
Lord Bruce of Donington: My Lords, is the Minister aware of the remarks that fell from the lips from the Deputy Prime Minister yesterday when he advocated that civil servants should be instructed in the use of graphical representation? If so, has the Minister taken it on board, because if a graphical representation was made of the number of people in the United Kingdom who are in favour of the privatisation of the Post Office, the depiction of those in favour would almost disappear off the graph paper by becoming a negative?
Lord Fraser of Carmyllie: My Lords, I think that it was an appreciation of public reaction that led to the Statement of 11th May. The Prime Minister has said no more than this—that further consideration will be given to privatisation proposals. I think that we should put the performance of the Post Office into context. We have now enjoyed the longest period of stability in stamp prices since the 1960s. There are fewer restrictions on capital expenditure. A new corporate planning process is under way and, as the chief executive of the Post Office has indicated, he now wishes to expand into Europe. That hardly seems to be a public corporation that is kept in fetters.
Lord Molloy: My Lords, if any fundamental change is to be made to the Post Office, will the Government consider seeking the views, and providing opportunities for the views to be expressed, of the trades unions, the employers' organisations and the very many other organisations that are interested in the Post Office and its future?
Lord Fraser of Carmyllie: My Lords, the noble Lord will appreciate that there have been a number of documents, not least the consultative document on the future of the postal service which was issued in June 1994. Therefore, there has been consultation when such matters have been considered. I emphasise what the Prime Minister said when he made that statement on television. He said that it was a matter that would be under consideration when the manifesto was drafted. I should have thought that that would reveal clearly that there was no intention of bringing about, or attempting to bring about, any privatisation of the Post Office this side of a general election
Lord Peston: My Lords, I congratulate the Minister on finding a way of getting the future of selective education into a Question on the Post Office. As I prepare for the next debate, may I ask the noble and learned Lord whether I should make some remarks on that subject ahead of him on the question of selective education in South America? Is that something that we should be doing all the time?

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On the Post Office itself, which is what I thought that this Question was about, did I understand his answer correctly—it seemed clear—that he regards the Post Office as doing extremely well because it is meeting its financial targets and is subject to enormous competition in the communications field? As is the case with the Stationery Office, would it not therefore be sensible to leave it to get on with things rather than going in for further barmy ideas about putting it into the private sector?
Lord Fraser of Carmyllie: My Lords, the noble Lord raises an interesting proposal. I had not intended to mention selective education in a debate on South America, but if the noble Lord feels that I could usefully spend my time dealing with that matter in the next debate, I am happy to do so because there are some interesting points to be made.
I return to the fact that we believe that the Post Office is now doing well. It now enjoys greater freedom than previously. It has been successful and has made profits. I believe that it is developing well to the benefit of the consumer. Something like 92 per cent. of all first-class mail is delivered the next day and 98 per cent. of second-class mail is delivered within three days. That is a real success.

Business
Lord Strathclyde: My Lords, after the debate on the proposed Free Trade Area of the Americas and before the debate on the United Kingdom motor sport industry, my noble friend the Leader of the House will, with the leave of the House, repeat a Statement that is to be made in another place on the Mitchell Report.

Business of the House: Reserve Forces Bill [H.L.]
3.8 p.m.
The Lord Privy Seal (Viscount Cranborne): My Lords, I beg to move the first Motion standing in my name on the Order Paper. It is unusual for a Bill to be recommitted to a Committee of the Whole House and it may therefore be for the convenience of the House if I give a few words of explanation of this Motion.
As your Lordships will know, the Reserve Forces Bill was published and consulted upon in advance of its introduction into your Lordships' House. However, during the process of consultation and the informal discussion of the Bill's provisions, it became apparent that the drafting could be improved. Indeed, the noble Lord, Lord Williams, made several suggestions to that effect. Therefore, my noble friend Lord Howe tabled a substantial number of amendments in tail of those discussions. Those amendments were considered in Committee yesterday and the Bill has been reprinted as amended.
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Perhaps I should add that the Bill has been prepared and considered in a constructive spirit. During the course of that consideration, it has become plain that the Bill enjoys all-party support. I think that it is important, particularly for the future of the Reserve Forces, that we should continue to consider the Bill in that spirit. It is above all for that reason that I was extremely happy to consider the suggestion made through the usual channels to which this Motion gives effect. That will permit the Opposition and Back-Bench amendments to be considered in relation to the text of the Bill as it now stands.
Moved, That the Reserve Forces Bill [HI.] he recommitted to a Committee of the Whole House.— (Viscount Cranborne.)
Lord Williams of Elvel: My Lords, the House will be grateful to the noble Viscount the Lord Privy Seal for what he has said. It is true that on Second Reading the Reserve Forces Bill obtained the general fair wind which I expect the Government would wish, and which we will continue despite certain hiccups. Nevertheless, I have to say to the noble Viscount that the Bill was published in draft in March 1995. There was wide consultation on the Bill. We gave it a Second Reading in this House on 28th November. It was given a fair wind by all sides of the House.
In response to a request to the noble Earl, Lord Howe, the Minister in charge of the Bill, there were meetings on 15th December and 21st December—the day after the House was in Recess, if I may say so—between myself and my noble friends Lord Judd and Lady Turner with the Minister to go through various points which we thought might be cleared up. The Opposition then tabled the large majority of their amendments on Friday 12th January and Monday 15th January for the Committee stage in the Moses Room under the new procedure on 23rd January.
Your Lordships will imagine my surprise when, on 16th January and 19th January, I received from the Minister a letter together with no fewer than 211 government amendments. Under those circumstances, I found it impossible to go into Committee on a proper basis, because the point of Committee, as I understand it and have always understood it—if I may say so I have some experience of handling Bills from the Opposition Front Bench—is for the Opposition and noble Lords in all parts of the House to question the Government and, if necessary, to move amendments, and to ask the Government to consider, or reconsider, what their Bill is about. It is not a process of a sausage machine simply to put in drafting amendments which clarify this and clarify that.
Yesterday's rather farcical procedure in the Moses Room took two hours and 10 minutes—all bar one minute spent on government amendments to which the Opposition took Trappist vows and did not speak. It took us two hours to get through those amendments. The Minister, and I do not mean this as an attack ad personem on the Minister, who has behaved, if I may say so, with dignity and courtesy throughout, felt that

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he had to oppose clause stand part of the Government's own Bill on the first day of Committee no fewer than four times.
I assume that we now have a Bill which can be put to a Committee of the Whole House in the normal way, but it is a sad and sorry tale. I have to say to the Leader of the House that I hope that we can now proceed in the way in which we should have proceeded before; that is to say, we have a Government Bill in front of us, and the Opposition and other noble Lords from all parts of the House will be able to make their contributions in Committee and on Report. No more of the time of the House will be wasted by government amendments. We assume that all the drafting has been cleaned up, although I understand from the Minister that we are now threatened with another schedule.
Let us hope that we can get on with the Bill. I join with the Leader of the House in insisting that there is still good will towards the Bill; but the good will has been severely strained.
Lord Harris of Greenwich: My Lords, the noble Viscount the Leader of the House indicated that the Motion he has put before us today is unusual; and that is undoubtedly true. But we deserve a rather fuller explanation from him as to how the situation arose. As he rightly said, there has been all-party support for the Bill. That was true on Second Reading and it remains true today. But to be greeted with an avalanche of government amendments in the way that has been described by the noble Lord, Lord Williams, is not a happy commentary upon the efficiency of the Ministry of Defence.
The Ministry of Defence puts forward a relatively small amount of legislation to Parliament. It seems that the level of competence that it has demonstrated on this occasion has been sadly lacking. We would all be reassured if the Leader of the House were able to indicate that he will make it clear to other departments that we will not accept a repetition of incidents of this sort.
Lord Craig of Radley: My Lords, in no way am I trying to criticise the noble Earl the Minister for the way in which he handled yesterday's proceedings in the Moses Room, but I found it an extraordinary and most unsatisfactory way of tackling what I believe to be an important Bill, and one upon which there has already been a great deal of consultation and agreement. When it comes back, I hope that we will not find ourselves having to deal with it in anything like the way we had to deal with it yesterday.
Lord Callaghan of Cardiff: My Lords, I should think that the Leader of the House must be very embarrassed by what my noble friend Lord Williams has said about the Government's treatment of the Bill. The only excuse that can be made is, as he has rightly said, that the Bill has general support in the House and among the reserve forces.
I have just one request to make. There are particular issues which some people may wish to raise at certain points in the Bill. The original Bill itself is a very
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formidable document. I cannot remember, but I believe that it has about 120 or 130 pages. Is it possible to show on the Annunciator when particular stages of the Bill will be reached so that those of us who may have an issue to raise—I have one that I may wish to raise later—can know where we are, and whether we can he here, there, or somewhere else?
Lord Pearson of Rannoch: My Lords, before my noble friend replies, would it be appropriate to widen the debate somewhat by remembering the difficulties faced over the drafting of—I think it was—the Criminal Procedure and Investigations Bill, and to consider these problems against the question as to whether we have too much legislation generally or not enough draftsmen to deal with it?
Viscount Cranborne: My Lords, I am grateful to noble Lords for the spirit in which they have addressed these exchanges. My noble friend Lord Pearson will recall, I am sure, what I thought was a most constructive debate during the previous Session in which we considered not merely the Hansard Society report on legislation but the report of the group of my noble friend Lord Rippon to the Leader of the House which was commissioned by my predecessor, during which I think everyone, including myself, expressed a keen attachment to considering how best we can improve the preparation and the planning of legislation. I remember in one of those debates announcing the recruitment of four more parliamentary draftsmen, something which I hope will, in part, address the point which my noble friend raised.
It seems to me, if I may say so, that the noble Lord, Lord Callaghan, made an extremely helpful suggestion. I undertake to raise it with the administration of the House to see whether anything can be done to address the point that he has raised, which I sure the whole House will have heard with some sympathy. I undertake to report back to him to see what is practicable.
I wholly agree with the noble and gallant Lord, Lord Craig, who said that this is an important Bill. During my time in the Ministry of Defence I had something to do with the early stages of the preparation of this piece of legislation. I can underline how important it is, not just to the reserve forces but, of course, in view of the increased integration taking place between the reserve forces and the regular forces, to the regular forces as well.
I think that the noble Lord, Lord Williams, would admit—if that is not too strong a word—that the bulk of the proposed amendments is fairly detailed and technical in nature. They are substantially drafting points. There were a large number of amendments but the noble Lord himself suggested quite a high proportion of them. I believe that my noble friend has done his best to address the suggestions made by the noble Lord, Lord Williams. I had hoped that the noble Lord would take that effort in the spirit in which it was intended.
The noble Lord and others suggested that we should give an undertaking that no more amendments should be proposed or accepted. I am sure that that is a misunderstanding because, after all, one of the purposes

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of this House, in particular in Committee, is to consider amendments to the Bill. If under the impact and the power of debate it becomes clear—
Lord Williams of Elvel: My Lords, I thank the noble Viscount for giving way. He is quite right in saying that I am quite prepared to have government amendments which pick up points made by Opposition or other noble Lords with which the Government agree. I am quite prepared to have government amendments which rectify mistakes. What I am not prepared to see is a whole raft of government amendments on drafting points which should have been cleared up a long time before the Bill was produced to your Lordships' House.
Viscount Cranborne: My Lords, as always, it is for the House to decide, not just the noble Lord or myself, what it will and will not accept. I am sure that my noble friend will have listened with care to the expressions of opinion that have come from all sides of the House today. The Government will certainly undertake to continue to address the passage of this Bill through your Lordships' House in as constructive, helpful and efficient a spirit as possible. I can do no more than beg to move.
On Question, Motion agreed to.

Business of the House: Debates, 30th January
Viscount Cranborne: My Lords, I beg to move the second Motion standing in my name on the Order Paper. If your Lordships will forgive me I will leave it at that.
Moved, That Standing Order 38 (Arrangement of the Order Paper) be dispensed with on Tuesday, 30th January to enable the Motions standing in the names of Baroness Hollis of Heigham and the Earl Russell to have precedence over the Second Reading of the Chemical Weapons Bill.—( Viscount Cranborne.)
On Question, Motion agreed to.

The Americas: Free Trade Area
3.20 p.m.
Viscount Montgomery of Alamein Viscount Montgomery of Alamein rose to call attention to political and economic opportunities in the proposed Free Trade Area of the Americas (FTAA); and to move for Papers.
The noble Viscount said: My Lords, I must begin by declaring an interest in that for the past 41 years I have been employed in different capacities by various companies in the promotion of British trading and investment in Latin America. I have also held numerous honorary positions in many societies, chambers of commerce and institutions involved with British-Latin American relations. Perhaps the most significant was that from 1987 to 1984 when I was honorary President of the Hispanic and Luso Brazilian Council, better
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known as Canning House, in which position I have been succeeded by my noble friend Lord Limerick, who unfortunately is not here today.
In October Canning House organised a most successful major conference on the proposed Free Trade Area of the Americas known generally as the FTAA. The conference was chaired by my noble friend Lord Limerick with speakers from Latin America, the USA and Europe. I shall return later in my speech to the proposed follow up to that major event. However, it is important to look a little at the past in order to understand where we are at present. As there have been various attempts at hemispheric integration it may be helpful if I sketch in briefly some of the background.
The first significant post-war initiative was the formation of the Latin American Free Trade Area (LAFTA) in 1960 which was based on a proposal by the Economic Commission for Latin America. The objective was the promotion of manufacturing industry on a regional scale, with particular emphasis on import substitution. At the time, the general economic philosophy emphasised centralised planning. This naturally suited the military dictatorships which were then prevalent in Latin America with only pockets of democracy. For various reasons that I shall not go into it did not prosper. However, intra-regional trade started to grow rapidly during the 1960s and 1970s.
In the aftermath of the 1982 debt crisis, when democracy swept through the region, the concept of trade liberalisation and market forces became the accepted norm. Governments began to look again at the possibilities of closer regional integration and various sub-regional groups were formed. Indeed some, such as the Central American Common Market, had started and stopped during the intervening period. I accept that that is a rather cursory and superficial generalisation of 40 years of intense activity in the region but it is intended to paint only a general picture.
I turn to the present. The Free Trade Area of the Americas (FTAA) was launched at the summit of the Americas in Miami in December 1994 when the leaders of 34 countries from North, Central and South America plus the Caribbean agreed to establish a free trade area for the entire Western Hemisphere from Alaska to Cape Horn by the end of 2005. The Organisation of American States, revitalised under the leadership of Cesar Gaviria, the former President of Colombia, together with the Inter-American Development Bank, were charged with the implementation of this very ambitious project. A number of working groups have already been formed, and more will follow, to discuss the harmonisation of trade between the various countries. Unfortunately, Cuba is excluded due to a thoroughly flawed US policy. However, I am glad to say that my noble friend Lady Young, who has led several very successful trade missions to Cuba, will speak about that in the gap. I am grateful to my noble friend because she has had a busy week dealing with other pieces of legislation.
The interesting point about the initiative is that it is a logical extension of a growing number of existing bilateral and sub-regional agreements. During the past four years 26 bilateral free trade agreements within the

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region have been signed and a further eight are under discussion. The North American Free Trade Area, better known as NAFTA, comprising Canada, the USA and Mexico, is already in operation, as is Mercosur, the Southern Cone Common Market of Argentina, Brazil, Paraguay and Uruguay. A number of countries, led by Chile, arc hoping to join NAFTA.
If Mercosur grows into a South American Free Trade Area, which I suppose will be called SAFTA, a logical extension would be towards integration with NAFTA. The whole area would he one great free trade area. Whereas historically the countries of South America have concentrated solely on trade outside the region, the recent years have seen a massive increase in intra-regional cross-border trade and economic activity. Of course, all this is very much a reflection and a repeat of what has happened in Europe. It is interesting to note that the process is essentially economic with no suggestion of political overlay. Therefore, the dream of Simon Bolivar for a unified continent from top to bottom is still some way in the future.
The object of this debate is to draw attention to the implications of those developments for Britain, in particular for Britain within Europe, since Mercosur is already in direct discussions concerning trading arrangements with the European Union. Britain has historic links with Latin America and is a natural ally and point of entry for Latin America into Europe. We are the second largest foreign investor in many countries of Latin America, but, sadly, our percentage of trade is still less than 2 per cent.
The total population of the countries which will comprise the FTAA is over 750 million with a GDP approaching 9 trillion dollars. That would be the largest single integrated trading area in the world, and is therefore seriously important. Obviously it will be difficult to achieve and probably not within the time-scale of 2005, especially given the present internal difficulties in the USA between the Administration and Congress.
In the aftermath of the long drawn-out negotiations on GATT and NAFTA, I fear that there may be signs of trade fatigue in the USA, and that there will be little concrete progress until some time next year. However, in the long run, delay is less important than maintaining momentum towards the ultimate objective of a unified hemispheric trading area. It is a goal worth striving for.
In conclusion, I turn to the possible follow-up. One of the difficulties for Canning House, LATAG (The Latin American Trade Advisory Group), and other organisations concerned with promoting Latin America in Britain, is getting the interest and attention of major company chairmen. To that end, I have from time to time, both in letters and in conversations—and also in the 1990 debate on Latin America—suggested a high level conference which would be organised by the Department of Trade and Industry in conjunction with the Foreign and Commonwealth Office and opened by the Prime Minister. Obviously institutions such as Canning House, LATAG and the CBI would lend close support.
I should remind the House that the last major conference along those lines took place in 1972. That led to a substantial surge in interest. Therefore, the proposal is now more valid than ever, especially as a follow-up to "Link into Latin America" which was launched last year by the now deputy Prime Minister but the then President of the Board of Trade. I very much hope that my noble and learned friend Lord Fraser will be able to say something positive about that idea today.
There are many things that I have overlooked in this huge subject, but I am sure that they will be picked up by other speakers. What is important about the proposed massive free trade area is that Her Majesty's Government should take it seriously as the opportunities for British trade and investment are so enormous. My Lords, I beg to move for Papers.
3.33 p.m.
Lord McNally: My Lords, when I made my maiden speech, just a week ago, a number of noble Lords said afterwards that they thought I was a little controversial for a maiden speaker. My only excuse, apart from the impetuosity of youth, was that my noble friend Lord Jenkins of Hillhead and the noble Lord, Lord Jenkin of Roding, were in such rumbustious form that I forgot myself and thought that I was back in the other place. However, I shall be under no such illusion today because I am sandwiched between two cerebral contributors. I am followed by the noble Lord, Lord Wright of Richmond, who, when I was a political cuckoo in his Foreign Office nest, treated me with great kindness when I worked as a political adviser there in the 1970s. Moreover, we have just heard a masterful introduction by the noble Viscount, Lord Montgomery, who, quite rightly, pointed out his long association with Latin America, not least through his presidency of Canning House.
The issue that we are discussing today—
"the proposed Free Trade Area of the Americas"—
is, in many ways, challenging us in Europe because at some stage we may be looking at similar issues and problems in relation to Africa. For example, how does a rich north deal with a less rich south and work a proper, stable relationship both politically and in trade? Perhaps in this ambitious project our colleagues in the Americas are setting us an example that we will follow.
As the noble Viscount pointed out, there is certainly a great interest in what happens. Indeed, 16 per cent. of Britain's visible exports go to FTAA countries as does about 37 per cent. of foreign direct investment from the UK. However, the lion's share of both those figures goes, of course, to North America, the United States and Canada.
The interesting point about our relations both with North and South America is how that is very much today a matter of a relationship not just between the UK and those continents, but one between the European Union and those continents. It is extremely encouraging that, in developing its policy, the European Union

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(which is often criticised for its straight bananas and for interfering in the minutiae of our lives) is, I believe, showing great imagination and leadership.
I suspect that much of the debate will be about Latin America, but perhaps I may say something about the northern part of the FTAA. In working out both its trade and foreign policy, it is important that Europe should take care to ensure that its relations with North America are in good order. I remember that in the 1970s Dr. Henry Kissinger had the idea of "a year of Europe" to refocus American thinking about the importance of North American European links.
I suppose that the time has passed for such an idea, but it is important and welcome that both the European Union and, indeed, President Clinton have shown a high priority for North American-European relations. Indeed, the recent European Summit in Madrid committed itself to promoting better and closer links between the business communities, between our science and technology communities and between educational and training establishments at all levels; and, perhaps as important, made a commitment to improve parliamentary links between North America and Europe. I say that because it worries me sometimes that those Republican freshmen who are giving President Clinton so many problems at present may turn their attention to the United States' links with Europe in a way which may not be entirely to our lasting advantage.
I believe that the noble Viscount quite rightly concentrated his remarks—and, indeed, I suspect that other speakers will do likewise—on the question of the opportunity side; that is, the opportunity that Latin America offers as a trading and political partner. The noble Viscount was correct to refer to the large number of groupings and associations which have grown up in Latin America over the past few years. I have in mind the Rio Group, the Group of 3, Mercosur and NAFTA. All those organisations are, in some ways, the best kind of flattery for the European Union. I say that because they obviously represent an attempt to emulate the kind of co-operation that European countries have shown and led by.
As I said before, I recommend that noble Lords should read the European Commission's document entitled The European Union and Latin America: the present situation and prospects for closer partnership 1996–2000. Those in Brussels do love snappy titles for their documents! Nevertheless, it is a good document because it sets an agenda for Europe that incorporates not only co-operation with the regional groups—for example, the Andean Pact, Central America and Mercosur—but also country-based initiatives with Mexico, Chile and Cuba.
The key to EU policy is institutional support and consolidation of the democratic process—something to which the noble Viscount referred—indeed, the very welcome return of democracy and the extension of human rights in Latin America in recent years; help to strengthen efficient legislative, judicial and police institutions and help to combat poverty and social exclusion. I know that the charity The Street Children Consortium does immensely good work with street
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children in many Latin American countries. We need to offer help with health and rural development and support economic reforms and co-operation in the fields of industry, science, technology and the information society. We also need to offer help with infrastructure and with education and training programmes.
As I say, this document is quite literally an example of the European Union at its best. However, this is not simply altruism because here we are dealing with an area of the world which has stewardship over two problems which, if they are not dealt with properly, will come to haunt us. First, there is the management of the environment. Unless we help the countries of Latin America not only to expand and to grow economically but also to hold in trust for all mankind their vast natural resources such as the Amazon Basin, great damage can be done to the global ecology.
Secondly, there is the matter of the drugs trade emanating from Latin America which affects both North America and Europe. Unless we offer positive help to those countries to give them alternatives to that trade we could find the problems which arise there very much on our own doorstep. The Madrid Summit announced that,
"It will continue to step up, by means of specific measures and projects and through co-operation in the appropriate fora, joint action to combat the production and social effects of drugs and drug-related crime".
Indeed, I hope that is so. I hope very much that MI5, MI6 and our other secret services are actively engaged in the war against drugs. We must regard drugs as a threat to our national security. We should deploy all the resources at our disposal to combat those dangers.
The noble Viscount referred to Cuba in the FTAA. I said that I thought that the EU policy document was sensible. It states,
"Cuba seems to be entering a period of change which the union is ready to back. To that end, the Commission has proposed the initiation of a dialogue aimed at examining the conditions for stronger relations with the country".
That must be a more sensible approach to a transition back to the mainstream of political and economic life for Cuba than continuing isolation. As someone who has always considered himself a friend of the United States, I believe it would be a disgrace if the United States continued to treat Cuba as a pariah to the point where the, present regime collapsed and was replaced by a regime as repugnant as the one Castro himself replaced. We should remember that it is not just a pack of liberal democrats waiting in Miami to return to Cuba. To allow Cuba to be a haven for organised crime would be a crime and a disgrace to the United States.
I should add that I am under strict instructions from my noble friend Lady Thomas, who cannot participate in this debate, to pay a graceful compliment to the noble Baroness, Lady Young, for her continuing support in these matters. I gladly do so.
In initiating this debate the noble Viscount has enabled us to focus on some important areas of foreign and trade policy. Over the years our relations with Latin America have been fitful. I remember the noble Lord, Lord Chalfont, being charged by Harold Wilson as Prime Minister to take a special interest in Latin America in the mid-sixties. We seem to have had a roller

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coaster of interest. I am pleased that the Chancellor of the Exchequer recently visited the area. That was a most welcome development. The noble Viscount has reminded us that across the Atlantic there are worthy partners for an outward looking Europe, and that we must seize this opportunity and develop relations. We wish them well in this bold endeavour.
3.45 p.m.
Lord Wright of Richmond: My Lords, I, too, wish to congratulate the noble Viscount, Lord Montgomery of Alamein, on his initiative in proposing this short debate. I express my thanks to that ex-cuckoo in the Foreign Office nest, the noble Lord, Lord McNally, for his kind remarks and my apologies for having missed his maiden speech. I also share good memories of our co-operation together not only in the Foreign Office nest hut also in the nest across the road.
I cannot myself claim anything like the experience or expertise which the noble Viscount has acquired on Latin America as a whole and on Argentina in particular. Indeed, I hope I shall be forgiven if I say that my education on Latin America has been somewhat selective. I shall therefore be brief. I never served in that region of the world during my 36 years in the Diplomatic Service although my first job in London was on the Central America desk in the Foreign Office and my last job, as permanent under-secretary, involved me in visits to several of the Latin American governments including, incidentally, Cuba. However, I was aware throughout my career of a sense of frustration and disappointment in the Diplomatic Service and in the Department of Trade and Industry that British business was not taking sufficient advantage of the opportunities which that region seemed to offer for exporters and investors alike.
Since my retirement from the Diplomatic Service I have seen at rather closer quarters what some sections of British industry are doing in the region. Indeed, I should declare an interest as non-executive director of three companies which are exporting successfully, and investing heavily, in several of the countries of Latin America. But I think it is still generally true that British exports to, and investment in, the sub-continent of Latin America do not match the opportunities which now present themselves with the reduction of tariffs, a general decline in protectionism, and falling inflation in a market which grew at an average of 17 per cent. a year between 1990 and 1993, and which is second only to Asia in the speed with which it has grown in the 1990s.
I have also seen for myself on a recent private visit to Argentina the wealth of goodwill which still exists there towards Britain in spite of our differences over the Falkland Islands. Any British visitor to Latin America must be struck by the continuing reminders of the historical role which this country played both in the struggle for Latin American independence and in the heavy investment which British business put into the infrastructure of many Latin American countries over the past century, particularly in the transport and energy sectors. I hope that the Minister
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will tell us something of the impressions which the Chancellor of the Exchequer received during his recent visit to a number of countries in the region.
The Minister will also, I hope, tell us something of the other measures which I understand the Government are taking to encourage British industry to take better advantage of these opportunities. I am delighted to learn that the Diplomatic Service has been able to strengthen its commercial sections in the region, including the opening of three new commercial posts in outlying cities of Brazil and Mexico in spite of the formidable pressures on the service in both manpower and finance.
Following the signature of the Treaty of Asuncion in 1991, intra-Mercosur trade has doubled to 10 billion US dollars. Both the Mercosur countries and the countries of Central America have made significant progress towards reaching agreement on a common external tariff, reflecting a change in philosophy throughout the sub-continent towards the conduct of economic policy which has led to a significant increase in the European Union's investment and trade with Latin America. I am glad to learn that British investment now represents over 40 per cent. of European investment in the region; and that British exports to Latin America increased by over 60 per cent. between 1991 and 1994. But, as the noble Viscount, Lord Montgomery of Alamein, has implied, our market share is still much less than it could or should be—significantly lower than that of France, Germany or Italy.
It is nevertheless encouraging that the Government, both bilaterally and in co-operation with our European partners, have taken steps recently to upgrade our political links with many of the governments in the region. The signature of a European Union Mercosur Co-operation Agreement in December, and agreement on negotiating mandates for co-operation between the European Union and both Mexico and Chile, are important steps forward. I should perhaps mention, as chairman of the Royal Institute of International Affairs, that I much look forward to the visit which President Zedillo of Mexico is paying to Chatham House next week.
This is an exciting and encouraging moment in the economic and political development of Latin America. I hope that both Her Majesty's Government and British industry will strive even harder to build on the major opportunities presented by these changes throughout the sub-continent and will give careful and positive consideration to the proposals put forward by the noble Viscount, Lord Montgomery of Alamein.
3.52 p.m.
Baroness Hooper: My Lords, nobody—but nobody—has done as much over so many years to establish and maintain links with Latin America as my noble friend Lord Montgomery. Even today, it is thanks to his foresight in tabling the Motion and his good fortune in being drawn in the ballot that we are able to debate this important topic in your Lordships' House at a very early stage in the development of this Free Trade Area of the Americas. I am happy that we are debating the issue which includes South America and Central America as well as North America.

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In my case my own first-hand experience dates back some 30 years to when I spent a postgraduate year at the Universidad Central of Quito. As a law graduate the course I chose to study in the Institute de Derecho International (the Institute of International Law) compared the then regional associations within Latin America with those of Europe.
In those days the United Kingdom was not yet a member of what was then the European Economic Community, but we did belong to EFTA. In Latin America, as has been said, there was then a Central American Common Market, the Latin American Free Trade Area, and the embryonic Pacto Andino. Of all those organisations, only the Pacto Andino remains, although in a somewhat different form.
In a sense, nothing is new. But there have been major changes and developments in the intervening years. What I celebrate particularly about the proposals for a Free Trade Area of the Americas is, first, that they represent a widening of the region. This it is to be hoped will overcome the rivalry, and perhaps I may say paternalistic attitudes, which dictated the relationship between Anglo-Saxon America and Latin America. Secondly, the new arrangement recognises and reinforces the principles of free trade and greater openness and transparency in trade practices which we all seek to ensure. None of that would have been possible without the strengthening of the democratic institutions and the disciplines of economic reforms throughout the region, to which reference has been made.
However, it is interesting that in Europe we, too, have experienced not similar but equally dramatic changes with the enlargement of the European Community, now the European Union, and the opening up and developing of relations with central and eastern Europe.
Like others in the debate—the noble Lord, Lord McNally, has already referred to it—in focusing my remarks on Latin America, I should like to draw attention to two developments which I believe augur well for the proposed free trade area. The Americas have always been a section of the world (if I may so put it) rich in natural resources. But it is interesting that today it is oil, not gold, which attracts attention. School children no longer learn just about Texas oil wells. They are quite familiar with the fact that Venezuela is rich in oil and that Mexico too, has oil production. They may even be aware of Ecuador, Columbia and Peru in that context.
One of the most exciting developments in the region is the dramatic change and opening up to international competition of the oil industry in Latin America. I learned only this morning that in the first four allocations in the current Venezuelan oil round two areas have been allotted to European companies and two to United States companies. There are six further areas to be allotted, but even in old fields, new technology is making finds never dreamed of and it is vital that this global industry remains part of the important international trade.
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I am happy that the need to keep the oil industry open and international has been recognised and that a seminar on energy sponsored by the European Union will take place in June in Caracas. It will be followed by a seminar in London in September on Energy in Latin America. The London seminar is being organised by the Centre for Global Energy Studies, of which I am a governor, and will again be supported by the European Union. I feel sure that in the years between now and 2005 there will be many other follow ups in that area to encourage stability and free trade norms in this sector, and to ensure the observance of internationally recognised environmental standards. However, the oil industry represents global interests and big business.
The other area to which I wish to make special reference is the development of links for small businesses, whether exporters, importers or hopeful partners of joint ventures. That is the area with which the United Kingdom Government links to Latin America programme is principally concerned, as has been mentioned.
Last year I had the pleasure of carrying out duties in Ecuador for the Government in connection with a successful British season there. My visit coincided with a mission organised by the London Chamber of Commerce and Industry which included representatives of some 20 companies and businesses ranging from Rolls-Royce to a specialist manufacturer of pipe couplings and repair products.
Useful contacts were made and I could see the possible development of commercial relationships which were being established. I hope to hear of progress in the two-way trade that should develop and I shall make a point of finding out the result of any joint ventures that were being discussed. At the time of that visit, it was evident that the DTI's initiative on links to Latin America was proving effective. A representative of a secondee to the DTI in the programme was present, he was extremely helpful and I am sure he will ensure that there is a follow through.
More recently, at the end of last year, I was privileged to lead a trade mission to Argentina and Chile, sponsored by the DTI but organised by the British Argentine Chamber of Commerce and the British Chilean Chamber of Commerce. Again I was able to see at first hand the benefit of direct links and contacts, principally for small businesses which might not have dared to charter such unknown territories. With perhaps one exception, all 29 businessmen in the group were there for the first time. They were able to reap the benefit of all the preparatory work that had been done, with the support and back-up which going in a group of that kind provided for them.
In that context, perhaps I may pay a tribute to the British Embassies in both places, in particular to their commercial departments. The service which is now available to British businessmen who wish to develop links is most impressive. I imagine it applies for anywhere in the world but I saw it at first hand in Argentina and Chile. The same has to be said for the embassies of those countries over here. Everyone is prepared now to recognise that the development of

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world trade is a priority and that it must be achieved by starting at the grass roots and developing small business contacts.
It was also interesting on that visit to find that, in a sense, expectations did not entirely match up with what was found. For example, there can be no doubt that the 29 small businesses represented in the trade mission had intended to learn about the market in Argentina. As well as low inflation, rising GDP and a warm welcome, what they found unexpectedly was that it was not just the market in Argentina that they were considering. Establishing a business in that country would give them an entrée into the wider market represented by Mercosur. Similarly in Chile, we were not just looking at the market there but at the countries with which Chile has established bilateral arrangements and at its future relationship with both Mercosur and NAFTA.
The noble Lord, Lord McNally, referred to the European Union and Latin America. I am happy that on a regional basis we are making an effort. Along with the noble Lord, I shall be even happier to see in the future that British participation in that effort is even greater than it has been. In particular in relation to the agreement which was recently signed between the European Union and Mercosur, it should be underlined that it is a promising way forward. As a first step, it seeks to support the creation of an internal market for agricultural products, with special emphasis on improvement of sanitary quality, as they put it. That seems to me the kind of thing which would make our business people, food processors and food manufacturers, look at what is going on there to find out what opportunities exist.
There are many more ways in which the United Kingdom can make a positive contribution and take a particular interest in the development of the Free Trade Area of the Americas. After all, we have a special relationship with the United States and we certainly have a very special relationship with Canada. We have much to contribute and many links to follow up with the various countries of central America, South America and the Caribbean. We have not heard too much about the Caribbean so far but I feel we shall soon have that pleasure.
There are other matters such as languages and the opportunity for more English-speaking people to learn to speak Spanish or Portuguese. There are many links and contacts in the educational field which must be developed, for which the atmosphere is right at the moment. I should be interested to hear from the Minister, when he winds up, what future he sees for educational and cultural links, particularly through the vehicle of the British Council, as well as in relation to various specialised missions which I know have taken place.
I realise that in such a debate we should basically dwell on broad strategies, general principles and multilateral links. But at the end of the day it is through the enthusiasm and efforts of people, individuals, that progress is made. When we talk about world organisations, regional organisations or individual countries, it will be the people in those countries who
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will have to see things through. I very much hope that this new Free Trade Area of the Americas will be a suitable vehicle to enhance that individual effort and improve the common lot.
4.7 p.m.
Viscount Waverley: My Lords, I remember well that the noble Baroness, Lady Hooper, spoke after my maiden speech on Latin American affairs, and it is a pleasure to follow her today.
The noble Viscount is to be congratulated on inviting serious consideration of this important subject. I believe, however, that the proposed free trade agreement must be seen in the wider context of the agreed principles of the 1994 Miami Summit. It is intended to encompass not only the promotion of prosperity, through economic integration and free trade, but also specific measures for the eradication of poverty and discrimination through improved access to education and health care. 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 substantial areas of the hemisphere. All that has great merit. not least going a long way to deal with the concerns of the noble Lord, Lord McNally.
Regionalism, shared resources, dialogue, democracy, together with free trade, are the essential ingredients for an equitable and safer world. I wonder what lessons might be drawn from this initiative that could have an equally beneficial impact on other regions of our global community. Could its principles be adopted—and adapted—to Africa's advantage? Could that be the blueprint for a new world order? I was delighted that once again the noble Lord, Lord McNally, touched on this subject.
I should mention one important caveat to this agreement which relates to the less well-off states. We in the UK are all aware of the difficulties that face mono-crop economies. Yet fair trade on a level playing field, as a result of being competitive, remains the goal.
Aid is not the answer, nor can preferential access survive in these new contexts, although it is difficult to envisage, for example, micro-states of the Caribbean competing effectively in the short or medium term without special assistance. So it is with relief that one notes in the declaration of principles and plan of action the following:
"As we work to achieve the Free Trade Area of the Americas, opportunities such as technical assistance will be provided to facilitate the integration of the smaller economies and increase their levels of development".
Many will be greatly heartened by that, even if the true test of such commitment arises only at the implementation stage.
The agreement looks for negotiations for progressive elimination of barriers to trade and investment to be completed by 2005, with a commitment to substantial

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progress by the turn of the century. I understand the concerns of the noble Viscount when expressing his doubts about keeping to that timetable, but at least there is a timetable, without which this initiative would not pass "Go".
The trade ministers meeting in Denver last summer did not move forward as much as had been hoped. There was a difference of view as to whether the agreement should be an expansion of NAFTA or a fusion of the existing trade groups. In addition, President Clinton still needs a fast-track authority in order to conclude any trade agreement. This would give the authority to negotiate, with Congress relinquishing the ability to amend.
The noble Viscount also spoke about the importance to the UK of Latin markets. Perhaps I may be permitted to say a few words in support. We were reminded this afternoon of the sad fact that the United Kingdom's returns with the Latin region do not correlate well with our direct investment programme. We are, after all, the second largest investor. But perhaps of greater concern is the loss of market share over the past 10 years. That situation can, and must, be reversed.
The opportunities are now more pronounced than ever, with our products and services highly competitive due to the devaluation of sterling against the US dollar, and the goodwill generated by the many exchanges of visits by high-ranking government Ministers. With the creation of trading communities such as Mercosur, Caricom and the Association of Caribbean States, and in anticipation of the enormous opportunities that will be created by this hemispheric free trade area, market size and potential now justifies involvement by the largest of our companies. There are many projects, both large and small, in the pipeline; and we have the knowledge and competitive edge to secure a stake in them. However, we shall secure a major share only by working from within, negotiating and serving customers where they are comfortable: on home turf and in their own language. We must therefore prepare and proceed accordingly.
4.14 p.m.
Lord Selsdon: My Lords, as has been usual in most of my trading life, I find myself breathing down the neck of my noble friend Lord Montgomery—a man, a visionary, a missionary. I suppose that the only time he breathes down my neck is on the ski slopes. As we know, since the war the pound sterling has depreciated by 94 per cent. against the Swiss franc. I have not spoken in this House and bored noble Lords on the subject of trade for such a long time that I thought I would try again.
Sometimes we get bored out of our minds and keep repeating the same rhetoric again and again. I recently re-read some of the histories of merchant banks and of countries that I had never heard of. I started to read Winnie the Pooh, and came across the extract:
"Sometimes I sits, and sometimes I thinks, and sometimes I sits and thinks".
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I have done a lot of sitting and thinking. Some of the "beat-up" parts of the world I have visited do not have very reliable transport. The plane that you are bound to get on does not exist, or does not arrive, and you cannot find a foreign newspaper, so you sit and think. And after nearly 33 years as an outpatient in this strange form of university in which I find myself today, I wonder whether I have learnt anything. And I realise that I have learnt a lot, but probably know nothing.
Recognising that those on the Labour Benches do not seem very enthusiastic about trade—there are so few speakers from that side—I want to ask the noble Lord. Lord Peston, if he can help me with a question that worries me. I should like to read a good essay, whether of a few words or a few thousand words, on the economic and political future of the United Kingdom—not about other parts of the world, but about ourselves at home.
I declare an interest. I have served on various trade boards, all unpaid; I am currently president of the British Exporters Association; I chair the international side of the Engineering Industries Association. I started my life in asbestos. All I seem to do is work in declining industries, and I realise that I am part of a dying breed. I suppose I am a peddlar, a tinker, a trader, or maybe even a privateer.
That is the word I come to in regard to the matter of trade with various parts of the world. Like myself, noble Lords know well that there are 5 billion people in the world. We churn these figures out as so many millions to whom we must sell. But surely we should examine our own economy and learn a little from the past.
Our great Industrial Revolution was not based upon ourselves; it was based on attracting foreigners—foreign technology and foreign investment. A hundred or so years later, we have reached the stage when the United Kingdom should never again use the word "export". Britain is no longer simply a national country. We no longer have an empire. But we are probably the sole successful international country in the world.
I think we became lazy. By good fortune rather than initiative and drive, we have attracted to these shores a remarkable collection of international people of all cultures, who have helped to restore and revitalise parts of our economy. The initiatives that Government have taken have been very good—because Government have not taken much initiative; nor should they. They have withdrawn from their role in trade; they never traded. If you ever ask, "What are the barriers to trade?", usually it is Her Majesty's Government. They find reasons why you should not go there.
I quote but one small example from the time when I first thought it would be a good idea to go to Cuba. I knew that people of Socialist leanings had close relationships with Cuba, so I asked the late Lord Walston, who had been a Foreign Office Minister, whether he would be kind enough to open the door for traders to Cuba. He told me the story of how, as a Minister in the Foreign Office, he had wanted to visit all his territories. The Foreign Office said that he could not visit Cuba because it would be misinterpreted as an official visit. However, it came

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up with the cunning idea that he could visit a country in the Caribbean on the way to visiting his own plantations in St. Lucia. So as a Minister he made a private visit.
I have learnt that the reasons why British trade and investment developed with many of those countries was that somebody thought it a good idea at the time. The reasons why they thought it a good idea were simply a question of gain, not of greed or glory. It was a development of the natural resources, to which my noble friend referred. As noble Lords know, throughout history, all cultural development has been related to the development of natural resources: the copper belt, and now perhaps the oil belt.
In that great area of the world we have a problem. We have been so successful in GATT discussions—the Uruguay Round—and free trade, that geography is no longer necessarily important in terms of the development of trade. If we study the development of our own interests historically, they were trade related, not geographically related. I regret now that I cannot find a single school that includes geography in its curriculum. I remember having to learn the rivers with those pictures of what mineral was located where and why. But people's own knowledge and knowledge of countries, to which my noble friend has referred, is remote and distant.
I do not know what the word "yore" means, but in the days of yore British companies had agents and representatives who would promote and develop their interests around the world, particularly in Latin America. When one speaks to people out there now there are a few left who say, "My father used to do a lot of business with the British". There are quite a few who say, "My grandfather used to do a lot of business with the British". There are more and more who say, "I think that my ancestors once traded with the British".
I do not believe that this Government can do much more to help and support trade. I have tremendous respect for the Department of Trade and Industry, having worked closely with it in many areas of the world over a vast number of years. What I believe we are missing, and my noble friend referred to it, is initiative by industry or British commerce itself; not by the public sector nor do I like the phrase, "private sector". It is extraordinarily difficult to go to a senior company in this country and say, "Here is an opportunity for you in a country with which you are not trading today" and to get them to go there.
Because they feel nervous, they like to go with a Minister. Over the years Ministers have spent an enormous amount of time taking businessmen abroad, failing to recognise that the businessman in general is going only so that he can have a discussion with the Minister about the row over high salaries in his industry or others. The people who trade are usually at a lower level. Those over the age of 35 years were always sent back from the Empire as being too old.
I am not being a cynic, but I believe that our problem lies not with government, not with export credit, not with aid, but with the need for a new thinking process about trade. The last mission I took abroad was not to that part
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of the world. I was horror-struck to find that I had four non-British out of nine people on the trip. I wanted to object. In fact, the British Government were making no contribution to that trip, although in the past they had kindly paid for things with which I have been associated. I also had paid for things with which they were associated. It has been a very fair and reasonable relationship.
But when one is trying to move a complete industry and a psychology back towards the former trading partner of Latin America, the Caribbean or even Canada, it is an uphill battle. I am not quite sure what we can do about it. The conference idea is not a new one. If only it were possible to get the key decision-makers together where the private sector and government draw attention to the opportunities, that would go a long way. The Government themselves have often forgotten that because of the desire always to get the state to pay, that they have within their walls vast goodwill and relationships where often a phone call from a Minister or a senior civil servant to a company saying, "I shall be most grateful if you would look at Argentina or Chile" or whatever, does an enormous amount of good.
We are talking about a part of the world about which very few people who are working in business today have any knowledge. The premature retirement age or the early retirement age, means that people who leave their company at the age of 57 or 60 are replaced by those who, although better trained than their predecessors, have no international experience or relationships. Most of the trade outside the G7 is still dependent on very close, long-standing, personal family relationships, and that is particularly true in the Caribbean and Latin America. Sadly, here we have destroyed many of the family-owned businesses of the past—and I make no further comment on that—and the relationships have died with them. Anyone in the branded goods field will say that to revitalise a brand is an extraordinarily uphill and difficult battle. The only way it can be done is to buy oneself into the market.
That leads me to the final point I wish to make. For a long time we were trying to encourage foreign investment over here. Although there were many of us who were extremely anti-Japanese in the beginning, we now do nothing but sing the praises of the success of Japanese investment in the United Kingdom. We then stopped trying to encourage British investment abroad, forgetting that trade and investment are totally linked. At this particular time we should be moving all out to encourage the maximum possible British-led investment in that part of the world. Why? It may be said that we are the largest foreign investor. It is not us, but money that comes to, and passes through, London. It is quite incredible how the globalisation of international markets has provided a financial base that can support, without any detriment to the British economy, vast investment around the world. Therefore, I believe that our future should not be export-led, but investment-led.
4.25 p.m.
Baroness Young: My Lords, I apologise to the House for speaking in the gap. I believe that some of my noble

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friends have decided that I can speak only on family law. I do sometimes address other subjects. I indicated that I wished to speak in this debate last week.
I am very glad to do so because, like other speakers, I particularly admire what my noble friend Lord Montgomery has done in building up very strong relations between Britain and Latin America: nobody has done more. He has promoted debates in your Lordships' House and constantly goes on trade missions to Latin America. I believe that no one in your Lordships' House knows that area better than he does.
I first became interested in that part of the world when I was a Foreign Office Minister and had ministerial responsibility for all the Americas including Latin America. I was fortunate enough to be able to make eight visits there during that time. I was also ministerially responsible for the Caribbean. It is to that area that I wish to address my remarks this afternoon because it is a part of the world that has not yet been covered. I can do so in my current capacity as president of the West India Committee.
I wish to say something about the Caribbean because the incorporation of the Caribbean into the Free Trade Area of the Americas by the year 2005, presents to those small countries a very great challenge indeed. They already have a number of changing patterns of relationships. The Caribbean has special links to Britain, France, Spain and to the European Union. The decision to pursue joining the Free Trade Area of the Americas is causing Caribbean governments to develop policies which react to four convergent, but rather different processes.
First, how can the Caribbean position itself between Europe—particularly the European Union—and the United States, as the European Union begins to accelerate its special relationship with Latin America, referred to earlier in the debate, through the development of special economic and other ties with the nations of Mercosur, the San Jose countries of Central America and with Mexico and Chile? That is one area.
Secondly, how can they position themselves as regards the changing relations with Latin America as a whole and the European Union and the development of policies that will affect any agreement that the Caribbean and the ACP might achieve when Lome IV ends in the year 2000?
The third and rather complicated process, is how the countries can determine how much weight they should place on the US Administration's long-term commitment to the free trade area, and how its requirements for full reciprocity might be phased in and structured in such a way that the United States in particular recognises that special provisions will be needed for the successful integration of the smaller economies of the Caribbean countries. Their needs are so different. For instance, one considers St. Lucia, which was referred to, and Dominica, and these very small and fragile economies which are so unlike the enormous economies in Latin America and the United States itself.
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The fourth process, which is also a difficult one, is the decision to take forward the Association of Caribbean States as a body that will in the long term assist the Caribbean Basin as a group to participate fully in the global economy in such a way that it can take advantage of both the free trade area and the European Union.
To bring those four processes to a successful conclusion, Caribbean governments will need to address a number of complex situations. And they have, of course, relatively small populations with which to address them.
The United Kingdom's overall concern must he how the small Caribbean nations—for example, Dominica—will be able to come to terms with the free trade area. Clearly, a nation of that size, with a population of only around 100,000, will not be able to cope with a free trade Brazil, Mexico or Chile, let alone the United States. Britain therefore needs to work closely with the Caribbean and with the European Union to ensure that there is a lengthy period of transition during which the special concerns of small island economies are taken into account.
This is not the time or the debate to go into the complexities of the banana regime, which has been raised in the House before, but we need to remind ourselves that a number of economies depend upon one crop and that if that is taken away there is a danger that it could be replaced by something difficult and unpleasant, such as drugs. I am not suggesting for one moment that it necessarily would be, but it is a possibility.
In all these complex arrangements with free trade areas we have a great responsibility towards the smaller countries of the Caribbean. We need our European Union partners to develop a European Union approach which supports the policy we are adopting and makes quite clear to the United States that regional stability, which is of great interest to the United States, will depend on a gradual and supported transition to open markets.
The noble Lord, Lord McNally, kindly referred to the visits I have made to Cuba and passed on greetings from his noble friend Lady Thomas. As part of my interest in the Caribbean I have in the past two-and-a-half years paid two visits to Cuba. It is a country which I expect to visit again later this year. I am currently chairman of what is known as the Cuba Initiative, which is an organisation of a number of businessmen and women with business interests in Cuba. It has a corresponding committee in Cuba itself. Its purpose is to promote trade between Britain and Cuba. It works closely with the Department of Trade and Industry and I am pleased to say that my honourable friend Mr. Ian Taylor, the Parliamentary Under-Secretary at the DTI, has paid two very successful visits to Cuba. I hope very much that I can encourage my noble and learned friend Lord Fraser to follow his example and visit Cuba before too long.
Cuba has been excluded from the free trade area. Conscious as I am of the remarks of my noble friend Lord Selsdon about trade missions—I hesitate to say that I have led two trade missions to Cuba—it is a

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country which to anyone is extraordinarily interesting to visit. I say that—I have already spoken in your Lordships' House on it—because it is a country very much in transition and experiencing change. No one can go there without being struck by the country's efforts to move towards a freer economy. Last time I was there I had a fascinating visit to a market which was freely operating, as would any market in any industrialised country, selling food and other things. After I had been around and had seen all the goods and the varying prices, with people pressing me and everyone else to buy things, I was asked what I thought. I said, "This is a market. This is the operation of a private enterprise organisation. This is capitalism". And, indeed, it was. There were other markets. I was taken with great pride to a farm where a man said to me, "It is now a farmers' co-operative and we are determined to get our fruit to the market before our competitors". One began to see the number of real changes taking place.
In relation to the remarks made about American policy towards Cuba, I think that it must surely he in the interest of Britain, the European Union and, if I dare say so, the United States to try to encourage as far as we can these developments towards a free enterprise economy. That is one of the purposes of taking trade missions, of having the Cuba Initiative and of encouraging visits between the two countries. On the political front, which is another matter, Cuba is not a democracy but it has taken one or two steps in that direction. It now has a national assembly and there is a certain amount of discussion and, what is more, criticism—it may be behind closed doors but it is there—of some of the things the government have done. It must surely be in our interests to encourage democracy in Cuba.
There is, after all, a self-interest which we as a country can have in trading with Cuba while the American embargo exists. We should make the most of that opportunity and encourage it. But we should not do so just for that reason. We should encourage it because it will greatly improve trade relations between our two countries and because Cuba is a country which Britain and other countries of the European Union can certainly help bring into the ambit of the western world.
I hope that Cuba will eventually be able to join in the regional integration within the area. I do not believe it is in the interests of the Caribbean, the United States or the European Union that Cuba should remain outside and that Cuba should in any way be destabilised. It is quite the largest country in the Caribbean. We should encourage all these positive and good movements.
I should like to leave not only that message about Cuba but another about the Caribbean generally. When we talk about these important developments in the free trade area with America and about all the other groupings which undoubtedly are leading to greater prosperity we should not forget the very different problems which face the small countries of the Caribbean, with their small populations and fragile economies. We should do all we can to ensure that they prosper too even if it means that we have to apply some special measures to help them achieve that prosperity.
4.39 p.m.
Lord Pearson of Rannoch: My Lords, I do not know whether it is appropriate that I, too, should apologise to your Lordships for intervening in the gap. If it is. I do so. However, when I joined your Lordships' House some years ago I received quite a lecture from the then Clerk of the Parliaments that he felt that when time permitted more noble Lords who had listened to the whole of the debate and felt they had something to say should intervene in the gap.
I join other noble Lords in thanking my noble friend Lord Montgomery for introducing the debate and I should declare an interest as the chairman of a firm of international re-insurance brokers. We trade in almost every country of South America, and I have visited or will visit almost every country there this year.
In that capacity, I should like to confirm what the noble Lord, Lord Wright of Richmond, had to say about the high level of investment—in most South American countries, we are the second highest investor—and the comparatively low level of trade that that brings to us. I also underline the fact that the overall growth rate of 17 per cent. in recent years in that continent is explosive. I do not want to single out any one particular country but at the moment Brazil is perhaps particularly impressive in the way in which recently it has brought inflation so valiantly under control.
The noble Lord, Lord McNally, mentioned Colombia and the drug trade. I should like to put in a plug for Colombia, if I may. When I was there recently I was constantly reminded of the fact that it is our demand which creates the Colombian drug trade. It is not enough for us just to sit here and say that they have to get the drug barons under control. Without the demand, the drug barons would be out of business.
Having taken that commercial view of South America, I want to take issue with some noble Lords who, I feel, have seen too substantial a role for the European Union as such in the future of South America. The noble Lord, Lord McNally, went so far as to say that he felt that some of the groupings—Mercosur and others—which are emerging in South America were emulating the European Union. I have to say that I very much hope that they do not. I hope that they will not emulate the Social Chapter or the absurd interference which comes with harmonising the single market. I believe that our South American friends know that a level playing field and a market are a contradiction in terms. I am sure it is helpful for European Union finance to be available to our South American friends, but I trust they realise that they will need a fairly long spoon when they sup with that particular devil and take advice on political institutions and judicial and educational matters.
My fear about the European Union in this matter is that it is once again merely trying to extend its field of competence, or, rather, incompetence. I very much hope that it will be the separate sovereign states of Europe which will take the enormous opportunities that the South American continent offers us and develop those opportunities with our friends in the countries in that continent.
4.43 p.m.
Lord Peston: My Lords, I join with all other noble Lords in expressing our debt to the noble Viscount, Lord Montgomery, for introducing this important debate. I too am deeply disappointed that so few noble Lords felt able to take part in this debate but, if I may utter the usual cliché, we make up in quality for what we lack in quantity.
This debate is to call attention to political and economic opportunities. I shall concentrate on the economic side because, as I demonstrate in most weeks to your Lordships, I have no understanding whatever of political matters. On the economic side, perhaps I may say to the noble Lord, Lord Selsdon, that I convey to your Lordships my views on the past, present and future of the UK economy at fairly regular intervals and I make those views available free of charge. If he would like more than that, I can give him more, but I have a rather high consultancy fee, especially looking to the future.
Perhaps I may make one other preliminary remark. I agree very much with what the noble Baroness, Lady Young, said about the banana regime and so on. I think she is right that this is not the occasion to debate that matter. I myself published some research on it two or three years ago. Let me just say that I agree with every single word that she said. Perhaps we shall come back to that issue at some time.
I regard myself as someone who is very much committed to free trade. I wish to see free trade generally, certainly in the whole of the American continent. If we eventually end up with the Free Trade Area of the Americas, I believe that not only will those countries gain but the whole world will gain. I certainly see no threat there to the European Union. Nor do I see any threat from the European Union to that area. I am supportive of it.
Having said that, I should like to follow other noble Lords and emphasise the South American aspect, but that is not to detract from the enormous importance of the United States and North America generally. But the point is—I shall illustrate it very clearly in a moment—that one often acts as though there is no such place at all as South America. For most people America means the United States. I am aware of that. In preparing for this debate, I was staggered to find how little I knew about South America and South American economies. That is another reason why I thank the noble Viscount for encouraging me to learn something about them. Until recently, if I had been asked the name of the Brazilian currency, I should not have known that it was the real. Nor would I have known that the Argentines have the peso. Even now, although I could tell the House just like that the sterling/dollar exchange rate up to a few hours ago, I do not have the faintest idea of the sterling/real exchange rate. That is indicative of a lack of knowledge of a very important continent.
As someone who has been an academic for a great many years, I do not recall ever talking about South America in any of my lectures, though I very often talked about the United States. I do not remember even as a student anyone telling me that I ought to know
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anything about the economy of South America. That is all indicative of a lack of balance, which I certainly should like to see rectified.
In that connection, I should like to say a word about languages taught in our schools. I am not one of those people who say that English is the only language that anybody needs to know in order to succeed in this world. Neither do I think that French is the only alternative language that we ought to use. I was immensely impressed by the pronunciation of the noble Baroness, Lady Hooper, of what I took to be Spanish. I should like to see more people learning some Spanish. I should also like to see them learning some Portuguese. It is all very well to say that other people can speak English. My experience has been that in any kind of dealings with people from abroad, they are immensely appreciative of one's ability to say even a few words in their language and at least to show that one appreciates that they have a culture of their own.
One should not just have a vision of South America as nations which produce great footballers and rhythmic dances. I looked it up and found that South America has five Nobel prizes for literature and five Nobel peace prizes. The Argentines have both a physics and a chemistry Nobel prize. That is not bad going for that part of the world. We have to take those places seriously. It is to our advantage.
That brings me to a matter about which I am puzzled. The noble Lord, Lord Selsdon, referred to it. We know that, in terms of investment, British people and British companies regard South America as a place into which it is very worth pouring capital. And we do. But there is a puzzle and it is a genuine economic puzzle; namely, the scale of our trade is minuscule compared with that. I wonder why that can be so. Those are markets which our competitors find worth going into. Why do we not have the normal correlation between capital investment and trade? I do not know the answer. I shall not necessarily press the Minister to say that he knows the answer. It is a puzzle. But it suggests that perhaps our businesses, as the noble Viscount said in his introduction, do not see the kind of opportunities that are there.
Lord Selsdon: My Lords, perhaps the noble Lord will forgive me for intervening. I may, indeed, be wrong on this matter. But in general it is because the capital investment over there is into the raw material, natural resource industries that we require over here, as we have no natural resources of our own. Certainly that should be compensated for by increased British exports, but we are not very successful.
Lord Peston: My Lords, I take the point. Perhaps we have made a mistake in interpreting South America too much as a land of natural resources and not as a land to which we can sell goods and services and in which we can help in the production of goods and services. That is something that I should like to happen. Indeed, the Germans, French, the Spanish and others are trading with those countries. Why aren't we?
I am an ignoramus in this field and I accept the remarks made by noble Lords about how supportive the Government and the Foreign and Commonwealth Office

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have been. That is fine. However, I sometimes wonder whether we are playing a fair game in terms of free competition and free trade. I wonder whether covert subsidies and covert support are being provided by other nations whereas we, because of our principles, are not engaging in that. Perhaps we are losing markets because we are too honest and straightforward. We have certainly seen that happen in other areas of competition, so I hope that we can look at that point.
I have said that I do not believe in poking my nose into another country's affairs. I truly believe that. I think that in the end people have to make their own decisions on such matters and that it is not for us to pontificate on what other people are doing. I know that many noble Lords find that difficult to resist. However, if I were advising the South Americans, I would suggest that they proceed on a step-by-step basis and put in place whatever free trading arrangements they can bilaterally between themselves and then within their own continent, rather than assume that plunging into the grandiose Free Trade Area of the Americas is the easiest thing to do. In other words, I would adopt a practical approach to these matters.
I do not say that to denigrate the United States. I am an alumnus graduate of Princeton University and no one is a stronger supporter of the United States than myself or is more aware of the leadership that the US has given the advanced industrialised world in our lifetime. However, if I were a South American, I would still want to go my own way first rather than say, "Let the US do it first and we will follow". I think that that is immensely important.
I do not have a great deal more to offer although I should like to venture one other comment which relates to cause and effect. It is a quasi-political point. I do not want to tell the South Americans how to run their affairs, but I truly believe—and I think that the events of the past decade show this—that, on the whole, trade is conducive to democracy. In the end, it works and if you get used to trading with foreigners, you get used to having a more open society. I think that that will apply to even Cuba in due course. We have seen some pretty awful things—not just there, but everywhere—but I remain an optimist. I believe that as long as we do not interfere excessively in other countries' affairs, as long as we are willing to trade there and as long as our Government, of whatever political complexion, are supportive of those who wish to trade, there will be a happy ending in South America.
Therefore, I simply repeat my thanks to the noble Viscount and hope that the next time that we debate South America we shall be able to say that our share of its trade has increased considerably.
4.53 p.m.
Lord Fraser of Carmyllie: My Lords, I am very grateful for the opportunity provided by my noble friend Lord Montgomery to develop the impact of the proposal to develop a Free Trade Area of the Americas. Like all of your Lordships, I know how much of his time my noble friend devotes to discussing the development of the Americas. With his strong presidential connections with
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Canning House, my noble friend has been instrumental in bringing the issue of the economic and political prospects in the Americas, and particularly in Latin America, to a wider audience. This debate is particularly timely in view of the very welcome and, I believe, successful visit by the Vice-President of Bolivia last week. I respectfully agree with the noble Lord, Lord Wright, that it is also timely that the debate should he held a week before President Zedillo visits the United Kingdom.
We welcome any new proposals that will lead to the removal of barriers to international trade and investment. We believe that by liberalising trade we create wealth and make economies more efficient. I entirely agree with the noble Lord, Lord Peston, because we also believe that open trade relationships create political stability. The example of Europe since 1945 shows that a commitment to open markets and regional integration can bring lasting peace to areas which have previously suffered terribly from the scourges of war and political upheaval. The wide acceptance throughout the world of the benefits of open economies is underlined by the commitment that has been made to the GATT and now to the World Trade Organisation, the principles of which have given and will continue to give tremendous gains for our economies from the reduction of trade barriers and from the application of the principles of most-favoured-nation and of national treatment.
The desire to create a FTAA is therefore to be welcomed. It illustrates that the case for markets that are open to trade and investment is widely accepted in that region. It is the natural result of a number of developments in recent years to create free trading groups within the region, for example the North America Free Trade Area members have agreed to remove all tariffs and a wide range of other trade barriers by 2008; and Mercosur's members have agreed to remove all barriers to intra-regional trade by 1999 and to achieve full convergence on a common external tariff by 2006.
The commitment made by the American nations to create a free trade area is to be warmly admired for its ambition. The only point on which I disagree with my noble friend Lord Montgomery is on the population figures. As we understand it, the total population of the region today is not 750 million, but some 850 million. A move to trade and investment without tariff barriers in the region would create huge dynamic effects that would spur wealth creation and promote cross-border trade and investment. It would offer opportunities not just for those inside the region, but also for any business selling its goods and services in that market, and for any business that is an investor in that market. The region has already come a long way in recent years in the development of open economies.
Much of the debate has been focused on the Latin American countries. Those countries have made remarkable changes to the way in which they operate their economies. My noble friend Lady Hooper was right to highlight the changes that have been made in the oil and gas industries.

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As yet, the FTAA is in a very early stage of development. Its membership would cover a huge variety of economies—from among the richest nations on earth to some of the poorest. Income per head in the US is about 25,000 dollars: compare that with a per capita income for Bolivia of 800 dollars. The FTAA nations have a long way to go to establish how their free trade area would work, and in certain areas they are still—not unnaturally—working on the groundrules. Furthermore, the FTAA will require sustained political commitment from the region's governments if it is to come to fruition over the long period being allowed for negotiations.
I agree with my noble friend Lord Montgomery and the noble Viscount, Lord Waverley, who indicated that the short-term prospects for the FTAA may be limited by the proximity of the presidential election in the United States. But I am sure that the noble Lord, Lord Peston, is right that there seems to be little sign that the enthusiasm of the Latin American nations for regional integration is waning.
Notwithstanding that there may be short-term problems, there is every reason for United Kingdom businesses to maintain their efforts to penetrate the markets of North and South America. The United Kingdom's strong investment position in the region means that our companies should be in a good position to take advantage of the liberalisation that is now taking place. We have, of course a strong position in the North American markets, particularly in the United States, based on long-standing trading and business links. It is our aim to strengthen that position even further. As for Latin America, it is our aim to ensure that businesses in the UK recognise how much the region has changed. In 1982 when Mexico defaulted on its debt and the debt crisis plunged that continent into what became known as the lost decade, who could have foreseen the remarkable recent developments, including growth in the region of nearly 3 per cent. per annum during the early 1990s?
Some might say of course that compared with average annual growth of some 6 per cent. during the 1970s that is not impressive. But what is important is that growth was not achieved by sheltering industry behind high tariff barriers. When that was the case, it was not sustainable. High periods of growth alternated with periods of excessive inflation, with several countries experiencing the pains of hyper inflation. The new policies of open markets, internal deregulation, privatisation and fiscal prudence, while painful in the short term, provide a much more solid foundation for future growth. In 1990 four countries in Latin America had four-figure inflation. By last year all these countries had inflation under 20 per cent.
On the political front too, the change has been remarkable. Apart from Cuba—there are changes under way there—democracy is universal and has been further consolidated by a series of peaceful and open elections, most recently in Argentina, Peru and Guatemala. Civil war has been effectively eradicated in Central America.
That change in economic philosophy was evident in the increasingly positive role which the Latin American countries played during the Uruguay Round negotiations
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which led to the creation of the World Trade Organisation. The positive spirit in which the negotiations were generally carried out was greatly enhanced by the recognition of Latin American countries that there is an absolute economic benefit to be gained from market reform and the removal of trade barriers. The unilateral action taken by many Latin American countries during the late 1980s to reduce tariffs and open markets contributed greatly to the spirit in which the Uruguay Round was conducted and ultimately to the wide-ranging result which was achieved.
The Mexican crisis last year and its after-shocks brought difficult times, but I believe that we arc now sailing into calmer waters, with belief in the fundamental correctness of the policy of openness unscathed. Indeed the enthusiasm of the Latin American countries for new regional integration agreements suggests that they have emerged from this period with their commitment to open markets and the FTAA made all the more robust.
While we welcome those dynamic regional developments, I must stress that we continue to believe that a truly open world trading system is best guaranteed by a strong World Trade Organisation which has a wide membership, and in which those members have made commitments to maintain open access to their trading partners. We therefore believe most strongly that the development of free trade areas like the FTAA must be in line with the rules that the WTO membership has set itself. Those rules permit the development of preferential trading areas as long as those areas do not raise trade barriers against nations outside, and as long as they create trade, rather than simply divert trade flows from one place to another.
A number of points were raised during the debate and I shall do my best to answer them. At one time my noble friend Lord Selsdon indicated that Her Majesty's Government were obstructive in their approach to trade. If he wishes to visit Cuba he will not merely go with a warm blessing, but I have no doubt that my noble friend Lady Young and others will be only too pleased to assist him in making the visit.
Lord Selsdon: My Lords, perhaps my noble and learned friend will forgive me, I have been to Cuba many times. I led three trade missions there at a time when Her Majesty's Government felt that it would be deemed inappropriate for them to be represented.
Lord Fraser of Carmyllie: My Lords, if my noble friend wishes to take a further trip, on this occasion he will know that he goes with the warm blessing of all parts of Her Majesty's Government.
I agree with the noble Lord, Lord McNally, and my noble friend Lady Young on the importance of our relationship with Cuba. Perhaps I may say as carefully as I can that the UK enjoys normal trade relations with Cuba. It is our policy to support the efforts of UK firms to participate in the growing market as Cuba proceeds with reforms of its markets. As my noble friend Lady Young indicated, my ministerial colleague, the Minister for Science and Technology, has visited there twice.

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Another important example of the improvement is the coming into force of investment, promotion and protection agreements.
We shall continue to play a full part in strengthening EU relations with the Caribbean, particularly in building the capacities of the private sector of the smaller island economies, and assisting with the diversification of their trade.
My noble friend Lady Hooper referred to EU support for industrial co-operation with Latin America. The DTI is actively promoting the opportunities under the EU programme for UK firms to become involved, for example, through the EC investment partner scheme which has a strong focus on SMEs to which my noble friend referred.
My noble friend Lord Pearson was concerned that EU support for Mercosur might be unattractive or unacceptable, certainly to him. It largely takes the form of technical assistance in areas such as administration and standards, where adopting European norms can be of direct benefit to our exporters. EU capital finance for Latin America provided by the European Investment Bank does so on competitive, commercial terms.
I agree also with my noble friend Lady Hooper that education and training should be a priority. We can play an important part. The British Council, as I am sure she knows, is very active in the region and will continue to be so. Your Lordships may be interested to know also that important education missions last year to Argentina and Brazil were led by my noble friend Lord Henley who was accompanied on one occasion by my noble friend Lady Perry.
Drugs are a real problem. We continue to urge close co-operation. We provide training and detection equipment and the Prime Minister and President Chirac in Madrid last December set up a working party to see how we might achieve yet further co-operation.
So far as concerns a conference, I am aware of the noble Viscount's proposal, and while I cannot offer him a clear decision yet, officials within the DTI and the Foreign Office are giving such a proposal serious consideration.
On the broader issue which came through on a number of occasions from my noble friend Lord Selsdon and the noble Lord, Lord Peston, yes, indeed, we understand clearly that it should not be a matter just of exports—investment has a crucial part to play. Indeed the DTI's trade promotion policy and, in particular, the link into the Latin America Campaign has the issue of investment as a feature.
The markets of the Americas are extremely important for British business. In 1994, 16 per cent. of UK visible exports went to those countries. We are already, as has been observed, major investors in the region which takes some 37 per cent. of our total foreign direct investment. Regional integration will undoubtedly create many new opportunities. Just within Mercosur, for example, integration will give rise to substantial opportunities in infrastructure, transport and energy. The value of infrastructure projects alone already at the feasibility stage, has been put at some 10 billion US dollars.
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We are committed to working for open markets between the EU and the Americas. In that context, I wish to note our full support for the EU's work with the US and Canada on trans-atlantic trade regulations and the new generation of agreements between the EU and Latin America, such as that signed last year with Mercosur. I noted with gratification that that met with the approval of the noble Lords, Lord Wright of Richmond and Lord McNally.
It is however a fact that while our investment performance in Latin America is strong, and trade and investment with North America is healthy, regrettably UK exporters have not hitherto given the attention to the Latin American markets that I believe they deserve. It is for this reason that my department launched the Link into Latin America campaign. This campaign and the continuing North America Now campaign will, I hope, help to ensure that UK business is ready for the many new economic opportunities to which the FTAA will give rise.
Wherever we look, we see evidence of the countries of Latin America joining the US and Canada on the world stage. I have already noted the valuable role played by them in the Uruguay Round. We have also seen Mexico joining the OECD, Chile joining APEC and negotiating to join NAFTA, and Argentina keen to join the OECD. There is co-operation over non-proliferation issues and participation in UN peace-keeping.
These changes bring new opportunities for Britain. We once enjoyed a predominant political and economic position in Latin America. We need to work to recover it. The British Government are actively responding to developments. In 1992 John Major made the first ever visit by a Prime Minister to Latin America. The Foreign Secretary has visited three times in the past four years. I can tell the noble Lord, Lord Wright, that, as he might have expected, the Chancellor of the Exchequer in his exuberant fashion very much enjoyed his visit to South America during the Christmas and New Year period. He returned, as do many of us following such visits, with a new appreciation of the genuine warmth and friendship that they would wish to extend towards us. There is a welcome regular and growing flow of Ministers from Latin America to the United Kingdom. Those of us in the DTI make regular visits to Latin America. Indeed, I hope soon to visit Venezuela, Columbia and many of the other Latin American countries within the coming year.
I conclude by thanking the noble Viscount for giving us this opportunity to debate this important issue. As the noble Lord, Lord Peston, honestly said, far too often in matters of public debate in the United Kingdom the importance of Latin America is forgotten. So, too, are the problems and the importance of the Caribbean. I believe that this debate has usefully brought a clear focus on just those issues.
5.15 p.m.
Viscount Montgomery of Alamein: My Lords, I thank all noble Lords who have taken part in the debate. We have had a fascinating discussion. As I anticipated at the beginning, there have been diverse contributions

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from all quarters of the House. In fact, so much so that I have learnt a great deal, as I might have expected, about the different aspects of the problem. I thank my noble and learned friend Lord Fraser and encourage him to visit the continent with great frequency and to ensure that his ministerial colleagues continue to do likewise. I am sorry that he cannot be more positive about the proposed conference. I hope that he and his colleagues in Whitehall will reach a decision soon as I know that such events take a great deal of planning and foresight if the proper speakers are to be assembled.
It is a great temptation to comment on all the contributions that have been made but time does not allow. I wish to make only one or two comments on particular points. I was grateful to the noble Lord, Lord Wright, for his comments on the increase in the number of commercial posts in Latin America. One of the problems of the past was that there was a shortage of diplomats in that part of the world. The propensity of the Treasury to make cuts in the smallest and most efficient department in Whitehall, the Foreign Office, is wholly deplorable. That is a welcome reversal of the trend and I hope that it will continue.
I was particularly pleased that the noble Lord, Lord McNally, and the noble Baroness, Lady Hooper, spoke of the European arrangements and initiatives in Latin America. That is important and it is a subject which Canning House embraces. It pays particular attention to European Union relations with Latin America.
The noble Lord, Lord Peston, needs no education in economics but I am glad to welcome him to this new area. His point about languages was particularly important. Spanish and Portuguese are the key languages but the noble Lord may not be aware that after Mexico the United States is the most important Spanish-speaking country in the world. More people speak Spanish as the first language in the United States than in Spain. That is a remarkable state of affairs and shows how the language is spreading. It is a welcome extension and—dare I say it?—another issue embraced by Canning House.
It was encouraging to hear several noble Lords endorse the notion that the United States' policy towards Cuba is flawed and that we should trade more actively with that country and encourage others to do likewise. Trade missions are very welcome and perhaps I may remind my noble friend Lord Selsdon that in 1974 I accompanied Lord Walston on the first trade mission to Cuba since Castro came to power. He had been in office for 14 years and on that occasion he made his first ever visit to the British Embassy. I gather that since then he has visited the embassy on many occasions but it was a welcome initiative. Our relations with Cuba are excellent.
One of the factors that has emerged from the debate is that there are a number of sub-regional trading arrangements already in existence. They were mentioned by a number of noble Lords. It is perhaps through the convergence of those sub-regional arrangements that the whole of that vast area will develop. However it develops and however long it takes, it is a vital initiative and it is extremely important that
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we in this country are able to take cognisance of it, pay proper attention to it and make use of the opportunities that this vast new development will present. I thank all noble Lords who have participated in the debate and I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Northern Ireland: Report of International Body on Arms Decommissioning
5.18 p.m.
Viscount Cranborne: My Lords, with the leave of the House, I shall now repeat a Statement on Northern Ireland and the report of the International Body on Arms Decommissioning made in another place by my right honourable friend the Prime Minister. The Statement is as follows:
"The key to progress in Northern Ireland is confidence—confidence to enable the parties to sit down together without threat of force. The retention of arms by the paramilitaries on both sides is the biggest single factor in holding back that confidence. It has so far prevented the holding of all-party talks.
"That is one of the reasons why we and the Irish Government established the international body to provide an independent assessment of the decommissioning issue as one track of the twin tracks initiative John Bruton and I launched last November.
"The Body's remit was to identify and advise on acceptable methods of verifiable decommissioning, and to report on the commitment of the paramilitaries to work constructively to achieve that. We set the Body the challenging target of reporting by mid-January. I am extremely grateful to Senator Mitchell, and his colleagues, for the energy and determination with which they have completed their task.
"The Body's main conclusions are: that the total and verifiable disarmament of all paramilitary organisations has nearly universal support and must continue to be a principal objective; that to reach an agreed political settlement and take the gun out of politics, all parties should commit themselves to, and honour, six principles embodying the path of democracy and non-violence—those principles include the total and verifiable disarmament of all paramilitary organisations, the renunciation of force and the threat of force, agreement to abide peacefully by whatever agreement is finally reached, and an end to so-called punishment killings and beatings; that there is a clear commitment on the part of those in possession of illegal arms to work constructively to achieve full and verifiable decommissioning as part of the process of all-party negotiations. The Body makes a series of recommendations on the modalities of decommissioning of illegal arms. It emphatically declares that there is no equivalence between such arms and those held by the security forces. It rightly emphasises the need for independent verification; and that other confidence-building measures are needed,

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such as an end to targeting of potential victims by the paramilitaries, information on missing persons and the return of those previously intimidated out of their homes.
"The Body also records its conclusion, on the basis of its discussions, that the paramilitaries will not decommission any arms prior to all-party negotiations. The House will note that the Body did not conclude that they cannot decommission but that they will not. The House will draw its own conclusions. Although the Body makes no formal recommendation on this point, it suggests an approach under which some decommissioning would take place during the process of all-party negotiations.
"The Government welcome the Body's endorsement of the seriousness of the decommissioning issue. We welcome and fully endorse the six principles set out. We call on all parties to do the same.
"If all concerned were to accept those principles, and honour them, as the International Body also rightly emphasises, that would be a significant step forward. Even more significant would be if, in addition, all parties, particularly Sinn Fein, also joined the two Governments in supporting the wide principles of consent set out in the Downing Street declaration.
"The Government also welcome the Body's broad recommendations on the modalities of the decommissioning process. We are ready to implement them. It is now for those in possession of illegal arms to say whether they will accept and act on them. We look forward to an early and definitive response from the paramilitaries on both sides.
"We welcome, too, the emphasis on other confidence-building measures. If the paramilitaries give up their present practice of keeping themselves ready for a return to action, that will be a most welcome sign of real commitment to peaceful methods. Otherwise, gun-law continues to hang over the heads of the people of Northern Ireland.
"There is therefore much in the report that we can welcome and endorse. But the practical problem remains: how to bring all the parties together. Self-evidently the best way to generate the necessary confidence is for the paramilitaries to make a start to the decommissioning process. We see no reason why they should not.
"There can be no justification for the maintenance of private armies by those who claim to be committed to exclusively peaceful means. Opinion polls in both Northern Ireland and the Irish Republic have shown overwhelming public support in both communities for decommissioning before talks. We shall, therefore, keep up the pressure for an immediate start to that process.
"However, I am not prepared to accept that any one group should, through its intransigence, stand in the way of peace and a comprehensive settlement for the people of Northern Ireland. We will not be deflected
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from our aim. It is now apparent that there may well he another way forward, consistent with the basic principles that we have always adhered to.
"One of the confidence-building measures taken up by the International Body is the idea of an election. The Body made clear that a broadly acceptable elective process, with an appropriate mandate and within the three-strand structure, could contribute to the building of confidence.
"The Government believe that such an elective process offers a viable alternative direct route to the confidence necessary to bring about all-party negotiations. In that context, it is possible to imagine decommissioning and such negotiations being taken forward in parallel.
"The election proposal originated in Northern Ireland and, as recent opinion polls have shown, has widespread cross-community support there. A number of parties, including those led by the honourable Members for Upper Bann and North Antrim, as well as the Alliance Party, have put forward proposals for some form of elected body as a means of getting all parties talking together, even if the paramilitaries persist in their refusal to decommission prior to negotiation.
"It is true that other parties have registered their concerns. They will certainly need to be addressed. We will discuss urgently with all the parties how to overcome them. But in a democratic system like ours I cannot see how elections could be regarded by any of the parties as a side issue or as a block to progress.
"As the Mitchell report says: 'Elections held in accordance with democratic principles express and reflect the popular will'. So let me make it quite clear to the House that we are ready to introduce legislation, and to seek both Houses' urgent approval for it, in order to allow an elective process to go ahead as soon as may be practicable. I would hope that that will attract support right across the House.
"To sum up, we believe that, in the light of the Mitchell report, there are two ways in which all-party negotiations can now be taken forward. Both are fully consistent with the six principles set out in the report.
"The first is for the paramilitaries to make a start to decommissioning before all-party negotiations. They can—if they will. If not, the second is to secure a democratic mandate for all-party negotiations through elections specially for that purpose.
"There are two routes to all-party negotiations and to decommissioning. The choice between them is ultimately for the parties themselves. I believe that the people of Northern Ireland have every right to expect that one or other of those routes will be taken and taken soon.
"For our part we, together with the Irish Government, will intensify our discussions with all the parties. I intend to meet the Taoiseach again in the middle of February to review progress.
"The people of Northern Ireland are enjoying today's peace. They want it to be permanent. They also want and deserve political progress. It is time to

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put old enmities aside and to allow the people of Northern Ireland and their representatives once again to have a normal say in their future and their affairs.
"The proposals that I have put forward today require all concerned to take risks for peace. We have done so before and will do so again, consistent with our principles. That is what is needed if we are to build on the achievements of the past two years.
"Let us never forget that we are dealing here with the lives of innocent men, women and children. We are dealing with their future and the future of Northern Ireland. In the end, our obligation as politicians is to the people we govern.
"I pledge that I will leave no stone unturned to deliver to the people of Northern Ireland on a permanent basis the precious privilege of peace that they have now enjoyed for 17 months."
My Lords, that concludes the Statement.
Lord Richard: My Lords, I am grateful to the noble Viscount the Leader of the House for repeating the Statement made by his right honourable friend in another place this afternoon. I am sure that noble Lords on all sides of the House will want to join me in welcoming the Mitchell Report. I start by paying tribute to the work undertaken by Senator Mitchell and the other members of the commission which has produced this valuable and helpful report. They did a great deal of work and they did it extremely quickly. The House and indeed the country should be grateful to them.
The publication of this report is indeed a significant contribution to the Northern Ireland peace process. I would hope that all parties recognise its value and vote together on the basis of the framework which it provides. I agree very much with what the noble Viscount said; namely, that the British and Irish Governments must continue to co-operate and to liaise closely on developing the peace process further. We on these Benches support strongly the six principles underpinning the report. They contain a great deal to recommend them. I hope that the different parties to the conflict will respond positively. I particularly endorse the need for a commitment to democratic and peaceful means of resolving political issues. One of the report's main proposals seeks to bring an end to the so-called "punishment" beatings and executions. I think that noble Lords on all sides of the House will welcome what the report has to say about that. These acts are totally unjustifiable and indeed in reality they are terrorism under another cloak.
The essential matter now—as the noble Viscount the Lord Privy Seal said—is to build the confidence necessary for all-party talks to take place. The importance of this report is that it points to alternative routes towards building that confidence. I share the view that prior decommissioning would perhaps be the better way but the report concludes not that it cannot be done but that it will not be done. The report therefore suggests an elective route as an acceptable alternative. I wonder whether the noble Viscount the Leader of the House can say a little more about how the Government see that. Is
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it intended that the assembly resulting from such elections should have any negotiating role, or is it to have merely an advisory role? As regards timing, Mr. Trimble said this afternoon in another place that he would hope that these elections could take place as early as April or May. I wonder whether that sort of timescale is the one that the Government envisage for this part of the process.
I wish to comment on the position of my party. We have consistently pursued a bipartisan approach in relation to the peace process in Northern Ireland. I should therefore make it perfectly clear now that we, for our part, would assist in the passage of any necessary legislation to enable this elective process to take place.
The report refers to verification of the decommissioning of paramilitary weapons. Will the noble Viscount the Leader of the House say a little more about that? Can he perhaps explain a little further the Government's thinking on how to move forward in this verification area? Any of us who have taken part in any negotiations at international level will know that verification is as important, or almost as important, as the actual negotiation and agreement itself. We on these Benches welcome this report. It points to an important way forward but in the end, as the noble Viscount the Leader of the House said, it will all depend upon the parties in Northern Ireland being prepared to accept that negotiations are preferable to continued conflict. The end result must also be acceptable to the people of Northern Ireland. Will the noble Viscount the Leader of the House confirm again the Government's commitment to a referendum on the final terms of any settlement that emerges? The search for peace in Northern Ireland is inevitably a long and difficult process. For our part, we offer it our full support.
5.35 p.m.
Lord Jenkins of Hillhead: My Lords, the Statement is often opaque but as in my view it uses its opaqueness to end up more or less in the right place I am not disposed to complain too much about that. Her Majesty's Government have in my view had somewhat too rigid a position about arms decommissioning before talks. As a result their Northern Ireland policy—one of the few in which Mr. Major has shown much more courage than party tactics—has shown recent signs of running into the sands.
Ex-Senator Mitchell and his coadjutors—I prefer to call them that than the somewhat ominous collective term of "the Body", which runs as a heavy but I hope no longer appropriate refrain throughout the Statement—have not surprisingly endorsed that view. I think they have produced a good, sensible and speedy report which we welcome. Senator Mitchell has conspicuously not claimed too much for it. He has not proclaimed that he has a golden key and the guarantee to permanent peace in Northern Ireland, but I would certainly say that a rejection of the Mitchell Report by the British Government would have been a guarantee against such a permanent peace. The Prime Minister has not done that. Indeed, under his smokescreen he has done almost the reverse, and I welcome that.

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The six principles offer much to the Unionist community and I believe that it may appreciate that. I certainly hope that will be the case. We, for our part, particularly welcome the opening up of the prospect of an electoral process. We lay more stress on our hopes for the future than on a too rigid but not very productive analysis of the understandable ambiguities of the Prime Minister's Statement.
Viscount Cranborne: My Lords, I am most grateful to both noble Lords who have spoken for the most constructive, generous and, if I may say so, extremely helpful reactions that they have given to my right honourable friend's Statement today. Once again I wish to echo the tribute that the noble Lord, Lord Richard, has paid to Senator Mitchell and his coadjutors for what I agree is a significant contribution to the peace process.
The noble Lord, Lord Richard, underlined most helpfully—if I may say so again—the importance of the continued co-operation between the two national governments. I was particularly pleased for the support that both noble Lords gave to the six principles. I wish to emphasise how important it is for all interested parties—the terrorist organisations on both sides of the divide—to take up the implicit challenge in the report of the six principles and not only to accept them in principle but also to take the advice proffered in the report that those principles should be—in the word that the Senator used—honoured.
I was also struck by the phrase used by the noble Lord, Lord Richard, that punishment beatings were not only unjustifiable but were also terrorism under another cloak. That must be right. I was also pleased that the noble Lord welcomed the proposition that we should look for alternative routes in order to keep the peace process going.
The noble Lord asked me a number of questions. We are not, of course, suggesting that any elected body should have a prescribed form as of now. It is important that the two tracks which the Governments on both 'sides of the Irish Sea adopted during the course of last year should be used fully in driving this peace process forward, and in particular that we should now use the political track to see what would be possible, and indeed what the modalities should be if we are to be able to explore constructively how the idea of an elected body could be taken forward. It is by no means clear that all parties would accept such an idea. However, I think it is at least cheering that so many of the interested parties have given a welcome in principle to this. It is now for the political track of the twin track approach to be used to see whether we can agree on the form the assembly should take, what its functions should be, what its numbers should be, how it should operate, the method of election and so on.
This is all to play for. I do not believe it is right that I should give any steer at this stage as to how that may happen. It is enough that there is an increasing interest in this regard. The fact that there is an interest underlines the importance that the communities in Northern Ireland attach to the peace process and that it should not he allowed to fail.
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As far as the timescale is concerned, we will do our best to enter into the negotiations as swiftly as possible. If there is sufficient agreement to enable us to introduce the necessary legislation we will do so as soon as possible. I am grateful to the noble Lord, Lord Richard, for his undertaking to play a full and co-operative part in making sure that legislation is passed as speedily as possible.
It is worth emphasising that verification and methods of decommissioning are clearly set out in the report, both in terms of flavour and the possibilities that may be discussed. The Government have absolutely no difficulties with the possibilities envisaged in the report. We are entirely flexible, as long as we can be sure that adequate verification will be put in place. Noble Lords who have had a chance to read the report will know that one of the possibilities envisaged is that the terrorist organisations destroy their own weapons. We are happy to envisage such a possibility as long as adequate verification can be put in place. I believe that to be evidence of how constructive we wish to be.
I turn to the final question put by the noble Lord, Lord Richard. The Government commitment to a referendum is still in place. From the very beginning of this process my right honourable friend gave an undertaking relating to what was known as the triple lock. Any final agreement would be subject to the approval of parties, people and Parliament. The "people" element will be evidenced by a referendum. If there is an agreement we will proceed as swiftly as we can to implement it, and a referendum will be part of it. The triple lock is still in place.
I always listen to the noble Lord, Lord Jenkins, with the greatest of respect and, very often, amusement. I particularly listen to the noble Lord on matters Irish. One of the most interesting and gripping volumes that I have read—I confess that I have not quite finished it—is the noble Lord's biography of Gladstone. In that biography the mastery which he displayed in his study of Asquith is exceeded, if that is possible. Since Ireland plays so great a part in the latter section of that biography the temptation not to read today's papers but to concentrate on the noble Lord's book is not quite such a dereliction of duty as it might otherwise have been last night.
I am pleased that the noble Lord broadly welcomes what is proposed. If I have a small quibble, I believe that the noble Lord is a little unfair to suggest that the Government have adopted a rigid position, particularly when one considers that the latest opinion poll in the Province suggests that as high a proportion as 83 per cent. of the population believes that there should be some prior decommissioning before the terrorist organisations are admitted to all-party talks. I will not go back over that ground again. I merely express gratitude to the noble Lord for his intervention in our debates, with his considerable expertise on this subject, and the fact that he welcomes the electoral process as a way forward, particularly when I know that his party has been a keen supporter of it from the moment it was proposed.
5.43 p.m.
Lord Boyd-Carpenter: My Lords, I would be grateful if my noble friend would comment on paragraph 34 of the report, which reads:
"The parties should consider an approach under which some decommissioning would take place during the process of all-party negotiations, rather than before or after as the parties now urge. Such an approach represents a compromise."
That is a clear recommendation by Senator Mitchell and his body, to use their own phrase. I thought from the tone of my noble friend's Statement that the Government were disposed to accept it. However, since he has not been quite explicit on the point and it is obviously of very great importance, I would be most grateful if he would comment.
Viscount Cranborne: I am grateful to my noble friend. The compromise that the Mitchell body suggests in paragraph 34 et sequentia is a matter that can arise, for instance in the event of all parties signing up to the idea of an elected body. Whether the elected body delegates some of its number to enter into all-party talks, which is one possibility, or does so itself—whatever device emerges for agreement—one of the matters to which it will have to address itself at a very early stage, as Senator Mitchell's committee makes perfectly clear, is the basis on which decommissioning should happen. It is possible that all parties will find the basis set out in paragraph 34 and following, but that will be for discussion at the time. It is worth underlining in reply to my noble friend that at no point does Senator Mitchell suggest that decommissioning should occur after agreement. I am sure that my noble friend will welcome that point.
Lord Mason of Barnsley: My Lords, I, too, welcome the report. I appreciate the effort and endeavours of the Mitchell team. I believe that the report will prove to be a useful document in future.
There has been no breakthrough on the decommissioning of arms but, thank goodness, there is still peace, albeit an uneasy one. All of us must be seriously concerned that the Provisional IRA still recruit, train, carry out dummy bomb runs to keep the militant element busy and kill and beat up their own kinsfolk to control and dominate their territories. Yet not one gun or one pound of Semtex has been surrendered, which is the crux of the deadlock. Is the Minister aware that, because of the absence of an agreement on the Washington third principle and the Government's repeated stand that there must be a token decommissioning before all-party talks can begin, the Government must painstakingly carry on and that the Mitchell Report is the base on which to found political and constitutional compromises in the future?
I was delighted to hear of the positive step that in the Government's mind there is now a possibility of legislation in both Houses—I say that it will be supported by all the major parties—a possibility of democratic elections and a democratically elected assembly in the Province. That will receive the blessing of both Houses and will get a speedy passage.
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Is the Provisional Sinn Fein prepared to tread the path of democracy? What are the real prospects of an all-party assembly? Some bilateral and trilateral party talks have taken place on these matters, and I believe that they could be expanded upon.
Finally, is the noble Viscount aware that there arc enough proposals in the report, especially the six principles, to encourage a continuation of talks—searching for the compromises, allied with confidence-building measures which we hope will create circumstances and conditions to encourage the eventual decommissioning of all terrorist arms.
Viscount Cranborne: My Lords, I am most grateful to the noble Lord whose record in the Province is well known to all your Lordships. He will have observed, I am sure, that Senator Mitchell specifically mentions the point that he first made. Indeed, it is clearly set out in one of the six principles to which he referred. Principle F states:
"To urge that "punishment" killings and beatings stop and to take effective steps to prevent such actions".
Therefore it is perfectly clear that the senator and his two coadjutors would wholly agree with the noble Lord's remarks on that subject.
It might be worth reminding your Lordships of the Washington third principle: in order to test the practical arrangements and to demonstrate good faith, there should be the decommissioning of some arms as a tangible confidence-building measure and to signal the start of the process. It is worth bearing in mind that we are not talking about anything more than a clear signal of intent.
We stick to the Washington third principle unless there is an alternative available which satisfies the parties who are interested in this. I am pleased to hear that the Unionist parties have certainly in principle accepted that that is a possible alternative. Indeed my right honourable friend made it clear that the idea for an elected body originated in the Province itself.
I am grateful to the noble Lord for his welcome for an elected body. I should point out that we should be wary about calling this body an "assembly". As at present envisaged, this is an elected body whose function is clearly to give electoral decency and authority to the negotiations. If it is an assembly, it rather implies that it might have something to do with legislation, or indeed administration, which at this stage it certainly would not.
The noble Lord finally asked the all important question: are the Provisional Sinn Fein and the Provisional IRA prepared to tread the path of democracy? That is the question that we must all continue to ask—and to ask insistently. Indeed, it is a question which Senator Mitchell and his two colleagues also asked through the means of the six principles that they have initiated. It is for all of us to continue to ask that question and to express the fervent hope that they will be able to give an answer which is strongly in the affirmative and indeed for them, in the words of the senator, to honour that acceptance.
Lord Elton: My Lords, my noble friend is well aware of the regard in which we hold Senator Mitchell, and

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the gratitude that we owe him for his intervention. I hope that he is also aware of the strong support and admiration which we have for his right honourable friend and the whole of the government team involved in conducting an extraordinarily difficult and delicate operation. We welcome the co-operation which they have had from other quarters.
At the beginning of the Statement, my noble friend pointed out that the principal obstacle on one track was the existence of weapons which were not being decommissioned. We welcome the existence of the other track to try to get round that. However, the weapons remain a matter of great concern. As it happens, we have had recently an extraordinarily successful amnesty for knives in this country. I wonder whether the principle of amnesty is present in what is now in mind. If so, is it to be extended to people'? If it is extended to people, can he reassure us that it will not be extended to those who are known as killers in the terrorist cause?
My noble friend is assured of the support of all people of goodwill on all sides of the House—not that I am entitled to speak for them—and elsewhere, to expedite the legislation necessary to bring into being the new body. We recognise the importance of not giving it a handle which suggests that it will have a legislative role. However, if that body can encourage people to talk and to use words instead of weapons it will be enormously useful. That is a classic way towards peace.
Viscount Cranborne: My Lords, I am most grateful to my noble friend. I think that I can give him the assurance that he needs. If there is going to be decommissioning of weapons, it seems at least logical that those who hand in those weapons, or who co-operate in the decommissioning, should enjoy an amnesty from the consequences normally visited on those who possess illegal weapons. But we should draw a very clear distinction between people who are taking part in activities which lead to decommissioning and those who have taken part in terrorist crimes during the course of the recent troubles. I hope that I shall carry the House with me when I say that Her Majesty's Government certainly have no intention, as my noble friend opined, of extending that amnesty, for instance to those who have committed terrorist murders in the past.
I am grateful to my noble friend for the rest of his remarks which will give great encouragement to those of us who support my right honourable friend in this very difficult task.
Lord Blease: My Lords, I shall attempt not to delay the business of the House. However, I am sure that the House would like to hear a Northern Ireland voice; and there are a few in the House at present.
The report has had a warm, helpful and constructive welcome in the House this evening. I am particularly grateful to the noble Viscount for the way in which he presented the report and his subsequent replies to a number of questions raised. I feel that they were constructive and helpful from the Northern Ireland point of view.
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I also thank the noble Lord the Leader of the Opposition and the noble Lord, Lord Jenkins, for their contributions. The fact that a body of opinion here is solidly behind this very important report will he well received in Northern Ireland.
We have to recognise that the present impasse results from a tremendous amount of mistrust—mistrust by both sides of the political spectrum in Northern Ireland. The Unionists fear that talks without prior decommissioning would be at the point of a gun; and the Republicans fear that decommissioning in advance of talks would be seen as a total surrender.
We have to remind ourselves that this is an international body. The Mitchell Report offers an opportunity to break out of this apparent irresolvable dilemma. It suggests using the process of decommissioning to build the necessary confidence and to take it one step at a time during the negotiations. That is an important part of the report of which note will be taken. There will be no seeking to have matters accepted in one go. It will be a step-by-step process.
All concerned—there are sometimes many sides involved in some of the issues—should take the initial step. All in Northern Ireland should help to take the initial step in the progress towards decommissioning. It must be a step at a time.
I endorse the Mitchell principles in order to create the atmosphere needed for further steps in a progressive pattern of maintaining trust and confidence throughout the community. Trust and confidence throughout the community are very important in this respect. It must be recognised by all parties that the normalisation of policing must be at the core of the building of confidence. Policing has not been mentioned, but I see it as absolutely necessary. I feel sure from what I know of talks with the RUC that there is the utmost constructive co-operation by the RUC and, where necessary, the Garda Siochana. We all expect that there will be allegations by party spokesmen of political opportunism and shenanigans. However, I feel sure that the community will see through any of those shortsighted expressed views, and that the larger community in Northern Ireland will see the need for peace among the people in Northern Ireland, as the Leader of the House said.
I will close my remarks by saying that praise ought to be given for the generous tribute of the commission to the people of Northern Ireland. It described them as being warm and generous but between themselves they are fearful and antagonistic. My experience is not at the same level, but from what I know of trade union negotiations, employers' wars and disorders, we can agree to disagree without being disagreeable. Through enshrining that principle, we may look forward to finding a constructive accommodation as regards the needs of people in Northern Ireland.
Again, I thank those who have already spoken as leaders in their own areas in this House, particularly the Leader of the House, for his positive and constructive

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answers to the points raised. We would like to see the commission going on to do the job for which it was set up in Northern Ireland.
Viscount Cranborne: My Lords, I thank the noble Lord. His voice and experience bring considerable authority to exchanges in your Lordships' House. The words he said about the importance of confidence are entirely echoed, not only by Senator Mitchell, but also by my right honourable friend.
As regards policing, we share his hope that policing in Northern Ireland can be normalised. It has already changed considerably because of the reduced threat, to which the noble Lord can testify. As he knows, we are engaged in the process of reform. Our aim is plainly to reach a position where the police can operate unarmed and where the make up of the force represents the community balance. I am grateful for what the noble Lord said.
Lord McConnell: My Lords, I join the welcome that has been given to the Statement made by the Leader of the House, in particular to his remarks about the possibility of legislation for elections in Northern Ireland. I strongly support that and I believe that he already knows that as Ulster Unionists we support that principle as well. It is much better if one can listen to people speaking because they were elected rather than because they have a few or perhaps many guns hidden away somewhere. Let us try to get down to democratic principles as soon as possible.
I was glad to hear that legislation might come fairly quickly. I should greatly welcome that. I was also glad to hear the Leader of the House say that there would be an amnesty for people in the process of handing in arms. That is right, just as one noble Lord drew the parallel with the handing in of knives in this part of the country. I was also glad to hear that the amnesty would not extend to people who had used arms in a criminal way in the past. That is important.
I find it hard to accept paragraph 34 of the report which suggests that decommissioning could be carried out piecemeal during the course of negotiations. That is even worse than saying, "If we get all we want, we'll hand in our arms". If they are able to say, day by day, "If we get what we want today, you can have a few Semtex bombs and Armalite rifles. If we do better next week, we'll hand in a few more". That is not a democratic way of negotiating and we should not enter into that kind of arrangement.
Paragraph 20.d of the recommendations of the International Body states:
"To renounce for themselves, and to oppose any effort by others to use force, or threaten to use force, to influence the course or the outcome of all-party negotiations".
If we accept that paragraph I do not see how anyone can subscribe to that principle if they keep arms.
I believe that everyone in Northern Ireland looks forward to a permanent peace. We must be careful that we recognise the word "permanent" and do not rush into something that will only last for a short time. We must think the matter out properly and listen to everyone who
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is concerned. As an Ulster Unionist I say that the Government will receive our full support in any sensible measures to bring about permanent peace.
Viscount Cranborne: My Lords, with the leave of the House, I believe that the 20 minute period is up, but if it were left to this House we could reach an accommodation quite quickly. I am grateful for what the noble Lord said and note his reservations about paragraph 34. However, the constructive way in which he and the leader of his party have responded is an extremely good omen for the future.

Motor Sport Industry
6.7 p.m.
Lord Astor of Hever Lord Astor of Hever rose to call attention to the United Kingdom motor sport industry; and to move for Papers.
The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. I am delighted that we have the opportunity to focus on the contributions of motor sport to the economy in this centenary year of the British motor industry. Surprisingly, this is the first time this British success story has been the subject of a full debate in either House of Parliament.
I declare an interest as President—honorary and unpaid—of the Motorsport Industry Association which promotes and protects the interests of the industry and which comprises many of Britain's most influential motor sport companies.
The motor sport industry is an example of what can be achieved when the Government provide the economic environment for it to flourish. We are now the world's acknowledged leader in motor sport innovation—a growth industry which last year generated more than £ 1.3 billion for Britain. Over £700 million of that was accounted for by foreign earnings. Fifty thousand people are now directly employed within British motor sport in small companies as well as major corporations. Three times that number enjoy part-time employment. Probably because no government aid or assistance is received in any form—unlike many other sports—these achievements remain largely unrecognised. Indeed, there are few official statistics or trends available—something the Government need to address as a matter of urgency.
Most of the Formula One teams, with their leading edge technology, are based in this country. Williams, Benetton, McLaren, Tyrrell, Jordan and Arrow bring in over £200 million of overseas sponsorship each year. Jackie Stewart's new team will join them next year and Ford have committed themselves to a multi-million pound investment over five years.
Since 1987, even that proud Italian institution, Ferrari has moved its design and development office here, tapping into the engineering talent in motor racing's established Silicon Valley to the south and west of London where there has been an explosion of independent research and development houses, providing specialist high level technology.

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Many of the developments that go into a racing car, such as better engine electronics, field management and lightweight materials, are technologies that can be transferred to road cars to make them more efficient and environmentally friendly. The most American of all motor sport series, the Indy Car Championship, has been dominated by British expertise for years. Indeed, since the inception of the current championship in 1979, an American-built car has won only once—and even that car was designed here. Last year, all 33 cars on the grid in the Indy 500 were designed and built in the United Kingdom.
The most successful Formula One engine of all time is the Ford Cosworth. Between 1967 and 1985 it powered no less than 12 world champions and won 155 races, including the famous victory for James Hunt in the Hesketh Ford at the Dutch Grand Prix. An all-new Ford Cosworth engine powered Michael Schumacher to his first Drivers' World Championship in 1994 and will be in Jackie Stewart's car next year. This engine has also dominated the Indy Car series for 10 years. Cosworth is based in Northamptonshire, the same county as Ilmor, which also builds winning Chevrolet engines for Indy racing, as well as Mercedes-badged units for the McLaren Grand Prix team.
The tremendous growth of the British Touring Car Championship is an example of how promoters have recognised the needs of the public for a series that provides close racing in cars with which they can identify. The series is attracting record crowds and commands huge international TV viewership, and some of the world's most successful industrial corporations turn to Britain to run and build their competition cars. BMW is moving its motor sport division here from Munich. Its chairman said,
"The UK offers us the infrastructure, component suppliers, skills and more flexible overtime we need in order to be successful in touring car sport".
Rallying is also increasing in popularity, and British technology and management is regarded as the best in the world. Over the past few years, most of the world's top rally teams have been run from the United Kingdom. However, the current restriction of rallying to private roads and tracks is significantly more limited in this country than elsewhere, and runs a risk of undermining the sport in the longer term. I should like to see this country fall in line with the rest of Europe by giving local authorities the powers, subject to due process, to close public roads for rallies, hill climbs and trials, and possibly even races. I hope my noble friend will give me some assurance on this point.
Complacency is the biggest threat to the industry. We face an ever-increasing challenge from overseas. A classic example is the British Formula Three Championship, which is now dominated by Italian-built cars, whereas three years ago it was 100 per cent. British.
What new policy developments can the Government consider to help the industry build on its current success and level of exports and encourage more inward investment? First, I very much hope that they will recognise motor sport as an industry in its own right. The absence of any British motor sport knighthood
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would seem to reinforce its lack of recognition. Furthermore, until that happens, British companies will be slow to come forward with sponsorship—the life-blood of the industry.
Secondly, the industry needs one contact point in the Government. That is essential, not only for motor sport companies, but also for the governing body, which needs someone to whom it can turn when political or diplomatic help is needed, particularly when it relates to European legislation. The president of the HA tells me that other countries, particularly France and Italy, are much better organised in this way. May I suggest that this is a role that my noble friend the Minister would he well qualified to fill? I am aware of his great interest in this subject since his days as a marshal in the 1960s.
Another issue that needs attention is the shortage of good engineers. It is a particular problem for component manufacturers. Those companies, mostly employing 50 or less, and many of them almost cottage industries, are one of the engines of future growth and employment for this country.
Unlike the position in Germany, France or Japan, engineering as a profession does not have the respect or status here that it deserves, and not enough students go into science engineering. One reason for that is that teachers do not have a good view of the industry. Schools need to visit factories and other suitable workplaces, so that children can be talked to directly.
Industry itself can help here. To promote the industry as a viable career option in this increasingly high-tech era, Toyota has set up an educational foundation, in which it has invested heavily in the past three years, to encourage children to take up engineering at school. The Government can also help by encouraging more companies to invest in future engineers in this way.
Furthermore, the education system does not prepare engineers to be ready for immediate use. In the case of the motor sport industry, they need to go through significant training before they are of any practical use in jobs such as the design of cars. Mechanical design should be more widely taught in engineering courses, as it ultimately affects the ability of manufacturers to design and develop components to a high standard. That must be addressed as it is a vital ingredient in attracting inward investment. I hope that Her Majesty's Government will promote the industry to universities, colleges and schools in order to attract high-calibre young people to the business and technical sector of this industry.
Finally, the massive traffic jams for the British Grand Prix at Silverstone, our flagship race venue, are a national disgrace. The Government recently approved a by-pass, as a private finance initiative, for Silverstone village, where the A.43 is permanently heavily congested and exceedingly dangerous. That by-pass needs to be started urgently, and I hope that my noble friend will take up the matter with the Highways Agency.
Great Britain is now the very centre of world motor sport. We are the enterprise centre for Europe. I congratulate Her Majesty's Government on providing the political environment for this industry to flourish.

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I very much hope that they can ride on its success and will continue to highlight, particularly to British sponsors, an industry that is a credit to this country. I beg to move for Papers.
6.18 p.m.
Viscount Simon: My Lords, I am delighted that the noble Lord, Lord Astor of Hever, has been lucky in the ballot and has introduced this debate. I have, since the mid-1950s, followed Formula One motor racing, and to a lesser extent rallying and saloon car racing. Before today's debate I sought advice from the Society of Motor Manufacturers and Traders and thank it for its assistance. I particularly thank Lotus Cars for its help. You would have thought that its many achievements since 1948 would have been highlighted in its letter to me—but not once did its name appear. I almost had to drag out of it the confirmation that it was a Lotus 49 which won the Dutch Grand Prix in 1967.
So what is noteworthy of that win? Both the car and the Ford Cosworth engine were brand new, and it was their first outing, having been completed only 10 days previously. I am not aware of that feat having been repeated. I asked Benetton for information, but it showed no interest. I understand that that is its usual course of action.
Motor sport is a complex industry which embraces a wide range of disciplines covering designing and building cars, marketing and funding, promotion, media activities and hospitality, with all the peripheral support these main areas require. It is a global business with an immense audience and considerable spending power and influence, to the extent that national leaders try to attract major events to their countries. Until I saw the television programme last week, I was not even aware that mainland China now hosts international sports car racing. This is an indication of its appeal.
The image of the sport attracts so-called glamour and personalities, which helps to sustain and feed the publicity. Worldwide audiences of Formula One are only exceeded by the Olympics and the soccer world cup, both of which are held only once every four years, not 16 times a year, every year, as with Formula One. A survey by the RAC showed that the annual turnover of motor racing in the UK is over £1 billion, of which more than 60 per cent. is from exports. There are about 50,000 people employed in the industry, as already mentioned by the noble Lord, Lord Astor.
The complexity and competitiveness attracts the very best in engineering talent and commercial professionals. It is widely acknowledged that British race-car designers, engineers and mechanics are the best in the world. Perhaps this is because we as a nation are good at innovation, tinkering and creative thinking. The evidence and confirmation is there. The top three motor sport arenas, Formula One, Indycar and World Rally championships, are dominated by teams and equipment sourced or based in the United Kingdom. While this island cannot be described as large, it is interesting to note that the majority of motor sport operations are based on an area covering about 100 miles by 150 miles.
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A leading Formula One team will raise up to £50 million for one season, and this excludes the drivers' salary of, maybe £10 million, tyres, engines and travel. The contracted sponsors will not only supply this funding but, in addition, will spend an equivalent amount in promoting their involvement to their customers. As your Lordships are aware, the Ford Motor Company of the United States of America has recently announced a £100 million start-up package to part-fund a new Formula One team, to be overseen by the former world champion, Jackie Stewart, for three to five years.
So why invest such large sums of money? The answer is simple: motor sport has been developed as a highly colourful package since the 1960s, which attracts an audience and sells products. I recall seeing a Lotus 49 at Warwick Farm, a course well-known to the Minister, in red, white and gold livery during the Tasman series. I had not seen a car with advertising on it before. I thought that it looked very odd indeed.
However, we arc now used to seeing advertising and would think it equally odd if an Italian car appeared completely red, apart from its number; a French car, blue; or a British car in British racing green. Household names are also established through the power of motor sport. Noble Lords should just remember Fangio, Moss and Hawthorn, Jim Clarke, Stewart, Graham Hill and Jochen Rindt—who posthumously won a world championship—Mansell, Senna and Schumacher.
Motor racing developments can, and do, lead to improvements in our ordinary, family car. I am led to believe that other countries are exploiting the image of motor racing in their production cars: this country should also do so.
The motor sport industry owes a lot to the innovations of Lotus: including the first successful aluminium monocoque in Formula One; the first road-going composite monocoque; the Chapman strut; commercial sponsorship; ground effect; skirts; active suspension and active rear steer, to mention but a few. The industry as whole has improved our lives by developing better chassis, disc brakes, four-valve cylinder heads, turbo-charging, tyre design and, very importantly, crash protection.
So where do we go from here? The sport can be used to encourage development in other areas. With rule changes and the creation of new classes, may be we shall one day see electric vehicle racing. An endurance race for solar-powered vehicles already exists. There are many varied possibilities. Motor sport attracts and applies much of the same leading-edge technologies as the aerospace and military industries, but demands viability in breathtakingly short timescales. If a new technology is developed in Formula One, it takes years to appear elsewhere, yet it takes a maximum of three months for a top rival Formula One team to spot and apply a competitor's so-called "unfair advantage".
At the other end of the scale, karting, banger racing, and so on, can be enjoyed by those unable to afford more. Many community and rehabilitation programmes are built around such activities. This must be better than joy-riding. Motor sport is often used in schools and

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colleges as a basis for education, some formally arranged on a national format, but also individual activities set up by enthusiastic teachers.
Motor sport answers the basic questions, "How good am I? Am I better, faster, more clever, braver than?" and, "What happens if?" It does so in a stylised and attractive way which comprises a huge industry with a myriad of small players and very few large players. The UK is particularly successful in this form of competition.
6.27 p.m.
Lord Hesketh: My Lords, I am sure that all Members of your Lordships' House are extremely grateful to my noble friend Lord Astor of Hever for introducing this debate tonight. Before I say another word, I must declare an interest as a manufacturer and an entrant of grand prix cars in the early 1970s, as president of the British Racing Drivers' Club today and chairman of the board of Silverstone race track. I hope that I shall not touch on any of those three points in the brief words I have for your Lordships this evening.
It is very important to remember that many of the childhood legends which my generation and earlier generations were brought up on, although great, were not representative of the mass in the automotive industry. One can think back to the names of Napier, Bentley, ERA and the pre-war legends and reputations, but they did not represent the significant part of engineering, ability and creativity in the greater picture in Europe and had no part in the United States and the development which took place there. The significant countries from the birth of the motor car until the post-war era were France, Germany and Italy, in Europe; and in the United States, production engineering doubled and they created their racing industry.
If one looks back, there were many concepts before the war which were British, but they have not necessarily succeeded. When one comes to the post-war era, we look at two strains. The first is the great men who were committed and willing to put forward a lot of money towards making British racing successful. I pick out two individuals: Sir Alfred Owen, of Rubery Owen, and Tony Vandervell of Vanwall. At the same time there were innovative engineers.
The first man to lead that was John Cooper. He came from Bristol; he laid his first car ideas by using chalk on concrete with a couple of RSJs and put the tubing round it. He came to Silverstone in 1947, which was then an airfield controlled by the Ministry of Works. He was forbidden entry by a minor bureaucrat who held the padlock to the gate and so he asked a police officer for advice. He told him that he could not get him into Silverstone because it was not a race track but an airfield—a former RAF base—and sent him down to the Saracen's Head at Towcester. He took advice there. They said, "Maybe you should ask Lord Hesketh". He went up to my late father's house and my father appeared with two large dogs and said, "Drive your cars round my race track", which was a horse race track at that time. I think they tore up a bit of grass. But a year later they came hack to Silverstone. The Aitken family
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and the Daily Express have over the years put a huge amount of commitment into it and turned Silverstone into what is today, the premier race track in this country.
Out of a very small start came a great legend. It came from the commitment that was put in by Rubery Owen; by Vandervell; and then the engineers who came after Cooper—Colin Chapman, TyreII, the organisers and the creators. Out of a tiny beginning, where we are talking not even about hundreds of employees in 1946–47 but tens, came an industry which today has more than £1 billion of turnover, more than £700 million of exports, more than 40,000 employees and is a world leader. There is no question about that. There is no other country which compares. When, as I know, and most of those taking part in this debate know, not only Mercedes Benz but BMW and other major manufacturers, including Ferrari, are moving all their R&D into the United Kingdom, into a crescent which springs from Reading round to Huntingdon, around the west side of London, it is a fact.
There are many unsung heroes. The noble Viscount, Lord Simon, made a very good point. Not one knighthood has ever been given to a sport which in real terms has far exceeded the output of Liverpool Football Club or the English cricket team. I am sorry to say that, but it is true. It is a fact worth remembering and knowing today that the first and biggest television sport on earth is the Olympic Games. But those happen once every four years for two weeks. The second is the World Cup finals, which happen once every four years for two weeks. But the biggest on earth is Grand Prix racing, which happens 16 times a year, every year, year in and year out. That was created and is controlled by a British institution called the Formula One Constructors Association.
Many managers of Premiership football teams have little to write home about in their records, but they are better known than Bernie Ecclestone, who when I first ran a car 24 years ago when we were starting out in the creation of the Formula One Constructors Association had created something hugely significant for his country and the people who work in it and for the industry with which I had at one time the privilege to he associated. It is true that what has happened in 50 years is unique. If the rest of British industry had achieved what the racing car industry has achieved, this country would have the strongest and finest economy on earth even with a comparatively tiny population.
I should like to finish with a brief remark. The industry has never received any help from government; more importantly, it has never asked for any help from government; and even more importantly, it has never expected any help from government. But the one thing that could wreck it would be and could be help from government on two issues. The first is environmental. There is a kind of irredeemable logic about environmental legislation which one day could say, "No racing car can run unless it is quieter than a wren bird lying in the wing of a tree". That would ensure the destruction of an industry overnight.
The other is the Broadcasting Bill. Luckily, though Formula One car racing happens to be a bigger world-wide sport than any of the so-called great sports

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being discussed in the Broadcasting Bill, the fact that the industry is able wholly to use its ability to sell its quantity in the market and give that back to its industry which guarantees its success raises a question about those who say that there should be control on the ability of any sport to sell what it owns and what should be constrained. That I put up as a small marker. There is no requirement, and never has been, for this industry to be supported by government at any level. It requires only one thing—a commitment on all sides of your Lordships' House to promise that it will never be interfered with by government in order that it can proceed to create and proceed to the success that it will no doubt ensure for future generations.
I conclude on one note. There is great concern about the principle of advertising and what it can do to the youth of tomorrow. It is worth remembering that when there was only terrestrial television in this country there was in principle some way that one could control advertising. When I first went racing there was no advertising of alcohol on any car. That has in a way changed. There were not any rules. There were so-called guidelines but those slid away. If one looks at the Schumacher car this year, one will see quite a lot of German lager advertising on the side of it. But I am more concerned about tobacco advertising.
It is said that tobacco advertising should be banned. If you can control television, if you can control advertising, and if you are in favour of political correctness, I can understand that. But the truth is that today, with satellite and cable, there is no prospect of controlling the advertising on a universal basis of any product which a country deems to be acceptable. The one way to drive the industry not only out of this country but out of Europe is to follow the European Parliament in having a grand view about banning tobacco advertising. If you want to drive to the Pacific Rim a hugely successful industry, which on a comparative basis provides vast employment in this country, that is the way to do it. But it is quite impossible to support any sport which is 12 time-zones away from the factory to the track.
The reality is that technology has excluded the ability of any state to prevent advertising which it does not like, be it political in one sense or the product in another. The truth is that we must accept the world as it stands, capitalise on it and move forward with an industry which did not exist 50 years ago and today provides not only employment but the benchmark for creativity for very many clever young men and women in this country to succeed at home rather than have to go abroad.
6.37 p.m.
Lord Montagu of Beaulieu: My Lords, it is with considerable diffidence that I follow my noble friend Lord Hesketh, whose involvement in and knowledge of motor racing is second to none in this House. Nevertheless, today's debate is particularly timely, as only last week, with 1,500 other people, I attended the celebrations in Coventry for the 100th anniversary of
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the founding of Britain's first motor industry firm, the British Daimler Motor Company, and with it the birth of the United Kingdom motor industry.
Since the early days the motor industry was irretrievably tied up with motor sport, so it is particularly appropriate to debate the contribution of the British motor sport industry, as this country has since the earliest days competed in motor racing world-wide with ever increasing distinction and success. It is particularly poignant for me as my father was the first Briton to race a British car on the Continent, averaging 31 miles per hour and coming third in his Coventry built Daimler in the Paris to Ostend race of 1899.
The noble Lord, Lord Astor, mentioned that motor sport has not been debated in the House very often; in fact, very rarely. But I can tell the House that it was first debated in February 1903 and that led to the first official motor sport event in the United Kingdom. That was the Gordon Bennet race in Ireland which took place in 1903 as a result of a British Napier driven by S.F. Edge winning the 1902 Gordon Bennet race from Paris to Vienna, thus giving the United Kingdom the right to organise the next year's race. It will be no surprise to your Lordships that there was inevitably, naturally fierce opposition from local authorities in England, Scotland and Wales, supported by, may I say, no less a person than Edward VII. But enterprising persons in Ireland saw a chance of international fame and fortune and agreed to stage it. The necessary legislation to close the roads was introduced and guided through another place by my father and, exceptionally, all stages were passed in one day, as was done similarly in your Lordships' House.
So, all was set for Britain's first official motor sport event, which was in fact won by Germany with the British putting up a rather poor performance. Nevertheless, the Gordon Bennet race put Britain firmly on the road as a major player in the development of international motor sport. That resulted four years later in the opening of the Brooklands racetrack at Weybridge. Indeed, after a very slow start, in recent years, since the war, the industry has transformed itself, taking on the mantle of technological excellence from the aerospace industry and thus keeping Britain in the forefront of the international league in many advanced areas of technology.
As has been said, it is an important employer, with 55,000 full-time jobs and 100,000 part-time jobs. It has the most highly skilled and qualified workforce. That growth has taken place quietly and largely unrecognised. It has been funded by the industry itself, without calls for public finance. All that success relies on several factors and is certainly to be emulated.
The first factor is the excellence of our design and engineering skills. That is complemented by a unique, highly-skilled and flexible workforce together with world-beating expertise at the cutting edge of electronics and materials technology. Jointly, the efforts of our motor racing industry make a tremendous financial contribution to the country, as has been said. The recent decision by BMW to move its touring car operation to Britain, to be run in partnership with McLaren,

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underlines that success. It is significant that the great days at Le Mans of Bentley in the 1920s and Jaguar and Aston Martin in the 1950s and 1960s were mirrored only last year by the remarkable success of the McLaren roadcar, which, at its first attempt, won the race with five of the cars in the top six places.
As a result of technical advances applied and proved in motor racing, the family car has constantly been improved and made safer. A good example of that was the fitting of disc brakes on cars raced by Jaguar which arc now standard on almost all cars. I believe that it is very important that the Government should give the maximum encouragement to the most advanced companies in this field, whose objective now is to transfer that leading edge technology into the production car process, thereby playing a very significant role in the development of a new generation of family cars which are lighter, safer, more fuel efficient and less polluting, with consequent significant benefits to our economy and the environment.
Additionally, motor sport plays a remarkably strong ambassadorial role for our country. Unlike in other countries, it has never had any financial backing. I certainly agree with my noble friend Lord Hesketh on that subject and that that is how it should be. However, young driving teams cannot survive without substantial financial support. Even someone as famous as Jackie Stewart has difficulty in raising funds. So it is sad for this country to see the benefit of their successes gained in Grand Prix racing enjoyed by other nations and foreign companies. I hope that the Government will agree with me that it is important to promote and support investment not only in developing expertise and research but also in supporting young drivers. I was delighted to read two days ago that the Secretary of State for National Heritage had announced that, as a change in policy, some Lottery funds in future will be made available for the training and encouragement of budding new talent in the sporting area.
I hope that the budding new stars in motor sport can be included in the Lottery money. Even if motor sport is not an Olympic sport, it benefits the country significantly more than any Olympic successes. I have a suggestion to make in that respect. When they achieve success in international motor sport the rewards are very high, so could not some system of loans be set up, perhaps supervised by the Sports Council or the RAC, whereby loans could he paid off when and where appropriate in every case?
However, as the noble Lord, Lord Hesketh, said, there is a cloud on the horizon, which might indeed threaten the predominance of Britain in the world of motor sport. I refer to the European Parliament's suggestion of banning cigarette and alcohol advertising, which particularly threatens the sponsorship of sporting events, including motor sport. That could have a very serious effect on the sport in Europe, which would see more and more racing events transferred to the Far East, where increasingly new circuits are being built and the attitude to tobacco industry advertising and sponsorship is very different. With increased satellite broadcasting, the races will still be transmitted to Europe without any difficulties or consequences to the promoter's or the
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sponsor's marketing. But Britain and Europe will suffer very much. I hope that in any future discussions which involve the Government concerning the curtailment of sponsorship and advertising of tobacco and alcohol, that will he borne in mind. The consequences of such action on sport in general would he disastrous.
Another issue to be addressed is the need for great improvement of the facilities for spectators, especially at our major tracks, which attract a high proportion of overseas visitors and arc a valuable source of income. The governments of other countries, like France, build splendid new circuits and sports stadiums, thereby giving a boost to local economies. Perhaps similar thinking could be applied in this country by Lottery money going either to improving existing circuits or creating new ones. After all, the Sports Council considered a new rugby stadium for Cardiff. Why not have Lottery money for new grandstands at a British racing circuit?
In conclusion, there are many people who believe that the British motor sport industry does not gain the recognition that it deserves. I know one leading motor racing organisation which had great plans for major investment but is finding them very hard to implement owing to planning and other problems. That causes considerable frustration, not least because those people know that they would he welcomed with open arms on the Continent, where our competitors would dearly love to have the British expertise. As of now, the world of motor sport is beating a path to our door. Let us keep it that way.
6.47 p.m.
Lord Skidelsky: My Lords, I am grateful to my noble friend Lord Astor for giving us the opportunity to sing the praises of British motor sport. Motor sport is one of the unsung success stories of postwar Britain. I come to this debate as a historian and historians talk about the relative decline of Britain, but no decline has taken place in motor sport. Rather, it is the reverse; motor sport has boomed. We go on producing more than our share of champion drivers at the highest level. Cars designed, engineered and built in Britain won over 80 per cent. of the Formula One Grand Prix races held over the past 10 years. It produces £1 billion or more in foreign earnings, both in exports and inward investment. It is an undoubted success story.
With me, motor sport is an interest rather than an obsession. I speak with great diffidence in the presence of so many enthusiasts and experts. But the success of British motor sport has often led me to wonder about the nature of the British genius and the obstacles that we manage to put in the way of its full expression. In that sense, it is a metaphor for much of the history of postwar Britain.
Let us consider the contrast between our motor sport industry and our motor car industry. While our motor car industry was being virtually wiped out in the 1970s, small competition car manufacturing firms, such as March and Lola, which started up at that time, were becoming world leaders. They were triumphs of entrepreneurship, engineering, teamwork and

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marketing—all the things in which the ailing giants of the British motor car industry were so woefully deficient. Yet it was basically the same product that was being manufactured: a motor vehicle with four wheels, an internal combustion engine and a chassis.
One explanation for that contrast between brilliant performance on the one side and a fairly dismal performance on the other side is familiar. We have always been better at providing custom-built products for niche markets than at standardised volume production. American mass-production methods did not take as well here as in Germany or Japan—for interesting reasons: partly because they were seen as a threat to a much older British tradition, that of the skilled craftsman, and partly because the hierarchies of those industries reproduced our peculiar class structure without its saving grace of paternalism. Our strengths seem to lie in individual initiative or leadership, to use an old-fashioned word, allied to small-group organisation in which each person can leave his own distinctive and recognised mark on the product.
While British Leyland was crippled by strikes, small firms like March worked round the clock to meet their bulging orders. As noble Lords have pointed out, in the 1980s the Thames Valley became a "silicon valley" of high-tech, small and medium-sized sports car manufacturers while Coventry went bust. Those firms became outstandingly successful by using some of the most durable features of the British way of doing things—the gifted amateur, the scientific boffin, and pride in good quality work.
The good news—this is the main point of my intervention—is that that British tradition of micro-organisation is much better placed to meet the challenges of the new technology than it was to meet the challenges of Fordist mass production techniques. With the advent of distributed processing, faxes and micro-computers, business is being broken up and returned to a human scale. Economies of speed and flexibility have replaced economies of scale. As one study has noted, the new micro-technology had,
"brought the benefits of automation within the reach of specialists as well as mass producers".
The emergence of a technology which fits our national habits and plays to our national strengths furnishes the most solid ground for believing that the long period of British relative economic decline has come to an end.
However, there still remains the considerable puzzle of why our undoubted centres of excellence and innovation have had so little impact on the long cavalcade of industrial mediocrity. Let us consider Japan where Mr. Karamoto, a racing car engineer in the 1960s, became president of Honda in the 1980s. In Britain we rarely get that transfer of ability and achievement from one sphere to another.
My noble friend Lord Hesketh mentioned Bernard Ecclestone, the head of the Formula One Constructors Association. I could mention Max Mosley, who started March in 1969 and is now the president of FIA, the Fédération Internationale de l'Automobile, to which the national motor clubs of 114 nations are affiliated. But
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those people, and many others of outstanding ability, are complete outsiders in the world of British motor car manufacture and distribution, and for that matter in the world of British sport, despite the fact that, as noble Lords have pointed out, motor sport attracts 100,000 competitors in this country, and mass television audiences.
There are many ways in which motor sport could contribute to wider commercial and social aims if it was given the chance to do so. Our brilliant sports car engineers have pioneered the development of low emission vehicles, which could guarantee our motor car industry a lucrative share of the American, and particularly the Californian, market. And why not get some of our top racing drivers like Nigel Mansell and Damon Hill involved in road safety education? We just do not think about such things.
I therefore welcome the announcement last week that the DTI will be looking at ways of building on the success of the British motor sport industry to enhance the competitiveness of the British motor car industry. As Mr. Lang, President of the Board of Trade, rightly put it:
"There may well be lessons which the volume market could learn from motor sport"
both in terms of innovation and export promotion. The Government can play a constructive role, both symbolically by honouring high achievement in motor sport, and practically by providing a point of contact for the fractured parts of the motor vehicle industry in order to facilitate the greater success of the whole.
6.55 p.m.
Lord Strathcarron: My Lords, I am grateful to my noble friend Lord Astor of Hever for initiating this debate on the motor sport industry. It is a specialised and small world about which little is widely known. It is also highly successful, but we arc not used to hearing or reading good news, mostly only bad news. For instance, few people know that the Ford diesel engines used all over Europe are built at Bridgend in South Wales or that the V6 engines built by Vauxhall at Ellesmere Port are fitted in Opel cars in Germany and Saab cars in Sweden.
In motoring sport, British technology and expertise in building racing cars have played a vital role. It all started in the late 1950s when John Cooper and Colin Chapman of Lotus built their very successful rear-engined Grand Prix cars. I should like to confirm the story told by my noble friend Lord Hesketh because I was among those who, with John Cooper, turned up to practise at Silverstone in 1947 when the custodian told us off and threatened to call the police because we were bound to run over his sheep. We went to my noble friend's father's house and he very kindly let us drive there. We did not tear up the racecourse, but drove discreetly up and down the drive and did no harm. Strangely enough, I later drove at the opening meeting at Silverstone in September 1948. At that time, the circuit did not go round and round but was diamond-shaped, using all the runways, but that is another story.

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Turning back to those rear-engined cars, that configuration is now used on all Grand Prix cars. Britain soon became the technical home of Grand Prix racing, hacked up by knowledgable and enthusiastic sub-contractors. The teams are mostly based in southern England. Ferrari first established a technical studio under the direction of John Barnard, the well known British designer, as long ago as 1986. The McLaren and Tyrrell teams are near Woking; Ferrari is near Guildford; Williams at Didcot; Benetton at Enstone; Jordan at Silverstone and Arrows in Milton Keynes. So, it is not only Grand Prix cars but the top world rally championship contenders which are based in this country.
Britain's sporting expertise extends well beyond Formula One. For instance, the Bicester-based Reynard company, which built the chassis for the car which won the Indianapolis race, has an export turnover of about £15 million a year. Its rivals, Lola and Penske, are also based here. Lola is going to build the chassis for Formula 3000 cars this year and has been building Indianapolis cars for nearly 30 years. Last year its earnings were about £12 million.
Indy car and Formula One engines are supplied mainly by the two Northamptonshire-based companies of Cosworth and Ilmor Engineering, building engines for Ford and Mercedes Benz respectively. In the last financial year, the British motor racing industry earned profits of £750 million on foreign earnings of £1.3 billion. Your Lordships will agree that that is a remarkable achievement for Britain's exports. The industry employs about 50,000 people and well over 100,000 part-timers, which is very important.
The major Grand Prix teams operate with budgets of about £25 million to £30 million a year derived from multinational corporations. Most of that money finds its way to the UK to fund technical development, factory costs, and to pay the personnel.
I am a keen motorcyclist, and I must mention that in motorcycle racing the world superbike championship teams of Honda and Suzuki are based in this country. There are many small firms which play a significant part in supplying specialist parts for all aspects of motorcycle sport. Long may the motor sport industry continue to flourish to the benefit of Britain's exports.
7 p.m.
The Earl of Liverpool: My Lords, I should like to join with other noble Lords in thanking my noble friend Lord Astor of Hever for giving us this opportunity to focus on the United Kingdom motor sport industry today, and I congratulate him on his excellent opening speech. It was so comprehensive and full of interesting facts that I fear there may be few original facts left for me to impart.
I venture to speak in the debate principally as a member of the public who, over the years, has derived great pleasure from watching the sport, and reflected pride from our many successes. However, I can claim some small experience on the track since, like my noble friend and team captain Lord Strathcarron, I have had the honour of representing your Lordships in the annual
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Lords v. Commons race at Brands Hatch. As your Lordships may imagine, that is a competitively fought event, and I remember one year—I think it was 1993—when the race took place three days after my noble friend had undergone surgery. He arrived with both hands in bandages, having flown down from Scotland that morning, and proceeded to win the race outright. I can say just two things to my noble friend. First, "You're a tough act to follow"; and, secondly, "I hope that I shall have the pleasure of watching repeat performances in the future".
It seems to me that when the good Lord was distributing talent in the field of motor sport he displayed outstanding generosity towards this country, for, as has already been said by a number of noble Lords, we are the acknowledged world leaders in creative design, engineering and technology. We have dedicated and highly motivated race teams with entrepreneurial skills to match. We have marketing and advertising expertise, and, last but not least, a steady supply of world class drivers.
Over the years one can easily recall such evocative names as Moss; Clarke; Surtees; Stewart; Hill; Mansell; and Hunt, who I believe always credited my noble friend Lord Hesketh and his racing team with giving him the experience, determination, and inspiration to become a world champion. And the list continues today with such names as Damon Hill, Coulthard, and others. So the happy result of that pool of talent is a vibrant and successful industry. That is wonderful news for UK Plc, and it is achieved without one penny of government grant.
Although motor racing does not claim to be a "safe" sport, the industry's safety record has improved enormously over the years, and it now rates between 11 th and 15th in the Government's official league of dangerous sports, with horse riding, swimming, air sports, climbing, and even fishing coming higher up the league table. Indeed, it is in the field of safety that the industry will make such a significant contribution to car manufacture and design in the future.
Last year, Grand Prix motor racing's governing body, the FIA, campaigned successfully for new crash test standards which were accepted by the European Parliament. That will mean that all new mass production cars produced in Europe from October 1988 will have to pass the new off-set deformable front impact test, and the 300 millimetre barrier height side impact test. That does not mean a great deal to me but I can tell you that taking EU countries as a whole, it is estimated that those new standards will prevent up to 90,000 deaths and serious injuries each year.
In addition, the FIA safety working group is currently working with the European Parliament to lobby car manufacturers to provide mounting points as standard for the Isofix child seat. That system uses four claws which fit into special mounting bars along the front and rear edges of car seats and in an emergency enable the seat to be removed without disturbing the occupant. That is another classic example of where leading edge technology and knowledge gained in Formula 1 racing is delivering improved safety in road cars.

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In the course of my research on this subject, I came across some interesting figures which I should like to share with your Lordships. The first was referred to by my noble friend Lord Hesketh. It relates to world-wide television audiences for Formula I races, but I do not believe my noble friend mentioned the average audience figures. I am told that they exceed 250 million viewers world-wide. The second interesting figure I came across is that cars designed in Britain have won over 80 per cent. of all Formula I grand prix in the past 10 years. The third statistic has already been mentioned by my noble friends Lord Astor and Lord Strathcarron. I hope that noble Lords will forgive me if I repeat it. The engine and chassis of practically every car competing on the famous Indianapolis 500 race tracks in the USA and elsewhere are designed and constructed in this country.
It seems to me that in the field of motor sport almost everyone is a winner: the public derive great enjoyment from it; it is a significant employer; the Government receive substantial tax revenues; and it provides companies with a highly efficient advertising forum. I agree entirely with those who have said that that should not be harmed in any way by the EU's attempt to ban alcohol and cigarette product advertising. Finally, the industry contributes towards improved road safety standards. So, I am happy to join with other noble Lords in wishing the industry continued success in this, its centenary year.
7.8 p.m.
Lord Lucas of Chilworth: My Lords, when my noble friend Lord Astor of Hever, introduced his Motion he reminded your Lordships that the motor industry is celebrating its centenary. I could not help reflecting, somewhat ruefully I must admit, that I have spent 54 years of my life involved in the motor industry. It struck me that I ought to know something about it, but when I am confronted by my noble friends Lord Montagu of Beaulieu, Lord Liverpool, Lord Hesketh, and others, I realise that I do not know very much about it at all, because they know the people and they know how it all started. But what I think I do know is that, love the car or loathe it—there are those two groups of people, although most I think fall somewhere in between—no one can deny the huge benefits that the motor car has brought to us, both economically and socially. The trouble is that as a result of the great success of the industry we are now saying, "This cannot go on". The loathers are becoming more predominant and the cry is, "Something must be done". Of course, that is the usual kind of cry. I am suggesting that within the context of my noble friend's Motion something is being done day on day, month on month, year on year.
My good friend Colin Dryden, who is a former motoring correspondent of the Daily Telegraph, wrote to me a few days ago and I wish to quote from his letter. He stated:
"We always used to say that 'racing improves the breed'. Early examples of advances in competition car design filtering down to the car driven by the mythical man … are".
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He gives as an example the humble screen washer which was developed as a result of rallying, not Formula One but motor cross and rally work. He instances the disc brake development by Jaguar for Le Mans. He goes on to state:
"These days the link is more tenuous but it's probably true to say that advances in aerodynamics enabling 220 mph plus down the Mulsanne Straight at Le Mans are applicable as well as fuel cut-off devices and crashworthy fuel tanks."
All that demonstrates that motor sport is a mobile test bed, the benefits of which are translated into the ordinary car that we drive about each day.
I had intended to comment on the costs but that has been adequately covered by other noble Lords. In relation to costs I had intended to say something about sponsorship. It would be more helpful to your Lordships if I say merely that I agree with my noble friend Lord Hesketh as regards sponsorship. Whether one is talking about petrol, oil or tyre companies or food, drink and tobacco manufacturers, their support for the motor sport business is absolutely vital if we are to continue in the same way—indeed, if we are to maintain our supremacy in building motor sport vehicles.
We cannot turn the clock hack, but I believe that with a little political will we can look forward to even further benefits accruing from the motor industry over the next 100 years. My noble friend Lord Astor of Hever spoke about the need for training. My noble friend Lord Skidelsky reminded us of the initiative that the President of the Board of Trade is taking. I suggest to my noble friend the Minister that in terms of giving assistance to the motor sport industry and to the training of motor engineers we might consider copying the successful programme that existed in the DTI when I was there—in fact, I was responsible for it—called "Industry Year". That was an effort to bridge the gap between school, college and industry; the gap that existed when young men and women were considering which career to follow. We may be able to reintroduce something along those lines in order to encourage people into the motor industry, which is a most exciting industry. It has the benefits of being able to move into high-tech design and development, which takes one into motor sport. There can be few young men and women who arc not attracted to motor sport.
In the rather more mundane area of "something must be done" as regards pollution and the environment, while technical advances can make a large contribution we may well have to change people's attitude to car usage. We jump into our cars for almost any journey when perhaps our legs would do better. Such encouragement can come better from the Government departments involved in the environment and the trade rather than from any one particular manufacturer or trade association.
I am grateful to my noble friend Lord Astor of Hever for the opportunity to take part in this short debate. I hope that all that can be done will be done to maintain Britain's supremacy in motor sport and in the motor industry.
7.50 p.m.
Lord Addington: My Lords, in speaking in the debate I feel that I am treading on sacred ground for the simple reason that I am not the greatest enthusiast of motor sports. Indeed, perhaps I more often come into the loathing category.
As was said by the noble Lord, Lord Lucas, however, one cannot deny that the motor car has fundamentally changed our way of life. It is a vitally important part of the way in which society functions. I agree with the noble Lord's point about social attitudes towards cars. The motor industry is probably the most ultimate symbol of the love affair with the car. The car has become one's personal space and it allows personal freedom—or at least it appears to. The motor industry presents us with an object which travels at tremendous speed requiring the driver's tremendous skill and in strident competition. It is something to which people can relate. That vision was brilliantly encapsulated by the noble Lord, Lord Hesketh. I have heard the noble Lord speak many times but never with such a degree of passion.
I wish to make my only controversial point. I disagree with virtually everything that was said by all noble Lords about advertising. I should like to read a quotation which puts the issue of advertising in context. A spokesman for Rothman's said,
"No one hands over big cheques just to get a warm, fuzzy feeling".
I am sure that the same attitude lies behind Marlboro when it hacks McLaren. The reason why tobacco companies and others are involved in motor sports is that it draws the huge audiences that noble Lords mentioned. One cannot help feeling that the vast numbers of people who watch the sporting events cannot imagine other advertisers coming to the fore. One might believe that they are replaceable. There may he problems in the transference of advertising but we live in a commercial world which is opening up the globe to commercial pressures. Surely the advertising of tobacco and spirits is replaceable. I suggest that we should all consider that because the status quo is what happens now and tomorrow is still up for grabs.
Much has been said about the economic benefits of the motor sports industry. The noble Lord, Lord Astor, said that 50,000 people are employed in the industry and there are possibly millions of secondary jobs down the line. We must treat the industry with great care and respect. It enables people to be involved in a sport and as an active sportsman who has studied the involvement of motor racing drivers I can say that in every way it is definitely a sport. It requires a physical skill to engage in competition with others—and I believe that we can probably use the following expression in its true context—on a level playing field. It is a competition between equals; or, indeed, as near as you can get to it. It is an equal application of resources. In motor racing, as is true in all other fields, where you have equal resources, equal expertise and money, you get the best results.
I am no great lover of motor racing, but I find myself watching and enjoying the sport when two cars are vying for the lead in a race. I must admit that my
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concentration span slips slightly when one car is permanently "x" number of seconds in front. It is very difficult for the cameramen to catch two cars running in first and second places in the same shot. In that situation my concentration may wane, but when there is competition my attention holds firm.
We are talking about a sport which deserves equal respect from the Government. It is also fortunate that it is one of the few sports which actually does not need—certainly in the present situation—government money. I am aware that another speaker may say, "Ah, but you will take away its main revenue", but I believe that we can say that the sport will look after itself. Broadly speaking, sport breaks down into two categories in all fields of activity. First, there is the pursuit of excellence about which we have been talking and, in particular, the highest levels of it; and, secondly, there is the participation aspect.
I return to the speech made by the noble Lord, Lord Hesketh. I agree with the noble Lord that motor sport is something where you must have, say, a fairly light touch when it comes to environmental issues. I suppose that "light" is probably the wrong word; but certainly very sensitive handling is needed in that respect for the simple reason that, in current technological terms, cars do make a considerable amount of noise when their engines are going at full throttle. However, I would say that it is unreasonable to try to restrict the major racetracks in this country on those few days when they are in operation. It is not a viable issue to try to do so.
A major concern of many people about sport relates to the proliferation of secondary events. There is one area in particular that I believe may well be worth mentioning. I refer to the use of four-wheeled vehicles for recreational purposes on some of our byways in the country. Our countryside is under great pressure of usage by many groups of people—for example, walkers, riders and so on. Moreover, now we have the increasing use of motor vehicles off road. To get a real buzz out of being in an off-road, four-wheeled drive vehicle, you need a very bumpy track. Ideally you need a nice pot-holed road after it has been subject to about two weeks of torrential rain. It is great fun to drive along with mud and water flying everywhere. Indeed, most of the people who are doing it are sitting in nice heated or air-conditioned cabs. They are sitting there in vehicles with bull bars, destroying the odd shrub at the side of the road.
Perhaps noble Lords can imagine what it is like for someone who is a walker or a rider on a horse using those roads after such activity has taken place. If such areas become popular tracks, they become virtually unusable. In 1981 we changed our classification about which types of roads could be used for such activities. We are now increasingly under pressure because any area which can be approached by a vehicle can be used for such off-road purposes. We must look most carefully at such activity. It is denying access to the countryside to other people who are not in cars. Surely the all-conquering combustion engine could be restricted in that respect.

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Surely walkers, riders and other people should take precedence in this case. Why cannot we construct, say, proper test tracks for such activities which can be manipulated to give a new challenge and provide new tests of handling and skills? The growth of the industry and the growth in sales of four-wheeled vehicles surely dictates that, once again, there is a commercial market involved. As such people would probably not pay willingly to use any facility that may be constructed, I would suggest that, once they are prevented from destroying other people's walking territory, they might just come round and cough up.
I have a few final comments to make as regards what has been said about the science and technology base of the motor industry. It is undeniable that the motor industry has been for the normal road-use car what military aviation has been for civil aviation. Indeed, it has been where the testing has been; where the money has been; and where the incentive to carry out work has been. Moreover, as has already been mentioned, it is also a great incentive for our science and technology base. I do not know how we could really encompass engineering—and, indeed, physics, chemistry and all the natural sciences—and be more friendly to it, other than by encouraging postgraduate study in those fields. However, I hope that the Government will look kindly on the matter and try to encourage the industry to put money back into it. I know that that goes on and that certain advanced engineering firms sponsor people in such work. But I believe that it is something in which the Government could become active in helping.
With those thoughts, I conclude by saying that, whether one loves or hates it, the motor industry is here to stay. When it comes to the motor sports industry we have—certainly at the top end—something of which we can be proud as a nation.
7.25 p.m.
Lord Haskel: My Lords, in preparing for today's debate—and, indeed, while listening to it—I have learnt much to be proud of. I am most grateful to the noble Lord, Lord Astor, for introducing a cheerful topic to debate. I must also congratulate those noble Lords who have spoken who play an important part in the motor sport industry. I hesitate to call them big wheels, but I am sure that they know what I mean.
It is nice to know that not only do we have some of the most successful racing teams in this country, but also that many successful overseas industrial corporations come to Britain to build and run their competition cars. Indeed, we have heard about such famous names as Mercedes, Honda, Renault, Ford and BMW. We have also heard how virtually all the cars which take part in the Indy 500 races are built in Britain.
Racing car construction may not be the biggest business in Britain, but, from what we have heard, we are certainly the best in the world. I was much impressed with the enthusiasm of noble Lords opposite. Perhaps they should swap the Tory flaming torch logo for the chequered flag.
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The noble Lords, Lord Hesketh and Lord Skidelsky suggested that we try to extract the lessons that might be learnt and which can be applied to other parts of British industry. Of course they are varied, complicated and are sometimes just due to luck and coincidence. Indeed, the noble Lord, Lord Montagu, spoke of the luck, or coincidence, regarding the fact that we had an advanced aircraft industry (perhaps because of the war), which meant that the sports car engineers could turn to it for engineering improvements. Frank Williams has described a Formula One car as,
"a low-flying aircraft with its wings upside down".
The wings are designed to keep the car on the ground.
Perhaps I should explain that I come from the textile industry, and was aware of the connection between motor racing and aircraft engineering because, many years ago, my company supplied flame-retardant overalls to the racing teams. That was because we were licensed by the Air Registration Board to supply fabrics for aircraft interiors, and it was natural for the racing teams to seek suppliers to the aircraft industry for their own needs.
Many of those sub-contractors came from the aircraft industry to supply the Grand Prix teams. Fortunately the firms prospered enough to achieve a critical mass that carried the industry forward. That, in turn, made it harder for other countries to enter into what the noble Lord, Lord Skidelsky, described as a small "niche" business sector. I agree with him. So in England we have a cluster of innovative small businesses situated around the Thames Valley and run by enthusiasts.
The noble Viscount, Lord Simon, told us about the competitive firms working towards a common end, providing mutual support and encouragement, driven by the need for continuous improvement and engineering excellence, because in motor sport racing split seconds count. I do not know much about motor sport but while preparing for this debate there seemed to me to be something in this matter that was familiar to my own experience in the textile industry. It reminded me of the cluster of textile firms in Emilia-Romagna in Italy which co-operated and competed to produce innovative, high quality clothing which is one of the success stories of Italy. Indeed one of the best known firms providing a focus to this cluster was Benetton which is now a household name—as noble Lords know—in the motor racing industry. Benetton was one of the first retailers to exploit the quick response technology available from this cluster of businesses.
Some of the technology and management systems required for quick response were in fact pioneered by my company in the UK some 25 years ago. Surely this is another example of Michael Porter's thesis in his book The Competitive Advantage of Nations in which he argues that modern competitive manufacturing is best carried out, and is most efficient, in just these circumstances—small, innovative businesses focused on their core competences and responsible for their own performance, producing high quality, innovative products. I believe that the noble Lord, Lord Skidelsky, explained this, and I heartily agree with him.

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During the 1980s we saw a decline in manufacturing industry in this country. In spite of this, corporate profits increased; but instead of investing these profits, most were paid out as dividends. In the motor racing sector these dividends were reinvested. Is not this the sort of desirable scenario we have been hearing about recently from the DTI in its papers on competitiveness? I see that the noble Lord, Lord Hesketh, does not agree with me at all, but it is true.
The RAC—and the noble Lord, Lord Astor—has called for a survey of the industry by the Department of 'Transport. I hope the survey will also look at these factors relating to investment and productivity because they encapsulate an essential difference between the Government and Labour on industrial policy—a laissez-faire, short-term, financial driven economy, compared with a high tech, high skill and high investment market economy.
Another area for learning valuable lessons is the way the racing teams handle sponsorship. The noble Lord, Lord Astor, and the noble Viscount, Lord Simon, spoke of this. It has been estimated that some £100 million a year is spent on Grand Prix sponsorship. The noble Lord, Lord Hesketh, told us that tobacco sponsorship is crucial to the business. Lotus cars were turned into Player's cigarette packets, and McLaren Cars became a flying Marlboro cigarette packet. Indeed the four main racing teams are all sponsored by cigarette manufacturers. Denied other forms of advertising, cigarette companies have turned to the glamour and sporting image of Grand Prix racing to sell their products. The result is that these advertisements are carried on the media, not least by the BBC. It is in fact a blatant infringement of its advertising ban and, frankly, I think it is a bit of a disgrace. The BBC may use weasel words to justify its going against the spirit and letter of its charter by saying that it is not carrying advertising but merely showing automobile races in which the advertisements are incidental. However, I think that it is about time the industry faced up to this problem and showed rather more social responsibility.
Like the noble Lord, Lord Addington, I, too, hope that sponsorship is opening out to new areas because the teams are good at getting sponsors. They understand a sponsor's needs and allow companies to use their sport for public relations. So sponsorship is perhaps becoming less about selling products and more about perceptions. It is interesting that after the Shell Oil company was hit by the Brent Spar fiasco, it tried to rebuild its image in Germany by sponsoring Michael Schumacher driving in Grand Prix racing for two years. Nevertheless Grand Prix racing has learnt how to squeeze every little bit of benefit from its activity. It seems to me that the only space that has not been sold is the space between the drivers' ears!
Many noble Lords have spoken of the spin-off from motor racing. The noble Earl, Lord Liverpool, told us of the contribution made to safety. The noble Lord, Lord Lucas of Chilworth, and other noble Lords told us how the ordinary motor car industry has benefited from better safety, better tyres and better suspension. The use of carbon fibre for lightness and strength has certainly been developed in motor sport. This expertise may well
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be used in other industries and it is no accident that Chris Boardman's carbon fibre frame cycle, on which he won an olympic medal, was made by Lotus.
The noble Lord, Lord Strathcarron, told us of the spin-off to the motor cycle industry. Like the noble Viscount, Lord Simon, I believe there is a need to speed up the transfer of technology to other sectors.
Many noble Lords have spoken of the role of government. One role of government in all this is certainly in the area of technology transfer as regards the use of carbon fibre; the use of ceramics in engines instead of metal, and fuel efficiency. There must be plenty of technology which can benefit other sectors of industry. The noble Lord, Lord Astor, spoke of the need to raise the status of engineers. I agree with him entirely. This is a problem inherent in other industries, too. In preparing for this debate I was interested to learn that Komatsu supplies engineers to the motor racing industry because having a chance to work on Grand Prix cars is so sought after by engineers that Komatsu reckons that attracts some of the best engineers to its company.
The Government can also encourage local colleges to become centres for knowledge, training and research. The sport is providing the winning drivers today. The noble Lord, Lord Montagu, spoke of the need to ensure—in order to hold on to that lead—that we invest in training the winners of tomorrow. Drawing on my textile experience, this was the role of the local government in Emilia-Romagna in supporting the cluster of textile firms. There the local government were also active in getting the mixture right and achieving a critical mass. Of course I can understand the Government being a little reluctant to learn from the administration in Emilia-Romagna because until last year it was a communist administration.
The noble Lord, Lord Hesketh, told us that in the past the industry has been sustained by enthusiasts investing their personal money. I understand it is an old saying in the motor sport industry that anyone can make a small fortune out of motor racing providing they start with a large one. Most of the firms are young and also sell to the aerospace and defence industries. Therefore it is important that all of these industries—racing, aerospace and defence—prosper. With the aerospace and defence industries cutting back, that is a matter of some concern.
Lord Hesketh: My Lords, during many years in your Lordships' House I have never, ever intervened in a wind-up speech. However, I have been so disgracefully misquoted by the noble Lord that I really must stop him. I never said that it was enthusiasts' investment that made the industry. All of these businesses depend on being run by businessmen. It is not some kind of cavalier adventure as the noble Lord would make out. The truth is that I have been misquoted constantly in his speech. He did not listen to a word I said. I have looked at his speech and seen that it was all typed out before he heard a word that I had to say. I should be grateful if he did not make any further mention of me because every time he does it is a wholly disgraceful, inaccurate misrepresentation. The noble Lord has no Whip with him which I think is also fairly disgraceful. It is

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becoming more and more clear that the Opposition spokesman has a lack of understanding which is frankly embarrassing.
Lord Haskel: My Lords, I am sorry that the noble Lord is upset. I carefully noted some of the comments that he made. Certainly I prepared my notes beforehand but I also noted down some of the comments that the noble Lord made.
I listened carefully to what everyone said. I noted that the noble Lord, Lord Skidelsky, told us of some of the fortunate sets of circumstances which have occurred over the past 40 years. He was speaking as an historian. With respect to the noble Lord, Lord Hesketh, one gets the impression, having listened to what other noble Lords have said, that these companies are driven by enthusiasm, passion and interest rather than by accountants. Many noble Lords have said that this set of circumstances seems to work well in this country, with responsive business units focusing on their core competences rather than working in large centrally-organised vertical production firms. Most importantly, I do not believe that those companies have as their first priority the production of shareholder value for financial institutions. Their first priority is simply to win races. That is what the sponsors want, and in many ways they are the providers of the capital. That is what the engineers, subcontractors and racing teams want. All of the stakeholders are united in a single objective. I would regard that as a very successful example of the stakeholder economy.
7.41 p.m.
Lord Chesham: My Lords, I very much welcome the opportunity for this debate. Like other noble Lords, I should like to thank my noble friend Lord Astor for initiating it. I have always taken a very keen personal interest in motor sports, and therefore it is a genuine pleasure to be able to discuss this exhilarating and commercially important sector of sport.
The motor sport sector is an area in which the United Kingdom leads the world. I can proudly make that statement without any reservation. Yet all too frequently it has been said that the achievements of the sector go unacknowledged. We should take every opportunity, such as this, to applaud and promote the sector. We have the most innovative designers; the best and most imaginative manufacturers; and I do not believe that we should be shy to say that we have some of the best drivers. The world comes to the United Kingdom for its racing cars. When we refer to motor sport we must recognise that we are talking not only of Formula One. Far from it. Undoubtedly Formula One is the pinnacle of the sector, which is only natural since it is such a high profile and glamorous sport.
A number of noble Lords have referred to viewing figures, etcetera. I have here some figures that are even larger than those that have been mentioned. Each season Formula One is televised to well over 100 countries and a staggering aggregate audience of 27 billion people. But we must not lose sight of the fact that the motor sport sector covers a much wider range and depth of
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activities. Rallying, Formula 3000, touring cars, research and development and manufacture of highly specialised components and electronics are just some of the areas in which we excel. Another area of motor sports that I highlight is the Isle of Man TT motorbike races. Surely there can be few who have not heard of this world famous event. The Isle of Man can rightly call itself the road racing capital of the world. Not only does it make an important contribution to motor sports but it also generates wider benefits. The races for both motorbikes and cars are held throughout the summer period and attract a significant number of tourists and race enthusiasts. This creates considerable economic benefits.
At the risk of sounding repetitive, I should like to repeat the incredible success story of the United Kingdom's complete domination of the Indianapolis 500 race series. Half a million people attend the event itself and another quarter of a million watch the pre-race practice runs. This serves as a superb advertisement for British craftsmanship and design ingenuity. That race is only one of a series. There is enormous coverage of the event in the United States in particular. Perhaps noble Lords will bear with me if I mention one more success story—there seem to be so many in motor sports. I congratulate Colin McRae who became our first world rally champion driver at the end of last year.
The sector is a very significant industry in its own right. My noble friend Lord Astor raised the question of statistics and the lack thereof. This is a matter about which the SMMT, DTI and representative bodies are concerned. The SMMT already has first-class information and statistics about the motor industry but not about the motor sport sector. I thank the noble Lord for drawing my attention to this matter. I will ask officials to see how the necessary statistics can be set up.
The noble Lord, Lord Haskel, will be interested to hear that there has already been an important transfer of technology from the specialist motor sport industry to the mainstream car production industry. Advanced braking systems, analysis of crash management, lightweight materials, engine and fuel injection development, electronic management systems and semi-automatic gear boxes are some of the areas that have directly benefited volume manufacturers. These developments have undoubtedly contributed to technical improvements in mass-produced cars, but, equally important, have improved the safety of driving for consumers.
In concluding this brief overview of motor sports, I should like to highlight some of the illustrious names that the sector has generated, some of which have already been mentioned tonight: Lotus, McLaren. Cosworth, Williams and Tyrell, to name a few. It is significant that although many people are not necessarily motor sports fans—including perhaps the noble Lord, Lord Addington—there is a high probability that they will have heard of at least one and perhaps all of those names.
Some of your Lordships have asked this evening what the Government are doing for the motor sports industry. I have also heard some noble Lords say that if they are

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not doing anything that is a damn good thing. We arc working with the sector actively in a number of ways. At last week's SMMT banquet for the centenary of the United Kingdom motor industry, the President of the Board of Trade, Mr. Ian Lang, announced an important new initiative to build on the success of the British motor sport industry. The purpose of the initiative will be two-fold. The first is to focus on ways in which companies in the volume automotive sector can adopt technology and other skills from the motor sport industry.
The companies in this country which design, develop, build and support racing cars are a supreme example of British engineering, flair and sophistication. They have many useful lessons for the wider component supply industry in terms of technology, organisation and teamwork. In all of these areas our component suppliers, with the support of the DTI, are working hard to improve their competitiveness. The second part of the initiative is to take a fresh look at ways in which the international prestige and world-class performance of British motor sport can support export promotion and outward investment initiatives.
We have a great asset in this industry, and the industry is in a position to attract public interest and attention across the world. More can be done to build on this. I am sure that noble Lords will agree that these moves arc to be welcomed. The DTI is actively developing methods to take forward this initiative. Moreover, DTI Ministers and officials will be intensifying their discussions with the Society of Motor Manufacturers and Traders, which is the lead trade organisation for the vehicle industry, and other representative bodies such as the Motor Sport Industry Association and the wider automotive industry to see how the interests of the sector can be further promoted. For example, the SMMT has offered to give the Motor Sport Industry Association affiliation status and appropriate administrative support. We believe that this generous gesture is to be applauded. It will provide the motor sport with a stronger voice and focal point. Of course, SMMT in partnership with DTI will continue to look at ways in which they can further promote the industry and enable it to prosper.
I should like to emphasise that the sound economic climate that has been created in the UK in the form of low inflation, low taxation and sound public finances has been central to allowing the motor industry in general, as well as the motor sport sector, to develop. In manufacturing we have world class vehicles and components manufacturers operating in the UK. We have a world renowned design engineering and R&D capability and our retail and distribution sector is increasingly innovative thanks both to manufacturers and dealers. It is no wonder that vehicle production is rising, that exports are rising, and that the UK has become the most attractive location in Europe for automotive companies.
One of the most exciting announcements that we have heard recently in motor sport was the news earlier this month by Jackie Stewart—surely one of the greatest names in the history of not only British but world motor racing—that, with the support of a multi-million pound
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long-term agreement with Ford he will form a new Grand Prix team. The team, almost inevitably, will be based in the UK—Milton Keynes to be precise—and will race for the first time in 1997.
These are exciting developments and serve to underline that the UK is regarded as the natural base for the motor sport industry. Indeed, Britain is arguably the enterprise centre of Europe with the automotive industry, and within that motor sport at the forefront of that sector.
Perhaps I may make a few comments on various points raised by noble Lords. A number of noble Lords mentioned tobacco advertising. A voluntary agreement was drawn up between the Department of National Heritage and tobacco companies last year. Some noble Lords may not be aware of it. A key feature of the agreement is that tobacco companies can now spend only 15 per cent. of their sponsorship budgets on promoting an event. That ensures that 85 per cent. of tobacco spending on sponsorship now goes directly to sports bodies. That agreement, of course, applies only in the UK. However, it is a voluntary agreement which has been entered into.
The noble Lord, Lord Addington, will be pleased to know that we are aware of growing concerns at the use of four-wheel drive vehicles on byways, in particular deliberate damage caused to countryside tracks. There is a commitment in the 1995 White Paper, Rural England: A Nation Committed to a Living Countryside, to consult on whether legislation to ban vehicles from byways may be desirable.
My noble friend Lord Astor and my noble friend Lord Lucas spoke about the shortage of engineers. It is a global problem, not just one faced by the UK. The DTI is aware that it is an important issue and is urgently investigating with the automotive industry ways of increasing the numbers of suitably qualified designers and engineers and addressing the industry's education and training needs.
I can give two examples. The cross-training initiative will pump prime the SMMT's design engineering group to undertake a feasibility study for design engineering initiative. The aim is to evaluate the scope for retraining people with non-automotive skills, such as those from the defence and aerospace industries, in automotive design and engineering.
Secondly, the DTI and SMMT are developing a concept known as the virtual university to meet more adequately the education and training needs of the automotive sector. It is an exciting proposal and one that the industry fully supports. The DTI, the SMMT and the industry are urgently exploring the options for this university.
I shall certainly take up the suggestion of the noble Lord, Lord Lucas, as regards the "Industry Year" to see whether vie can take it further.
My noble friend Lord Astor suggested that I might be a focal point for the industry. I am flattered and grateful to my noble friend for suggesting that I should be. In the absence of the noble and learned Lord, Loki Fraser, when that occurs, I would be happy to fulfil such a role as appropriate. However, Ministers

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in a number of government departments have a keen interest in the motor industry. In particular, Ministers and officials from the DTI have responsibility for sponsoring the UK vehicles manufacturing and motor sport industries. The DTI and in particular the department's automotive directorate already has an active and positive working relationship with the industry and always stands ready to advise and support on issues of concern to the industry.
My noble friend correctly pointed out that the Silverstone bypass is part of a private finance initiative. Indeed, the bypass is part of a larger project, the A6/A43 south Midlands network, which was announced by the Secretary of State last November. The project is entirely dependent on private finance. The Department of Transport does not envisage work starting on the project until some time in 1997.
My noble friend Lord Astor raised the issue of motor sport on roads. Although the Department of Transport has not objected to events such as the Birmingham Superprix for purpose-built racing cars, the department believes that motor sport on public roads conveys the wrong message to motorists and encourages dangerous imitative behaviour. That can be borne out to some extent by the number of deaths after the TT by people using those roads thinking that they are qualified TT riders.
My noble friend Lord Montagu raised a number of interesting matters. I should like to consider them to see whether we can do something about those interesting and helpful suggestions.
I wish the industry the very best for the future and emphasise that the Government stand ready to continue to help nurture the industry.
7.58 p.m.
Lord Astor of Hever: My Lords, this has been a fascinating debate. We have heard some very successful, distinguished, informed and uninformed speakers. I am delighted that on the whole most speakers reinforced what I said earlier.
I am grateful to all noble Lords who took part. I apologise that they will he leaving later than I promised because of the Statement. I thank the Minister for his reply. With his interest and enthusiasm I feel that I have achieved my objective of making the Government more aware of the motor sport industry.
I have two points. First, I strongly disagree with the noble Lords, Lord Addington and Lord Haskel, about the ease in obtaining sponsorship. That is completely untrue. I know that even some of the leading Formula One teams are struggling to obtain all their sponsorship. I hope that they will bear that in mind.
Secondly, as deputy president of RoSPA I shall certainly follow through the very good point made by my noble friend Lord Skidelsky on road safety. I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Companies Act 1985 (Miscellaneous Accounting Amendments) Regulations 1996
8 p.m.
Lord Chesham Lord Chesham rose to move, That the draft regulations laid before the House on 16th January be approved [5th Report from the Joint Committee].
The noble Lord said: My Lords, I should like to begin by saying a little about the purpose of the draft regulations. The draft regulations in the main simplify or repeal a number of specific Companies Act accounting disclosure requirements, thereby removing provisions that have been superseded by other requirements, or are otherwise no longer warranted. The draft regulations also rectify a technical problem identified in relation to audit exemptions for "off-the-shelf" companies and correct some technical anomalies identified in the implementation of the insurance accounts directive. In addition, they include a new requirement for public limited companies and their large subsidiaries to publish their payment policies in the directors' report.
With the exception of the new requirement requiring disclosure in the directors' report of a company's payment policies—of which I will say more in due course—the draft regulations, taken as a whole, should reduce the administrative and other costs to companies in complying with Companies Act disclosure requirements.
With the exception of the new requirement for disclosure of payment policies in the directors' report, which will apply solely to public limited companies and their large subsidiaries, and those provisions relating exclusively to insurance companies, the draft regulations as a whole apply to the entirety of registered companies, regardless of size or business type. However, in practice the provisions relate mainly to the accounts of large companies, as small companies are already exempt from a number of disclosure requirements.
Turning now to the new requirement that public limited companies and their large subsidiaries disclose their payment policies in the directors' report, I should like to say a little about the background to this measure. The Government's 1994 competitiveness White Paper, Competitiveness—Helping Business to Win, announced a package of new measures to help tackle the problem of late payment of commercial debt. One of the key elements in that package was the introduction of a requirement for public limited companies to publish their payment policies in the directors' report, thereby providing suppliers and others with information about how they can be expected to be treated by such companies, and thus giving additional data on which to base decisions on, for example, supply and pricing.
In February 1995 the DTI consulted the business community on the form of the statement that directors would be required to make. The statement was to be based on whether or not the company follows any code of practice on prompt payment: companies would either disclose that they complied with such codes, including

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the proposed new British standard, or they would disclose that they complied with principles of good practice to be specified in the proposed regulations.
The majority of those responding to the consultation were in favour of this policy, although a number of respondents pressed for alternative measures to address late payment. A further round of consultation, based on the text of the draft regulations as a whole, was undertaken in October last year. The response to the new disclosure requirement was favourable, although some respondents again sought to use the consultation to argue for additional measures to combat late payment, including a statutory right to interest.
The new disclosure requirement will only apply to public limited companies and to large private companies which are subsidiaries of public limited companies. We estimate there to be approximately 11,900 public companies. The new requirement will come into force in relation to accounts for financial years ending after 24th March 1996, although the information to be provided will he in respect of the payment policy for the forthcoming year.
Requiring public limited companies to publish details of their payment policies should prove a real disincentive to poor practice. Chairmen will not want to admit publicly that their companies do not have a policy of paying on time. Furthermore, the fear of being confronted with evidence from disgruntled suppliers—who may well seek to generate adverse media comment—that their stated policies and actual practices differ, should help ensure that directors take the necessary action to make sure that they pay promptly.
Finally, I should like to reiterate the point I made earlier that all the measures contained in the draft regulations before the House today have been subject to full public consultation. The draft regulations have been widely welcomed and are seen as a positive first step in simplifying the accounting disclosure requirements of the Companies Act. I beg to move.
Moved, That the draft regulations laid before the House on 16th January be approved [5th Report from the Joint Committee].—(Lord Chesham.)
Lord Haskel: My Lords, I welcome the statutory instrument as an attempt to change the culture so we will not oppose it. However, I have two problems with it. First, I do not think it goes far enough. Secondly, will it apply to government, local authorities, government agencies and so on?
I am sure that the Minister will be aware of Francis Fukyama's new book: Trust—The Social Virtues and the Creation of Prosperity. In it he argues that social culture comes before economics and if there is no culture of trust, the transaction costs are enormous.
What has all that to do with late payments? Firms spend many years building up relationships, and paying your supplier on time is an important part of that. It is in that context that I should like to see the statutory instrument. Without that ethical context, there is no real need to pay your supplier on time. Every businessman knows that credit from suppliers is a cheap source of finance. So we certainly welcome as a contribution
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towards a cultural change the requirement to make a statement in the annual report, but I have my doubts as to whether it will help practically.
We support companies having to state their intentions, but it would also be a useful discipline to state what their practice has been during the year. That point was made in the Labour document: A New Economic Future For Britain. If the directors reported on their record of payments and the auditors checked it, not only would it be a useful discipline but also the small company receiving late payment could bring that to the attention of its customers' auditors. At least the small companies would have someone to talk to, instead of talking to the press, as the Minister suggested.
If we really want to help small businesses collect their debts, we must help them to help themselves, as the Government's White Papers on competitiveness have pointed my:. For instance, in large and small firms nowadays roost orders are processed by computer. The software is such that it is easy to print out orders and order confirmations. Let those orders and order confirmations state precisely the terms of payment. Of course, one effective way to get prompt payment is to give discounts and cost them into your prices.
Many years ago there was a radio programme called "Your 100 Best Tunes".
Lord Henley: It still exists.
Lord Haskel: I should have thought that the noble Lord was too young to know the programme. I remember that at the time in my office we kept a record of the hundred best reasons for not paying. If I can find it, I shall send it to the Minister. I remember clearly that Reason 76 for the customer not paying was that he did not have any cheques and he could not get any from the bank because the printer was on strike.
The DTI has a department for promoting good business practice. I hope that those practices will be promoted to small companies via business links while, at the same time, the requirements in this statutory instrument are made obligatory for large companies.
Most important is the question of payments from government, local authorities, government agencies and other customers not entirely in the private sector. In the statutory instrument or in Appendix A to the consultative document, there is a statement that the public sector must give a lead and that the Government will require all government departments and their agencies to comply with the CBI prompt payment code. Very laudable. But what happens in practice?
The Minister will have noticed that last weekend Mrs. Barbara Roche MP issued a statement pointing out that in 1994–95 £208 million was paid late by the Government to firms. The Treasury, the DSS, the ODA and National Heritage were able to say how much they had paid late. The DTI—the Minister's department—the Home Office and the Department for Education and Employment could not. Is it surprising that hills are paid late if the accounting systems in Whitehall are in chaos? Can th Minister say what the Government will do about it now?

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I can do no better than to quote the Federation of Small Businesses:
"How can the Government say in one breath that it wants a solution to the problem of late payments, when its very own departments are guilty of major delays in their payment record? Setting an example should be paramount in Ministers' minds".
I could not have put it better myself.
I believe that that covers the main point in the statutory instrument. The remaining points are mainly technical, dealing with accounting standards for Europe. There are also some measures making good earlier omissions and minor points tidying up the accounts of insurance companies and banking companies. However, they are additional regulations. I hope that the Minister is keeping count, so that when the Government are next in deregulation mode, and we hear about how many regulations have been scrapped, the regulations in this statutory instrument today will be subtracted from the total.
Lord Chesham: My Lords, to respond to the matters raised by the noble Lord, Lord Haskel, there is clearly one point that the noble Lord has not understood: this is a Companies Act regulation; therefore it could not affect government departments, local authorities, etc.
Government departments and their agencies already publish their payment performance and are required to comply with the CBI prompt payment code. That information is in the public domain; it is publicly available. The Government are very concerned to ensure that if they are not complying with the code, their systems are being addressed to make certain that they do comply. The statistics that the noble Lord mentioned were related to invoices that had actually been received. If invoices are received late, it is very difficult to make prompt payment on them. Therefore those figures can be slightly misleading.
In summary, the main aim of the draft regulations is to simplify specific Companies Act disclosure requirements and to remove provisions that have become redundant as a result of new developments. Given that that is the case, I should have thought it is deregulation, not regulation. The new requirement on disclosure of payment policies in the directors' report has been included with the accounting simplifications so as to avoid inconvenience to business by introducing two sets of regulations in quick succession. This new requirement is one of a number of measures implemented to tackle the late payment problem. I commend the draft regulations to the House.
On Question, Motion agreed to.

Financial Services Act 1986 (Investment Services) (Extension of Scope of Act) Order 1995
8.12 p.m.
Lord Henley Lord Henley rose to move, That the order laid before the House on 18th December be approved [4th Report from the Joint Committee].
The noble Lord said: My Lords, I beg to move that the Financial Services Act 1986 (Investment Services) (Extension of Scope of Act) Order 1995 be approved.
Perhaps I may say how much I appreciate the extraordinary interest the House is taking in this rather fundamental and important order! As a Minister in the Department for Education and Employment, but on this occasion speaking on behalf of Her Majesty's Treasury, I am not terribly surprised that there is not a great interest in these regulations. They have nothing in them about selection in schools, grant-maintained schools, standards or other matters. I am, however, grateful to see the presence of my opposite number, the Opposition spokesman on education matters, in the House. Perhaps the noble Lord might want to add something later in the debate.
Lord Morris of Castle Morris: My Lords, I am most grateful to the Minister for giving way. I should point out that I am here in my capacity as Deputy Chief Whip, and unfortunately not in any other capacity.
Lord Henley: My Lords, I am of course distraught to hear that the noble Lord will not wish to engage me in discussion on those matters. I appreciate that he and I recognise that they would not have any strict relevance to our discussion this evening.
The measure before us today is a small but necessary part of the implementation in the United Kingdom of the European Union's Investment Services Directive. The directive extends to investment firms, as from the beginning of this year, the arrangements which already apply to banks, building societies and insurance firms.
Under these arrangements, firms authorised in accordance with the minimum requirements of the directive may either establish branches or provide services directly into any other European Economic Area state.
The UK financial services industry, as noble Lords opposite will well know, with its wide range of expertise and strength in depth, and its high proportion of non-bank investment firms, is particularly well placed to take advantage of this, and the industry itself has been anxious to see the Investment Services Directive implemented.
The basic requirements of the Investment Services Directive in fact fit well with our existing authorisation and regulatory regimes. Many investment businesses in the United Kingdom will find the directive makes very little difference to the way they actually conduct themselves, although it will open up far greater opportunities to boost business in Europe. It also has the effect that our recognised investment exchanges now have the right to place screens in other EEA states if firms located in those states wish to become screen-based members.
UK firms within the scope of the directive who are already authorised under the Financial Services Act, have automatically been deemed to be authorised under the Investment Services Directive and, if they are already doing overseas business either directly or through a branch, have been accorded "passported" status.

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The present order has two main purposes: it extends the coverage of the Financial Services Act to ensure that all the activities covered by the directive are included; and it enables the Securities and Investments Board to apply conduct of business rules to certain activities by authorised firms which do not, in their own right, require authorisation. I commend the order to the House.
Moved, That the order laid before the House on 18th December be approved.[4th Report from the Joint Committee.]—(Lord Henley.)
8.15 p.m.
Lord Haskel: My Lords, I must apologise for the absence of my noble friend Lord Chandos, who is delayed at a discussion about educational matters. In that, I gather he shares an interest with the noble Lord, Lord Henley. I am sure that we could debate that subject at another time, possibly in the Bishops' Bar. I thank the Minister for explaining this order. We will certainly not oppose it.
The order is important for our financial services industry, and it is particularly important for Britain, because the financial services industry is an important part of our economy. We have the largest financial services business in Europe. I agree with the Minister it is to be hoped that this order may allow businesses to grow yet more.
However, the order allows financial services business in Europe to trade in the UK; and it lays down some rules for that competition. What the Minister did not tell us in detail is that the order adds more regulations to the heavy load already carried by our financial services industry. The compliance departments in companies will have to see that these new regulations are also complied with. Fairly soon, the compliance department will be as big as the administration department.
The industry takes compliance seriously. But in spite of that effort, the financial services industry is not popular. The pensions and life insurance sectors certainly do not enjoy public confidence, particularly as it now looks as if we are still two or three years away from clearing up the mis-selling of pensions. As my honourable friend Mr. Alistair Darling, has frequently said in another place, how much more self-regulation compliance are the Government going to impose on our financial services businesses before the businesses crack and the Government are forced to introduce proper regulation? In addition to the regulations in this order, the order empowers the Government to make yet further regulations. Does the Minister have any regulations in mind with which to burden yet further the financial services industry?
As the Minister told us, these regulations allow European companies to set up business here on the back of a passporting system. What happens when something goes wrong? We seem to have great difficulty in dealing with problems when something goes wrong with companies based in the UK. It will be far more difficult when we are dealing with companies regulated by different rules in their home countries. Indeed, our regulators can fall out with their regulators. It seems to me that by opening up the financial services business to
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European competition while retaining our current system of self-regulation, the Government are setting up a disaster waiting to happen. I hope that the Government are giving this matter some thought. Perhaps the Minister can tell us what is the position.
This is a particular problem for the UK. Our financial services industry is larger, more diverse and more fragmented than those in other European financial centres. We have thousands of different companies, large and small, whereas in other European centres the financial services industry is owned by a few large institutions that all know each other and deal with each other. Regulation is much easier there than it is here. I hope that the Minister can assure us that the Commission will take this into account when drawing up these European regulations.
Finally, I repeat what I said a few minutes ago when dealing with the previous business in your Lordships' House. We are constantly hearing on the radio and reading in the press how the Government are busily deregulating business and industry. We are frequently told how many regulations have been scrapped. When these figures are given, I hope that the regulations we are passing today in this order will be subtracted from the total of those scrapped.
Lord Henley: My Lords, I am grateful for the noble Lord's warm welcome of these regulations. I am glad that he recognises the strength of the financial services sector in the United Kingdom economy and how well it does. He went on to imply a degree of criticism of the self-regulatory regime which applies and implied that some more onerous and more regulatory regime—which I believe he opposed in the earlier order which he spoke to—might be appropriate. There is a fundamental divide between us and one which probably cannot be bridged over the Dispatch Box on this occasion. I simply say that I believe the noble Lord is wrong.
I said that I am grateful that the noble Lord recognises the strength of the financial services sector. I appreciate that he had a number of concerns which he addressed. He asked whether we had any more regulations up our sleeve. I can give the noble Lord the simple assurance from this Dispatch Box that we do not. He further asked whether this legislation adds to our regulatory load. Again, I can say no to that. As I said, the provision is largely modelled on the existing system.
He implied that the system showed a great deal of trust of the overseas regulators and asked how that can be justified. As I believe the noble Lord will be aware, Lord Justice Bingham supported the home state regime in the BCCI case. That demonstrated graphically the difficulties that occur when there is no single state responsible. This directive is simply following a pattern established already for credit institutions and insurance firms. The banks and building societies have been able to passport into the United Kingdom for the past five years. Depending on the extent of their home state operations, they have been able to provide investment services in the United Kingdom throughout this time. I believe that we have had relatively few practical difficulties as a result of the operation of the passporting regime.

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The noble Lord asked what was happening in other European countries. Our latest information is that there are four European countries who have fully implemented this directive. They are ourselves, once this order goes through, the Netherlands, the Irish and the Swedes. There are three countries involved in the capital adequacy directive; namely, this country, the Netherlands and the Spanish. Therefore, investment firms situated in those countries will have an early opportunity to take advantage of the single market. I am very glad to stress, as the noble Lord did, that the United Kingdom, which has the strongest financial services sector, falls into that category. The Commission has made it very clear that it intends to move promptly to the institution of infraction proceedings against those member states which fail to implement properly. As a result of this measure, United Kingdom firms will now have the right to passport into all EEA states and only the Dutch, Irish and Swedish firms will have the right to passport into the United Kingdom.
I believe that the noble Lord also implied that we were over-regulating and going over the top in implementation of the directive. I am the first to reject that. I assure the noble Lord that we have taken extraordinary pains to ensure that there is neither
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gold-plating nor double-banking in our implementation of the directive. The implementation follows very closely on the previous implementation of the second banking directive. There is certainly a very big premium for the industry in having two regimes as similar as the two directives will allow.
Finally, the noble Lord implied that there was considerable opposition within the Community to this particular set of regulations springing from the directive. Her Majesty's Treasury sent out about 3,000 copies of its initial consultation document in 1994. It received three dozen replies—that is, 36 for those of us who date from the post-decimal era. I do not believe that that suggests extraordinarily great anxiety on the part of industry. I hope that I have dealt with most of the noble Lord's points and hope that he will accept that this very well-attended House can now give these regulations their approval.
On Question, Motion agreed to.

Police Bill [H.L.]
Reported from the Joint Committee with amendments and recommitted to a Committee of the Whole House.
House adjourned at twenty-six minutes past eight o'clock.