Lords Sitting of 31 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 Chelmsford.

Lord Bowness
Sir Peter Spencer Bowness, Knight, CBE, having been created Baron Bowness, of Warlingham in the County of Surrey and of Croydon in the London Borough of Croydon, for life—Was, in his robes, introduced between the Lord Weatherill and the Lord Clark of Kempston.

European Football Championships: Policing
2.48 p.m.
Lord McNally Lord McNally asked Her Majesty's Government:
What steps they are taking to ensure adequate measures to prevent violence and disorder among rival groups of supporters at the European Football Championships, Europa '96, to be held in Great Britain this summer.
The Minister of State, Home Office (Baroness Blatch): My Lords, the Association of Chief Police Officers has developed extensive plans for the policing of Europa '96 in conjunction with the Football Association and government departments. There will be police intelligence centres adjacent to the eight grounds, with a co-ordinating centre in central London. The latest technology will be used to ensure that local police have up-to-date information about known and suspected hooligans. Police officers from the participating countries will be present to assist our police with visiting fans.
Lord McNally: My Lords, I thank the Minister for that encouraging Answer. Does she agree that, with an expected 250,000 visitors spending approximately £125 million in this country, this will be a marvellous opportunity to show Britain as a tourist centre and as a centre for staging major sporting festivals? If anything were to go wrong, it would be a disaster for our tourist industry and those prospects. For that reason, will the Minister help me by agreeing that there may be a case for a "buck-stops-here" Minister to co-ordinate some of the numerous bodies to which she referred in her Answer? Furthermore, is she satisfied that the policing of the Trooping the Colour and the England-Scotland game, both of which will take place in London on 15th June, will have adequate resources?
Baroness Blatch: My Lords, I am pleased to help the noble Lord by agreeing with his first statement that this is a great event. We want it to be a happy, enjoyable and successful event, and I believe that it will be. Much
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work has gone into the planning and there is a great deal of co-ordination. A European working group is meeting to discuss these matters, together with police and other people in this country. In addition, a Football Association group is meeting the government departments. There is a good deal of exchange of information between the countries, and as much intelligence as possible is being used to minimise the disruption from, I have to say—and it needs to be recorde—a few hooligans who have a disproportionate impact on the enjoyment of others at these games.
It is our view that the majority of people who will arrive in this country to support their own teams will he law abiding citizens. The Department of National Heritage is making available £400,000 to allow cultural activities to take place in the host areas where the games will be played. National Music Day will also coincide with the final of the championships. Therefore a good deal is going on and there is much co-ordination too.
Lord Macaulay of Bragar: My Lords, will the Minister confirm that the championships are not being held in Great Britain, but in England? Does the Minister recognise that the behaviour of Scottish football supporters throughout the world has been impeccable during the past five years? We hope that Scottish football supporters will maintain their great record in contrast to the behaviour of some people south of the Border who shall be nameless.
Baroness Blatch: My Lords, we have high expectations of all the players and all the fans. It is worth saying that it is not only English fans who cause trouble at football matches. Many countries have the same difficulty. What is encouraging is the way in which countries and police forces are now co-operating to do what they can to root out hooliganism so that the championships will be an enjoyable event for everyone.
Baroness Seear: My Lords, does the Minister agree that England is in Great Britain and that Great Britain includes the greater as well as the lesser?
Baroness Blatch: My Lords, I am happy to agree.
The Viscount of Falkland: My Lords, does the Minister agree that it is almost certain that large quantities of alcohol will be consumed at the championships? Are there any contingency plans to cope with that?
Baroness Blatch: My Lords, one thing that the Government have done which will be enormously helpful is to pass legislation on that matter. I refer to the controls on the sale and possession of alcohol under the Sporting Events (Control of Alcohol Etc.) Act 1985. We expect the police to use those powers and the courts to support them.
Lord Howell: My Lords, is the Minister aware that, for the purposes of football, England is regrettably not in Great Britain or the United Kingdom but is separately represented in FIFA? From this side of the House may I endorse everything that the Minister said about our confidence in the ability of the police and the authorities

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to deal with this matter? May I invite the Minister to congratulate the Football Association and to wish the England team well? Will she rejoice with me over the fact that the whole nation will be able to watch that event because it will be on terrestrial television?
Perhaps I may ask the Minister about police costs which are likely to be enormous. Can the Minister assure us that no undue costs will fall on the local authorities bearing in mind that the event will take place in only one or two areas? Finally, may I ask the Minister for an assurance that Part II of the Football Spectators Act, which we all supported, will be fully implemented, enabling the police to bring offenders before the courts to obtain banning orders to stop those offenders from attending any more matches? Since that Act was put on the statute book, no more than five or six offenders have been brought before the courts. Is it not a case of the Government saying—
Lord Hailsham of Saint Marylebone: My Lords, that is the third "Finally".
Lord Howell: My Lords, no, I believe that there has been only one. Is it not a case of the Government saying, "Don't look at what we've done, but at what we say", which is inadequate?
Baroness Blatch: My Lords, the role of Parliament and the role of politicians within Parliament is to pass legislation. The use of those powers is a matter for the police, and supporting the police is a matter for the courts. It is not a matter for politicians either in this place or in another place. Like the noble Lord, we expect those powers to be used. That is why they are on the statute book. We hope that they will be used to make sure that there is early intervention at any signs of disruption which might spoil the fun of all those who want to play or watch the games.
As to the costs, there is no specific provision. Policing outside football grounds is part of normal policing duties and as such the costs should be met from existing resources. As the noble Lord knows, the costs of policing inside the grounds is a matter for the Football Association. Special payments of grant are made to police authorities only when the Home Office and the Treasury are satisfied that the expenditure is exceptional, unforeseen and of a scale that is likely to threaten the efficiency of the force. I can report that the Football Trust has agreed to contribute to the capital cost of the police communication equipment that will be used during the competition.

EU Convergence: Unemployment
2.57 p.m.
Lord Bruce of Donington Lord Bruce of Donington asked Her Majesty's Government:
Whether they will propose, as a specific addition to the convergence criteria set out in the Treaty on European Union, a condition that the unemployment rate in each member state, defined as the percentage
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of economically active people who are unemployed on the International Labour Organisation (ILO) measure, shall not exceed 3 per cent.
The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, the Government have always taken the view that the present convergence criteria are necessary but not sufficient for successful economic and monetary union. Clearly, labour market flexibility would be important for economic and monetary union to work. A formal unemployment target is not acceptable because it wrongly implies that governments can create jobs.
Lord Bruce of Donington: My Lords, I invite the Government to accompany me to the heart of Europe. Is the Minister aware that in Europe as a whole unemployment now stands at 18 million people and is still rising and that there is a growing realisation among the member states that unemployment at a certain level has to be adopted as a convergence factor? I refer particularly to Italy, which holds the presidency, where proposals along the lines suggested in my Question are already being discussed.
Lord Mackay of Ardbrecknish: My Lords, I would happily take a trip to the heart of Europe with the noble Lord. If he forwards me an accompanying air ticket, perhaps we can leave at the weekend to study these matters. The noble Lord is right. If we study unemployment, we see that most of our European partners have much higher levels than we do. We have an unemployment rate of about 8 per cent. In Germany it is 8.5 per cent. and in Spain, as I have pointed out on a number of occasions, 22 per cent. It is pleasing that some European countries are beginning to see that the steps we have taken to ensure that we do not price our workers out of international markets and do not impose unbearable social costs on industry are correct. That is why we have an opt-out from the social chapter; it also explains why we shall not impose a statutory minimum wage.
Lord Boardman: My Lords, might not the better course for dealing with the problems to which the noble Lord, Lord Bruce, refers be to ensure that our European colleagues adopt the policies of this country? I have in mind, as my noble friend said, our policies towards the social chapter and the minimum wage.
Lord Mackay of Ardbrecknish: My Lords, my noble friend is absolutely right. Indeed, we have been saying for some time that greater labour market flexibility is vitally important if we in the United Kingdom—and, indeed, the whole of Europe—are to compete in the modern world. I believe that an increasing number of people on the Continent are beginning to realise that the social chapter and all the things that go with it are a European employment tax.
Lord Richard: My Lords, will the Minister ponder on what seems to have been happening with the Conservative government in Germany and the Conservative administration in France over the past week or 10 days? It seems that they see the way forward

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through a consensus of government, trade unions and employers. Does the Minister not consider that approach to be rather more sensible than the institutionalised confrontation that he advocates so much?
Lord Mackay of Ardbrecknish: My Lords, since our various reforms of trade union legislation, the institutional confrontations have not been present in this country. It is interesting that the reaction of trade unions in Germany to yesterday's package of proposals from the German Government was hardly enthusiastic. The Germans are beginning to realise that a reduction in social welfare contributions is vital if their economy is to improve and their unemployment rate to decrease. The hope is that the public spending share of GDP will he reduced from just over 50 per cent. to 46 per cent., a course of action which we have been pursuing for some years without the help of the Opposition whose desire for increased government spending seems to continue.
Lord Pearson of Rannoch: My Lords, when my noble friend says that the convergence criteria are necessary but not sufficient, will he go further and agree that they are unlikely to be met either? If that is so, will the Government use Article N of the treaty to prevent the other countries of Europe from signing up to the folly of monetary union?
Lord Mackay of Ardbrecknish: My Lords, such decisions are for those other countries to take. Of course, we have our opt-out provision which we negotiated. I must tell my noble friend that I am not very sure what the Opposition's view on the opt-out is. We have the negotiated opt-out and, as I have said continually from this Dispatch Box, we will decide such matters when the day of decision is right and we can take the decision with a full view of all the consequences. That means not just the convergence criteria, but also the impact that joining EMU might have on our economy and on employment. I believe that that is the right and responsible approach.
Lord Wallace of Saltaire: My Lords, does the Minister agree that the importance of getting the convergence criteria right implies that Her Majesty's Government need to play an active part in all such decisions and not be passive in defining the terms for monetary union? Does the Minister also agree that it would be unfortunate for our national interests if we were to give our partners the impression that we are always in the right and the others are in the wrong, as, sadly, Ministers occasionally do?
Lord Mackay of Ardbrecknish: My Lords, we believe that we should pursue British interests. If that means that we are alone, then so be it. The noble Lord's party can perhaps be characterised as one which believes that if we ever disagree with any of our European partners we must inevitably be in the wrong. On the noble Lord's substantive point, I can say that we are playing an active role in the work that is going on leading up to monetary union. However, the important point to note is that, because of the Prime Minister's
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opt-out, we shall be able to make a decision as to whether to join nearer the time when we see what the position is for the United Kingdom's interests.
Lord Dixon-Smith: My Lords, does my noble friend the Minister agree that the flight of manufacturing capacity from Germany and the troubles in France at the end of last year are scarcely examples of successful economies that we would wish to emulate too directly?
Lord Mackay of Ardbrecknish: My Lords, my noble friend is right to draw attention to the problems that exist in both France and Germany. I have drawn attention to the unemployment problem which is actually far greater in France than in Germany. However, it is growing in Germany. It is most interesting that the German Government decided yesterday to privatise Lufthansa and to bring forward proposals to deregulate the electricity and gas industries. That suggests that they are beginning to learn from us.
Lord Stoddart of Swindon: My Lords, will the Minister remain with me at the heart of Britain? It will be far cheaper if he does. Does he agree with the article in the Financial Times today by the right honourable Douglas Hurd, the former Foreign Secretary, who says that by pushing the issue of economic and monetary union too far and too fast the Government may in fact derail the project and perhaps the European Union at the same time?
Lord Mackay of Ardbrecknish: My Lords, the noble Lord makes a serious and proper point that everyone in Europe should consider. If Europe pushes ahead with the project without all the problems being resolved and without the proper conditions, I believe that there is a danger; indeed, a wrong EMU would be far worse than no EMU at all. However, other governments will have to address such problems from the point of view of their countries. Thanks to the Prime Minister's opt-out, we will be able to consider our position. I believe that you can he at the heart of Europe without necessarily having to follow slavishly everything that the rest want.

Scotland: Police Protection Measures
3.6 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
What proposals they have to improve the ability of police in Scotland to protect themselves from violence, in particular whether they propose to issue CS sprays or special clothing.
The Parliamentary Under-Secretary of State, Scottish Office (The Earl of Lindsay): My Lords, the Government fully support the development of protective equipment for the police in Scotland. The issue of such equipment is, however, the responsibility of chief constables.
Lord Campbell of Croy: My Lords, I am grateful to my noble friend the Minister for that reply. As trials

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with sprays are now to take place in England, can my noble friend say whether my right honourable friend the Secretary of State for Scotland has considered with the Scottish police forces any similar personal protection, presuming that violence of a similar kind must also be expected in Scotland? Further, as regards special clothing, can my noble friend say whether protection from knife attacks has been less necessary since the successful knife amnesty in Strathclyde that took place three years ago?
The Earl of Lindsay: My Lords, my noble friend has raised two important points. The operational trials of CS incapacitant spray that he has heard about will in fact be started in England and Wales in March. The outcome of those trials will guide my right honourable friend the Secretary of State as to whether CS spray should be deployed in Scotland. If it should be, then it will be for the individual chief constables to judge where that will be necessary.
The recent knife amnesty in Strathclyde, to which my noble friend referred—called Operation Blade—was an outstanding success; indeed, 4,500 knives were surrendered. Moreover, there is evidence to show that there are now fewer knives on the streets. In fact, the attempted murder rate with knives fell by one-half during the operation. However, it should be pointed out that police officers will always have to face a degree of risk when going about their duties. Therefore, we shall continue to develop protective clothing. We shall also continue to supply officers with expandable batons and other such measures of protection.
Lord Carmichael of Kelvingrove: My Lords, is the Minister aware that the Question tabled by the noble Lord, Lord Campbell of Croy, is most timely because this is becoming a very important issue not only in Scotland but in Great Britain as a whole? I believe that it is a wise decision on the part of Scottish chief constables to await the results of the English experiment.
However, people speak perhaps too loosely about the use of CS gas spray. I understand that it has a range of about 15 or 16 feet. Indeed, there are great dangers both to the police and, perhaps, to innocent passers-by—in particular to children and people with breathing problems. Moreover, I believe that exposure to the gas can be most serious for pregnant women. The Minister said that the use of protective clothing for the police was being studied. I understand that such clothing would cost somewhere in the region of £350 per officer and that that would amount to something like £9 million for the whole of Scotland. Can the Minister say whether that money would be available to local authorities to enable them to equip the police for the very difficult job that they have to do?
The Earl of Lindsay: My Lords, the noble Lord is quite right to say that the use of CS sprays should be treated, and undertaken, with care. That is why we have operational trials starting in March in England and Wales, and that is why we are not pre-empting the results of those trials. Decisions will be made after the trials have been analysed. As the noble Lord pointed out, protective vests cost around £350.
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The deployment of police resources and the deployment of the budget is a matter for the police authorities and the chief constables. We in the Scottish Office would not seek to dictate to them how they should deploy those resources. However, I can tell the noble Lord that police resources will increase by 7.7 per cent. in this coming financial year as compared with the current financial year. Since 1979 expenditure on the police has risen by 57.3 per cent. in real terms.
We are committed to law and order in Scotland and we are determined to see more police officers on the heat. We have a commitment over the next three years to put an extra 500 police officers on the beat in Scotland.
Lord Orr-Ewing: My Lords, can my noble friend give the previous occasion when we really considered using water sprays as a cheap and effective way of discouraging violence? That would be particularly effective in the current cold weather.
The Earl of Lindsay: My Lords, I cannot tell my noble friend exactly when that matter was previously considered. However, we are especially anxious that the police authorities and chief constables have as much discretion at their disposal as possible to respond to the need as they think best.
Lord Merlyn-Rees: My Lords, is the Minister aware that I agree with him that the use of CS sprays, body armour and other such materials is a serious matter? I seek knowledge on it all the time. Is the Minister saying that this is only an operational matter and that it is not something for the Secretary of State for Scotland?
The Earl of Lindsay: My Lords, it is up to the chief constables and the police authorities, who best understand the challenge with which they have to cope in their areas, to consider what resources to deploy and what equipment to supply to their police officers. Our job is to make sure that they have the necessary financial resources with which to meet that challenge. As I have said, since 1979 financial resources for the police have risen by 57.3 per cent. in real terms. We now have 15 per cent. more police officers on the streets. We have a commitment to increase that number yet further in coming years. Protective clothing poses special practical problems. To have a protective vest, which is both knife resistant and bullet resistant and light and flexible enough to wear for any length of time while on operational duty, demands a material which has not yet been properly developed

Shellfish Transportation
3.12 p.m.
Lord Palmer Lord Palmer asked Her Majesty's Government:
Whether they intend to revoke the Welfare of Animals during Transport Order 1994 (S.I. 1994 No. 3249) in respect of shellfish.
Lord Lucas: No, my Lords. We plan in the course of 1996 to remake the Welfare of Animals during Transport Order 1994. We expect that the new order

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will continue the present requirements that shellfish should be transported appropriately and with basic documentation.
Lord Palmer: My Lords, I thank the noble Lord for that Answer. Could he perhaps confirm whether, unlike other animals, shellfish do not have to travel with a passport?
Lord Lucas: My Lords, the noble Lord is perfectly correct.
Lord Campbell of Croy: My Lords, as it is advisable that most shellfish be alive at the point of retail sale, as Molly Malone clearly knew with her cockles and mussels, does my noble friend agree that it is in the interests of fishermen and fish merchants to handle and treat shellfish with care but that those who initiated this interpretation would have difficulty in making a commercial business of running a store for selling whelks?
Lord Lucas: My Lords, on my noble friend's first question, the answer is indeed yes. That is why we have experienced no trouble at all with these regulations since they were first brought in, in 1977. I think in this case, as in many others, the aspersions which my noble friend casts upon the European Union and the Commission are entirely inappropriate. This is a sensible regulation sensibly interpreted.
Lord Carter: My Lords, while it is extremely reassuring that the Government intend that oysters, mussels and other molluscs can travel around the European Union in the style to which they are accustomed, will the Minister assure the House that the Government will use their best endeavours to ensure that this order is interpreted with the maximum of common sense, and that each species, be it large or small, is treated in a way which is appropriate to that species? Although my next question is a little wide of the Question on the Order Paper, will the Minister comment on the problems affecting the transport of day-old chicks, for example?
Lord Lucas: My Lords, as regards the first part of the noble Lord's question, I entirely agree that that is exactly what the directive says. But the connection between oysters and day-old chicks escapes me!
Lord Strabolgi: My Lords, is the noble Lord aware that the British oyster—our oysters—have been considered the best since the time of the Romans? Is he further aware that during the past century they were plentiful and reasonably priced, unlike now, although in France they are still plentiful and much more reasonably priced than ours, and many millions are eaten every year and they are available in every brasserie? What, therefore, are the Government doing to encourage our own oyster industry to expand to what it was 100 years ago?
Lord Lucas: My Lords, I think this is entirely a matter for commercial oyster growers. As the noble Lord says, British oysters have an excellent reputation
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and they are well appreciated on the Continent and in this country. We in this country eat many fewer oysters than we used to. That may be a matter of national taste; I do not believe it is the fault of the fishermen or the Government.
Lord Walpole: My Lords, is the Minister also aware that under the same order a goat is a sheep—a concept that I feel the right reverend Prelate may have a problem in accepting?
Lord Lucas: My Lords, I suppose the question also arises under the order of whether shellfish have souls? The right reverend Prelate may have views on that, too.
The Lord Bishop of Chelmsford: My Lords, does the Minister accept that as far as the Church is concerned, sheep are sheep and goats are goats, and that any regulations for the transportation of shellfish will have no effect whatsoever upon the teaching of the eternal verities?
Lord Lucas: My Lords, it is a long time since we heard the Church of England in such firm voice.
The Countess of Mar: My Lords, is the noble Lord aware that this new order is an improvement in that just after the war goats were classified as poultry?
Lord Lucas: My Lords, the noble Countess always knows more than I do.

Business of the House: Debates this Day
The Lord Privy Seal (Viscount Cranborne): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the debate on the Motion in the name of the Viscount of Oxfuird set down for today shall be limited to 3½ hours and that in the name of the Viscount St. Davids to 2½ hours.—(Viscount Cranborne.)
On Question, Motion agreed to.

UK Inward Investment
3.18 p.m.
The Viscount of Oxfuird The Viscount of Oxfuird rose to call attention to the level of inward investment into the United Kingdom in recent years; and to move for Papers.
The noble Viscount said: My Lords, it is a real pleasure for me this afternoon to propose this Motion, particularly when I note the array of talent from all sides of the House speaking today. I was especially pleased that the noble Lord, Lord Borrie, has chosen this occasion on which to make his maiden speech. All noble Lords will have benefited either directly or indirectly from his work over so many years at the Office of Fair Trading. I am sure that we are all looking forward eagerly to the impact that his special knowledge in the commercial field of law will bring to our debate this afternoon.
Judging from the contributions made from all sides of your Lordships' House when this matter was previously debated on 10th July last year, the need for inward investment into our country is widely accepted. In the 19th century the flow of investment capital from this country was, of course, predominantly outward rather than inward. Times have moved on and now we live in what our American cousins call a "global village". Outward investment from this country is quite rightly matched by inward investment into the country. In the 19th century we were investing outwards in terms of both the moneys and the skills that we could provide, but we were not always thanked for it. I wish to quote from Kipling who said,
"Take up the White Man's burden— And reap his old reward: The blame of those ye better, The hate of those ye guard."
Our debate this afternoon is about inward, not outward, investment. However, when I look back at some of the points that were made back in the 'seventies before this Government began to place emphasis on the importance of inward investment I shudder to note that the vital importance of this issue was often misunderstood and that investment from overseas was not always welcome. Indeed, some of the far-sighted industrialists from the United States, Japan and Korea who decided to invest their money here were reviled, rather in the same way as pioneering European colonists of the past. That point is worth emphasising.
A number of surveys have indicated that an important factor in encouraging Japanese companies to come to the United Kingdom rather than to locate elsewhere in Europe has been the warmth of the welcome they have received both at official and social levels in the United Kingdom. Our welcoming attitude seems to have worked, because I note that every one of Japan's top 10 consumer electronics firms has chosen the United Kingdom as its manufacturing base in Europe.
The reality is that inward investment into the United Kingdom has helped to develop and modernise our industrial base. It has created new jobs, introduced innovative new products and processes, filled gaps in our established domestic production, increased output overall and brought in valuable management and technological expertise.
If we accept the thesis that inward investment is a good thing and should be encouraged, let us begin to examine the reasons why we in the United Kingdom have, in recent years, seemed to be rather good at attracting it. The United Kingdom is the number one location for Japanese, United States and Korean investment in the European Union. We consistently succeed in attracting one-third of all inward investment into the European Union from outside.
There are a variety of reasons. One factor is, of course, the English language—a point that was well made by the noble Lord, Lord Haskel, in your Lordships' debate on 10th July last year. I understand that my noble friend Lord Geddes will have something to say on that subject this afternoon.
I contend that that is certainly not the only reason. An overriding reason is that over the past decade the United Kingdom has undergone a remarkable sea change. No longer do we suffer from overtaxation, overregulation, overmanning and uncomprehending and unco-operative trade unions. Overseas investors make commercial decisions to locate their factories here because it makes economic sense for them to do so. The culture of deregulation and competitiveness that we are progressively building in this country is not unnoticed abroad.
I have spent much of my working life promoting the export of British goods overseas—and what a soul-destroying job that was in the 1970s when the United Kingdom was seen to be the "sick man of Europe". Our goods were perceived as overpriced and of indifferent quality. Delivery promises were broken because of strikes, restrictive practices or plain poor management. How different is the picture for our exporters today, many of which are the very overseas firms which have chosen to invest here.
Overseas firms now account for about 40 per cent. of all the United Kingdom's manufactured exports, worth in the region of £45 billion in 1994. In 1995, 35,000 overseas companies in this country won a Queen's Award for Export Achievement. Success breeds on success. It helps to reinforce this country's position as the enterprise centre of Europe.
Let us look at what is being said about us abroad. On 15th October last year the New York Times ran a special feature under the rather journalistic headline:
"Smitten by Britain, Business rushes in".
It reads:
"For years, much of Europe derided Britain for creating a low-wage, low-security economy—one far closer to the American model of flexible work forces and intense pressure to drive down costs than to the European tradition of high pay, lavish benefits, strong unions, restrictive work rules, generous social welfare systems and high taxes. Now, however, policy makers in other countries are looking more closely at the British experiment as they grapple with high unemployment and eroding international competitiveness".
The disastrous consequences of signing up to the Maastricht social chapter, now commonly referred to all over the world as the "European employment tax", are beginning to be seen as a cursed millstone dragging down the performance of our European partners and striking deep into the heart and very lifeblood of the competitiveness of Europe.
It is noteworthy that since 1980 the United Kingdom's fixed investment has grown significantly faster than the European Union average; a statistic which is in stark contrast with those of the 1960s and 1970s when our growth rate was much lower than that of our European partners.
Perhaps I may also say a word about the exchange rate. The competitiveness of British firms has, of course, been enhanced by the fall in the value of sterling when we left the exchange rate mechanism. It is important not to forget that that benefit is likely to be relatively short term. In the medium to long term we would expect exchange rate levels to reflect the health of the United

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Kingdom economy, which is stronger today than it has been for many years and has become the envy of most of our partners in Europe.
In the longer term we must look to other factors to enhance our position. Let us look, then, at what additional measures we can take to further improve the position. Speaking on this subject in your Lordships' House on 10th July last year the noble Viscount, Lord Waverley, made a plea for better integration of the various agencies promoting inward investment into the United Kingdom. English Partnerships, the economic regeneration agency for England, which was established last year, has succeeded in creating valuable links between regional and local authorities and the Department of Trade and Industry's Invest in Britain Bureau.
However, we should not overemphasise the importance of those agencies. They will achieve nothing without the availability of attractive locations and potential employees with the right skills and competitive wage rates. Siemens, the German electronics group, which announced a £1,100 million investment last year in Newcastle upon Tyne, has been quite open about the factors which influenced its investment decision. Concerning the national and regional agencies, Siemens laid great stress upon their speed of response and their ability to offer a one-stop service as soon as the company began to show a serious interest in investing here.
There may be a lesson in that for the current political debate about regional government in England. Those in favour take it for granted that a new tier of government will improve the capacity of England's regions to attract foreign investment. In reality, England's past weaknesses in this sphere appear to have been primarily due to poor national promotion and inadequate co-ordination between regional and national agencies. It is far from clear that a new tier of regional politicians, all vying to outdo their neighbours, will improve upon the status quo.
The agencies in Scotland, Wales and Northern Ireland also deserve some mention since they have each proved successful in promoting the potential of the areas they represent. We shall be considering the economy of Wales in some depth later today, so perhaps I may be permitted to dwell for a few moments on my own homeland of Scotland.
Inward investment is a great Scottish success story. The year 1994 to 1995 was a record year for inward investment in Scotland, with 97 projects attracted, involving total planned investment of £1.1 billion and the creation or safeguarding of 12,300 jobs. Late last year Scotland secured the largest inward investment project ever attracted to the United Kingdom when Chunghwa Picture Tubes, of Taiwan, announced that it would create some 3,300 new jobs in Lanarkshire, an unemployment blackspot, by setting up a factory to manufacture cathode ray tubes for televisions and computer terminals.
It is interesting to note the facts about Scotland. Scotland now produces 12 per cent. of Europe's semiconductors, over 50 per cent. of Europe's
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automated banking machines, over 35 per cent. of Europe's personal computers and nearly 60 per cent. of Europe's workstations. Scotland is such an attractive location for inward investment because it has one of Europe's most cost-competitive operating environments, a low rate of corporation tax, excellent communications, and an education system geared to the needs of modern industry. How sad it would be if those achievements were threatened by the proposals that have been made by the Labour and Liberal Democrat Parties to create a tax raising Scottish Parliament. The so-called "tartan tax" would destroy much of what has been achieved and would create a less favourable environment for inward investment into Scotland than any other part of the United Kingdom.
I should like to turn now to the importance that the financial skills of the City of London play in attracting investment into the United Kingdom. I am particularly grateful to my noble friend Lord Sheppard of Didgemere for briefing me on the activities of the London First Centre and the role that it plays in helping to attract foreign companies to establish their European headquarters here. I note that my noble friend Lord Cuckney will speak later in the debate; and I know that we shall hear more from him on the subject.
Of equal importance to professionalism of our City institutions in attracting inward investment is the contribution made by the science community in the United Kingdom.
I refer now to the report of your Lordships' Select Committee on Science and Technology under the able chairmanship of the noble Lord, Lord Walton of Detchant. It was published in late 1994. One of the things that the committee studied was the reason why international companies choose to invest in UK science in a whole range of sectors. It found that the English language, which has now established itself as the international language of science, was a factor, but that of equal importance was the sheer excellence of United Kingdom science coupled with its well-established capacity for innovation. I quote from two Japanese companies. Sharp states:
"The United Kingdom enjoys a high reputation for the standard of basic research and research training in higher education".
Toshiba states:
"The most attractive feature of UK science which lends itself to collaborative research with multinational corporations is the strength of the basic, curiosity-orientated research and its associated infrastructure".
Time moves on. However, the message with which I wish to conclude is that the success of the Government in attracting inward investment into this country is real and tangible and has been of benefit to our whole community. Let us therefore build upon the successes of the past by continuing with much more of the same in the future. I beg to move for Papers.
3.34 p.m.
Lord Borrie: My Lords, I am most appreciative to the noble Viscount, Lord Oxfuird, for introducing the Motion. Not only is it one that has attracted so many

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names to speak in the debate, but I felt that it gave me an opportunity to make some comments by way of a maiden speech.
I must, first, declare an interest in that I am a non-executive director of a French owned company and of a largely American owned company, both of them investing in the United Kingdom.
I do not think that it will be too controversial in a maiden speech to say that there is much good in inward investment in terms of job creation, of added competitiveness for our country and sometimes of enhancing regeneration in some of our communities. I hope, too, that it will not be regarded as too controversial to say that sometimes we in the United Kingdom should be watchful and wary of inward investment—wary because it may be transient and footloose; wary because inward investment may mean that decision-making on important matters is taken outside this country; and wary also because it may be that inward investment distracts us from the important need to encourage and promote homegrown or indigenous investment.
During the many years that I was at the Office of Fair Trading, to which the noble Viscount kindly referred, I was less involved with inward investment by way of greenfield sites than by way of acquisition. It was my task to advise successive Secretaries of State for Trade as to whether such acquisitions should be referred for fuller investigation by the Monopolies and Mergers Commission. I can recall a number of instances of acquisitions from outside this country—for example, acquisitions or proposed acquisitions of the Royal Bank of Scotland and the Nestlé Company—when I was concerned to examine and advise on whether they would lead to something which would be adverse to the British economy because, among other things, it would lead to decision-making departing from these shores.
I recall the acquisition by Guinness of Distillers in Scotland—not, it is true, an acquisition from abroad, although many Scots seemed so to regard it. But the Office of Fair Trading was concerned to advise on whether that would be adverse to the Scottish economy because important headquarters functions and so on would be taken out of that important part of the United Kingdom. Your Lordships may recall that in order to counter that concern a distinguished Scottish banker was appointed as chairman. There were photographs of the chief executive's wife scurrying around Edinburgh allegedly house- hunting.
It is quite appropriate that the relevant authorities in the United Kingdom should consider whether, as regards acquisitions from outside Scotland or other regions, important functions are being taken away. If that is so, it seems more important still that one should be concerned if important centres of power and decision-making are removed altogether from the United Kingdom, especially, for example, if those industries are of strategic importance or the predator comes from another country whose laws may forbid takeovers in the opposite direction.
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Subsequent to my leaving the Office of Fair Trading in 1992, the late John Smith appointed me to be chairman of the Commission on Social Justice, where I acquired quite a lot of positive feeling towards inward investment. Among other places, we visited Nissan United Kingdom in Sunderland. The commissioners and I were much impressed by working practices there and by the way in which workers at the company were involved in making decisions. We were impressed by the involvement with the local community, for example, through training and education at the local university of Sunderland and with the high proportion of UK-made components which were being used.
Of course, as the noble Viscount said, it is important to recognise that such investment from abroad has had great benefits to industry at large because the management techniques, the practices and the other ideas which are brought spill over, through conferences and discussions, into industry. I am well aware—but, fortunately, so are the inward investors—that, as a newcomer in an area of historically and traditionally strong industrial cultures, there has to be a responsiveness, a careful treading on the waters, in order to ensure that sensitivities are not damaged. However, most of our newcomers who involve themselves in inward investment have taken a great deal of care in such matters and have built bridges into the traditions. They have been careful to ensure good relationships with the local community.
What sours relations, and what many people in the country are worried about, is when the inward investor behaves like a predatory tourist: here one day, gone the next, leaving behind a trail of broken hearts and unfulfilled promises. The House of Commons all-party Select Committee on Trade and Industry mentioned last year in its report that not all inward investors behave in the desirable way that I have described. They do not all use a high proportion of UK components; they are not all as sensitive as we would like them to be. They do not all bring to Britain the higher value activities like research and development.
I am a member of my party's Regional Policy Commission. When we have gone round the country taking evidence in the Midlands, Lancashire and elsewhere, we have been told many times that there must be a stronger insurance that there is a balance between indigenous investment and inward investment. The Select Committee on Trade and Industry was surely right when it said in its report published in March last year:
"both indigenous development and foreign inward investment have vital roles in regional economic development".
I hope that your Lordships will regard that as at least one useful message which can go out from this debate.
3.43 p.m.
Lord Laing of Dunphail: My Lords, on behalf of the whole House may I congratulate the noble Lord, Lord Borrie, on his maiden speech. The noble Lord has had a varied and distinguished career in law and commerce, and he and I met on many occasions during his period as a successful director of the Office of Fair

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Trading. I know that his wide knowledge and inquiring mind will, like his maiden speech, be much admired in your Lordships' House.
I congratulate the noble Viscount on his introduction to this important debate and thank him for giving us an opportunity to discuss the subject. As a Scot and chairman of a Scottish company—United Biscuits—for about 20 years, I shall largely confine my remarks to Scotland. Those responsible for arranging the remarkable result of inward investment to Scotland are greatly to be congratulated. Nothing that I say should detract from those congratulations. Foreign firms have located in Scotland because of the competitiveness of its workforce, some tax advantages and its excellent communications infrastructure. If, however, the so-called tartan tax is imposed, it will be a deterrent to foreign firms locating there and some Scottish companies would relocate to England.
United Biscuits employs 2,000 people in Scotland. When I was chairman, I made clear to them that, with our factories in England and throughout northern Europe, a factory in Scotland was not essential and if devolution in whatever form led to extra taxes being imposed on our employees or the company we would employ many fewer people there within a relatively short time. Indeed, our major factory in Glasgow would probably be closed.
There are great dangers to Europe if it spends too much time and effort looking inwards. The emerging countries of the Pacific Rim are those which pose the greatest threat to jobs and prosperity in Scotland or any other country in Europe for that matter. Let us not take any action that makes us less competitive. That is exactly what a tartan tax and some aspects of the social chapter would achieve.
I applaud inward investment. It is a sad fact, however, that British companies are not investing sufficiently in the United Kingdom. British companies have a vested interest in keeping Britain great. Looking to the next century, there are real dangers in relying on foreign firms investing here, as the noble Lord, Lord Borrie, said, when we should be making that investment ourselves. Too much money which should be invested in manufacturing industry is paid out in dividends and to accountants and lawyers in takeovers. I have made that point too often in your Lordships' House to labour it. There are other ways of changing inadequate managements, which are just as effective and achievable at much less cost, as has been demonstrated both here and in the United States.
Some 40 per cent. of our manufacturing industry is already controlled from outside this country by people who must surely have less interest in the UK than we have. While inward investment has undoubtedly been a boon, if we look about 25 years ahead and assume—I repeat assume—that by then we have a common currency with no control over interest rates or the exchange rate and recognise that we are on the periphery of Europe, with the major centres of population well south of Birmingham, we have to acknowledge the danger that foreign owners may well decide to move production away from, say, Scotland and nearer those
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centres of population. In a society which seems to look increasingly to the short term, I hope that that thought is sufficiently relevant to be fed into the equation.
With inflation at its lowest level for 30 years and clearly under control, with the unions operating within the law, with a workforce who have seen the folly of inflationary wage claims and who, when properly trained and led, are as good as, or better than, any in the world, the time has come for us to have the same faith in Britain as our overseas competitors seem to have and greatly to increase our investment in manufacturing industry in our own country.
On a minor point, it would be a considerable help if aid to small companies in Scotland were not restricted to relatively small areas. Inward investment is favoured by special tax arrangements and grants of one kind or another denied to some small Scottish companies. But it is largely to small companies that we must look for increasing employment. When my son's company, Shortbread House, whose business is located in Edinburgh, applied for a grant for a new factory adjacent to the existing building, so doubling the workforce, the only question asked was, "What is your postcode?". I find that rather a narrow view. I hope your Lordships do too.
3.50 p.m.
Lord Wallace of Saltaire: My Lords, I add my congratulations to the noble Lord, Lord Borrie, on his maiden speech. This is only my second speech in the House. I remember with a degree of nervousness the maiden speech I made not so long ago. The noble Lord made a very useful and expert contribution.
I welcome the debate. As the noble Viscount, Lord Oxfuird, remarked, we are in a global economy in which there is increasingly no such thing as a British independent economy. Investment flows in and out; global companies operate. However, there is a question of balance. I wish to add my own note of caution.
There is a question of sovereignty. I have been struck during my short period in the House by the passion which issues of sovereignty arouse when they are directed towards Brussels. I am struck also by what seems to be the complacency with which sectors of British industry become immensely over-dependent on foreign-owned companies. In that way, sovereignty slips away. We may talk with pride about the electronics sector in Scotland, almost all of which is under foreign ownership. I am not sure that that is entirely healthy. Those who talk about the problems of German control of British money may wish to reflect on the number of German companies that now own substantial parts of British industry and indeed of the City. I declare an interest. I spent five years happily engaged in a fellowship at the University of Oxford funded by Deutschebank. I came to know Deutschebank very well and to admire it.
There is, I repeat, a question of balance. It is not enough for the Government to proclaim that inward investment is a substitute for civilian industry policy. We need to spend more time promoting British industry and, as the noble Lord, Lord Laing, pointed out,

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encouraging British firms to invest in Britain. One very sad statistic is not often quoted. British companies invest less in Britain than do their counterparts in other OECD countries. That should give cause for thought.
I am puzzled by those who think that devolution to Scotland, and perhaps in time also to the north of England, will put companies off. I spent time in Germany and in Spain. I note the very successful partnership between the Baden Württemberg government, universities and high technology industry in promoting the economy of that region. I note the Catalan government following a similar path. The idea that German companies such as BMW, with its close relationship with the Bavarian government, will be put off from investing in parts of Britain because we also have regional government seems a little odd. Why an independent entity in Scotland, rather than simply a bureau for investing in Scotland, should worry companies already familiar with federal systems both in the United States and in Germany is beyond my understanding.
I wish the Minister who replies to reassure us that the Government, in pushing as hard as they do for inward investment, are not promoting foreign companies sometimes almost at the expense of British companies. Working, as I now do, at the London School of Economics, I am aware of the very odd occasion when a senior Minister intervened to ensure that County Hall, just across the river, was successfully sold to a Japanese company rather than allow the London School of Economics to make a bid. That was a very odd preference for foreign ownership as against a British institution which, I remind the House, won the Queen's Award for exports for the number of foreign students attracted each year from outside the European Union. We are thus an invisible exporter on a very large scale.
I note that Battersea power station is also now in foreign ownership. Nothing much has happened to it since it was bought. I look forward to seeing what happens to the palace at Greenwich. Several foreign institutions are interested in buying it. That also gives me cause for thought, as does the Invest in Britain Bureau pronouncement that this country is so competitive because our labour costs are now cheaper than those of Ireland. Is it an immense source of pride for Britain that we have managed to place ourselves below Spain and Ireland as a low-cost competitor in the European market? Professor George Bain, principal of the London Business School, has written on precisely this point; namely, failure to invest in our own country and willingness to stress that we compete on low labour costs, a good strike record and low taxes. As he said, that is not enough for the long-term prosperity of this country.
My title comes from a small village in Yorkshire, Saltaire. Like the rest of Bradford, when the great surge in the value of the pound came in 1980–8, many branches of foreign-owned companies in Bradford closed. Salt's Mill, once the largest mill in West Yorkshire, finally closed in 1983 when its American owners decided that it was no longer a profitable branch. Companies owned by people in Yorkshire stuck it out.
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I am very happy to say that Salt's Mill now contains Pace Electronics, a small bunch of people I recall meeting in 1983–84. It is now well on its way to becoming one of the largest local employers. Our capacity for survival at a time of rising unemployment depended disproportionately on British-owned companies sticking out those two or three years. I worry about Britain becoming too much a branch economy for Germany, Japan, Korea, Taiwan, Sweden, the United States and others.
As we look ahead and appreciate that low wage costs are a passing benefit and as the Czech Republic, Poland and Hungary open up as effective competitors to the United Kingdom, with their well-trained workforces, we are going to have to do more. The promotion of inward investment is not enough in itself. I should like to hear from the Minister what we are doing to encourage British industry to raise the level of investment in Britain. How far are we sure that inward investment and its encouragement will also be marked by encouragement for British companies? It is clear that the encouragement of inward investment in this highly competitive global market is necessary and desirable. But it is not sufficient in itself.
3.58 p.m.
Lord Haskel: My Lords, this is indeed an important topic, crucial to the economy of the United Kingdom. I am most grateful to the noble Viscount for giving us the opportunity to debate inward investment, so that we can understand it better.
As we have heard, some inward investors are world-class companies, so I welcome their inward investment for the jobs it creates, for the new technology it brings to industry in Britain, for the advanced management and production methods that we learn from such companies, and particularly for the high standards that they set for their local sub-contractors.
However, other inward investors make acquisitions, and we have been told of the problems that can arise from them by my noble friend Lord Borrie. I welcome my noble friend's experience and his remarks today.
I would also welcome any news that the Minister in replying to this debate can give us about encouraging inward investment because, sadly, it seems to be in decline. The Central Statistical Office provides figures only to 1994, but they show that the net annual overseas investment in the UK rose in the 1980s from £3 billion to a peak of £18.5 billion in 1989, but by 1994 this had declined to £6.5 billion.
I say "sadly" because, as the noble Lords, Lord Laing and Lord Wallace, told us, we need all the investment we can get. According to the OECD, we invest less per head than Spain, Portugal and Iceland. We invest £1,600 per person in the UK. In France it is £2,250, in Germany £2,600 and in Japan £3,900. Unless we invest equal amounts per head of the population as our competitors, we have little chance of becoming as competitive as them and becoming the enterprise centre of Europe. It is the unit labour costs that matter, not the hourly labour cost, and investment is crucial in bringing that unit cost down.

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The noble Viscount, Lord Oxfuird, told us about the studies made in relation to encouraging inward investment into Britain. I assume that he was referring to a survey commissioned last year by the Invest in Britain Bureau of 200 manufacturing assembly and research companies which had already invested in the United Kingdom. When we last debated this matter I drew the Minister's attention to two conclusions to be drawn from that survey. The first was the importance of teamwork in attracting inward investment. The noble Viscount spoke of that when he gave us the example of Siemens. The team which attracts inward investment consists of the Invest in Britain Bureau, the development agencies, the local authorities and the local private companies on which the inward investment will depend.
The research showed how crucial was the role of the local authorities and the local development agencies both in attracting the inward investor to their areas and in providing grants and facilities. Many of them are Labour authorities, particularly in Scotland; and the research showed that the Government's attitude towards Labour-controlled local authorities had cast doubts in the minds of some inward investors.
I urge the Minister to encourage his colleagues to be generous in their praise of local authorities in attracting inward investment. In that way inward investors will not be discouraged by the thought of perhaps more Labour-controlled local authorities after the May elections and even the possibility of a Labour Government after a general election. The Government rightly welcome the good sense of overseas companies investing in Britain. But they try too hard to make political capital out of it for the Government alone.
I remind noble Lords that in the survey of 200 firms, 126 mentioned the need to be in the European Union as part of their world strategy, 32 mentioned the English language and only 12 mentioned labour costs. The conclusion to be drawn from that is that the Government's employment policies are irrelevant. They are not as important as the noble Viscount said. What is relevant are the management skills and practices of the inward investors and their long-term intentions. What is crucial is that the Government sort out their policy towards the European Union. I have no doubt that the division in the Government in relation to their attitude to Europe is one reason why inward investment is not even greater.
My final point concerns the need to disaggregate the inward investment figures so that we can understand them better. The noble Lord, Lord Wallace, referred to the problems of investment for the purchasing of assets. There is a difference between inward investment which creates a modern new car factory on a greenfield site and inward investment which buys up the shares in a factory already in existence, which is then closed down. The Minister will remember that that happened when Du Pont bought ICI's fibre business, as well as with the woollen companies in Yorkshire about which the noble Lord, Lord Wallace, told us. There must be a difference between inward investment which brings a new factory with new technology and high standards and inward investment which buys an asset like County Hall.
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I urged the Minister to disaggregate those figures when he first stood at the Dispatch Box in his present job last July. My enthusiasm was reinforced recently by an article in the current Harvard Business Review by Paul Krugman entitled "A Country is not a Company". I do not know whether the Minister had an opportunity of reading that article before switching on Coronation Street, but its main theme was that it does not follow that someone who has made a personal fortune and successfully run a business will also know how to make a nation more prosperous.
Mr. Krugman explained that point by the fact that business people and economists look at the same set of circumstances differently. One example he gave was inward investment. He said that US business people will welcome as an inward investor the overseas company that buys the Rockefeller Center. However, an economist working for the Government should look upon that purchase as a way of financing the US trade deficit with Japan. The purchase of the Rockefeller Center is a way of paying for the consumption of Japanese cameras and cars imported into the United States.
As businessmen, many noble Lords are absolutely right to welcome inward investment. I welcome it too, but perhaps not as blindly as the noble Viscount. I have tried to learn from Mr. Krugman's article and to take a more balanced view. That is not running down Britain; it is understanding inward investment better and being realistic.
4.7 p.m.
Lord Wade of Chorlton: My Lords, I too thank my noble friend and congratulate him on introducing this subject. It gives us an opportunity, on the one hand, to congratulate the Government on the tremendous amount of work that they have done—the travels that they have undertaken and the teams that they have led around the world—to encourage people to come and invest in Britain. It also gives me an opportunity to tell your Lordships a little about the North West and to emphasise a point which many noble Lords will have heard me mention before—that the most important thing that this country, or any business, can do is to ensure that investment increases.
As many noble Lords have said, it is not only important to bring in investment from elsewhere, but also to ensure that we use everything we have got to encourage investment at home. It is only through investment that we can stimulate jobs and acquire sufficient wealth to provide those things that we want to provide.
I must declare an interest. I am a director of INWARD Ltd., which is our North West inward investment organisation charged with the responsibility from government by the IBB to draw in and attract as much investment as possible. We have an income of approximately £2 million a year of which £1.6 million comes from the IBB and the rest is raised locally from major companies in the North West and local authorities.

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I wish to tell your Lordships a little about our successes and our constraints, because possibly the constraints apply to inward investment throughout the UK in general. Our successes have been considerable over the 10 years of our life. We have brought in approximately £0.5 billion of up-front investment which, from the follow-on investment that that generated from successful companies, has now run into around £2 billion and provided initial employment for 40,000 people, which has increased substantially over the years. Most of the companies from the time of that initial investment have grown considerably.
As a result of inward investment we have stimulated an awful lot of investment and technology—which is the keynote of that activity—throughout the North West. We have gained a lot of extra jobs and developed more local businesses. Out of major investments from abroad have come many supplying companies in the region who have been encouraged to invest also, which in turn has stimulated a general level of activity in the area. I hope that that will continue.
Things have changed slightly in recent years as a result of government policy. We are not now in competition with other regions in the way that we used to be because the IBB makes the decisions on where major inward investments will go. Whereas at one time we in the North West felt that we could compete positively with other regions of England—I refer to England at this stage—by offering better sites and opportunities and going out of our way to market the region, that is now less easy to do because of the way the IBB takes all of the initiatives. However, we are still very competitive with Scotland, Wales and Ireland, which has taken very positive views on inward investment.
One of the constraints I see in the system is that there is no regular basis on which financial support is offered to incoming companies. A major investment took place at the end of 1994 into the Chester region. It was a bank from Newark in America. It was offered different amounts of money from Ireland, from Scotland, from England and from Wales. By looking at that with the Treasury we could identify that the British taxpayer was competing against himself in the different regions to which the company might have been attracted to go because the Government were prepared to do more in one region than in another. We were actually becoming our own competitors and building up a price which it was probably unnecessary to do in the first place. Undoubtedly, that company would have benefited from an investment into it by the UK taxpayer when it would have come here for a lot less. That is a constraint on the system which the Government should look at.
The other area where we find serious constraints is the availability of the right, properly serviced, sites which are needed to attract major investors. It was interesting to hear noble Lords compare those people who want to buy a business with those who want to invest in creating a new business with new employees, new technology and new buildings. The one who wants to invest in a business will invariably go into an area where there is already activity and where businesses are
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already operating. Those who want to invest in new businesses and want to make major investments for a long-term future want green field sites. When one examines the major investments that have been made into Britain the companies concerned have been attracted by the green field sites that were on offer.
My noble friend mentioned the investment that had recently taken place in the North East of England. The company concerned was attracted by the special green field site on which it was able to build. In the North West we are finding it more and more difficult to find those sites. There needs to be a positive view from the Government, from the local authorities, and from what is now the greater Manchester area, and the Merseyside area to provide the sites that will attract investors who will take a long-term view.
A positive message has come out of inward investment. It has brought a great many opportunities to Britain that would not have been there before. But we need to appreciate what the customer wants. Whereas when we talk about businesses we emphasise the importance of the customer, we sometimes try to push investors where they do not necessarily want to go. One of our major companies in the North West wishes to expand very considerably. We are talking of 1,000 employees or more. It makes sense for that company to expand on the side of its existing site, where it has the skills and the opportunities. It is not in a development area. It is not in an area to which any support is likely to be given. Therefore, it is finding it very difficult to put forward a case which would enable it to get support. Yet an incoming company from, say, Taiwan could go to a site where we might want it to go, or where society felt it was more appropriate to invest, and it would get a great deal of support. It would be encouraged and the British taxpayer would be asked to foot yet another bill. That issue needs to be looked at more closely.
If we really want to encourage as much reinvestment from our own economy as we do to encourage that from outside, we have to make sure that we do not control things to such an extent that we act against our own investment and encourage someone else to come in who might not take a long-term view.
I conclude by congratulating the noble Lord, Lord Borne, on his maiden speech, which was a splendid contribution to the debate.
4.15 p.m.
Lord St. John of Bletso: My Lords, even though the noble Lord, Lord Borrie, has just moved on, I join in congratulating him on his most interesting maiden speech, coming, as he does, with all his expertise and experience, from the Office of Fair Trading. I should like also to thank the noble Viscount, Lord Oxfuird, for introducing today's debate.
In speaking in this debate, I ought to declare an interest as a financial consultant to Merrill Lynch, with particular responsibility for promoting United Kingdom stocks and shares to the Japanese market. Only yesterday I was asked to present to a leading Japanese bank the reasons for my bullish stance on why it should invest more into our market.

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The noble Viscount, Lord Oxfuird, has already given a number of reasons why the United Kingdom has attracted the largest single share of inward investment into the European Union. While this debate focuses on the level of inward investment into the United Kingdom, rather than get bogged down by the myriad of comparative facts and figures, region by region, I would prefer to focus my remarks on why the United Kingdom is such an attractive market for inward investment, particularly for the Japanese, but also on what needs to he achieved to make the market even more attractive.
The main factors that have been mentioned for the attractiveness of the UK for inward investors have been our comparatively low labour costs, the comparatively low and simple corporate tax system, the relatively low levels of industrial disputes as well as the attractive financial incentives that have been given in certain regions. However, just as important is the fact that, for many international companies investing into the UK, it is an ideal entrée into the European Union. The noble Viscount, Lord Oxfuird, has already mentioned—and the noble Lord, Lord Geddes, will be mentioning it later on—the importance of English as a business language. Another positive point, particularly to the Japanese, is our comparatively stable currency and our low levels of inflation and interest rates. As well as low labour costs, there are also low levels of severance costs compared with many of our European partners.
One statistic that particularly impressed one of my Japanese investors was that last year marked the lowest number of days lost due to industrial disputes since the 1890s, unlike France which was almost paralysed by strikes last year. The fact that unit labour costs in Britain are so much lower than in Germany and that British manufacturers can produce car components of equal quality for around 60 per cent. of the cost in Germany is also noteworthy.
The influx of Japanese manufacturers has not just created much needed jobs, but has also created greater awareness of the need for world class standards of quality, efficiency and productivity in the global market place. In many cases that has resulted in the transformation of working practices in the United Kingdom.
On the point of quality of product and quality of services, it is worth mentioning that so far in Britain almost 50,000 companies have received certification through ISO 9000 quality management systems and there is an annual 10 to 15 per cent. increase in the take-up of this certification. I was interested to hear the remarks of the noble Lord, Lord Wallace, when he spoke not just about the importance of inward investment, but called for investment by British companies into their own companies here and asked what measures Her Majesty's Government will give to such companies to invest more here.
Only last week I was involved in the presentation ceremony to the Swindon Chamber of Commerce on achieving recognition to the ISO 9000 quality management systems. ISO 9000 is one of the most internationally recognised documented quality systems and has been the basis of an introduction of a culture of greater efficiency to many companies.
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As my home is in Wales, I should have liked also to have spoken this afternoon to the debate, to be introduced by the noble Viscount, Lord St. Davids, on the economy in Wales and the reasons why Wales has been so successful in attracting inward international investors. International employers have commended their Welsh workforce for being flexible and stable with few industrial disputes. In fact, a survey of Japanese managers found that they liked the general working environment, the opportunities for career development—as well, of course, the sporting facilities—and the warm welcome that they were given by their Welsh friends, a point that has already been made by the noble Viscount.
However, as in many parts of Britain, with foreign-owned companies becoming more technologically advanced, there has been an ever-increasing need to upgrade the skills of the workforce. This need for improved skills training remains as urgent as ever. The perception remains widespread that the United Kingdom's skills levels are low and that it will take much more than marketing and inter-agency co-ordination to put that right. Apart from the attractions of low labour costs, low levels of industrial disputes and attractive financial incentives in some regions, there is the added requirement of a good infrastructure, transport links, green field sites and healthy living conditions.
Perhaps I may mention very briefly the financial services industry, particularly as regards the Japanese. London remains the undisputed headquarters of the Japanese banks and other financial institutions in Britain, with almost 700 Japanese firms here. London, with its many sushi and karaoke bars, Japanese newspapers, schools and other services—not to mention the many golf courses scattered around London—offers an extremely attractive location for Japanese investors.
I would have liked to have spoken more on the role of the City in attracting foreign investment, but time precludes me today from doing so. This subject was examined in an article in the Financial Times on 2nd October last year and has been extensively covered in the most interesting report that I read in September by London Economics, The City and Inward Investment: Revitalising the UK Economy.
In conclusion, it is clear that inward investment is not just a matter of the creation of new jobs, but it is also the addition of new technology, new products and, most importantly, new management. I wholeheartedly support the Government's business links programme initiative, despite its initial teething problems, in offering a one-stop shop for investment inquiries both for domestic and international businesses, of what government services are offered to them. I would also like to commend the work of the Invest in Britain Bureau established by the DTI for promotional investment in the UK as a whole.
As we know, there are a number of excellent agencies promoting inward investment. The noble Lord, Lord Wade, and the noble Viscount, Lord Oxfuird, have already mentioned English Partnership, which has been providing valuable links between regional and local

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agencies promoting inward investment. The improvement in co-ordination between national and regional agencies has clearly helped to improve inward investment. I shall be interested to hear from the Minister what additional plans the Government will be providing, particularly in the field of training, to promote the quest for more inward investment here in the years to come.
4.25 p.m.
Lord Cuckney: My Lords, I wish to make particular reference to the financial services area. Although I have had past involvement in banking, merchant banking and insurance, I have no current connections which call for a declaration of interest.
The growth of inward investment in the financial services area has been impressive. The number of foreign banks in London has increased sevenfold in the past 10 years and there has been a significant increase in the number of overseas companies, American, Japanese, EU and non-EU, which have chosen London as their European headquarters.
There is a tendency to consider inward investment too much in terms of the manufacturing industries. OECD figures show that nearly one half of inward investment into the UK is in the services sector, one-fifth of that in finance, insurance and business services. The growth in the importance of the City is well illustrated by the latest figures from a Bank of England survey showing that average daily foreign exchange dealings in London total 464 million US dollars a day, nearly 60 per cent. higher than in 1992 and far exceeding the turnover of New York at 244 million dollars and Tokyo at 161 million dollars. The UK still attracts the largest amount of inward investment in the European Union. Although overall investment in the European Union as a whole has declined, the largest amount of it comes to the UK. I do not believe that the Government's present European strategy is exactly putting investors off.
The attraction of the financial services sector and especially the City of London lies with the increasing globalisation of markets and in the professional skills and services which exist in the City. I personally welcome the open door policy of the Treasury and the Bank of England encouraging the growth of remote trading based in the City. For instance, the City has now become the world capital of the Eurobond market, the largest non-governmental bond market in the world. This exploits to the UK's benefit, with valuable invisible earnings, the critical mass of skills and services which are absolutely essential for an international financial centre.
It is worth recalling the definition of the International Monetary Fund of foreign direct investment, which is inward investment, as,
"investment that is made to acquire a lasting interest in an enterprise operating in an economy other than that of the investor, the investor's purpose being to have an effective voice in the management of the enterprise".
I welcome the presence of foreign members on both the City's supervisory bodies and on bodies promoting the City. These policies, particularly the open door policy,
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led in 1994 to a 30 per cent. increase to £20.4 billion in the City's contribution to our invisible earnings. Without such policies, I do not believe that London would have been able to establish itself, as it has done, as an international financial centre.
It is important that we recognise the steadily improving effectiveness of our regulatory and supervisory systems. That will further help the international respect for, and the attractiveness and competitiveness of, the City as an international financial centre.
The Treasury and Civil Service Select Committee of another place in its sixth report on The Regulation of Financial Services in the UK, published last October, makes two, among other, important points:
"Failures in the regulation and supervision of that industry do not simply have financial consequences for the individuals concerned; they can also threaten the balance of payments, the stability of the currency and the prosperity of the national economy as a whole, to the extent that they threaten confidence in that industry".
Secondly, the committee noted that the regulators, in evidence to the Committee, pointed out that it is no longer strictly correct to talk about a self-regulatory regime as that description now fails to recognise the independence of the regulators and the statutory basis of their authority.
It is necessary, when considering the environment which encourages inward investment—low inflation, low taxation, low interest rates, good industrial relations—to bear in mind also the great importance of a supervisory and regulatory regime which must somehow strike a balance between being effective and clearly understood but not excessively bureaucratic and onerous. I believe that that balance, with some refinements, has now been struck, and I hope that my noble friend the Minister will feel able to endorse the point. There is incidentally a timely article in today's Financial Times warning against success in business depending more often on satisfying officials rather than the customer and warning against regulatory creep.
4.32 p.m.
Lord Desai: My Lords, first, I owe an apology to the noble Viscount, Lord Oxfuird, for not being here when he opened the debate. I hope that he received the apology I sent him. I missed the speech of my noble friend Lord Borrie, but the speeches I have heard have persuaded me of how much in this House we hear distinctive speeches from Members who know the different aspects of the problem. We do not just repeat or engage in party disputes. I was especially impressed by the speech of the noble Lord, Lord Cuckney. It is the first time I have heard him speak, and I learnt a great deal from him.
Noble Lords have spoken on different aspects of the subject, but I want to emphasise, first, that one must welcome inward investment, partly because if anyone gives us money, that is always a good thing so long as we make good use of it; and, secondly, that in a globalised world we will have increasingly to forget the artificial distinction between national and foreign investment. What will matter ultimately is the total volume of investment. It does not matter greatly from

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where it comes. I know we still have a hankering to have some of our people running our factories and for foreigners to go away, but that is wrong and increasingly irrelevant. When Honda (USA) exports more cars to Japan than General Motors, one wonders which is the American corporation and which is the Japanese corporation. But that distinction is no longer relevant.
We can point also to the remarkable revival of the British car industry. The British car industry had its last gasp in the late 1970s and early 1980s. Today, it is predominantly foreign owned, but that does not matter because the workers are British. The interesting point—the noble Lord, Lord St. John of Bletso, pointed this outߞis that foreign investment does not just bring money and technology but a distinctive style of management. It is to the credit of Japanese and American management that, while we used to hear complaints of how the British worker was lazy, recalcitrant and all that, the same British worker performs successfully for the Japanese manager.
We must ask ourselves in relation to inward investment: what is it about the quality of management that the Japanese and the American managers bring which somehow, for reasons which I do not understand, we have failed to reproduce? The paradox of course is that we send out more investment than we bring in. We have always done that. British business can be very successful abroad. It is perhaps more successful than native business abroad, but at the same time foreign business is more successful here. We should perhaps export our capital and managers and import foreign capital and foreign managers. Then the whole world would be a better place in which to live. But I do not know about that.
While we talk about numbers—it is important to talk about numbers—it is not the amount of the investment as such but what it yields that is important. Inputs count less than outputs. After all, the Soviet Union had a tremendous amount of investment, but it was low yielding. What we are looking for are investors who obtain a greater yield from the investment than just the investment. My noble friend Lord Haskel—I say this parenthetically—almost did himself out of a job when he said that just because a man can make money he need not be a good policy maker. I hope that he will not talk himself out of a job when we are in government.
My noble friend drew the vital distinction between certain kinds of investment which were merely established assets changing hands without a great deal of value added and assets to which value was added. It could be just an old factory taken over. The important distinction is whether the new owner transforms the factory, adds value, changes work practices or acts merely as an absentee landlord. A greenfield site may be better than a non-greenfield site, but whatever it is, the crucial point is what distinctive value is added.
In that respect—leaving party considerations aside—one should examine seriously not just the level of inward investment, which is high, but the fluctuations in inward investment. As my noble friend Lord Haskel pointed out, inward investment was low in 1994 but it
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was high again in 1995. In the first six months of 1995 we had as much inward investment as in the whole of 1994, or so I gather from a story in the Financial Times.
Inward investment here is influenced as much by what happens abroad as by what happens here. It is not just a question of our pull factor; the push factor is also important. It is not enough just to be smart, intelligent and attractive to foreign investment. We must understand their economies and their markets and what we can do to attract inward investment. It is probably the sorry state of the Japanese property market and the situation in which the Japanese banks find themselves which have led to the reduction in Japanese outward investment rather than anything particular about the British economy. That applies similarly to some European economies.
Lastly, on the problem of attracting inward investment and regional competition about which the noble Lord, Lord Wade, talked, we sometimes have regions competing against one another. With the establishment of the IBB, things will be better.
Perhaps I may raise the following question which may need an answer. Is it right that British taxpayers should enter the battle over regions, or should we not have some sort of financial mechanism whereby regions in England, Scotland and Wales have their own fund to attract investment? Some of that investment could come from local taxation with a little national subvention, but let us have competition among the regions. Regions should bear the burden and the capacity for attracting investment, and while the British taxpayers may pay something, let it be part of the general local authority or regional finance grant. I would rather have more heterogeneity, more competition and less allocation. It may lead to some interesting outcomes.
We must also bear in mind that while we are doing all that we must attract domestic investment, in part to increase the present amount and in part to attract better management to accompany that investment. That alone will ensure that we survive in the new globalised world.
4.40 p.m.
Baroness Seccombe: My Lords, I wish to add my thanks to my noble friend Lord Oxfuird for initiating this debate on a subject of such vital importance to this country. I congratulate the noble Lord, Lord Borrie, on his maiden speech. I am sure that Members on all sides of the House will look forward to his next contribution.
Over the weekend I was in Switzerland. When I said that I had to spend some time preparing for today's debate on inward investment, one of my friends immediately suggested that I should have a howl of muesli. Whether that was to ensure that my brain got into gear or whether he felt that the ultimate had happened and we were now exporting such a Swiss product as muesli, I am not sure; but whatever it was I thought it was not had advice.
The problem with having a long-lasting Conservative Government is that the memory of the situation before 1979 can fade. However, one thing is certain: what will never fade is the horror and humilation of being seen as the sick man of Europe by our overseas competitors. I

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am not surprised that that was so because we had record strikes, record inflation and record misery for our people, culminating in the winter of discontent. Other countries saw us as a nation almost ungovernable, the unions in control and a workforce unable to operate because it was forced to go on strike.
Let us also never forget that in those years the price of gas and electricity was controlled by the Treasury and was always spiralling upwards; and the rates bills in Labour-controlled authorities were quite out of hand. How on earth could anyone start a business with such unknown factors? Today is so different, with a stable economy and the price of gas and electricity falling in real terms since privatisation. The business rate is pegged across the country.
In marshalling my thoughts I felt that my comments could apply to both of today's debates, as the inward investment that we enjoy today is spread across the land from, for example, South Antrim in Northern Ireland, Pontypridd in Wales, Stirling in Scotland to Torbay in England; and by countries such as Japan, the USA, Germany, Korea, Belgium, Taiwan, Canada, France, Sweden and Turkey. In total there were more than 450 investment successes in the year 1994–95. They are in a wide range of industrial sectors, including automotives, chemicals, engineering, electronics and pharmaceuticals.
The world's view of Britain today as opposed to the view of the Opposition parties is of a vibrant economy, with low inflation, low tax and a workforce better paid and producing some of the best goods in the world. Of course we are seen as a haven within the EU, not affected by the dreaded European jobs tax. The Prime Minister played a master stroke when he secured an opt-out for this country so that we do not have to embrace the Social Chapter or the minimum wage and the extra tax that they would create on jobs.
Many people underestimate the impact of the minimum wage and its effect on jobs. They often fail to take differentials into account. The DTI calculated that a minimum wage of £4.15 would cost 950,000 jobs if only half the restoration of wage differentials were implemented. But if the full differential were taken into account, that figure would rise dramatically to 1,800,000. We know who would suffer; it would be the young and the unskilled.
We have only to see the effect on the countries of our European partners. In Spain total unemployment is 22.2 per cent., with youth unemployment at 40.3 per cent. In France the total is 11.3 per cent. and youth unemployment is 26.5 per cent. In this country the total is 8 per cent. and youth unemployment is 17.2 per cent. I believe that there is a realisation across the Community that some of these enforced measures are detrimental to the interests of individual countries.
The name "Social Chapter" sounds warm and friendly but it is in reality anything but warm and friendly. It is a mechanism for enforcing social policy on member states and, with the added qualified majority voting, it would impose measures on this country whether the
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British Government liked them or not. That would only undermine our competitiveness and make us once again unattractive to foreign investors.
Inward investment is responsible for creating and safeguarding more than 700,000 jobs since 1979. They are jobs of high quality, permanent and well paid and in projects across the whole country, often in areas where jobs are desperately needed. Government cannot create jobs; they can create only an environment in which entrepreneurs create the jobs.
This country is now seen as a place to invest if investment is to take place in the European Union, making the UK the centre of the enterprise economy. More than one-third of all such investment in the EU comes to this country. The USA heads the list with 43 per cent. of its EU investment in the UK. Of course, we must remember the effect that that investment has on our exports. Approximately 40 per cent. of our exports are accounted for by overseas firms. Whoever thought that we should see the day when we were net exporters of television and exporting more cars than ever before in our history? In Japan today a British car is much valued for its reliability and quality, which is a far cry from the days when stories abounded about the Friday car.
The Government, through the DTI, must be congratulated on their foresight and determination to attract overseas firms here. The success continues and it would indeed be a tragedy if it were stopped in its tracks by the European jobs tax. Those who flirt with such ideas should think very carefully. Fortunately, we have a Government who understand trade and its effect on the lives of our citizens. Long may they continue.
4.47 p.m.
Lord Astor of Hever: My Lords, I welcome the debate introduced by my noble friend Lord Oxfuird as it gives your Lordships' House a chance to hear just how much recent inward investment there has been to this country. For the past decade and a half British business has closed the gap against some of the best, most innovative competition in the world. In the words of Jan Timmer, President of Philips:
"The most competitive country in Europe today is the UK. It has a great sense of realism and a great sense of competitive spirit".
One of the best indicators of competitiveness is the extent to which we are able to attract multi-national businesses which are free to choose where to invest.
The United Kingdom's car production has increased by 600,000 since 1982, over half of which is due to Japanese investment, which has directly created thousands of jobs and further substantial employment in the component sector. Japanese car plants are expected to increase production by a further 0.25 million vehicles by the turn of the century. Those investors have brought worldwide management practices to this country and have spread them to sectors that were performing badly.
Those companies, which must have very good reasons to invest in the UK, come because we have the best environment for business. This has been achieved partly through deregulation, with more than 500 measures repealed so far under the deregulation

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initiative. A low cost base, union co-operation and a skilled and hard-working labour force, sterling competitiveness and a stable economic environment mean that few countries present as benign an economic environment for making cars. We are inside Europe (which is a big attraction) but have rightly opted out of the social chapter with all its extra non-wage costs.
The strength of the fast-growing automotive components industry in Wales was highlighted with the announcement last year of three inward investments which will help to safeguard and create hundreds of jobs. American domiciled Ford chose its Bridgend plant to produce a new range of engines for its hugely popular Fiesta. Gillet from Gwent clinched an order from General Motors to supply 850,000 exhaust systems a year for the new Vauxhall Vectra saloon, and British Steel's Llanwern steel works, also in Gwent, is to supply steel for the new Mitsubishi Carisma. South Wales now rivals the West Midlands as the automotive capital of the UK.
Rover has gone from strength to strength since the BMW purchase. At the time, I well remember the Labour Party's fulminations over the way Britain's best volume car producer had been sold at a "knock-down price" to the Germans. The chairman of BMW now calls Britain,
"the most attractive country among all European locations for the production of cars".
He is backing that confidence with massive investment in Rover's future.
For every new job in the expanding car factories, there are probably two more created among the other businesses which service them. As production levels in British car factories rise—both Honda and Toyota are planning to double their capacity—a virtuous circle of prosperity comes into effect, both among the manufacturers themselves and in the component industry supplying them. It becomes more sensible to make all the major parts over here, including axles and engine blocks which have hitherto been shipped in from elsewhere for reasons of economy of scale: the British-made content of British-produced cars could rise eventually to 95 per cent.
The component industry, including thousands of smaller British-owned companies, is now reaping the rewards, having sharpened itself up to meet the more demanding specifications of the car makers. This, in turn, means that British firms are now better placed to sell to continental car firms, which have been forced by cost pressures, against their nationalist interests, to source parts from abroad. The perfect illustration of this turnaround was the announcement that Lucas is to supply a billion pounds worth of electronic fuel injection systems for diesel engines to Volkswagen—a contract which in previous times could only have gone to the German supplier, Bosch.
Ford, the country's largest inward investor last year, is delighted with its purchase of Jaguar. I had the privilege of visiting Jaguar yesterday with, among others, my noble friends Lord Oxfuird and Lord Brougham and Vaux. The turnaround since Ford made
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its enormous investment in 1989 has been dramatic—33.9 cars per man per annum were produced in 1991; last year, the figure was 69, which is more than double. Last year Jaguar's import bill was £120 million, hut it exported £1.26 billion-worth of cars.
However, there is no reason for complacency, and I was astonished to hear that Brussels' approval for local authority grants for the new Jaguar X200 on a brownfield site in Birmingham has been so slow in coming. Brussels have been examining this matter since July last year. We are not talking about this factory going anywhere else in Europe, but if a decision is further delayed, Jaguar will build the new car in the United States, where it will be warmly welcomed and a suitable factory is already available—and who can blame it?
I have long seen the commercial benefits of being in Europe. However, in a world where investment is free to flow around the globe, I cannot see why those decisions should take so long. Are the European technicians unable to validate the level of grant? Are they really prepared to drive away a £500 million investment programme that could treble Jaguar sales? I should be grateful to hear the comments of my noble friend the Minister on this specific matter, and hope he will be able to tell me what Her Majesty's Government and the DTI are doing generally when faced with incompetence or unwarranted delays on inward investment decisions from Brussels that put at risk hundreds, and sometimes thousands, of British jobs.
4.56 p.m.
Viscount Waverley: My Lords, it is appropriate as we draw nearer to a general election that we carefully consider Government policy. The electorate will shortly have the opportunity to express its wishes and to determine what policies it wants from the next government, but does it have sufficient information to make an informed decision? The noble Viscount, Lord Oxfuird, is therefore to be congratulated on enabling serious discussion of this important subject. Government policy must continue to facilitate the United Kingdom's role as the premier location for development as a European hub.
There are two issues of fundamental concern to me. What degree of competitiveness is required to guarantee high levels of inward investment, on the one hand, and, on the other, would the professed policy of the Labour Party, to sign away our opt-out of the social chapter, enhance or hinder that position? I believe that to be a central issue of the debate this afternoon. The question has perplexed me since the short debate on inward investment last year.
I want to understand the answers to the following questions. First, will the United Kingdom be any less competitive as a result of the social chapter? Secondly. will the value of people's pay packets be adversely affected as a result of the social chapter? We know that the Germans and the French are paid more, but they have higher costs. Will UK spending power increase proportionately as costs rise? If the Labour Party signs away our opt-out of the social chapter and sets a

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minimum wage, whatever that rate may be, employers will surely pass the extra costs of higher salary levels on to their customers.
If the social chapter is such an attractive proposition, what is the reason for Germany having 9.9 per cent. unemployment and France having 11.5 per cent., while the United Kingdom's unemployment levels are 8 per cent. of the workforce? Would employers lay off in order to increase productivity? That would mean higher unemployment. There may be flaws in those suppositions and I would, therefore, be grateful to hear how those dilemmas would be dealt with.
5 p.m.
Lord Geddes: My Lords, as other noble Lords have already stated, we are indeed immensely grateful to my noble friend Lord Oxfuird for his initiative in tabling the Motion for debate this afternoon. My intervention will he brief and, as alluded to by my noble friend, it comes from what perhaps may be described as a different angle; namely, the increasingly dominant position of English as the language of international business. Encouraging proficiency in the English language to speakers of other languages is, if you like, an outward investment to encourage and facilitate inward investment.
Not least following the recent deadline of this House, I declare an interest as non-executive—and, indeed, non-remunerated—Chairman of Trinity College, London. It is a United Kingdom company whose principal activities are to offer training and assessment for teachers of English to speakers of other languages and practical examinations and assessments of proficiency in the English language for speakers of other languages.
I hope that it may be of interest to your Lordships if I use Trinity as an example of the way that the English language is growing in importance world-wide. Indeed, I am proud to be wearing the Queen's Award for Industry tie, the award having been granted to Trinity in April of last year.
Noble Lords: Hear, hear!
Lord Geddes: My Lords, of course it is essential to have the right environment and climate to encourage inward investment into this country. Other noble Lords have rightly concentrated on that area. My premise is that it is also important that those who do invest in this country can communicate easily in our own language. There is a certain amount of chicken and egg in the situation. Clearly those who have made the decision to invest within the UK want their non-British employees based in this country to be able to speak English proficiently. In that context, I shall cite an example in a moment.
Outside the UK it is almost as important—at one remove, if you like—to encourage proficiency in English for those for whom it is not their first language in that, I believe most strongly, such proficiency in English may well influence an overseas company to
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invest in the country where there is already proficiency in its language. The BBC World Service (both radio and television) continues to have a very important role in that context.
The English language, and particularly spoken English, is now acknowledged to be a most valuable invisible export. Its teaching and examination represent an annual source of income for this country which, although difficult to quantify, is certainly measured in terms of hundreds of millions of pounds. In the exploitation of the opportunities presented by this demand for English, Trinity has adopted a policy of reinvestment to finance the design and development of a whole range of products, including: graded examinations for students of all ages and levels of ability; publication of syllabus support materials; and qualifications for the certification of teachers of English to speakers of other languages.
By way of illustration on the point of reinvestment, while Trinity's revenue has grown by 21 per cent. over the past three years, its reinvestment has increased by 75 per cent. I have just two more statistics to prove the overall point. Over those past three years, Trinity has increased the number of its examiners by 44 per cent. and a number of countries in which the examinations are held by 43 per cent., including, last year, countries as diverse as Uruguay, Argentina, Mexico, Hungary, Iran and, indeed, Outer Mongolia.
I mentioned earlier that the knowledge of English overseas was itself a potential encouragement for companies to invest in this country. There is also a growing demand from companies which have already taken that decision to invest to improve the linguistic capabilities of their employees. Last year, Samsung (a multinational South Korean company which has already made huge investments within this country) recognised a fundamental need for their employees to gain greater proficiency in English. It approached Trinity to seek assistance. The response has been to initiate a project in close co-operation with the company, with the objective of developing a corporate language training programme, tailor-made to suit the specific needs of the company but designed in modular form with the capability of being adapted and modified to suit the varying requirements of other multinational companies which might recognise the need for similar services.
There is every reason to be optimistic about the continued advancement of English as the international language of communication from all areas of business and commerce. A recent survey conducted world-wide by the British Council as part of its English 2000 Project found that 95 per cent. of respondents agreed with the proposal that,
"English will retain its role as the dominant language in world media and communications".
Companies employing a workforce which is made up, either wholly or in part, of speakers of languages other than English will need to address that problem if they are to enjoy real success in international markets. It will not surprise your Lordships that I believe that that will result in a substantial demand for corporate, English language training services. Expansion in that context

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and substantial growth in demand from those overseas should—it is to be hoped—encourage foreign companies to invest with linguistic confidence in this country.
5.7 p.m.
Lord Goold: My Lords, in his absence, I should like to add my congratulations to those already expressed to the noble Lord, Lord Borrie, on his maiden speech. I should also like to thank my noble friend Lord Oxfuird for initiating this debate on such an important topic. Inward investment, particularly to Scotland over the past decade, has been a real success story, with many high quality jobs created.
More than any other sector in Scotland, electronics has benefited from inward investment. Electronics is a global industry with overseas-owned plants generally highly integrated within European and global networks. Hence, the situation of the Scottish industry will continue to be strongly affected by competitive dynamics among the major players. Equally, the stability of growth of overseas-owned units in Scotland will largely depend on the importance to the parent of its Scottish facilities in terms of plant role and performance and the local operating conditions which support plant performance vis-à-vis sister plants elsewhere in its world-wide corporate network. Those local operating conditions are good at present but they may not always be so, as I shall show.
The overseas-owned sector has provided a major stimulus to productivity improvement in Scotland and is a source of relatively high-paid jobs and capital investment. There is evidence that it has also helped indigenous investment, which is vital.
In electronics, as in other areas of inward investment, Scotland has benefited significantly from the development of the European Union to date. Scotland, with a generally well-educated workforce, is a good, efficient base for entry into the European market.
The United Kingdom is the main recipient of US and Japanese investment in the European Union, with nearly three times that of Germany, four times as much as France, six times as much as the Netherlands, and seven times as much as Italy. That has had a particularly beneficial impact, especially in the central belt of Scotland.
A short time ago there was a tremendous outcry at the closure of the Ravenscraig steelworks in Lanarkshire, yet today unemployment in that area is lower than it was when Ravenscraig was operating. That is thanks, to a very large extent, to inward investment. There are, however, two matters of great concern on the horizon which could put all this at risk. This Government have opted out of the social chapter but the Opposition have committed us to it in the event of their winning the next general election. This would, I believe, be disastrous.
I should like to give just one example which illustrates clearly the cost of the social chapter. A British company which I know employs a young married man at its office in Brussels. That individual's net cash salary—his take-home pay—in 1995 was £29,415. The
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gross equivalent in Britain would be about £45,000. However, the cost in 1995 to the British company situated in Brussels was £82,239. That additional sum of around £35,000 is what the social chapter and Belgian social laws and taxes cost, and it is what would he added to employment costs in this country if we were to join up to the social chapter. We should have none of it.
The other concern which, like others, I wish to mention is the "tartan tax". Not being a civil servant I am allowed to call it a "tartan tax". It is what we would have if Labour's devolution policies for Scotland were enacted. Does anyone really believe that if taxation in Scotland were 3 per cent. higher than in other parts of the United Kingdom, Scotland would not suffer? Of course it would suffer. Companies would relocate, as we heard the noble Lord, Lord Laing, say earlier. Higher paid individuals would move their main place of residence south of the Border. I cannot believe that an American, or a Japanese, or indeed any company, would choose to go to central Scotland rather than the north of England if there were a 3 per cent. difference in tax in England's favour.
The actions of this Government to encourage inward investment have paid great dividends. The actions of this Government in opting out of the social chapter are fully justified by the figures I have given which show Britain with several times the inward investment of our European partners. The actions of this Government in devolving power to Scotland and Scottish local authorities—but without the monstrous, costly bureaucracy which would attach to a tax raising assembly or Parliament—are correct. If we had the social chapter and if we had a Scottish assembly, not just inward investment would suffer but every worker or would-be worker in Scotland would suffer. As we heard during the discussion on the second Starred Question earlier this afternoon, unemployment is higher, and is rising, in our European partner countries. That is what would happen here if the Opposition policies were to be introduced. This Government's record on inward investment in recent years is excellent and long may it continue.
5.13 p.m.
Lord Rathcavan: My Lords, I am grateful to the noble Viscount, Lord Oxfuird, for this opportunity to address the subject of inward investment which is of such vital importance to my region of Northern Ireland. I should declare an interest as chairman of the Northern Ireland Tourist Board and also as a director of a French owned and an Australian owned company.
The Northern Ireland Tourist Board is, of course, deeply involved in attracting—and with some success—inward investment to our tourism infrastructure. In terms of job creation we are also making level progress with our colleagues in the Industrial Development Board of Northern Ireland. As I have said to your Lordships before, new jobs and a return to economic normality arc the cement of peace.
Since the ceasefire in September 1994, and during the subsequent peace process, we can at last operate on an almost even playing field with other regions of western

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Europe and our neighbours in the Republic of Ireland in particular. The figures for inward investment inquiries and visits by potential investors have soared. Considering that it is a long-term process to convert inquiries into real projects, much progress and success in creating new jobs from inward investment have already been achieved in 1995. Particular tribute should be paid to the noble Baroness, Lady Denton, our Minister responsible for the economy in Northern Ireland, for her tireless efforts in travelling the world and selling the region of Northern Ireland so successfully as a cost-effective and efficient production base for the European Union market.
I hope that the noble Baroness, Lady Denton, will also keep an equally keen eye on how the peace dividend—that is, the reductions in security related expenditure—is being distributed. We see signs of the Treasury trying to get its hands on it. That is fair enough in due course, but at this critical time for Northern Ireland it is essential that the cash benefits of this peace dividend are channelled into the right places, particularly those agencies which are responsible for the pursuit, from so many angles, of inward investment, greenfield projects which we need so badly, and for which we are now well placed. Those agencies must have adequate funding if they are to remain competitive. I hope that the Minister will pass on those comments to the noble Baroness, Lady Denton.
Northern Ireland is overcoming its natural disadvantages of peripherality. One of these disadvantages is high electricity prices which are forcing some companies such as Shorts—a fine example of successful inward investment—to generate its own electricity. I hope that the proposals by the electricity regulator, which were announced this week, to change the way in which our electricity industry has been run post-privatisation, will be heeded and will lead to lower prices. However, against that, we have one of the best telecommunication systems in western Europe using a fibre optic network with much lower tariff costs than our competitors.
We have an outstanding resource in the availability of well educated and skilled employees. Only last week it was announced that Northern Ireland had the highest pass rates in GCSE and A-levels of any region in the United Kingdom, and the highest proportion of school-leavers going to third level qualifications. We also have an excellent record in labour relations and a positive contribution from our unions.
Often the key to a decision to locate in a particular region is not the level of production costs, the tax breaks or the cost of transport, telecommunications and energy, but the quality and flexibility of the labour force. The absence of the social chapter is another increasing advantage in our hands as our principal and natural competitor, the Republic of Ireland, begins to introduce legislation on the many EU directives which are involved in the social chapter.
The net benefits to the Republic of Ireland of full membership of the European Union are huge but the social chapter will add substantially to its non-wage labour costs. It will make some employers less disposed
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to employ women and it will prevent jobseekers from obtaining part-time work, while employers will work out ways to expand their businesses and increase production without increasing employment. That is the view of IBEC, the equivalent of the CBI in the Republic of Ireland. I believe that the measures of the social chapter will discriminate against normal and natural job creation.
It is interesting to reflect this week on the current case of the Fokker aerospace company in Holland. That situation is threatening 1,500 jobs in Northern Ireland and perhaps 20,000 jobs in Europe. It is a salutary reminder of what happens when one has a social chapter. Fokker is going down because the social chapter made it impossible for the company to shake down its business quickly enough. In the real world of the airline industry we are dominated by US manufacturers because they have a flexible labour market. One cannot compete if one cannot control one's costs. That is what happens to an employer who is unable to respond to his competitors in the marketplace, as was the case with Fokker.
In Northern Ireland we now have a unique opportunity to heal the wounds of the past 25 years. Inward investment must play a vital part in that healing process of a return to economic normality. We are, on the whole, well positioned to seize the opportunities that now exist as world companies seek to globalise their operations and position themselves for market access. I believe that, given a fair wind, we shall succeed.
5.20 p.m.
Lord Lyell: My Lords, like many noble Lords, I wish to begin my remarks by thanking my noble friend Lord Oxfuird for giving us the opportunity this afternoon to discuss a subject which is rarely discussed in your Lordships' House on a Wednesday. It is an area where politics tend very much to take second place. We are discussing jobs and we are discussing winning. In addition, my noble friend has given us the opportunity to hear an outstanding maiden speech by the noble Lord, Lord Borrie. All of us hope that we shall hear further speeches of such quality from him often in the future.
Speaking once again, with another noble friend with the same name as myself, as tail-end Charlie on the list of speakers, I feel rather like the character in the Danny Kaye song,
"The king is in the altogether",
because all the points that I should have liked to make have been made by fellow Scots. My noble friend Lord Goold, as a typical Scottish chartered accountant should, made a very interesting point about net and gross pay which had me working with my pen rather than my calculator. He also mentioned the electronics industry. My noble friend Lord Laing represented Scotland very well on behalf of the food industry and in particular the biscuits industry. I thought that we might have heard from one of my noble friends on the subject of films, but I shall pass that by for today.
The theme which has run through the debate is the need to identify success in areas where industry and entrepreneurs in the United Kingdom do well, to build

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on that and to identify friends who will help us to do so. The debate last week initiated by my noble friend Lord Astor, which has been referred to today, dealt with a typical example of an industry where there has been change, namely the British motor industry. We heard from my noble friend what he saw yesterday at Jaguar. Everything that was discussed a week ago in my noble friend's debate related to an outstanding example of inward investment and the utilisation of the enormous talents of small and middle-sized companies in one particular field of motor sport in the United Kingdom. The noble Lord, Lord Wallace, will appreciate that that is one example of the British mittelstand of small companies thrusting up and building on and developing a core business of the motor industry.
Nineteen years ago, when my party was situated on the Benches opposite where the noble Lord, Lord Peston, and his noble friends are sitting, I recall taking part in debates on a Bill which completely rewrote the law on patents in the United Kingdom. As part of my studies on that Bill—which were carried on by my noble friend Lord Belstead—I became very interested in and heavily involved with the pharmaceutical industry. That is one indigenous British industry that has been immensely successful. It has also attracted a great deal of inward investment.
This morning I obtained a very interesting but lengthy document from, of all places, not the Department of Trade and Industry but the Department of Health. It is called Prescribe UK. My interest has nothing to do with the fact that for the first time in 25 years I am taking antibiotic pills as a result of skiing injuries. The document is a valuable source of information.
That booklet gives very good professional and specific advice, sources of information and useful addresses. The Prescribe UK initiative includes an advisory team to advise outside investors who may wish to come to the United Kingdom to make use of the outstanding talent, achievements, scientific knowledge and education which we have throughout the United Kingdom. The advisory team includes the chairman of the number one company in the Financial Times list of companies, which happens to be a leading pharmaceutical company. There are five members of the team from various government departments, all of whom have had considerable experience in industry, accountancy or other disciplines which are relevant to investment and to presenting businessmen from all over the world with figures, facts and almost instant advice. The team includes one investment banker from a leading Scottish firm in the City, I am delighted to see. He, too, was involved in pharmaceuticals. There are also two chief executives from the industry. With such an advisory team, all of whom can give superb and relevant advice, we see a perfect example of partnership. That is what the debate has been about.
In one chapter of the booklet, entitled Investing in the United Kingdom, it is pointed out that 98 of the 100 top companies mentioned in the American Fortune magazine have their European headquarters in the United Kingdom, and 100 of the top 200 Japanese companies have their European Union headquarters here. More than 100 have their research and
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development headquarters here in the United Kingdom. As my noble friend Lord Astor mentioned last week, all the development on Subaru and Mitsubishi rally cars is done in the United Kingdom.
In 15 years inward investment from all over the world has increased sevenfold. Therefore it seems that we are doing one or two things right. Is it the English language, is it the committed workforce that has been mentioned, or is it the fact that foreign executives so appreciate living in the United Kingdom, as is mentioned in the booklet? The booklet also indicates that schooling, housing and lifestyle are all relevant. All those factors are relevant in the success of a large number of companies about which we have heard today. It is also the fact that the indigenous pharmaceutical industry has attracted inward investment from throughout the world. It is a great success story. I am grateful to my noble friend Lord Oxfuird for giving me the opportunity to tell your Lordships about that today.
5.27 p.m.
The Earl of Shrewsbury: My Lords, I am indebted to my noble friend Lord Oxfuird for bringing the debate before your Lordships today. I add my congratulations to the noble Lord, Lord Borrie, on an excellent maiden speech. It is high time that such a serious subject, which impacts on the future of our industrial and commercial wellbeing for many years to come, was debated by people who have real experience and knowledge of the world outside Parliament.
It is often said that the British people are at their best when they are talking down the successes and achievements of this country. Sadly, we in the UK are often recognised as whingers. That should not be the case. We have a great deal to be proud of.
My thrust today is to sing the praises of the Black Country, Birmingham and the West Midlands in general. It is an area where I both live and work. It is a success story of some proportion. I place the Black Country first on the list because that is where, in small villages, through the skills and natural resources which were available, the first Industrial Revolution was produced. Some people think that it occurred near Telford, at Ironbridge. I can assure your Lordships that that is not the case.
I must declare my interest as Chancellor of Wolverhampton University, a very pleasant task and completely unremunerated. It means that I have a few letters after my name and, for the first time in my life, a qualification.
I have taken advice from chambers of commerce, development agencies and many friends involved at the cutting edge of day-to-day business within the West Midlands region. From the business point of view it is all too easy to carp habitually about the lack of help from government. Government are often perceived to be the providers of large grants and the cure for all ills. It is therefore interesting to hear businessmen in my area state that things are improving, that financial assistance from government is not at the top of their agenda and that interest rates are at a historically low level. It comes as a breath of fresh air.

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We rely heavily in the West Midlands on inward investment. We have a number of excellent organisations whose role it is to sell our attractions to foreign business. We have, for instance, the West Midlands Development Agency, the Black Country Development Corporation, the chambers of commerce and the TECs, to name but a few. The Black Country Development Corporation is, of course, winding down its operations. It has a limited life and will come to an end in 1997, but it has done much good work.
Various areas in our part of the world have been awarded enterprise zone status and those areas have been revitalised to a great degree by private sector developers taking on substantial risks. Recently, the Prime Minister announced that he wished the UK to become the enterprise centre of Europe. We in the West Midlands have the capacity and capability to do just that. Already in Birmingham we have the National Exhibition Centre, the International Convention Centre and many other venues of international importance. We have a first rate international airport which is about to benefit from a large expansion and investment programme. I pay tribute to Sir Bernard Zissman, a past Lord Mayor of Birmingham, who had the vision to expand the attributes of the city and make it a world class venue. He has done much to promote the region to foreign companies; he is an excellent ambassador for the West Midlands.
The region has been successful over a long period in attracting and retaining international companies. In the past five years overseas companies have invested £3.2 billion in the area, creating over 17,000 jobs and safeguarding over 25,000. Those figures do not include the recent acquisition by BMW of Rover. The region is now home to 1,100 overseas companies from 30 countries between them employing 120,000 people. The largest investing countries are currently the USA, Germany and Japan. However, the West Midlands does not enjoy the high profile of other regions such as the North East for the simple reason that comparatively large numbers of foreign companies locating in our area typically generate only between 50 and 60 new jobs. That is not a large enough figure to grab the headlines. One of our problems in attracting large companies is a lack of substantial sites of quality. The failure to secure the investment by Siemens was attributed to the lack of large sites and poor quality land.
The general perception of those whose business it is to sell the benefits of locating in the West Midlands is that there is a lack of political will and a certain failure of promotional bodies, politicians and others involved in the attraction process, to sing from the same hymn sheet. That has to be addressed if the region is to build on its past success and attract more foreign investment. In addition, funding for the West Midlands Development Agency is inadequate with the result that too little has to be spread too thinly on promoting a wide range of potential sites. In short, WMDA is under-supported compared with similar organisations in other areas of the UK. A level playing field is needed.
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Another factor of considerable concern to the foreign investor is the congestion on the M.6 and M.5 motorways in the Birmingham area. The motorways block up on virtually every working day. I live perhaps a 40-minute drive from Birmingham on a good day. The journey can take me three hours; that is ridiculous. Companies need first class road communications, especially since many manufacturers these days use the "just in time" method for acquiring components. Those traffic problems have to he alleviated. The cost to industry is enormous. We need the Birmingham northern relief road as a matter of some urgency.
The planning process has to be improved. The time it takes to achieve planning consents is often unacceptable, and the bureaucracy involved far too great. I am aware of a number of instances where a foreign investor has been put off coming to our region because of major delays and obstacles in planning terms. This causes frustration and considerable cost to developers. As a consequence the opportunity to create jobs and strengthen the local economy is passed by. That is not good enough.
The future success of the region in attracting inward investment depends, first, on an improved and improving product to sell, greater financial and non-financial support from both regional, public and private sector supporters, the development of a regional profile, an identity to match that of the North East, and a reduction in the fragmentation and duplication of business support organisations which so often confuse investor companies.
5.35 p.m.
Lord Hughes: My Lords, there is time to spare since previous speakers have not used all the allocated time. I intervene because of the speech by the noble Lord, Lord Laing. I have spoken to the noble Lord to let him know that I would refer to what he said. I was glad that I did so because I discovered two factors. First, what the noble Lord said was not a threat to close the Glasgow factory if devolution came to pass in Scotland. He told me that it had been said when he was chairman of United Biscuits. That speech was made five years ago. Therefore, the noble Lord, Lord Laing, has no knowledge of what United Biscuits would do today because he no longer has anything to do with the company. Consequently, no threat was made by the noble Lord, Lord Laing, today. I am glad that that matter has been clarified.
Secondly, I discovered that the noble Lord did not know that corporation tax would not be part of the so-called tartan tax. The authority of the assembly would be only to increase or reduce income tax by up to 3p in the pound, but corporation tax would remain the same throughout the United Kingdom. As the noble Lord, Lord Laing, knows, and as others ought to know, companies do not pay income tax. Therefore, there is no reason to fear, even if an income tax change were to come into operation, that it would affect the desire or the willingness of companies to locate in Scotland.

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My next point has nothing to do with what the noble Lord, Lord Laing, said. As I understand it, when the Scottish parliament, assembly, or whatever it is to be called, comes into existence, the power to exercise the change in income tax is most unlikely to be made during the first parliament in Scotland. My understanding is that if the members of that assembly believe it to be desirable to have a greater income at their disposal they will wait until the next election and seek a mandate from the people of Scotland either to have higher tax and better services, or for the tax to remain unchanged. That is the main reason for my intervention.
Perhaps I may now refer to the speeches of the noble Baroness, Lady Seccombe, and the noble Lord, Lord Goold. The noble Lord did not go so far as the noble Baroness, Lady Seccombe, who seemed to indicate that it was very unlikely that companies from abroad would locate in Scotland if there were a Scottish assembly. I was a Minister in the Scottish Office for seven years. I was chairman of Glenrothes Development Corporation for three years before I became a Minister. I was chairman of East Kilbride Development Corporation after I ceased to be a Minister. I know what happened to investment in Scotland during those years. There is no reason to fear that another Labour Government would have any less success in attracting investment in Scotland than previous Labour Governments.
The point made by the noble Lord, Lord Goold, was slightly different. He mentioned investment in Scotland from abroad, especially during the past 10 years. Has he any reason to believe that it has been any better over the past 10 years than during the previous 10 years? Has he any reason to believe that it was any better than what happened under Labour Governments? I do not believe that the people of Scotland have anything to fear in relation to the location of industry from anything that may be done by a Scottish parliament.
I am in no better position to predict what will happen in the future than anyone else. The noble Baroness, Lady Seccombe, indicated what might happen in Scotland if there were a Labour Government but she is in no better position than I to make forecasts.
5.40 p.m.
Lord Ezra: My Lords, the noble Viscount, Lord Oxfuird, must be pleased at the wide-ranging nature of the speeches which have emerged during the course of the debate. Like some other noble Lords, I wish to declare an interest: I am chairman of a company which is a subsidiary of a large French group in the environmental services sector. It has given me the opportunity of understanding inward investment at first hand. I shall come back to that in a moment.
There is no doubt that the inward investment development has been on a large scale and has generally been very successful. The latest report of the Invest in Britain Bureau indicated that by the end of 1994 no less than £131 billion had been invested in Britain by overseas companies. Twenty four per cent. of net output was represented by that investment, 32 per cent. of
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manufacturing investment and no less than 40 per cent. of manufacturing exports. Those are remarkable figures which show great success in mounting the campaign.
I wish to he assured that we are receiving all the benefit we can out of that massive investment. I was pleased to note from the speech of the noble Lord, Lord Lyell, that the companies with which he was familiar were doing development work over here. There was a fear that when the large Japanese motor companies first established themselves in Britain all the development work would be done in Japan and we would simply become a nation of assemblers. I believe that that is not so, a great deal of development work is being done over here.
I also wish to raise the subject of the supply chain. The very big enterprises, with their massive requirement for components and services, present us with a potential double benefit. Not only do we receive the benefit of the direct investment and direct employment, but also there is the benefit that we can derive from supplying the services and components that are required on a competitive basis. I hope that we can be reassured that the Invest in Britain Bureau does not lose sight of the companies that it attracts to Britain once it has taken its decision and that it follows through with after-care service to ensure that we receive the best benefit.
Another form of benefit which I believe we should derive was referred to by the noble Lord, Lord Desai. He said that we could benefit from other management styles. Particularly in the case of the Asian countries that invest here, and in France and Germany, companies tend noticeably to take a longer-term, more strategic view of investment than we do in this country. We have much to gain from their management approach.
Here I wish to refer to my own experience. The company of which I am now chairman was at one time a medium-sized publicly quoted company in the sector of energy management. One of our shareholders was a French company which was eventually taken over by a larger French company, the Compagnie Générale des Eaux. In due course it made an approach to us to acquire my company. That was done on an agreed basis. At the time of the acquisition, the company for which I was responsible employed some 650 people and had a turnover of about £50 million. That was in 1986. This year, the group which has been based on that initial acquisition has a turnover of £1,500 million and it employs 20,000 people. That is a vast increase which shows the initiative that has been taken.
From the change in ownership I noticed immediately the impact of the company's long-term strategic thinking. As chairman of a minor publicly quoted company, I found that we were hounded from pillar to post by the analysts who forced us to have regard to only one thing: the dividend. All other longer-term aspirations took secondary place. As soon as we were acquired by the larger group, long-term thinking came into the picture. I can give an illustration of that not far from here. The company which I still chair was responsible for the building of one of the largest enterprises for converting waste to energy, the SELCHP plant near Deptford. Some of your Lordships may have

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visited it. The plant depends upon a steady supply of waste material and it was built to take 400,000 tonnes of waste material. It cost £100 million to build.
At the time that the decision was taken to go ahead with the project, we did not have all the waste material under contract and we took a risk; we thought that it would come in due course. The plant was built to the best specifications to conform to all the regulations from Brussels and Britain. That plant has been held up as being the most efficient and up to date in its sector. I give that as an illustration of the thinking that lies behind the actions of investors who take a longer term view.
Sometime before the French interest was shown in my company, I approached a few large British companies. I had come to the conclusion that the future for that medium-sized company, which I considered was in a growth market, could only be assured if we had a large partner. I regret that I found no interest at all. It was felt that the growth prospects were either non-existent or too small to worry about.
That leads to the next point I wish to make which concerns the anxiety expressed by the noble Lord, Lord Borne, in his excellent maiden speech. I am glad to see him among us. He is a friend of long standing and we have done much work together. The point was also mentioned by my noble friend Lord Wallace and the noble Lords, Lord Laing of Dunphail, Lord Haskel and Lord Wade. While appreciating the level of inward investment, they all expressed concern about the smaller level in relative terms of indigenous investment. If we compare the performance in indigenous investment in Britain with that of other OECD countries, we find that they are investing at a level of 22 per cent. of GNP per annum and we are investing at a level of 16.5 per cent. That is noticeably less.
I find it surprising that, having created a climate in which Britain proves attractive to foreign investors, that same climate and those same factors—flexible labour market, efficiency, lack of regulation, the large market in the UK, and the even larger market at our doorstep in Europe—apparently do not have the same impact on firms already established in Britain. The level of investment brought in is more than counterbalanced by the level of investment outside, particularly in the United States. Whereas other countries come to the United Kingdom to be near the European market, we appear to be moving further afield into the United States. That requires a bit of looking into.
I should have thought that in the long-term strategy for this country we ought to find out why it is that the factors that attract others apparently do not sufficiently attract our own indigenous industry. The Invest in Britain Bureau does not suggest by its name that it is meant only to attract investors from overseas, although that is what it does. I suggest to the Minister that perhaps it should devote part of its attention to stimulating more indigenous investment. Not only overseas investment, but indigenous investment and a better balance between the two, seems to be what is required.
5.50 p.m.
Lord Peston: My Lords, I, too wish to congratulate the noble Viscount, Lord Oxfuird, on prompting this interesting debate with so excellent a collection of speakers. I also wish to congratulate my noble friend Lord Borrie on his maiden speech. It was first-class. I echo the words of the noble Baroness, Lady Seccombe (it is about the only remark she made with which I agree) in looking forward to hearing my noble friend speak again—if only to take some of the burdens off me in all the various matters that I seem to have to deal with all the time!
I regard myself as an internationalist and a believer in free trade. I do not want to stop foreigners investing here, just as I do not wish to see foreigners preventing our people from investing abroad. Those who favour placing barriers to trade and to international capital movements (if there are any left in our country) are really announcing to the world that in a fair economic competition we cannot win. That is certainly not my view. To the question that the noble Viscount, Lord Oxfuird, puts before us—namely, whether inward investment is a good thing for this country—broadly speaking, taking the pluses and minuses into account, my answer is unequivocally yes. If that were all there was to it, this debate could have ended more or less a moment or two after it began. However, there are some sub-texts, some underlying themes, which have to do with the economic performance of this Government. I have a slight sense that some bits of politics have found their way into this debate in one way or another; I therefore feel an obligation to join in on one or two of those matters.
To get down to some serious economics, let us start with precisely the point made by the noble Lord, Lord Ezra, which I regard as fundamental. If the United Kingdom is such a good location for economic activity, and if it attracts foreign-owned multinationals, why do those same forces, whatever they are, not attract our own firms? There seems to be a paradox. The UK is attractive to foreigners for the production of, for example, motor vehicles, various forms of consumer electronics, semi-conductors and computers. But why is it not attractive to our own businessmen? One could give many examples. To take just one, in the field of non-defence electronics, there is no major UK-owned company left.
I agree with my noble friend Lord Desai that we must take a global view (to use the current buzzword) and in a sense argue that it does not matter who owns what. Certainly I agree that workers in this country require investment, and they do not in any way worry about ownership. What they want is jobs, high productivity and good pay. But the fact remains. Certainly, wearing my economics hat, I do not understand why the position is as it is. To put it in another way, which I find extremely intriguing, direct foreign investment here is largely in manufacturing. That is not entirely the case, as was pointed out, but it is to a very considerable extent.
We invest a great deal ourselves. A great deal of direct investment goes out from this country, as the noble Lord, Lord Ezra, and others pointed out—hut

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again, interestingly, not in manufacturing. It is typically in hotels, retail trading, insurance and all that sort of thing. It is also, as was pointed out, much more typically in the US than in the European Union. I do not have an answer to the question. I am certainly not in this sense pointing a finger at the Government. I really should like to know why, somehow, we are not good at things which I see no reason why we should not be good at.
The reason given in the textbooks as to why foreigners come here and are successful is that they have skills, especially managerial skills, and intellectual property that we do not possess. If that is true, it is a terrible reflection on our own people. I can only say that I hope it is not true. Looking at the issue that way, the facts are disturbing.
There is a related fact, to which the noble Lord, Lord Laing, first referred. I entirely agree with the noble Baroness, Lady Seccombe, that we must not forget the past. I am about to quote the past in some detail. Let us start in 1979, when a cataclysmic event occurred; namely, a change of government. Comparing the ratio of private investment (gross domestic fixed capital formation) to GDP with that of the present day, bearing in mind the enormous expansion of the private sector as a result of privatisation, we find virtually no change. If we then add to that the large proportion of investment undertaken by foreigners through direct inward investment, the reflection cast on the propensity of our own entrepreneurs to take risks is appalling. Since they tell us that on the whole they favour the Conservative Government, one wonders what they would do under a government that they did not favour in terms of having confidence in their own country.
To be slightly acerbic, I love Scotland and I thought the Scots loved Scotland. The thought that all the Scots will abandon Scotland simply as a result of 3p. on the rate of income tax is not an entirely convincing argument. I just do not believe it. They might follow Dr. Johnson's advice in terms of the high road to England, but for quite different reasons. Everyone argues about that, and we ought to have a debate on it at some time. I cannot believe that the Scots will abandon the country they love simply as a result of a couple of pennies on the rate of direct taxation.
I also offer a word of apology. A number of noble Lords made remarks with which I totally disagree, but I shall not have time to attack them. I hope that they do not regard that as a discourtesy on my part. I am not short of comments and there will be other occasions on which I shall make them, but I want to stick to the time limits of the debate. Since, as the noble Baroness, Lady Seccombe, suggested, this matter is to be viewed in a historical perspective, I shall quote just a few figures. From 1979 to 1994 our gross domestic product rose by one-third (about 31 per cent.). Those were the good days. In the bad old days, 1964 to 1979 (the previous 15 years), gross domestic product rose by 43 per cent. So I am happy to remember the past.
A more significant point that intrigues me (I have paid tribute to this before) is that manufacturing productivity has risen very distinctly since this Government came to power. There can be no doubt
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about that at all. I regard it as about the one achievement in economic terms of the Conservative Government. But a couple of paradoxes still remain in that connection. Despite the very considerable change in manufacturing productivity, manufacturing output from 1979 to 1994 rose by only 8 per cent.; whereas in the bad old days, as I keep repeating, from 1964 to 1979, it rose by over 25 per cent.
That certainly requires an explanation. How can we be improving our efficiency and yet not finding it profitable to sell more? How can we have moved from a surplus on the balance of trade, generally and in manufacturing, to a deficit? I do not know the answers to those questions. Again, I am not trying to make a political point; I am simply asking the Government not to make political points on areas which are—if I may be a bit snooty—perhaps slightly more complicated in terms of economic analysis than is sometimes appreciated.
The noble Lord, Lord Wallace, raised two questions. He uttered some fears in regard to foreign ownership. I am not sure that I agree with him in that regard. It is one of the things about which the Americans and the Canadians have argued, but on the whole is not the case.
The noble Lord, Lord Lyell, mentioned pharmaceuticals and I should perhaps declare an interest as chairman of the Office of Health Economics. The pharmaceutical industry, which is multinational in both directions, engages in an enormous amount of research in our country. As I understand it, the Japanese motor car firms are themselves engaging in research and development also. Therefore we do not need to have the fears that, say, the Canadians had about the Americans.
That is also beginning to be true—I should welcome the Minister's comments on this point—in regard to management. I know one or two American-owned firms in which the domestic management cannot rise above a given level. But, as I understand it, that is ceasing to be the case. I believe that in the Japanese-owned firms—and, for all I know, in the German-owned firms as well, though I am less well informed on that—there would not be a discrimination against our best people rising to managerial top positions. That would be important; it would have political ramifications and it would worry me.
I have not touched on the questions posed by the noble Viscount, Lord Waverley, and the noble Baroness, Lady Seccombe, and perhaps also those put by the noble Lord, Lord Goold, in relation to social chapters and minimum wages. It is about time we had a debate on those matters so that they can be brought out into the open; we can put our arguments forward and I can at least say where my side stands.
I ask noble Lords to reflect. Under the current Government, a few years ago unemployment rose to 13 per cent. But there was no increase in social welfare costs taking place at that time. As far as I am aware, there has been no great increase in social welfare costs recently in France and Germany to cause their rise in unemployment. Our unemployment figures fell and then rose again, but that had no connection with the points raised by those who object to the social chapter. The

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social chapter cannot yet have come to bite. Most of the relevant matters are not yet in action. Therefore, before coming to any definite conclusions, one ought to pause.
Finally, before sitting down I shall make a nasty remark about the DTI. It has allegedly done some research into the effects of a minimum wage, which the noble Baroness, Lady Seccombe, quoted. My view is that if that is the department's idea of research, goodness help us. Logically, if we have a minimum wage and all other wages rise pari passu, we do not have a minimum wage; we have a general wage increase. Other things being equal, if nominal demand is constant and we have a general wage increase, it will be deleterious to the economy.
If the DTI wishes to do some research—I am available at my normal extremely high consultancy fee—I shall explain how to do it. The department has not yet read the available literature (summarised in a number of easily accessible US journals), but it will discover that the matter is infinitely more complex and, to quote myself from a few weeks ago, one cannot demonstrate that a minimum wage leads to unemployment. That cannot be done on the empirical evidence and for that matter it cannot be done on the theoretical evidence. But that is a subject to which I should like to return. What I most look forward to, as always, is listening to the Minister.
6.4 p.m.
The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie): My Lords, like all those who have engaged in this debate, I too welcome the opportunity provided by my noble friend Lord Oxfuird to debate inward investment and I join in the widespread remarks of congratulation extended to the noble Lord, Lord Borrie, on his maiden speech. We are delighted to hear his contribution and look forward to those he will make in the future.
Inward investment is one of this Government's and this country's greatest success stories. At one point during the debate there was a slightly querulous questioning of the desirability of inward investment. I am delighted that the noble Lords, Lord St. John of Bletso, Lord Desai and, latterly, Lord Ezra and Lord Peston, made it clear that they recognise that it is a valuable contribution to our economy.
The competitiveness of our economy is nowhere better demonstrated than in our ability to attract inward investment. Over 40 per cent. of all US, Canadian and Japanese investment, together with over 50 per cent. of Korean and over 55 per cent. of Taiwanese investment in the European Union comes to the United Kingdom. Our stock of inward investment is now £147 billion, up from £44 billion in 1985. Ninety-nine of the Fortune top 100 companies have chosen to locate in the United Kingdom. Our record in attracting inward investment within the EU is second to none and there is an encouraging, freshening trend to the United Kingdom from within the European Union itself.
The facts speak for themselves. Since 1979 the Invest in Britain Bureau has registered more than 4,200 inward investment projects with more than 700,000 associated
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jobs. In recent months we have secured investments from Ford, Siemens, Nissan, Fujitsu and Chungwa. That equals over 11,200 jobs. In the past financial year alone we won some 454 inward investment projects supporting some 91,000 jobs. Those are jobs for tomorrow's industries—highly skilled and bringing the best management standards without any bamboo ceiling or whatever it might be. The noble Lord will be pleased to hear that the managing director of Samsung is a Scot and the managing director of Nissan is also British.
Those inward investments also have the exciting potential on which the noble Lord, Lord Ezra, clearly focused. There is a potential to move down the supply chain of industry. I am only sorry to have to say that there is an extremely interesting announcement on such a project which I hope will come forward within the next 48 hours—unfortunately, 48 hours too late for my purposes, but nevertheless very welcome.
Those who invest in our country from abroad add significant strength to our industrial economy. Overseas-owned manufacturers provide one-third of all manufacturing investment; nearly one-fifth of manufacturing employment; over one-fifth of manufacturing output and around two-fifths of UK-manufactured exports—a point made by my noble friend Lady Seccombe. We are determined to maintain that enviable record. We must remain competitive if we are to continue to attract investment.
The noble Lord, Lord Borrie, advised us in some respects to be wary. If the type of inward investment we were attracting was the screw-driver assembly plant type, then I could understand his misgivings. But there has been what I see as a fundamental change not only in the quality of the job, but also in the research and development that comes with them. Samsung and Siemens are classic examples of that. It is interesting that Samsung not only brought its plant to the United Kingdom, but also intends to provide up to 500 jobs in the City of London by the year 2000, their European regional headquarters being sited here.
Britain has many attractions for the inward investor. It has a strong economy; a pro-business environment and the English language, which my noble friend Lord Geddes referred to. We have no foreign exchange controls nor restrictions on sending profits abroad. Britain offers the best available combination of a skilled and flexible workforce, low taxes and lower production costs. To pick up a point made by the noble Lord, Lord Cuckney, we now have a stable regulatory regime. It can only be tested in this way. When I have taken trade missions abroad, seeking investment in other countries, the keenest disincentive in those countries is that there is a regulatory regime that is unstable or too heavy.
Another attractive feature of the United Kingdom is its valuable research and university base. No doubt that is worthwhile. The noble Lord may be interested to know that there are now over 50 science parks which create an ideal environment in which companies can develop links with researchers. I believe that the list of inward investment successes is a testimony to the excellent and continuing work of the Invest In Britain Bureau and, I hope increasingly, Business Links. Every

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effort is made to ensure that the process of setting up in the United Kingdom is as easy as possible and that investors have quick access to the best advice. I also pay tribute to the work of the Foreign and Commonwealth Office, not only for their promotional work in relation to inward investment but also in relation to exports. I am grateful to the noble Lord, Lord Rathcavan, for his kind remarks about the Northern Ireland Office. Some 4,000 jobs have been created as a result of inward investment since the ceasefire. That is extremely desirable. Clearly, we are keen to see that figure rise even further.
The noble Lords, Lord St. John of Bletso, and my noble friend Lord Cuckney asked what was being done to promote London as a financial services centre. Clearly, that is equally important in terms of inward investment. There is now a new City Promotional Panel to promote our service industries, and clearly London is the jewel in the crown. That panel is an important step forward in co-ordinating the promotion of financial services and the attractions of the City of London in particular. The city's attractions as a European financial and headquarters centre are marketed actively not only by Invest in Britain but by London First Centre and the Corporation of London.
We do not stand alone in the world looking for inward investment. It is now a global activity. Increasingly, we live in an open, global marketplace. Attitudes to overseas investment throughout the world have undergone a dramatic change. Where it was once regarded with suspicion, it is now eagerly sought. I do not believe that we should resist it. The noble Lords, Lord Borrie and Lord Wallace, were concerned that we might disappear under foreign ownership. In 1994 cross-border acquisitions made by United Kingdom firms overseas amounted to over £15 billion. At the same time, acquisitions made by overseas firms in the United Kingdom were valued at just over £5 billion; in other words, our acquisitions were about three times as large as those who invested here.
The noble Lord, Lord Haskel, highlighted that there had been a fall in inward investment recently. In that he is technically correct. The figures for inward investment flows in 1994 were lower than those for 1993. However, this was due mainly to a fall in the flow from the United States. The total United States outward investment fell by about a third in that year. Notwithstanding that fall, we still enjoy about two fifths of the Untied States inward investment to Europe and about one-sixth of US investment in global terms.
Concern was expressed that there might be a degree of safeguarding of the ownership in the manufacturing sector. The noble Lord, Lord Peston, indicated that he did not regard that to be important. I share that view. Fascinatingly, last week when motor sports were discussed, it became quite clear exactly what was being invested in here by a most extraordinary range of companies from around the world. I would have thought that Ford was regarded by many people in this country as a British company. Not only do people work in it now but their fathers and grandfathers may also have worked for that company. I do not believe that ownership is that important a feature.
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The noble Lord, Lord Astor, raised the specific point about Jaguar. We are fully aware of the position on the X200 project. We continue to have a close and, I trust, positive dialogue with the Commission, and we have provided it with extensive information to enable it to evaluate that project. I assure the noble Lord that Her Majesty's Government is determined to keep Jaguar within the United Kingdom.
There has not been over a period of change, as some have feared, any significant degree of disinvestment in the United Kingdom by investing companies. There are signs that existing US investors are reviewing their pan-European operations in order that they remain ahead of their competitors. As one may expect, there is a standard form of rationalisation, but we appear to be doing very well. The noble Lord, Lord Ezra, picked up a point very much at the centre of the Invest in Britain Bureau's present strategy, that we should emphasise the role of aftercare. It should be made known to those who have already come here as inward investors how welcome they are. I believe that the best proof of the success of that approach is the recent major expansion that Fujitsu have announced.
Bedevilling discussions about inward investment is the issue whether or not we have attracted investment here because labour costs are lower than elsewhere in Europe or the world. The Government do not associate themselves with any notion that the case for inward investment depends upon the concept of a low-wage economy. We are concerned to ensure that labour unit costs are low. They are probably about 60 per cent. of German labour unit costs. In that context, what is of interest is that the take-home pay of someone who works in the car industry for a company owned by a German company is probably 80 per cent. of the take-home pay of a worker in Germany, whereas the cost of living here is significantly lower. For example, in terms of real take-home pay a single person in the United Kingdom is second only to Luxembourg in terms of the European Union.
I stress that the issue of wages does not seem to he the most direct point in terms of attraction. While it is important that labour unit costs should be low, actual wages are not that important. I believe that it is the experience of anyone who has had contact with inward investors that the general pattern is that they pay at, or in many cases above, the going rate. What concerns them are the broader social costs.
Concern was expressed by both the noble Lord, Lord Laing, and Lord Wallace, that inward investors received more favourable assistance than indigenous investors. Regional selective assistance operates under the same rules and regulations both for indigenous and foreign companies to set up, expand or safeguard managing facilities, resulting in a net creation or safeguarding of jobs in United Kingdom assisted areas. Both noble Lords may be interested to know that some 60 per cent. of RSA goes to United Kingdom companies and only 40 per cent. to foreign investors.
My noble friends Lord Wade and Lord Shrewsbury were concerned that some areas of the country might not secure the same level of support as others. It is our

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view that we cannot promote individual locations or regions to foreign investors, since decisions on the location of investment are for the commercial judgment of the companies themselves. However, in 1995–96 the IBB made grants totalling approximately £8.8 million towards the funding of the inward investment activities of the English regional development organisations and similar activities in the east and south-east regions. That is an increase of 57 per cent. compared with 1993–94.
There may be arguments about the levels of incentives or the areas in which they are made available, but there are certainly incentives in place. What I would clearly wish to avoid is that there should be any disincentive to investment. I would be particularly concerned were there to be any disincentive north of the Border. That theme was taken up, first, by my noble friend Lord Oxfuird, and then by the noble Lords, Lord Laing and Lord Goold. I heard very clearly what the noble Lord, Lord Laing, had to say but I think it is worth appreciating that even if corporation tax were not payable by a Scottish company to a Scottish Assembly, should that folly be perpetrated on Scotland, all those who worked in Scotland within those companies might face the risk of having to pay that extra 3p in income tax, whether the managing director or someone sweeping the floors. Even if Locate in Scotland did not draw that risk to the attention of potential inward investors to the United Kingdom, I have no doubt that such a doughty fighter for his own region as my noble friend Lord Wade would make it known to them that there was that disincentive north of the Border. Being the sponsor Minister for the north-east of England, I have no doubt that those responsible for attracting inward investment there would similarly make that point. I do not believe that anyone would seriously take up the stance that extra income tax payable north of the Border would not affect the distribution of inward investment or the location of existing jobs between England and Scotland.
I leave the matter with just this observation. The noble Lord did not care for what he described as the "threat" of the noble Lord, Lord Laing, which I certainly did not understand it to be. But when he promised that the next Labour Government would be as good as the last Labour Government, I regarded that as being the one threat that has truly been issued during the course of the debate this evening.
Another area which threatens a serious level of disincentive with regard to inward investment is that of the social chapter. What we have to remember is that the United Kingdom is not only competing for inward investment and trade with other European countries but we are also competing with other countries in eastern Europe which are not members of the European Union and indeed with the United States, where statutory regulations on employer-employee relations are relatively limited.
I hasten immediately to say to the noble Lord that I shall not engage in discussion on the minimum wage. For what concerns me most about the impact of the social chapter is that if we were to lose our flexibility of hours, including shift working, there would be a serious risk of losing inward investment. If we were to accept restrictions on hours being worked, I have no
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doubt that the keen competitive edge that we have at the moment and which, if I may remind noble Lords, has been remarked on by the former President of the European Commission, would be lost. He accepted that Britain would remain a paradise for inward investment so long as we kept our position outside of the social chapter. All those parts of the package are more significant than even the minimum wage.
Inward investment is all about partnership. At one time I was asked to be clear that it was not just success of the Invest in Britain Bureau that brought this all about. I am ready enough to acknowledge that. It is a partnership of national, regional and local organisations, Business Links and the like. I know from my experience in the north-east of England that that has certainly come into place. Siemens is a brilliant example. It took a decision to invest in the United Kingdom in late July. By a skilful partnership in the north-east of England, it was possible to cut the sod, with all permissions granted, by the beginning of December. I do not believe that a comparable pattern could have been achieved anywhere else within Europe. That is clearly important and I am glad to pay that tribute to the partnership that brought it about.
I intended to conclude with a series of quotable quotations from foreign investors around the world. I shall restrict myself to just two. First, the chairman of BMW recently said:
"Structural change has made Britain by far the most attractive place to invest in Europe".
Perhaps I may say to my noble friend Lord Lyell, given his keen interest in the pharmaceutical industry, that the chairman and chief executive of the pharmaceutical company Upjohn had this to say:
"London is the centre of the globe in terms of the pharmaceutical industry".
The United Kingdom has been voted the world's most popular destination for foreign direct investment, ahead even in 1996 of China. A survey by Corporate Location showed that the United Kingdom was being considered by 27 per cent. of foreign investors for projects within the next three years. In citing these figures, I hope your Lordships do not believe that the Government are complacent. Far from it. As we have achieved this position of primacy, our task must be to ensure that we do not lose it.
6.25 p.m.
The Viscount of Oxfuird: My Lords, I am very, very pleased and honoured to have been able to facilitate this debate. I genuinely believe that the skill, experience and dignity with which this subject has been treated demand that Hansard of your Lordships' House should be available on every news-stand in the country. But unfortunately we cannot afford to do that. I thank all those who have participated in the debate. I beg leave to withdraw my Motion.
Motion for Papers, by leave, withdrawn.

Edinburgh Assay Office Order Confirmation Bill
Brought from the Commons, read a first time, and (pursuant to the Private Legislation Procedure (Scotland) Act 1936), deemed to have been read a second time and reported from the Committee.
Edinburgh Assay Office Order Confirmation Bill

  The Welsh Economy
  6.27 p.m.
  Viscount St. Davids Viscount St. Davids rose to call attention to the economy in Wales; and to move for Papers.
  The noble Viscount said: My Lords, the last opportunity we had to debate the economy in Wales was 29th January 1992, at col. 1311 of Hansard. It is unfortunate that tonight's debate is without knowledge of the contents of the rural White Paper which will be published early in February.
  During the past four years your Lordships have passed three Acts specific to Wales and two education Acts containing special provisions for Welsh education. All these Acts have an economic impact on Wales. The situation is not unlike a nest of Russian dolls, the Welsh economy being the smallest, contained inside the UK economy which itself lies within the European economy, which in turn lies within the world economy. In the past, when our economy was overwhelmed by the colliery face and steel plants, the world sneezed and Wales caught pneumonia.
  Wales entered the recession ahead of the United Kingdom and came out earlier. The index of industrial production for Wales now stands at a higher figure than that for the UK, having passed that point during 1994. Manufacturing as a percentage of GDP, at more than 27 per cent., is significantly higher than the 21.6 per cent. for the United Kingdom as a whole and compares very favourably with the best regions of England. Unemployment, historically higher in percentage terms than in the UK as a whole, started the recession at a higher level but now, at 8.2 per cent., is within 0.2 per cent. of the UK figure.
  Surveys published this month by the CBI and Dun & Bradstreet show Wales to be the most optimistic region of Great Britain. Nearly 80 per cent. of Welsh firms expect to increase sales, 70 per cent. to increase their exports, and 66 per cent. to increase employment. Welsh manufacturers continue to plan high levels of investment in training and innovation and a moderate increase in investment in plant and machinery. Wales is the only part of the United Kingdom in which manufacturing employment has increased in the past decade. There has been a slow narrowing of the gap in average earnings, which in Wales now stand at 90 per cent. of the UK figure.
  There has been a second industrial revolution in Wales. That can be attributed to successive governments. The statistics do not reveal the true picture for the whole of Wales. It would be a golden age if they did. The second revolution relates not only to assets but also locality. It is mainly confined to the area known as
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  the M.4 corridor. The statistics would look even better if they were not diluted by lack of economic progress elsewhere in the Principality.
  Unemployment in Newtown in December 1995 was below 3 per cent., in south Pembrokeshire over 13 per cent. An article in the Western Mail last week mentioned unemployment rates of over 20 per cent. in some areas. We know that Wales has an exceptional inward investment record. We have consistently attracted up to 20 per cent. of all inward investment recorded for the United Kingdom despite having only about 5 per cent. of the population. Overseas-owned manufacturing companies employ over 70,000 people—31 per cent. of the total number of manufacturing jobs in Wales. Why do they come to Wales? How do we ensure that they continue to come—not only overseas companies but also companies from elsewhere in the United Kingdom—and enable skilled Welshmen to stay at home?
  The main attractions of Wales lie in its quality of life, its telecommunications infrastructure, its inward investment promotion policy and the availability of suitable sites, premises and housing. To that we must add the fact that manufacturing productivity in Wales is the third highest of all UK regions and, on the latest figures, 3.2 per cent. above the UK average. Let us not forget the high quality of Welsh education, a subject to which I shall return.
  The Welsh Office and the Welsh Development Agency are not the only agents at work securing inward investment. We must also recognise the important part played by local authorities, many of which have built up a considerable expertise. We must ensure that this expertise is safeguarded during the process of local government reorganisation. It is far too early to know what will be the effect on the Welsh economy of the proposed changes.
  This year is the 20th anniversary of the Welsh Development Agency, created when the right honourable gentleman Mr. John Morris was Secretary of State. Many functions were brought into being by the noble Lord, Lord Cledwyn of Penrhos, and subsequent Secretaries of State. The invaluable contribution that the Welsh Development agency has made to the economic prosperity of Wales is well known. The agency will have removed all major industrial blight and dereliction by the year 2000, a very remarkable achievement. The noble Lord, Lord Cledwyn, who has done so much for the cultural and economic prosperity of our country, can be proud of his brainchild. It has taken the Welsh economy from the 19th century, through the 20th and prepared it for the 21st century.
  The agency has decided to adjust its programmes to take account of both slower than expected progress in some schemes and lower than anticipated receipts this financial year. However, contractual commitments will be honoured and no projects lost. The agency is expecting to exceed its target for inward investment at 10,000 created, or safeguarded, jobs of which about 8,000 have been secured. That is 60 per cent. up on a year ago. The 1996–97 budget will allow the agency to increase grant-in-aid by 58 per cent. to reflect its

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  priorities and the work that it has to do. That will enable the agency to fund gross programmes of a size similar to those of this year at around £130 million.
  The Cardiff Bay Development Corporation, another important engine of economic growth, is still expected to meet its key lifetime target of providing of over 25,000 jobs, 6,000 homes and the attraction of about £1.5 billion of private sector investment, of which £350 million has already been achieved.
  Tourism is not an area in which I lay claim to any particular knowledge other than that I live in an area of Wales which could not exist without it. The tourist industry contributes about £1.3 billion to the Welsh economy, being about 5.5 per cent. of the Welsh GDP. It employs 9 per cent. of the labour force and provides about 95,000 jobs. But its contribution to the economy is out of all proportion to these numbers as it brings prosperity to areas far from the M.4 corridor.
  I pray that I am not being over-harsh when I suggest that if tourism in Wales is to play a more prominent part in the growth of the Welsh economy it must trade up. There are too few quality hotels and many of our resorts give the appearance of living in the immediate post-war period when the competition was a holiday camp. With its short summer season and uncertain weather, it is to the growing wealth of the older generation that Welsh tourism must look. There may be a market to capture as medical opinion raises concern over excess exposure to the sun—not a Welsh problem! But that will also require a fresh look at the accommodation and other amenities being offered. The sunny southern regions of Europe will not part with their tourist trade willingly.
  The short-term cottage rental sector maintains a high standard, policed by standards set by the letting agents, the Welsh Tourist Board and competition from other cottages in the neighbourhood. The tourist board does a first-class job, but in many areas of Wales further gains will depend upon a reappraisal of what is being offered and major investment in upgrading.
  Education is all-important to economic success. The Welsh have always known that the route to the classless society is through the classroom. They have always known that the ladder that extends from poverty to personal fulfilment is the ladder of educational achievement. That is why the culture that pertains to education in Wales differs so widely from the culture that pertains in England. I believe that this cultural difference is little understood in Whitehall.
  I do not intend to set up an educational polemic to tilt at. Tall I may be, but Don Quixote I am not! I believe that local authorities have sufficient resources available to ensure that their schools are adequately funded. The number of young people entering higher education, at 30 per cent., has more than doubled enrolment at higher education institutions other than the University of Wales. Enrolment at the University of Wales has increased by 70 per cent. since 1980 despite the fact that many Welsh students seek their education elsewhere in the United Kingdom.
  I express considerable concern that Welsh language education is little understood outside Wales. I have heard of cases of entrepreneurial talent being deterred in Wales by misunderstanding. If education is a cornerstone of economic success, then so is social cohesion. A people divided against themselves will not succeed. Most of Wales is a long way from London and even further from Brussels. National identity is a protection against a feeling of isolation by the individual. Language is a part of national identity. The Welsh Language Act—its birthplace was your Lordships' House—has a key role to play in Welsh culture. But it must be used sensibly, as an agent of cohesion, not of division.
  Each locality will have a local innovative job creation scheme of note. This evening I draw attention to just such a scheme. Mr. Danny Fellows, district secretary for Wales of the TGWU, has started a lottery, licensed by the local authority, which can raise up to £10,000 a week. It offers prizes of £2,000 a week. The profit is devoted to the financing of small businesses.
  Small business projects are selected by a committee drawn from the local business community. The scheme is promoted by local banks which may well contribute capital, adding gearing to the number of jobs created. The lottery is creating jobs at the rate of 200 per year, a number expected to rise to 400 as it becomes better known. Mr. Fellows's scheme shows that "good causes" are not necessarily the "best causes". If such a scheme was copied by all local authorities in Wales, the resulting job creation would be enormous.
  I had high hopes of the West Wales task force when it was announced by my right honourable friend Mr. David Hunt. Unfortunately, its inception caught the downturn in government spending and it is unfunded.
  The geography of Wales does not allow for easy north-south communication. Road projects must remain a high priority if the whole of Wales is to take part in growth similar to that achieved in the M.4 corridor. Local innovation cannot overcome bad communications.
  In the time allowed, I can raise only a few of what appear to me to be important issues. The economic success of the south must now be matched by equal success in rural and coastal areas. Let us hope that the rural White Paper will sow the seeds of that success. I beg to move for Papers.
  6.42 p.m.
  Baroness White: My Lords, we should all appreciate the speech made by the noble Viscount, Lord St. Davids, although he used the word "economy" in a wider sense than I had supposed that he would. Earlier this afternoon I listened to a number of the speeches in the previous debate on inward investment into the UK, including the excellent speech of the noble Lord, Lord Borrie. I could not help wondering whether it was better for us to have our own separate debate on a complex subject in Wales or whether it would have been more desirable to have joined with Scotland and England in the previous debate. Having listened to the noble Viscount, I think that we are probably better off as we are with our own opportunity and our own subjects. Those of us who have

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  at heart the welfare and well being of Our native land must express our gratitude to the noble Viscount for giving us this opportunity to consider aspects of the current and prospective economic position of the Principality.
  I must confess to being slightly irritated to find that when I had gone to some considerable trouble 10 days ago to check at source the current Welsh position in the two areas about which I wish to speak, I found that one was dealt with at some length last Friday in the Financial Times and the other today in our major Welsh newspaper, the Western Mail.
  The first subject in my area of concern relates to aspects of the Welsh Regional Technology Plan which was not touched upon by the noble Viscount. I have the consultative text of the Welsh Regional Technology Plan which I will happily give him at the end of the debate.
  The other subject with which I am concerned is tourism, which the noble Viscount discussed but upon which I should like to give further detail in a moment. The RTP—everyone now calls everything by its initials—is an interesting way of discussing the problem of our culture and our financial position. It took about 18 months' discussion with 600 companies and organisations to bring about a consultative report, which was issued on 24th January, on a regional technology plan aimed at developing a much needed culture of innovation in Wales.
  The interesting point about it is that Wales is one of only eight European regions, and the first in the UK, to have been invited to devise an RTP by the European Commission which provided 200,000 ecu (£157,000) in each case to fund a pilot scheme. The prime motivation for the RTP is that investment in research and development and innovation has been shown to be a key factor behind the disparities in the prosperity of European regions. The richer regions spend six times more on that than the poorer regions such as Wales. The noble Viscount was confident about the Welsh situation, although it seemed to me that the RTP was a little less so.
  Wales appears to have the lowest level of industrial R&D investment of any mainland UK region. Compiling a report was a team effort with the WDA which matched the European funding and led the project with support from the Cardiff Business School. This is, of course, attached to the University of Wales, with which I had a good deal to do years ago when I was a university officer in Wales.
  The Welsh Office chaired a steering group drawn from industry and the public sector, including local authorities. In charge of the group, and the author of the consultative report, was Mr. Meirion Thomas, who is attached to the Business School, although he wrote the report independently. When the report was being issued last week, he said:
  "In Wales we have trouble with implementing new ideas".
  He emphasised in particular:
  "Established banks expect to have a quick return. They do not really understand innovation. They are not prepared to wait for the 10 or 15 years it takes for the return to emerge".
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  I am not well enough informed about these matters to he able to judge the validity of what he said but it sounds convincing to me. The objective of the RTP exercise is to develop a consensus among academia, the public sector and industry, on a strategy to help to improve the performance of the Welsh economy. That is an interesting way to go about such matters. The consultative report was issued last week at a seminar in Cardiff attended by nearly 300 people. It had the blessing of the Secretary of State for Wales, who was present on the video only. However, I understand that that was reasonably effective.
  The final report on the RTP is expected to be published late in March. Mr. Meirion Thomas states:
  "The exercise over the past 18 months has put Wales at the forefront of European thinking on regional development and innovation strategy".
  He suggests that companies learn best from each other. Supply chains and networks are crucial to innovation. That is easy to say, but not so easy to carry out. That is so as regards the smaller firms, which may have good ideas but lack confidence or resources, and as regards the larger, established firms which fail to realise the need for change.
  We are fortunate, therefore, that the Welsh economy has caught the attention of the resources of the European Commission as well as the Welsh Development Agency and we must wish it well. In the meantime, we can expect to face highly relevant increased competition from South-West England, following the second Severn crossing and the new West of England Development Agency. On the positive side, I believe that we have some promising developments ourselves. I am told that the new steel production facility at Llanwern may become the most advanced plant in Europe. I very much hope that that is true.
  Perhaps I may refer briefly to the other subject on which the noble Viscount, Lord St. Davids, touched; that is, tourist enterprise in Wales. It is undoubtedly one of the most important subjects. Again, I have brought with me the necessary document. I am not sure whether the noble Viscount has seen the Wales Tourist Board's magazine for 1996. It was made available last week and I should be delighted to give him another present if he does not have a copy. When we spoke about tourism in Wales a few days ago he seemed to me to be rather scathing about some aspects of it; I believe mistakenly so, because during the past 10 years the tourist industry in Wales has improved remarkably. The Wales Tourist Board's holiday magazine for 1996 is a very impressive publication. No other tourist organisation in Great Britain has or could have anything superior.
  Some of your Lordships may know that for the past 10 years or so the Wales Tourist Board has been actively run by Mr. Paul Loveluck, who has recently resigned to take over the post of Chief Executive of the Countryside Council for Wales. I know that he was most active during the 10 years that he was in charge of the Wales Tourist Board. In his farewell message to colleagues two weeks ago he wrote:
  "It has been a privilege to play a part in the development of one of Wales' most important industries and to see it done in ways which will sustain our natural environment and our cultural heritage.

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  Through the partnership which has been forged between the private and public sector a great deal has been accomplished. The standard and range of facilities for our visitors has improved beyond recognition. Our professional and customer care skills have also improved. Our universities and colleges are now turning out well qualified and motivated young people anxious to join the industry".
  Mr. Loveluck then refers to the development of image building and direct marketing in the United Kingdom and to the achievement of overseas marketing powers for the Wales Tourist Board. Most noble Lords will know that the board had great difficulty in obtaining adequate arrangements for its overseas direct marketing. A national tourist information centre network of 85 centres has been set up with 55 of them now open throughout the year, compared with only two centres 10 years ago. The tourist industry in Wales has great resilience and has a capacity to play an even greater part in the programme of balanced economic growth in Wales.
  I apologise to your Lordships for speaking for too long; I did not follow the numbers on the clock. However, we have plenty of time to discuss Welsh issues and I am glad that the noble Viscount has given us this opportunity tonight.
  6.56 p.m.
  Lord Hooson: My Lords, it is always a pleasure to follow the noble Baroness, Lady White, who in a variety of guises has made such a great contribution to the life of Wales, not least to the economy of Wales. I wish to congratulate the noble Viscount, Lord St. Davids, on introducing the debate, which is so timely. I appreciate fully the thrust of his remarks, which went beyond the M.4 corridor.
  I wish to say at the outset that I completely support the remarks that will be made later by my noble friend Lord Davies on the importance of the opera house at Cardiff as an integral part of the development of the attractions of the capital city of Wales. I do not wish to duplicate his remarks, but I have been privy to correspondence and comments made by the noble Lord, Lord Crickhowell, as chairman of the Opera House Trust. My noble friend Lord Davies is co-chairman of Welsh National Opera. I completely share their exasperation at the lack of consistent approach and inadequate reasoning that so far has emerged on that subject.
  I wish to concentrate my remarks on three topics and for my sins I must make a declaration of interest in respect of each one. The first is the importance of the M.4 corridor. The prosperity of the M.4 corridor depends to a degree, and assists to an even larger degree, on the Severn crossing. I happen to be chairman of the company which is building the second river crossing and which runs the present bridge across the Severn. That development is of supreme importance to Wales. I agree that the development that has taken place along the so-called M.4 corridor is natural and inevitable.
  Years ago when I was practising at the Bar I undertook a case for the late Sir Brandon Rhys Williams. He was a far-seeing chap and perhaps a little eccentric at times. The case engendered an enormous
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  amount of opposition and it concerned the land which is now the home of the Bosch factory at Miskin. A great deal of the inward investment—Bosch was only one investor—came to that corridor. It is clear that such development will flourish on each intersection that is available along the M.4 and on tributaries to and from it. That part of South Wales is going to develop apace, as is its counterpart on the other side of the Severn estuary.
  Perhaps I may give some figures about the growth in the volume of heavy goods vehicles travelling on the present Severn Bridge. Perhaps contrary to the impression which the Cardiff Business School created a little time ago the figures show—I have checked them today—that the increase between 1993 and 1994 in heavy goods vehicles using the bridge was 2.6 per cent. and that between 1994 and 1995 that figure increased by 6.3 per cent. We do not yet have the figure for 1995–96, but all the indications are that the increase will be at the same rate. That increase has gone on month by month. There has been a steady increase in the number of heavy goods vehicles using that bridge for 17 or 18 months now.
  In passing, perhaps I should mention that the bridge is a marvellous example of European co-operation and of investment on the part of the European Investment Bank, without which it could not have been built. It might be worth pointing out for the benefit of all the Euro-sceptics that the bridge is a marvellous example of British-French co-operation. If it were not for the existence of the common market and other markets in Europe, there would have been no need for a bridge. We in South Wales would have slumbered into decline at a rate that is unimaginable today. That is why I am clear about the future prosperity of that area.
  I turn secondly to the greater problem of the rural areas, which was mentioned by the noble Viscount. I should like to concentrate on Mid Wales as it is the largest of the vast rural areas in Wales. I have an interest to declare here because I happen to be chairman of Laura Ashley plc, which is a supreme example of the success of such a venture in a rural area. Although I had known that it was the largest private employer in Mid Wales, I was amazed to learn last week that Laura Ashley plc is the third largest private employer in the whole of Wales.
  It is important that we recollect that in 1962 when I became the Member of Parliament for Montgomeryshire the whole area was suffering from acute depopulation. The noble Baroness, Lady White, will well remember that. I shall not go over all the steps that were taken, or all the campaigning that was necessary, to change that trend, but I would say this—and every government should remember it—that without government investment and leadership, the rehabilitation of Mid Wales could not have taken place. Mid Wales needed pump-priming, intelligent investment, the development of its roads, and leadership from within Mid Wales, which mercifully, was present. It also needed the backing of government through the Welsh Office and the development board in its various guises. That body is now known as the Development Board for Rural Wales. That point is important.

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  The present requirements are as follows: it is important to safeguard the industries that are there. There are disadvantages to being in Mid Wales. The transport difficulties are obvious. In addition, air communication is not easy, although it is so important for larger companies which have to get their products to ports or to airfields that can take large planes. All those factors are important, as is the availability of grants for equipment. In the 1960s when such companies were developing in Mid Wales those grants were extremely important. Small business loans have also been successful there.
  However, there is also a case—I have no doubt that the Government will look at this—for allowing organisations such as the rural development board and the Land Authority for Wales to take equity in a company and to share the risk and take the benefits. There needs to be a partnership between private industry and public investment.
  The third matter that I should like to discuss is agriculture. My noble friend Lord Geraint will deal with this in more detail, but I particularly wanted to mention the research facility at Aberystwyth. I refer to the famous plant breeding station. Again, I must declare an interest because I am a farmer and was for some years a member of the governing body of the Institution for Grassland and Environmental Research. I mention that because everybody involved in agriculture knows how important that facility in Aberystwyth has been for the past 75 years, not only for Wales but for the United Kingdom and for developing countries overseas. If only one institution can claim the greatest credit for the green revolution, it is that institution under Sir George Stapleton, one of the most distinguished Englishmen ever to become a naturalised Welshman. He made a tremendous contribution.
  This year the future of that facility, like the future of IGER, will be carefully considered under the "public options" scheme. All that I ask the Government to do is to give an indication of what they think is the right road ahead and to keep that very important research capability and all the research expertise at that plant breeding station in Aberystwyth. Is it to be differently formed under IGER? Is it to be attached to the university? Whatever happens, it is vital that that capability and expertise are preserved.
  7.6 p.m.
  Lord Elis-Thomas: My Lords, as always it is a pleasure to follow the noble Lord, Lord Hooson, and to endorse what he said about European investment and rural policy. The noble Baroness, Lady White, did the House a courtesy by referring in great detail to the importance of research and development in the recent regional technology plan (RTP) of the European Union. It is perhaps the most important recent innovation in the Welsh economy and I congratulate the noble Baroness on drawing the attention of the House to that important subject. We look forward to the final stage and to the report produced by Mr. Meirion Thomas.
  The whole House is grateful to the noble Viscount, Lord St. Davids, for helping us to celebrate the 20th anniversary of the Welsh Development Agency; an
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  agency which I recollect the Conservative Party opposing at the time of its establishment, but we shall not go over that ground now. Nevertheless, it is important to celebrate such occasions and to mark the work of the agency, which has not had an altogether positive press in recent years. I deprecate the tendency of some Members of another place to talk down Wales and through some of their statements to undermine the effectiveness of our institutions when they are abroad working for the development of regional policy in Wales.
  In its 20 years of operation, the agency has spent over £1,750 million in the Welsh economy. Of that, a total investment of nearly £280 million went directly into business between 1977 and 1990. I should like to refer not only to investment in business, but to the equally important environmental investment of the agency. That is the theme that I want to pursue. I declare an interest as vice-chairman of Cynefin Environmental Limited, a small to medium-sized environmental consultancy. Between 1976 and 1995 the agency improved over 9,000 hectares of land by reclamation at an investment of nearly £300 million. That investment means that the agency is committed to greening Wales in all senses. After 20 years, it is appropriate that the agency itself should be taking stock of its contribution to the greening of Wales and realising that greening is not just about clearing dereliction, but about developing sustainable development in the broadest sense and ensuring that the quality of life in Wales is enhanced in all ways.
  I believe that in the next 20 years the environmental policy of the agency—indeed, the environmental goals of government and public sector investment—should be at the front end. Surely Wales can take the lead in that. We still have a magnificent environment. We have areas which are designated for their outstanding landscape and scientific quality. We already have a good image in terms of the quality of life in Wales.
  What we need to do is to enhance that in all possible ways. That requires a vision for the Welsh environment which I know the agency is developing in partnership with the other agencies, such as the Countryside Council for Wales and the equally important agency referred to by the noble Lord, Lord Hooson, the Development Board for Rural Wales. I very much applaud the recent decision of the board to restructure itself to meet the new requirements and "Go West" by separating its western and eastern sections. I am sure that that will bring benefit to the people in my old constituency of Meirionnydd and also to the area of Ceredigion.
  The emphasis on rural development is not the only essential emphasis in terms of environmental policy. The South Wales Valleys are a major area of environmental improvement. The agency, the countryside council, the tourist boards and the local authorities have a new vision for the valleys which is to restore its traditional landscape and to reverse the dramatic developments of the 19th century, while maintaining the very special sense of community which was created at that time.
  That enhancement is important because it would create the opportunity for people to take part in restoring their own community. Here I declare an interest as one

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  of my voluntary activities is chair of the co-ordinating committee of the "Keep Wales Tidy" campaign. We have been involved in a number of initiatives; for example, in cleaning rivers and cleaning up valley communities and, indeed, with providing people with the opportunity and skills to care for their own areas. That initiative itself is an indication of the importance of the greening of our towns and cities.
  High quality landscapes are important, but equally important, too, are the objectives of environmental policy as they apply to technological development. Here I should like to commend what the noble Baroness, Lady White, said about the importance of developing a culture of innovation through the regional technology plan. I should like to mark up one particular area where I hope that that plan and the new investment of the agency will lead; namely, in the so-called direction of ETS—to add another acronym to our debates—which stands for environmental technologies and services. Surely they are the scientific investment areas of the future.
  The current world market in the area is already worth some 250 billion dollars according to OECD estimates, and it is calculated to rise. We can set that in perspective if we look at the aerospace industry, which has an estimated value of some 180 billion dollars. Therefore, it is already a major area. The market is currently dominated by Germany, the USA and Japan. One of the important aspects of that market is the fact that not only is it an example of how investment meets environmental criteria (which is usually set by legislation of Parliaments, of the European Union and, indeed, by international regulations), but also many of the costs of environmental improvements and of achieving new standards and promoting efficiency are seen as savings when they are turned into investment in new job opportunities.
  I should like to see Wales lead as a region which has had environmental problems to deal with but which still has a fragile and very striking environment of great variation, which is still attractive to tourism, with an emphasis increasingly on green tourism. Indeed, I endorse all that the noble Baroness, Lady White, said about the sterling work of Paul Loveluck with the tourist board. We wish him well, as she did, with his new role in the countryside council. Within that context, it is possible for Wales to develop and become a market leader among European regions in the whole area of ETS. I have in mind the technologies of water and effluent treatment in which we already have a strong lead from Welsh Water (our regional water company), the areas of waste management recycling and air pollution control and, indeed, the areas of energy and urban amenities, including the restoration and development of public transport.
  We heard earlier an emphasis on the importance of road transport and road communications. I am proud of the fact that I travel between North and South Wales regularly by train and try not to drive. It is important, I believe, that I should save myself for my work of ensuring that the Welsh language becomes developed in the life of Wales and it is easier to do so using even that
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  convoluted train ride from Bangor, through the lovely Welsh borders and down to Cardiff. However, we need to improve that service. We need to improve the quality of the rolling stock and, indeed, of the timetable. But we also need to look at our inter-valley urban transport and our bus services in rural areas. We need an integrated strategy for public transport throughout Wales.
  In terms of the development of our environmental industries, we can also look at the development of environmental biotechnologies and other environmental services. If we consider that as a key area we can see that it is possible to envisage Wales as a lead area in environmental technologies and in sustainable development. But that can only be done in partnership. Moreover, it would have to be a partnership between the major agencies and the private sector; and it would also have to be a partnership with communities in Wales and in particular with our new local authorities.
  I hope that our new local authorities will be taking up the challenge of local Agenda 21 and that they will be look at sustainable development as a key activity for them within their own communities. Each community can look at what it should be doing to ensure that it is a community which is greening itself and that it becomes an attractive place for its residents and a place in which they can be proud to live, about which visitors will say, "Here is a country which is both local in its commitment to its language, culture and heritage, but which also has a global vision".
  7.16 p.m.
  Lord Aberdare: My Lords, I, too, should like to thank my noble friend Lord St. Davids for giving us the opportunity to discuss Welsh affairs. We do not have many such opportunities and this one is certainly most welcome. My particular interest lies in what were the mining valleys of South Wales, and especially in the Cynon Valley where my family had its home until recently. I listened with great interest to what the noble Lord, Lord Elis-Thomas, said about the mining valleys.
  The whole valley depended on the coal industry, and the disappearance of the collieries has caused massive unemployment. The key issue in improving conditions in the valleys, therefore, is the creation of more jobs. I listened with great interest to the end of the last debate and I certainly agree that we need much more inward investment. After all, we are not that far from the M.4 corridor.
  Much has been done—and, indeed, is still being done—to achieve that end. I should especially like to commend the Cynon Valley Business Partnership which was stimulated and is run by Mr. Alun Davies. The partnership involves local businessmen with statutory bodies in the task of bringing new jobs to the area—just, I believe, what the noble Lord, Lord Hooson, advocated for his area. They have had some success thanks to the excellent co-operation from council officers, the backing of elected members, the money and efforts of the Welsh Development Agency (which has been frequently mentioned this evening), the support of the Welsh Office and the selective financial assistance

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  scheme. It has indeed been a thoroughly co-operative effort and there are signs that things are improving both economically and socially, though slowly. At least the unemployment figures have begun to fall.
  In the past year, unemployment in the Cynon Valley fell by 10 per cent. compared with 7.8 per cent. in the UK as a whole. So that was slightly satisfactory. But unemployment is still far too high and there is plenty more to do not only to bring industry to the valley, but also to improve communications in order to encourage people to travel to areas such as the greater Cardiff area where work is more readily available.
  However, there are worries and two in particular. The first is the fact that the Rhondda Cynon Taff Unitary Authority which comes into being in April has a total population of 232,000; Cynon Valley has 69,0000. As a result, out of 72 councillors in the new authority, only 12 come from the Cynon Valley and they hold no important committee chairs. They are, therefore, heavily outnumbered. Despite that fact, I hope that the new unitary authority will continue the work of regeneration in the Cynon Valley that has been a feature of recent years.
  The second worry is that the new unitary authority starts life, as I understand it, with a required cut in spending of £24 million, entailing a likely increase of 45 per cent. in council tax. If that is true, it is indeed a serious problem for a poor area. If the Minister is able to give us any comfort on those predominant worries when he replies to the debate, I should be most grateful.
  I now turn to a real success story in Caerphilly. There is a company called National Britannia which provides a package of environmental, hygiene and safety services and has many prestigious clients throughout the country, including Asda, Marks & Spencer, Littlewoods and British Gas just to mention a few. National Britannia was formed in November 1992 by Mr. Anthony Record. In 1993 it employed some 200 people and had a turnover of some £6 million. Last year it employed over 300 people and had a turnover of £9 million. Its latest objective is to spread its activities into mainland Europe. Apart from being a commercial success, it has fostered a feeling of mutual involvement among its staff, who feel themselves very much part of the company and responsible for its future. I am sure that there are many other small companies of this kind which are doing an admirable job, but this is just one that I happen to know well. I must declare a paternal interest because my son is employed in it.
  Finally, I wish to say a few words about the rural areas, which have been mentioned by other speakers. My personal interest lies in the neighbourhood of Llandovery. I wish to draw attention to the fact that, as in other rural areas, there are enormous difficulties for young people. It is hard for them to find employment and many of them go to the bigger towns or even leave Wales altogether and go to England. Those who stay behind still face many problems. In Llandovery there are 15 pubs but until recently there was no other meeting place for young people. This inevitably leads to problems of alcohol, of drugs and of vandalism. Now, thanks to the initiative of a young lady, Jill Tatman,
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  there is a new YMCA. Perhaps I should declare an interest as I am the president of the National Council of YMCAs in Wales. This new YMCA was started on a shoestring. The club was held in a school hall on one evening a week but it has proved to be meeting a real need—even though it was held on only one evening a week—by the fact that there was soon a membership of 95 boys and girls.
  I am happy to say that thanks to the generosity of some charitable trusts the YMCA has acquired a dilapidated church hall and, furthermore, has recently received a handsome grant from the National Lottery of £70,000 to renovate the hall and to buy a minibus. At present it is still staggering on in grim surroundings but it is managing to keep open three nights a week. The YMCA hopes that once the renovation is complete the club will be run for five or six nights a week. This is an astonishingly good performance and an example of the work the YMCA is doing for young people throughout Wales.
  I am afraid that this speech has been somewhat disparate, but one single theme runs through it—the success that can be achieved by individual initiative and enterprise. I have a few minutes left in which to speak and I wish to declare my support for those who advocate a general purpose theatre in the docklands area capable of providing a home for the Welsh National Opera company as well as providing a stage for ballet and other stage performances. I have great sympathy with that ideal. Many years ago I was chairman of the St. David's Theatre Trust. My fellow trustees were Sir Kenneth Trehearne, Sir Lincoln Hallinan, Clifford Evans and the great Saunders Lewis. We struggled along. We had an excellent architect in Elydr Davies and we received initial financial support from Richard Burton. We were trying to provide an all-purpose theatre for Cardiff. In those days the Welsh National Opera company had an amateur chorus and only a three-month season. There was no National Lottery to help us and I therefore sympathise very much with the difficulties with which the present trustees are faced. I very much hope that the Millennium Commission will see its way to reconsidering its decision. I believe that the docklands development needs a landmark building to crown its achievements.
  7.25 p.m.
  Lord Prys-Davies: My Lords, I wish to apologise to the noble Viscount, Lord St. Davids, for not being in the Chamber for the opening part of his speech. I had been to a meeting which was not unrelated to Welsh affairs. I also wish to thank the noble Viscount for giving us the opportunity to discuss the Welsh economy. Of course we gladly recognise that many parts of Wales have benefited greatly from the large-scale inward investment policies of the past decade or so. However, the benefits which flow from the new industries along the M.4 and, to a lesser extent, the A.55 have not reached the remoter rural communities and the industrial communities high up in the valleys of South Wales. In those communities there is high long-term unemployment and under-employment and income levels are low.

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  Of course the trickle-down process cannot be completed all at once and overnight. However, we are right to draw attention to the future of the poorer communities. I believe that their case is central to the whole question of the future of the Welsh nation. In preparation for this discussion—I say "discussion" because this is more of a discussion than a heated debate—I spoke to a number of people whose judgment I value and who live in the poorer communities both in the rural north and west and in the industrial valleys of South Wales, not far from where I live. I have to place it on record that some have expressed considerable disillusionment, even of anobaith; that is to say, hopelessness. I place that on record because it gives some sort of feeling of mood. However, I gladly acknowledge that there are other voices. Many of those who are working within the voluntary sector and with the local anturau—the local enterprise agencies—to regenerate local economies are more hopeful.
  I am not an economist or anything of the kind but it seems to me that the first purpose of economic policy is to enable all people to earn a decent living for themselves and their families, to provide an opportunity for our young people and to provide a reasonably civilised background for all our people. That is high principle but it leads me to ask a few questions of practical significance to the Welsh communities of which I have spoken. However, the Minister should not feel under any obligation to answer them all tonight, although obviously I should welcome a reply at a later stage if he is not able to do so this evening.
  My main questions relate to the policies of the Welsh Office and the need for more financial assistance from both the Welsh Office and the European Union. I have been encouraged by the degree of co-operation which is being achieved by the area partnership networks which seek to co-ordinate the activities of the local authorities and the agencies of central government, with their different objectives for different services. However, there is a grave shortage of matching strategic development funds. Can the Welsh Office enhance the funding available for the strategic development schemes?
  Like the noble Lord, Lord Aberdare, I have been told that the new unitary authorities will be very short of money. That is worrying, because in the past 20 years or so the total funding required at local level to embark on a community enterprise has included an important contribution from the local authorities. There is now widespread anxiety right across Wales that the new authorities, with their budgets under heavy pressure, will not be able to provide the funding which the county councils currently provide for economic regeneration. Is the Welsh Office seriously addressing that problem? I look forward with great interest to how the Minister will respond to the anxieties expressed by the noble Lord, Lord Aberdare, on that point.
  That brings me to the European Union funds, and in particular the European Regional Development Fund, the Social Fund and, in the context of rural areas, the Agricultural Guidance and Guarantee Fund. Can the Minister give an indication as to how European-minded
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  the Welsh Office is these days? Is its relationship with Brussels what it ought to be? There are anxieties about that relationship. I shall mention briefly the most recent cause for concern which has come to my notice.
  A few weeks ago the Scottish Secretary of State exercised his power to make the Rural Diversification Programme (Scotland) Regulations to implement for the benefit of Scotland's Objective 5(b) areas the European Council's decision to provide financial assistance for economic diversification of such areas. Under the terms of that order the Scottish Office can grant up to £25,000 (and in some cases £30,000) for approved diversification measures in respect of an agricultural holding. Why has the Welsh Office not made a comparable order? Is that not a symbol that its relationship with Brussels is not what it ought to be; or is it simply the case that the Welsh Office does not have the resources to enable it to proceed to make a comparable order independently of the Ministry of Agriculture? In any event, the delay in issuing a Welsh order comparable to the Scottish order needs to be fully explained.
  The last Secretary of State went through a difficult stewardship of the Welsh Office. However, I am glad that the present Secretary of State has not been afraid to change direction on occasion. Thus he has decided to publish a White Paper on rural Wales. Can the Minister give an indication when that document is likely to see the light of day?
  Under the last two Secretaries of State the Welsh Office committed huge resources and time to local government reorganisation. Can it now find some time to consider the future role of the Development Board for Rural Wales? As the noble Lord, Lord Hooson, explained, the board is a creature of statute, set up almost 20 years ago. There have been changes since then. Surely the board's area of operation should now include all the Objective 5(b) areas in Wales. Can the Minister please say a word about that?
  The partnership networks are conscious of the importance of information technology being made available for the economic development of the more remote areas. However, I shall not dwell on the importance of that technology as it is my understanding that the present Welsh Secretary has already grasped its significance. That is another issue upon which we should like to have assurance.
  My final comment concerns the role of the co-operative movement, which was part of the tradition of 19th century Wales. It still has relevance. That has been strikingly demonstrated by the solid achievements of the Welsh Co-operative Centre set up a decade or so ago and by the recent history of the Tower Colliery in Hirwaun. In a debate in your Lordships' House a fortnight ago my noble friend Lord Carter argued that there was a need for a new co-operative Act to take account of modern co-operative requirements and to provide modern legislative machinery. I urge the Welsh Office to take an interest in the proposal for new legislation which has been submitted by the UK Co-operative Council to the Treasury and the DTI.
  I shall be grateful if the Minister can answer some of the questions that I have addressed to him.
  7.35 p.m.
  Lord Kenyon: My Lords, I too should like to thank my noble friend Lord St. Davids for the debate. Four years ago, when the previous debate took place, I had not inherited from my father, so for me this is a first. I feel sure that it will not be the last.
  To the English it must seem curious that in the union of this United Kingdom we should set out to debate the economic condition of any particular region. We do not have debates on the economy in the south-west or the midlands region, but it is the historic nature of Wales that continues to set it apart from the rest of the Kingdom. While we welcome our union with the remainder of the country, we continue to cling fiercely to our identity as a principality, differentiated not least by our language and culture and largely unsullied by the Roman occupation. In a word, we are Welshmen first but we want the same terms and conditions as the rest of the country.
  Perhaps one of the greatest perceived disadvantages in Wales in terms of economic activity is its isolation from the rest of the country—"peripherality" in the words of Brussels. It is true that great advances have been made in the improvement of access to Wales, as has already been mentioned, but the concentration of economic activity in the south-east, where two major international airports (or four major international airports if one includes Luton and Stansted) make access so much easier. It means that there is always an uphill struggle when trying to attract new business to Wales.
  I should first of all declare my interest. Last May I was elected to the new Wrexham County shadow authority, so I am shortly to become a councillor in that authority. Two years ago I made my maiden speech on the Welsh local government Bill; it is no accident that many of those who spoke then are also speaking today, because Wales is paramount in their minds.
  The creations of that Bill, the 22 new unitary authorities, are now about to come into being. In just a few short weeks the unification of Welsh local government will come about. The transition has not been without its problems. The timescale was very short, as we pointed out at the time. Money, needless to say, is scarce and the cutting of the various bits of the cake has, from time-to-time, been acrimonious and will doubtless continue to be so for some time to come. Nevertheless, on 1st April the new authorities will open shop and the economic prosperity and progress of Wales will be an objective that they will pursue relentlessly.
  The new authorities realise that their goals cannot be achieved overnight and that there is a need for a concerted plan of action over a long period of time. More importantly, there must also be a partnership between all the players if success is to be assured. One of the problems of the past was the frequent lack of co-operation between county and district councils. That has now disappeared and the new authorities should be able to produce a single economic development plan specifically for their region.
  Of course, I am not forgetting the contribution of the government agencies. Those have already been mentioned. The Welsh Development Agency, the
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  Development Board for Rural Wales, the Welsh Tourist Board as well as the Department of Trade and Industry all play a major part in the development of a healthy Welsh economic environment. It goes without saying that the continuing partnership between those public sector bodies and the local authorities is fundamental to the success of any economic policy.
  On a national scale, economic development programmes are, quite rightly, the province of central government. But central government can only influence, as has already been said on at least two occasions earlier today. It does not create the economy or the jobs.
  Local government, too, is only a facilitator, or an enabler. However, it plays a central role in translating the national strategy into local action. The new authorities, even in their embryonic state, are acutely aware of the importance of keeping the momentum and of preparing now to form their own individual and collective views on how they wish to go forward in the coming months and years. Although it is a time of massive reorganisation and staff upheaval, they are conscious that they must not allow any strategic gap in the formulation and execution of the economic development plan. To allow such a gap would undo much of the good work that has been done to date.
  I believe that it is particularly important that a meaningful dialogue continues between my right honourable friend the Secretary State for Wales and the new authorities. I feel sure that he will acknowledge that the local authorities are in an ideal position to influence his policies and the other Welsh Office agencies' economic development policies rather than merely being directed by them, and that the local authorities should play an active role in the execution of the programmes.
  I am often reminded that Wales has benefited substantially due to the efforts of central and local government initiatives, and especially from European Union initiatives. I acknowledge that those have indeed been fundamental in encouraging the development of the economy. But it is all too easy to forget how Wales suffered after the war in the losses of jobs from the mining and heavy manufacturing industries as well as from agriculture.
  Wales continues to attract investment in new manufacturing industries and particularly electronics industries. Despite a general decline in manufacturing jobs in Europe, productivity in manufacturing, measured in terms of GDP per person, has increased in Wales to the extent that we are now among the highest in the European Union.
  However, in highlighting those strengths, we must not be fooled into thinking that all in the garden is rosy. Wales is still a long way behind the rest of Europe, and the position, if anything, is getting worse. Between 1981 and 1991 GDP per person dropped from 85 per cent. of the EU average to 83 per cent. and that even after the addition of Portugal, Spain and eastern Germany to the Union. For rural Wales the GDP in 1991 was even worse at little more than three-quarters of the EU average. Between 1983 and 1993 the average pay of those in employment in Wales compared with the rest of the United Kingdom

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  fell from 94 per cent. to 89 per cent. Therefore while it is true to say that jobs are being created in Wales, they are all too often low paid jobs.
  The goal for the future of the Welsh economy must he that set out by the Institute of Welsh Affairs; namely, to ensure that Wales enjoys a quality of life as good as the best in the European Union. In the light of the present starting point, which already shows evidence of deterioration, as well as tight spending plans and fierce competition from other regions of the UK and the remainder of Europe and of the world, this may sound like a tall order. But the evidence of success and the will to succeed are already there, and with the advantages of the higher public investment levels and the dedication of the development agencies in particular we are well placed to achieve that given a clear vision and leadership, and a willingness of all partners to engage in the closest possible collaboration.
  I wish briefly to touch on agriculture, and in doing so to declare my interest as a farmer and landowner; I know that my noble kinsman Lord Harlech will speak at length on that. The continuing structural changes are having a devastating effect on the rural communities. I know that this problem is by no means exclusive to Wales, but in many of the more remote rural areas there is no alternative to agriculture. Agriculture will always be the predominant factor in the economies of those areas. Many marginal hill farms in Wales produce incomes totalling less than £8,000 a year, and that probably for a 12 hour day, 365 days a year, no holiday, and precious little social life other than a weekly trip to the livestock market. It was a cruel blow to this disadvantaged sector of the farming community when the hillside livestock compensatory allowances (HLCAs) were cut. Such a small saving to the public purse has a magnification factor of indescribable proportions in the Welsh hills and valleys, and I hope that the position will be redressed very soon to stem the ongoing depopulation of rural Wales.
  I look forward to the White Paper on rural Wales which was promised by my right honourable friend the Secretary of State for Wales. I am sure that it will contain a cast-iron commitment to ensure the long term viability not just of agriculture but of the overall management of the rural environment in Wales. Anything less will spell disaster.
  The Welsh team are playing strongly, but they must keep their eyes firmly fixed on the ball if they are to win the game.
  7.45 p.m.
  Lord Davies: My Lords, first, perhaps I may thank the noble Viscount, Lord St. Davids, for initiating the debate on the economy in Wales today. I declare an interest in that I am the chairman of Welsh National Opera and trustee of the Cardiff Bay Opera House Trust. I wish to speak briefly on the effect on the Welsh economy of those two organisations—the first actual and the second potential.
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  Welsh National Opera, now celebrating its 50th anniversary season, has built an international reputation for excellence on the secure foundations of a company growing from an amateur band of musicians and singers, many from down the mines—truly the voice of the people. Fully professional for the past 20 years, the company employs at its headquarters in Cardiff some 250 full-time staff, including chorus and orchestra, and 50 or so part time. Of the turnover of £10 million, £7 million to £8 million goes directly back into the local Welsh economy. On the income side, some £2.1 million comes from ticket sales in England, and £0.5 million is earned by the set-making arm of the company, making sets for other companies in the UK and abroad. In the past year £170,000 was earned from a Japanese company for sets and costumes for "Madame Butterfly" for performances in Tokyo—a most successful collaboration. During the past three years the company has averaged £0.5 million in overseas earnings from production hires, foreign touring and set construction.
  But Welsh National Opera is probably more important to the Welsh economy in indirect ways. For many years the company has established a reputation for such quality in its work and care with its preparation that it has been able to attract artists of the highest order and as a result has created some productions that have aroused international interest. Thus the company has been invited abroad, including visits to Paris, Milan, New York and Tokyo. The last two visits were made in co-operation with the Welsh Development Agency and enabled it to reach a very large number of the captains of industry in both countries. The huge success of both visits was enhanced by the presence at a performance of our patron, the Princess of Wales, with, in Japan, the Prince of Wales, resulting in enormous media exposure for Wales associated with the excellence of the company. That, together with the improvement the company thus gives to the perception of the quality of life for staff living in Wales, will have played its part in the success of Wales in attracting overseas investment.
  Welsh National Opera is part of the way through its 50th anniversary season—wonderfully successful so far—with three new productions still to come, a celebration concert at St. David's Hall, a newly commissioned opera to open in Llandudno in July and a further season sponsored by Amoco at the Royal Opera House in March. The company's balance sheet remains in the black and we expect this year to end with another small surplus. But serious threats to the future viability of the company can be seen ahead. The government policy of cutting funds for the arts is already having a serious effect and, if continued, will mean the end of the company as we know it within a very few years. After all, most of the benefits to Wales that I outlined earlier will be lost if the company is not able to continue to work at the highest level. A great asset can be quickly lost.
  The other threats to its future are the compulsory purchase order on its headquarters for development due to be enforced in four years' time and the setback to the plans for a new home posed by the refusal of the Millennium Commission to support present plans for the Cardiff Bay Opera House. Ideas for this scheme started

  1521
  to form in the mid-1980s when it was realised that a centre for the performing arts, as it was then known, could form an important and constructive element in the planned regeneration of what was then a derelict docklands area. It was the vision of the Secretary of State for Wales, Nicholas Edwards as he then was, to link the city of Cardiff with its waterfront, a new waterfront that would rival the great waterfront developments of Baltimore and even Sydney.
  By 1991 a steering group had been formed under the auspices of the Cardiff Bay Development Corporation. Major feasibility studies into the viability, economy and fund raising were put in hand for the new opera house, as the project was called, at the instigation of the then Secretary of State for Wales, Peter Walker. Perhaps he had that most famous waterfront opera house in Sydney in mind, which is also used for far more than opera for much of the time.
  Re-reading some of the most comprehensive reports in preparation for this debate, I have been struck by how well they have stood the test of time and how accurate their figures for all but inflation have remained. The conclusion of the economic report by KPMG contained the following:
  "In both appraisals the quantifiable benefits are small compared with the capital and operating costs. Consequently, the economic case depends upon the weighting attached to other factors, notably the extent to which the opera house would enhance Wales as a location for inward investment and benefit the local community.
  As regards inward investment, it is estimated that the net present value of the options involving the construction of the new opera house would equal zero if investment projects from overseas worth £5 million-£6 million per annum at July 1991 prices were attracted by the presence of the opera house. The likelihood of this occurring should be assessed in the context of the fact that, in 1988 and 1989, the total number of such projects attracted to Wales was 104, with an average value of £14.5 million. The net present value of the base case in which no new facility is created is minus £5.5 million …
  Taking into account both the quantifiable and other benefits, the appraisal shows that a prestige building with a single auditorium is a better option than a low impact building with a single auditorium, and that the case for the second auditorium rests largely on benefits to the community".
  All the studies concluded in favour of the project and the Welsh Office was urged to combine with private funding to bring forward the necessary funds. (At that time there was no lottery.) Without commitment to the eventual outcome, further substantial funds were provided by the Welsh Office through the Cardiff Bay Development Corporation for the development of a design brief and for a major international architectural competition to be completed. Although, perhaps inevitably, not everyone approved of the outcome, the competition itself was generally regarded as a model of its kind.
  By this time, of course, the lottery was in being and a detailed application was made to the Millennium Fund. The fund was chosen as the appropriate body because the Arts Council fund which would normally be the source for such funding is split between England and Wales. So the Welsh element is not of a size to be able to cope with large projects of that sort. The Millennium Fund is not so split, but it funds only 50 per cent. of a project, whereas the Arts Council fund will go to
  1522
  75 per cent. That has a most serious effect on a project like this in Wales, which is an area less financially favoured than many in England.
  The application was duly considered by the commissioners at Christmas and turned down in its present form, to the great dismay of our many supporters, both in Wales and in England. I do not think it helpful to dwell on the reasons for that decision. Suffice it to say that we found some of them surprising.
  However, we have been listening carefully to what has been said and seeing whether the commissioners' concerns can be met. We have entered into conversations with other bodies and organisations to see whether both the capital and the running costs can be spread and the value of the building to Wales increased still further. Those conversations are continuing and arc opening up some most exciting possibilities.
  This is the most crucial project for the regeneration of Cardiff and the economy of Wales. As reported by the Millennium arts assessor for the project, it represents by far the most significant landmark project yet to have emerged from the cultural sector in England and Wales. Yet it will also provide jobs in the area of highest unemployment in Wales. It will provide a home and a future for Welsh National Opera, but it will be used for musicals and dance even more than for opera, which, in any event, is not an elitist art form as practised by Welsh National Opera. Anyone who attended the performances of "Madame Butterfly" or "Nabucco" in the packed 2,500-seat Liverpool Empire before Christmas would testify to that. The trust has already evolved a programme for the involvement of young people and the community in the design and development of the project. Access and participation for all are central to the design of the building and the thinking of the trust.
  Whether or not one likes the design, there is no doubt that it has the potential to make the impact into the next century that the Sydney Opera House has made in this and also to be a much better theatre. What is more, it is the only one on the table which could be built for the Millennium and thus attract Millennium funds. The door is still open at least a chink and it is essential that all in Wales—local authorities, industry and commerce, the Cardiff Bay Development Corporation, the Welsh Office, the Arts Council and all interested bodies and people—get behind this project and push it through.
  Do we really want to be remembered in the next century as the generation that celebrated the Millennium with cliff paths and bicycle tracks—worthy though such projects are—rather than a project that will make an impact on how the world views not just Cardiff and Wales but the UK as a whole?
  7.55 p.m.
  Lord Griffiths of Fforestfach: My Lords, it is a great pleasure to follow the noble Lord, Lord Davies, in his eloquent statement of the case for the opera house, which I believe most, if not all, of us wish to support. It is also a great pleasure to take part in the debate this evening on Welsh affairs. Like everyone who has spoken so far, I wish to thank my noble friend Lord

  1523
  St. Davids for giving us this opportunity. Having trained as an economist, I interpret the Welsh economy rather narrowly and I wish to take it from that perspective.
  As one looks at Wales over recent years, if there is one word which I wish to use to describe the country as we stand back to look at it, it is "success". I use it advisedly and the reason I do so is that Wales has gone through the most extraordinary restructuring in recent years. It has gone from being dependent on coal and steel to being today a totally different economy. As my noble friend Lord Aberdare reminded us, it is a success based on individual enterprise and effort.
  Perhaps I may remind noble Lords that before the Second World War there were about a quarter of a million people in Wales employed in the coal and steel industries. They accounted for 25 per cent. of the Welsh labour force. Today the figure is less than 20,000, under 2 per cent. In the past decade nearly 100,000 jobs have been lost in those two industries in Wales. In 1980 there were 35 working pits; today there are two. Yet today employment is greater in Wales than in 1975 and unemployment is near the average for Great Britain as a whole. That has not been the case since the mid-I920s.
  What is even more remarkable is that the resurgence in Wales has been driven by manufacturing. As we were reminded by my noble friend Lord St. Davids, manufacturing in Wales has had one of the highest productivity levels in these islands. Not only that, the manufacturing resurgence is broadly based. Companies which have invested and grown in Wales are in the consumer electronics, car components and multimedia sectors. They are also in aircraft maintenance, frozen foods and a whole variety of other areas. We have left behind dependence on just two major industries. For example, in areas of electronics like opto-electronics we are world leaders, with 10 per cent. of the world market for optical fibres, employing about 40,000 people. Self-employment in the Principality has increased over 20 years by about 70 per cent. Cardiff, we are reliably told, is predicted to be the most rapidly growing conurbation in the United Kingdom for the rest of the decade.
  Although Wales started from a low base, earnings have grown more rapidly than in the UK as a whole; and Welsh GDP per capita has grown more rapidly. As a result of the extraordinary restructuring that has taken place, with a tremendous loss of jobs in coal and steel and the revival of broad-based manufacturing, the Welsh economy today is stronger, more robust and more vigorous than it has been for a very long time. That is something with which the Government should be satisfied. However, it is not the whole story, and I shall come to that later.
  What factors have given rise to this? It is very easy for someone of my background and inclinations to say that it is entirely a result of the market economy and of enterprise. Government policy is very important. One cannot emphasise enough that low inflation, low taxation, low interest rates and a rejection of the social chapter from Brussels are an ideal background against which enterprise can grow and inward investment can be attracted. Looking at Wales over the past 20 years,
  1524
  when unemployment has risen in the United Kingdom, possibly because of mismanagement of the economy, unemployment has risen in Wales. When unemployment has fallen in the United Kingdom, it has fallen in Wales. In the early 1980s unemployment was rising both in the UK and in Wales. In the late 1980s it fell in both cases. In the early 1990s, it went up again in Wales and in the United Kingdom, and since 1993 it has fallen.
  Secondly, it would be foolish to suggest that the public sector has not played a critical role in the resurgence in Wales. We have heard much in this debate about public spending on infrastructure, about roads, the Severn crossing and the cleaning up of dereliction, particularly in the Valleys. All those strike me as terribly important and necessary factors in getting enterprise going. In some cases it could have been done by the private sector. However, it would have taken a lot longer and would not have been nearly so effective.
  A number of noble Lords referred to the quite extraordinary success of Wales in attracting inward foreign investment: £4 billion over the past five years. With only 5 per cent. of the population of the UK, Wales has nevertheless attracted between 10 and 15 per cent. of inward investment. Before this debate I looked up the names of the companies that have come to Wales with inward investment. Going through the list of companies—Aiwa, Bosch, Calsonic, Sony, Ford etc.—we find a thousand jobs here and a thousand jobs there. We see broadly based inward investment coming to Wales.
  There is a fourth factor, not much mentioned this evening, that is critical; namely, the people of Wales. It is the resourcefulness of the people and their willingness to be adaptable in the workplace, to be flexible in their working practices, that has led to the high productivity in manufacturing that was referred to. The Welsh economy is a success story.
  That said, there are some serious problems. There are unemployment blackspots; there is very high youth unemployment; and there is low pay, as referred to by the noble Lord, Lord Kenyon, especially in the field of services. I have to say that low pay is better than no pay, and being in a job is the best way of improving one's job. However, low pay results in low skills.
  There is one matter to which I draw the attention of the House. Last year, Panasonic led inward investors to Wales in making a statement claiming that there had been a drastic failure in the education system of Wales. It advertised six apprenticeships for 16 year-olds with five or more GCSEs. Of over 200 applicants, only three had basic level education. Sony said its experience was very similar. People dropped out before their apprenticeship was complete. Other inward investors have reported a lack of well-qualified people, which is now becoming a constraint in Wales.
  I see this as a very serious problem. The noble Baroness was right to say that innovation would be wonderful. We should also like to see the expansion of inward investment. Clearly it will not come about simply by more firms coming to greenfield sites; it will have to come about where it is. But people are telling us that there is inadequate basic education and that there

  1525
  is an attitude problem. Post-16 education is too academic, and too many of the people in TEC training are being trained outside of engineering and outside of business.
  That is a problem that the Government must face and tackle. I wish I could be as enthusiastic about education authorities as the noble Viscount who proposed the Motion. While I am totally committed to the measures the Government are taking, I should love to see more partnership involving private sector firms and government spending in order to solve this problem.
  8.6 p.m.
  Lord Harlech: My Lords, I join noble Lords in thanking my noble friend Lord St. Davids for initiating this most important debate.
  The Government's achievements in attracting investors from around the world to revitalise, as we have heard, the worn-out and run-down coal and steel communities of North and South Wales demonstrate how much can be done through a combination of private enterprise, central and local government working together in co-operation, and indeed the same return of funding from Brussels as we invest as partners in the EU.
  Although the most rabid advocates of the free market economy might find this success—involving, as it has done, active government support and intervention, an embarrassment in some ways, I certainly do not see it as that. Without skilful stage management, at which, to its great credit, the Welsh Office has become adept, Wales—one of the most successful regions in Europe, as we heard, attracting inward investment—would not still be getting that investment.
  My noble kinsman Lord Kenyon was kind enough to say that I should go into careful detail about agriculture. In fact, I shall identify mostly with the rural economy, of which that is, of course, a very important part. I also agree with my noble kinsman that I must declare an interest as a farmer and landowner.
  The rural communities of Mid and North Wales that I know best have different problems, for which the solutions are much less obvious. The problems facing those communities are by no means peculiar to Wales. Indeed, they are to be found in the remote areas of Scotland and throughout upland England.
  Perhaps the first thing to be said about these areas is that the people who live and work in them do not wish to be patronised by politicians who have no understanding of the issues that matter most to them. Together with other remote parts of rural Europe, with which I have some familiarity and which I know make up a tiny minority, they are not peopled by some form of flotsam, left marooned when their fellow countrymen left for life in the cities. The people of whom I speak choose to live and work where they do. They certainly do not see themselves or their communities as a sort of political problem.
  They do not wish to rely for their livelihood entirely on hand-outs from government, while needing some support of course for schools, health, housing and, as we have heard, to encourage commerce. The 1990s are
  1526
  clearly turning into a decade of cost-cutting, in government, in industry, in the professions, and in services—and not only in Britain. Who can feel happy or secure at being dependent wholly on the Government or on European Union grants and subsidies at a time like this?
  Tourism and agriculture are always likely to be the mainstay of a rural economy. That is very true in North and Mid Wales. But throughout North and Mid Wales there are large numbers of decaying and, for modern farming practices, impractical buildings of traditional construction that could, with some encouragement from the planners—I say that carefully—provide accommodation for a wide range of light industrial and office uses. Although the conversion of such buildings into holiday accommodation—we have heard a little about that this evening—to an extent benefits the local economy, it does not make a major contribution to local employment on a constant basis. Unfortunately, it is also transitory. Its impact lasts only a short while. Therefore, small manufacturing service industries would be greatly encouraged to stay where they are by the assistance of government, of whatever political complexion.
  In the age of the computer and the Internet it would presumably be possible for differing skills and interests to work in quite remote areas of the countryside and communicate with cities via data lines. At any rate, I believe that to be the theory, though I am not an expert. Perhaps the Government should be looking into ways to make that a reality.
  Another form of communication which is of constant concern in those parts of Wales with which I am familiar is public transport. While during daylight hours, as the noble Lord, Lord Elis-Thomas, said, the journey is pleasant, it can be arduous even over a small distance when one has to make a lot of changes.
  All political persuasions may think that they can cure the public transportation problem in remote areas, but so far they have not done so. For one reason or another I rely heavily on public transport, as some noble Lords may be aware. It has totally failed the rural communities.
  Finally, I draw your Lordships' attention to what I see as a potential danger in the future affecting areas such as Wales. The rules, regulations, memoranda, protocols, and bureaucracy of Brussels, Strasbourg, London, Paris and Rome may, in some instances, be wholly impossible or, at any rate, impractical to put into effect in rural communities—for instance, in Penrhyndeudraeth, Llanfihangel-y-traethau, Blaenau Ffestiniog, Llanfairpwllgwyngyll, Goch Dré or Llantysilio Goch Goch Goch. It would be all too surprising to me if the best policy for dealing with, for example, waste disposal or homelessness, hospitalisation or communications, were the same in a city of 3 million people as that for a rural area not one hour away with an average population of three persons to the square mile. The solutions cannot be the same.
  It sometimes seems to me that a strand runs through the European institutions, a thought which cannot cope with diversity in any form. But diversity in any form is extremely difficult to measure unless one is raising it

  1527
  from a city format. That cannot be translated into a rural area. But whether or not politicians and civil servants like it, I am delighted to say that we live in a world of startling diversity and in which my native Welsh people will always play a major role.
  8.15 p.m.
  Lord Geraint: My Lords, it has been an interesting debate initiated by the noble Viscount, Lord St. Davids, and I thank him for his contribution this evening. We had excellent contributions from noble Lords on both sides of the Chamber and all those who spoke, in my view, care for Wales, its people and its economy.
  I was fortunate to be elected on to Cardiganshire County Council 44 years ago—that is a long time. On the agenda in those days was the economy of Wales. Those of us who had been brought up in the rural parts of Wales and in Mid Wales in particular, were talking then only about the problem of depopulation and what could be done to stop it taking place. Over a period of 50 years between 50,000 and 60,000 people had left Mid Wales. There was no work for them. That was due to the closures of the old lead mines at the turn of the century.
  I remember at the first or second meeting of the Cardiganshire County Council in 1952 we decided to form the Mid Wales Development Agency with representatives from Breconshire, Radnorshire, Montgomeryshire, Merionethshire and Cardiganshire. From there it developed and excellent work was done for a period of years. Then, in the 1970s, we established the Development Board for Rural Wales and the Welsh Development Agency. As a nation we are fortunate to have those two boards. People will say perhaps that they are quangos; but in my view they are not.
  Those two boards have saved Wales and especially Mid Wales. They have helped to stem the depopulation. The Development Board for Rural Wales covers 40 per cent. of the land area with a population of 213,500 inhabitants, but only 7.5 per cent. of the total Welsh population. It has among the lowest population density in Europe, yet it is the centre of Welsh language and culture. Twenty-five years ago the population was approximately 185,000. It was therefore a wonderful achievement on the part of the development board to turn the economy around. I agree entirely with my noble friend Lord Hooson that we will never survive in the rural areas without government involvement. The Development Board for Rural Wales and the Welsh Development Agency have proved that point.
  Mention has been made of the unemployment rates which, in rural Wales, were 50 per cent. above the Great Britain average. But today, the DBRW has helped to reduce that to only 20 per cent. below the GB average; that is a wonderful achievement. I hope that it goes from strength to strength.
  We are talking of inward investment. I was delighted to read a few weeks ago of the first ever direct Japanese investment attracted to rural Wales—a £5 million project. We are fortunate. Then we have the European headquarters of the Canadian company, Fisher Gauge Limited, being built at Welshpool, and it goes on and on. We are proud of that record.
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  I became a Member 44 years ago and have been in public life ever since. I have had the privilege of declaring an interest in agriculture and farming, but today I have to add that I am now a retired farmer. It sounds even better, does it not? I have received many letters recently. There are many problems that face the agricultural industry. I have received a letter from the well known National Sheep Association whose affairs are run by Mr. John Thorley, who is a very good chief executive. That body is very perturbed about the Irish distortion in relation to sheep. The recent special deal negotiated by Irish farmers has made the United Kingdom sheep industry highly critical of the British Government for allowing Irish sheep farmers once again to benefit at the expense of United Kingdom and Welsh producers. The deal which allows farmers in the lowland areas of Ireland an extra £8.46 per ewe in European Union payments in 1995 compared with 1994 is seen as grossly unfair. It distorts the market in both the immediate and long term and helps the Irish to undercut Welsh lamb prices. In addition, it will sustain an uncompetitive Irish lamb producer and contribute to a small and destabilised European Union sheep market. Just under 10,000 flock owners will have benefited from this special deal, with a total of about 1.2 million ewes which provides an increase of £10 million, or an average of £1,000 per producer. I advise the Minister to keep in touch with the National Sheep Association, which is a wonderful organisation, to ensure that the interests of sheep farmers are well looked after in the years to come.
  I have spoken to agriculturalists in Wales, many of whom have referred to the future of the common agricultural policy. The major problem that faces the milk and sheep industries is the quota system. They would like to have a lead from the government of the day as to whether or not quotas will be around up to the turn of the century or afterwards. I am sure that the Minister is aware that very often quota is worth more than the stock. If it came to a sudden end the industry would face a major financial problem.
  Another major problem in Wales relates to county council smallholdings. We are fortunate that we have so many of them both in Wales and England. Perhaps the Minister can tell me—or write to me if he cannot answer tonight—the latest developments in regard to the bid by a merchant bank to buy the 5,728 county council smallholdings in England and Wales. In his wind-up, can the Minister give an assurance to the tenants of those smallholdings that the county councils will remain their landlords in the years to come? Another major problem is rural crime.
  I deal next with the White Paper for rural Wales. I agree entirely with the sentiments expressed by the president of the Farmers' Union of Wales. That body believes that a departmental structure of the Welsh Office will lend itself to the establishment of a rural affairs department responsible to the Secretary of State for Wales. I hold that view. It is very important to the rural economy. I am sure that that department can he set up in the Welsh Office, and a similar department in Brussels, to look after the interests of farmers.

  1529
  So far as communications are concerned, can the Minister give an assurance that the road from Montgomeryshire to Cardiganshire will be improved in the years to come?
  Finally, I believe that the Minister will agree with me that the economy of Wales will never be the same if Wales beat England on Saturday at Twickenham.
  8.25 p.m.
  Lord Williams of Elvel: My Lords, the House will be grateful to the noble Viscount, Lord St. Davids, for introducing this debate and making it possible. Many interesting contributions have been made. The picture that comes across to me is somewhat patchy. Many noble Lords claim, quite rightly, success in many parts of the Welsh economy; others, like my noble friend Lord Prys-Davies and the noble Lord, Lord Aberdare, point to certain difficulties. In particular, the noble Lord, Lord Geraint, has pointed to difficulties in agriculture.
  It may be appropriate if I say a little about the industrial sector, go on to agriculture and finish with some thoughts on rural Wales. As the noble Viscount, Lord St. Davids, said, manufacturing has been the success story of South Wales and possibly the A.55 corridor as well, though on a lesser scale. I detected in the speech of the noble Lord, Lord Kenyon, a degree of sentimental regret, which I share, that the mining industry had collapsed so quickly. In my view, it was not quite so necessary. I believe that had the economics been slightly different, as Tower colliery has shown, Wales might still have had a mining industry of considerable proportions. To leave that aside, the transformation described so graphically by the noble Lord, Lord Griffiths, has been a success story. I agree with those noble Lords who say that all shades of government, but particularly those that have been interested in and formed the agencies about which noble Lords have spoken, are quite rightly credited with a large part of the responsibility for that restructuring. I do not believe that to be a party matter. Governments of both colours have pursued roughly the same policies.
  Inward investment has been in part the key to this. There are now 360 overseas-owned plants in Wales—about 100 more than in 1985. Employment in those plants has risen by 50 per cent. In 1993–94 inward investment projects promised to create or safeguard nearly 14,000 jobs. We must be grateful for that. But the 1994–95 report of the Invest in Britain Bureau indicates that Wales is slipping a bit in the league table. We are getting only 11.5 per cent. of United Kingdom inward investment, whereas in the 1980s we were scoring 20 per cent. I believe that the changes in assisted areas put in place in 1993 have contributed to the decline in the percentage of inward investment that comes to Wales.
  Another problem in relation to inward investment was graphically described by the noble Lord, Lord Griffiths. There is a clear skills shortage in Wales. I believe that that is part of the price of inward investment. Much of it has come from assembly and other operations which result in low-skilled, low-paid employment. Wales has failed to develop a suitably balanced overall industrial
  1530
  structure. Added to the problems in the educational system, as pointed out by the noble Lord, Lord Griffiths, Wales is in danger of having a clear skills shortage. It was pointed out in Cardiff in March 1995 by the then Director-General of the CBI:
  "More successful regions of the European Union appear to have a better-educated, better-trained workforce. We know that training remains the Achilles heel of the economy, and that is particularly true in Wales. Inward investors like Panasonic and Sony have been telling us of their disappointment at the quality of applicants coming forward. That is a worrying sign at this stage of the recovery".
  Ignoring these concerns, the Government cut the budget of Welsh training and enterprise councils by 17 per cent. in 1995℃96.
  As a result of that policy we are in danger of becoming a low-skill low-wage economy. Pay levels, which were relatively high in Wales in relation to other parts of Britain under the last Labour Government, have fallen dramatically while the Conservatives have been in power. That is the only party point I shall make. Average weekly earnings for full-time employees in Wales were £291 in 1994, the lowest level of average earnings of all the 10 regions of Britain. Forty thousand people in Wales earn less than £2.50 an hour. That is a dangerous situation for any country to find itself in. We have to consider carefully what plan of action is needed.
  We need to encourage the expansion of existing indigenous and foreign industry in Wales. We need to capitalise on the multiplier effect of major manufacturers in Wales, to some of which the noble Lord, Lord Griffiths, referred. We need to attract investment with high value added employment. We need to assist the expansion of small and medium sized enterprises which are the main generators of employment, particularly those that can cluster around major companies—such as Panasonic and Sony, which are coming in with their big plants—to provide components. We have to concentrate on that area.
  I shall move on to agriculture. I was most interested in the comments of the noble Lord, Lord Harlech, on the matter. It is perfectly true—this is my personal experience as well—that large areas of Wales, particularly of Mid Wales and North Wales, will, for as far as we can see, depend on agriculture as a main industry. That lands us with all kinds of problems. As the noble Lord, Lord Geraint, mentioned, there is an Irish problem which is suddenly produced out of the blue. We all agree, and have agreed for a long time, that we should reform the CAP. But if we reform the CAP, what will happen to the Welsh hill farmer? If, as we have heard before, the HLCA is suddenly removed and the CAP is suddenly restructured, plenty of my neighbours in Radnorshire will go straight out of business and into bankruptcy. I should like to be cautious about this because agriculture will keep those people, ourselves and our countryside alive. After all, there are four times as many sheep in Wales as there are human beings. We have to look after the human beings as well.
  It is not just a question of small hill farmers. Rural market towns like Builth Wells and Llandrindod Wells depend on the farming community for their prosperity. There is a knock-on effect. Shopkeepers, transport and

  1531
  so on depend on a healthy agriculture. There are things we can do which I hope the rural Wales White Paper will recommend. The noble Lord, Lord Harlech, mentioned the possibility of converting out-of-date agricultural buildings into possible small factories. They are what are called the new cottage industries; electronics networks, people working out of their own homes with computers which are linked up to central organisations in towns. The activities of the DBRW, which the noble Lord, Lord Geraint, rightly praised, should be devoted to that end. But there is no point in pretending that that will more than scratch the surface of the problem of the general poverty of Mid Wales and the Mid Wales farming community. We have to address that point.
  Finally, I wish to say a few words about tourism. I agree with all that has been said about improving the transport system. It is well known that it is easy to get into Wales but very difficult to get up and down Wales. Anyone who has driven on the A.483 will know what I am talking about. Tourism is fine but it is seasonal. We are not like Switzerland. We do not have a winter tourist season. The Swiss have a winter tourist season and a summer tourist season. One can see it in my part of the country and in the part of the country of the noble Lord, Lord Aberdare. In July and August we are flooded with tourists. However, they all go away again in September and we do not see them back until the summer. However many hotels or theme parks one builds, it will always be a seasonal operation which will be run down when the season is finished.
  Unemployment is too high. The Government have pursued good policies in many respects. We look forward to the rural Wales White Paper but it must address all the problems in rural Wales as an entity rather than try to disperse them as I think the rural England White Paper did.
  8.35 p.m.
  Lord Lucas: My Lords, I thank my noble friend Lord St. Davids for initiating the debate, though I find myself greatly awed in rising to answer. All noble Lords who have spoken share knowledge, experience and wisdom to which I cannot lay claim. They also share a great and evident love of Wales. That I can understand because my mother's family lived in Wales for 250 years. Even 150 years after they left one can see in their journals the regret at their departure. Not that that regret was shared by the Welsh. There is still a plaque in Ruthin church recording the day the de Greys left. It was a great relief to the Welsh that they did.
  Wales has some extraordinary economic advantages—its people, its countryside, the Welsh language, culture and heritage. It has made excellent use of those advantages. As my noble friend Lord Griffiths said in a powerful speech, the theme of the Welsh economy over the past 50 years is success. Wales has recovered from the decline of its primary industries, celebrated in detail by my noble friends Lord St. Davids and Lord Griffiths of Fforestfach. In all the speeches
  1532
  today credit has been given where credit is due—first and foremost to the Welsh people and in due measure to governments of all colours.
  It was a pleasure to hear the noble Lord, Lord Williams of Elvel, saying nice things about the Government. I hope that it will not be the last time. The noble Lord, Lord Hooson, was also lavish in his praise. And from the noble Lord, Lord Elis-Thomas, I thought I even caught a longing for the day when the Welsh railways are finally privatised.
  Noble Lords: Oh!
  Lord Lucas: Perhaps I was mistaken. Noble Lords have raised many different aspects of the Welsh economy. I shall be able to address but a few of them in the time available. I am particularly aware that I shall have to write letters to the noble Lords, Lord Prys-Davies and Lord Geraint, and perhaps others too. I shall look through Hansard tomorrow.
  I turn first to the subject of rural Wales. As the noble Lord, Lord Prys-Davies, said so accurately, this is central to the whole future of the Welsh nation. We shall shortly be publishing a rural White Paper for Wales. I could go into great detail of what it contains but I think I should get into difficulty with my Secretary of State if I did. I shall confine myself to the broad principles. The first is to ensure that rural Wales remains rural and keeps its identity. We do not want to change it from what it is. We do not want to destroy it. We want to ensure that whatever changes or improvements come about they do not do so at the cost of what is there now. The Government are committed to promote conservation and to preserve our natural heritage. The role of the Countryside Council for Wales is being enhanced. Its budget for 1996–97 has been increased by 24 per cent. I hope that that is welcome to the noble Lord, Lord Elis-Thomas. We are committed to providing positive support to rural communities. The quality of life in a rural community is of paramount concern to us. We intend to place emphasis on such areas as housing, rural health, village shops and schools.
  I hope that it will please the noble Lord, Lord Williams, and many others who have spoken that we support and value farming as a foundation for rural life and the environment. We shall be embarking on, and continuing, a number of initiatives to support the Welsh farmer in developing the specialist market for Welsh foods and we shall follow through the farming families initiative.
  Although CAP reform is eventually on the cards and is something to which all parties in this House are committed, I believe we all recognise that hill farms will continue to need, and deserve, our support. We intend to support new employment through initiatives in such areas as planning, IT and, most importantly, education and training. Perhaps the most crucial need is for more people to live and work in rural Wales. As my noble friend Lord Harlech said, the force for that may be the telecommunications revolution. As it becomes as easy to do a job from a house in west Wales as from a flat in Battersea, noble Lords will not be surprised to learn that more people are choosing west Wales.

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  Perhaps I may allow myself my one piece of party politics. In telecommunications we are doing what the Labour Party has only dreamt of. That party's plans, announced at the 1995 party conference, were well described by Wired magazine:
  "When the history of Britain's lane on the information motorway is written, the October 1995 Labour Party Conference will hopefully go down as its most surreal moment … It's hard to imagine a more clueless or counterproductive policy than this deal".
  If ever the time should come, the deal will be completely unnecessary because we have already put in place most of what the Labour Party says it wishes to do. Half of all Welsh schools will be on the Internet by 1998. Every secondary school in Wales has satellite equipment. South Wales is being connected to cable television at a great pace. The strategic development scheme is bringing the information highway to rural Wales and the WDA is putting a great deal of effort into teleworking and bringing to Wales the kind of jobs that can be accessed through Internet and communications. Wales already boasts the largest concentration of such businesses in the UK.
  Inward investment has been one of the great Welsh success stories over the past 15 years. Since 1983, over 1,000 projects have been recorded with capital investment of about £7 billion, safeguarding or creating about 100,000 jobs. This success is bringing new industries not just to the industrial heartlands of Wales but to many rural areas as well. I know that the noble Lord, Lord Geraint, will be pleased at my assurance that the Welsh Development Agency will always look for people capable of making such investments in rural Wales and will pursue them with particular vigour.
  The noble Baroness, Lady White, was supportive of our efforts in research and development. We agree that that is a crucial aspect of any strong economy. Research and development is where future jobs in an economy come from. It may seem expensive now, but research and development repays itself many times long into the future. We are supporting many young and innovative companies, particularly in South Wales.
  Native talent has not been idle either. The performance of indigenous companies is crucial to the success of Wales. The training and enterprise councils in Wales support an average of 2,000 new business start-ups each year. It is vital that these new firms receive the support and help they need to prosper and grow. The launch earlier this month of the business connect scheme provides exactly the sort of comprehensive and accessible system that busy people need. The new arrangements take the hassle out of the quest for advice over a whole range of activity. With only one telephone call a network of advice will be available to businesses.
  My noble friend Lord Griffiths of Fforestfach and the noble Lord, Lord Williams of Elvel, mentioned education. I do not want to stray too far into that subject today—it is a debate on its own—except to say that I agree with all the concerns expressed. We have seen great improvements over the past 20 years; they are well known to everyone. Equally, everyone realises that we need to continue those improvements and do the same
  1534
  again over the next 20 years. That is what will be required to attract the jobs that will bring Wales back to being one of the leading economic areas of Europe.
  Praise was lavished on various government agencies. I was pleased to hear that from the other side of the House. My noble friends Lord St. Davids and Lord Griffiths and the noble Lord, Lord Elis-Thomas, and others praised the Welsh Development Agency, a creation of the Benches opposite which has been lovingly cared for by this side of the House as well. Since 1979 it has provided over 17 million square feet of factory space and has spent in excess of —780 million on property development activities. It has a solid foundation of success on which to build. It will continue to develop its role as an enabler rather than as a direct provider, concentrating its effort on filling gaps in the market. It will also continue to play a central role in the promotion of inward investment and, through its capital programmes, will support local authorities' strategic development plans.
  A number of other agencies have achieved notable successes. The Cardiff Bay Development Corporation has been mentioned. I do not want to go into the question of the opera house. I am a great fan of Welsh Opera. As part of its tour it visits Southampton which is close to where I live. I am also a great fan of Welsh rugby—except perhaps next Saturday. I do not wish to try to judge between the rival claims on the Millennium Commission.
  The Development Board for Rural Wales was praised by the noble Lord, Lord Geraint. Other agencies and partnerships were mentioned. My noble friend Lord Aberdare mentioned the Cynon Valley business partnership. I believe that between them the multifarious agencies of national and local government and the local partnerships between them and industry have been one of the great successes of the Welsh economy and one of the reasons why that economy has shown such good performance over the past 20 years.
  Tourism is one of the main industries of Wales. It is an old industry which now accounts for 9 per cent. of the Welsh labour force. It is a growing industry but not at any great speed. It is growing at about 5 per cent. a year. However, for a long time it will be one of the foundations of the Welsh economy. My noble friend Lord St. Davids says that it needs fresh emphasis and has to go up market. The noble Lord, Lord Williams, says that its activities are seasonable; perhaps that illustrates one of its main problems.
  The Wales Tourist Board and the Government will continue to give the tourist industry all the support that they can. The 1999 Rugby World Cup will obviously be a major tourism opportunity, but it is even more importantly one of the best opportunities that we shall get for promoting Wales's image. In the light of that unrivalled opportunity, the Wales Tourist Board has launched a major new —2.5 million marketing campaign to promote the image of Wales, and its budget has been increased by more than 30 per cent. over the past five years.
  Much mention has been made of the new councils which come into full existence on 1st April. Many noble Lords are concerned that the new councils should be

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  resourced adequately. That is the Government's concern also. Overall, authorities' spending will be 3.1 per cent. more in 1996–97 than in 1995–96. The support they will be receiving from the Welsh Office will be increased by 2.2 per cent. That reflects the Secretary of State's view that local authorities should raise more of their own resources. The Secretary of State announced yesterday a further £15.9 million for the authorities to limit council tax increases in some areas. That is further evidence of the Government's concern that this should be a successful transition from one set of authorities to another.
  I do not want to stray into the areas of disagreement on economic policy which exist between us and the parties opposite. They are well known and would be out of place in a debate which has shown how much we all value Wales as part of Great Britain and how much we all share in the celebration of its economic success and hope that that will be continued for many years to come.
  8.51 p.m.
  Viscount St. Davids: My Lords, I never cease to be amazed at how diverse in debate my fellow countrymen can be on a single subject. Tonight's debate has much of importance for my right honourable friend the Secretary of State to ponder. I hope that my noble friend Lord Lucas will ensure that a copy of Hansard will follow him home for the weekend.
  It remains for me to thank all noble Lords who have taken part in the debate; the noble Baroness, Lady White, for promising me another Christmas so soon after the last; and my noble friend Lord Lucas for winding up a debate which may, at times, have seemed strangely foreign to him. I beg leave to withdraw the Motion for Papers.
  Motion for Papers, by leave, withdrawn.

  Party Wall Bill [H.L.]
  8.52 p.m.
  The Earl of Lytton: My Lords, I beg to move that the Bill be now read a second time.
  As this is a maiden voyage in sponsoring a Bill in your Lordships' House, I would merely ask for your Lordships' customary indulgence towards the novice. Noble Lords may be aware that I am a chartered surveyor in private practice, and therefore it will be of no surprise that I have some small professional involvement in the matter of party walls and thus a contingent pecuniary interest to declare in the matter of the Bill by virtue of my profession.
  Before I go any further there are a number of people to whom I must express my thanks: the Department of the Environment Building Regulations Division which flagged a number of technical points and which has been of great value in fine tuning some of the thoughts on the Bill; the Building Regulations Advisory Committee which scrutinised early drafts, without which the form of the Bill would not be in its present state; the Royal Institution of Chartered Surveyors for its help and
  1536
  support; the working party of professional people who scrutinised all sorts of detail; and, last but not least, that philanthropic gathering of party wall surveyors known as the Pyramus and Thisbe Club, named after the characters in Shakespeare's A Midsummer-Night's Dream who met through a chink in the party wall.
  I have a client in Sussex in a case that received recent media attention. She would have been saved 10 years' anxiety, and there would have been a saving of tens of thousands of pounds in costs but for the fact that there is a legislative void. There are other cases which I can supply to any noble Lord who is interested which illustrate the problems that arise. They represent but the tip of an iceberg.
  Party walls have a long and cherished history, but in this country the watershed was undoubtedly the Great Fire of London, followed by the London Rebuilding Act 1667. There were further Acts and some consolidation under the London Building Act 1894. Changes continued, and there was a further London Building Act 1930. That again was amended in 1939 under the London Building Acts (Amendment) Act. It is those two 1930s Acts which form the current basis upon which party wall surveyors act in Inner London.
  There are thousands of cases a year, and very few unresolved disputes, even to a third party surveyor and even fewer to a court of law, and usually on some other complication. That is a remarkable success rate.
  Outside Inner London the general law on party walls is derived from the Law of Property Act 1925. Briefly, that means that an owner can do anything to his own half of a party wall, and therein lies the problem. Owners carry out works that affect shared structures without reference to their neighbours, but, crucially, that legislation confers no rights to do essential remedial works such as underpinning, or to upgrade deficient structures if the neighbour objects.
  The Bill will have no effect on title. The wall owned by one party or another is not a party wall, nor does it cut across provisions for easements contained in title. It is not designed to affect common law rights of support or conflict with other statutory requirements. But it will not resolve other human failings: dogs, children, trees and personal animosity. All those are things which no legislation can hope to overcome.
  The aims of the Bill are to extend the tried and tested provisions of the London Building Acts to England and Wales. It rests upon a principle of voluntary agreement between parties wherever possible; it provides for notice to be given where works are proposed; there is an opportunity to respond and comment; it sets out to protect existing structures; there is a clear liability for damage and making good; there is provision for the resolution of disputes, other than by going to law; it sets out how costs of works and fees arising from them shall be dealt with; and clarifies the extent of rights over common structures, including floors—that is, floors between different units of occupation. So the Bill is a safety net and not a fiery hoop.
  There have been inevitable changes to adapt local legislation to national purposes. There has been a need to rectify an awkward legal precedent to do with party

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  walls used by only one owner, and it sets out to remedy an anomaly relating to differential treatment of floor structures. Finally, there are improved failsafe mechanisms within the Bill. Otherwise, it is very much as the 1930 and 1939 Acts are at present.
  I turn to the detail. Clause 1 covers proposed works adjacent to a legal party boundary, known in the Bill as the line of junction, which is not already built upon. A building owner who is proposing works serves notice on the neighbour who is known as the adjoining owner. Those owners can agree that the new wall shall be a party wall. They can agree its position, and the Bill provides for the manner in which the expense of building the wall, and its subsequent maintenance, is to be defrayed according to use. But, if there is disagreement, the building owner may only carry out the work at his own expense and on his own land. He must still serve a notice if he wishes to construct up to the line of junction. But he will have certain additional rights, subject to Clause 1(6), to install the necessary minimum projecting footings and foundations under the land surface of the adjoining owner where that is necessary, and subject to safeguards.
  Clause 2 applies where the line of junction is already built upon by the forming of a boundary wall, or the external wall of the building, or, indeed, the party wall between buildings. Clause 2(2) specifies certain rights of the building over. Prior notice of the works is mandatory, but I would like to dwell on a few of those particular rights that warrant special attention. As regards subsection (2)(b), I would point out that it is usually a matter of strengthening rather than demolishing or reconstructing a party wall. But if more drastic action is necessary, the Bill allows for this in the interests of both parties.
  Subsection (d)(iii) provides that all damage to adjoining premises must be made good. This invariably triggers the practice of preparing an agreed record of condition. Subsection (h) provides for the removal of any overhanging portions of the adjoining owner's property to enable a vertical party wall to be erected. That is not as draconian as it sounds, as there may be title to the overhang but, if not, the building owner may still have to make good and compensate the adjoining owner. More typically, the projecting eaves of an adjoining owner's building can be cut away subject to making good.
  Subsection (1) removes an anomalous precedent. It allows the reduction in height of an existing party wall or party fence wall to the extent that it exists primarily for one owner's benefit, but only to the extent that it is not required for any purpose other than a boundary wall. So if a neighbour's building or outhouse uses the wall for support, the wall cannot be reduced in height below that required for that structure. Other rights relate to the insertion of damp-proof courses dealing with chimney breasts and other projections and dealing with structures which are inherently deficient or do not accord with statutory requirements.
  Clause 3 deals with the form and content of initial notices. At subsection (3)(a) it is provided that a building owner can do any Clause 2 work with the
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  adjoining owner's consent. So obtaining consent obviates the need for any further procedures under the Bill. Subsection (3)(b) provides that if the works arise as a result of a statutory notice served on the building owner, there is no need to serve a party structure notice at all; he may proceed to deal with the works as required.
  Clause 4 governs the service of counter-notice by an adjoining owner. He may require the work to he done differently or in a manner which mitigates adverse effects on his property. A building owner must take the requirements on hoard unless they are felt to be unnecessary, injurious to him or otherwise to cause difficulty. In that case the matter is in dispute and is resolved under the disputes process.
  Clause 5 contains the general provisions that if matters are not settled between the parties a dispute is deemed to have arisen.
  Clause 6 covers excavation and construction within specified distances of an adjoining owner's property. These works are regulated by depth, by proximity and by reference to a notional 45" plane extending outwards and downwards from existing foundations. The purpose is to protect existing structures. This clause also sets timescales for dealing with the works, so the building owner must proceed with despatch or start the process again.
  Clause 7 provides for compensation of an adjoining owner for any loss or damage arising out of the works. At subsection (3) the building owner must take proper precautions to protect adjoining land, buildings and people by means such as shoring up and protection from falling debris.
  Clause 8 relates to powers of entry. If the procedures have been followed, an adjoining owner may not unreasonably deny access. Entry may be forced, but subject to safeguards.
  Clause 9 protects existing easements, including easements of light. Clause 10 deals with the resolution of disputes. In this particular instance both parties can agree on the appointment of one surveyor. That is a step to be recommended most strongly, particularly for householders carrying out small works. Alternatively, the parties may each appoint a surveyor. These in turn will nominate a third surveyor who is called in to adjudicate only in the few instances of sustained disagreement. Between them they will produce an agreement or award. Normally a party wall surveyor or third surveyor cannot be removed, but the Bill provides for instances where surveyors are unwilling or unable to act.
  The duty of party wall surveyors is quasi-arbitral. Once appointed they have a duty to act properly in the interests of both parties as statutory surveyors, which is a most important safeguard. Experience indicates that the great majority of disputed cases are dealt with by agreement between surveyors. The building owner generally meets the cost of the adjoining owner's surveyor. But that is not a licence to charge excessive fees and there are generally prior agreements on charges. Safeguards are provided where a party to the dispute neglects to appoint a surveyor, in which case the

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  other party may appoint one on his behalf. There is a fallback power whereby the local authority makes the appointment of a third surveyor on application of one surveyor if there is a breakdown in the normal procedures.
  Clause 11 provides for the payment of cost for the works generally by the building owner who is proposing to carry the works out but also in proportion to the use to which each party puts the wall. Additional subsequent use of a new or altered party wall may trigger the liability for a further contribution. Clauses 12, 13 and 14 refer to securities for expenses, accounting procedures for costs of works and settlements of accounts respectively.
  There is deliberately no means of summary enforcement as it is felt that this could fetter the jurisdiction of the courts. Most owners and adjoining owners in experience thus far discharge their obligations voluntarily. The normal county court procedures remain for cases where they do not. An unappealed party wall award would be strong prima facie evidence that it was reasonable. Experience shows that there are very few complications in this area.
  Clause 15 governs the service of notices. Importantly, if an adjoining owner fails to respond to the initial notice the dispute procedures come into play as a failsafe mechanism. Therefore in future there will be no presumption of agreement by default.
  Clause 16 is self-explanatory and refers to offences and fines, while Clause 17 refers to Crown exemptions. This currently repeats the existing London Building Acts, but my inquiries continue as to whether the Crown wishes to be exempt.
  Clause 18 covers definitions. There is a change in this Bill from the current London Building Acts to make all horizontal structures between flats and maisonettes party structures covered by the Bill, regardless of whether they have separate or communal access. I apologise for paraphrasing in the interests of brevity what is a slightly more complicated issue. The term "surveyor" means anybody acting on behalf of the building owner and adjoining owner or appointed to settle disputes. It could be an architect or solicitor. It could even be a lay person with no technical qualifications.
  Clause 19 and Schedule 2 govern repeals. I think that they are self-explanatory.
  I shall need to move a number of amendments in Committee to remedy a certain number of textual errors and omissions. I shall deal with those at the appropriate time. The effect of the Bill is to assume agreement. It is intended to provide a system which is cost-effective and which offers the cheapest option before it is necessary to move on to more expensive procedures. There are important safeguards and rights for both neighbouring owners. The Bill creates a situation which is more clearly identifiable as a process and which is freer from risk than the rather capricious process of going to litigation.
  I hope that it will be seen that the Bill is worth while and uncontroversial. I hope that it will be seen as something which will encourage good order and create
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  a framework for dealing with disputes. It will reduce risk and be preferable to the litigation of the sort in which my client, and the other cases that have come to my attention, were involved. The Bill dovetails in with the Access to Neighbouring Land Act. I am satisfied that there is no conflict with that. Statutory consents such as planning, listed buildings and building regulations will be unaffected. They will continue to apply as before. However, the Bill will create businesslike relations between neighbours in respect of shared structures, based on established procedures with an excellent track record thus far. I believe that the Bill has industry-wide support and I commend it to the House.
  Moved, That the Bill be now read a second time.—(The Earl of Lytton.)
  9.9 p.m.
  The Earl of Kinnoull: My Lords, I congratulate the noble Earl, Lord Lytton, on introducing his Bill. He did so with his customary skill and clarity in what is a very technical subject. Given the short list of speakers, I have a feeling that only the brave are taking part. I saw no hint of the noble Earl's so-called "novice" approach. Indeed, his performance was the reverse of that. He showed the same robustness and depth of knowledge of the subject that I well recall from his interventions during the passage of the Environment Bill.
  I welcome the Bill. It is timely. In fact, it is long overdue; some may say that it is 300 years overdue. The Bill has great merit in helping those with party wall claims to settle issues that lie close to their hearts; namely, their property.
  At this stage I must declare an interest as a practising surveyor also, but not with the same sharp-end experience as the noble Earl. In fact, this is not a subject with which I have tangled professionally. I leave it to more skilled colleagues.
  I was fascinated by the noble Earl's introduction, as I am sure were other noble Lords, and by his historical references to the long background of party wall claims legislation, and the wisdom of those forebears in London who saw the need for such legislation and guidance. Indeed, the first Mayor of London in 1189 and the Great Fire of London in 1666 were milestones, as I understand it, leading to the current legislation of the London Building Acts, and especially to the legislation of 1939 and 1984. Those provisions applied exclusively to London owners and gave them a procedure of orderly regulations which I believe has worked well in recent times in terms of avoiding untold litigation.
  I am sure that awareness of those procedures has been helped by the excellent green book on party wall procedures which was published by a splendid organisation called the Pyramus and Thisbe Club. The noble Earl paid that club a tribute, to which I should like to add because I know that that club of professionals has done tremendous work. I pay a particular tribute to its chairman, John Anstey, who, like other colleagues, has been active in helping to draft the Bill.
  The question that has crossed my mind—I am sure that it will have occurred to other noble Lords—is why for all these years the rest of us living outside London

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  have been denied the benefits of the London Building Acts. There have certainly been many cases outside London to justify the introduction of provisions such as those contained in this Bill, but we have suffered from a lack of procedures for adjoining owners. One has to remember that disagreement on party wall claims can lead to disputes out of all proportion to the issues involved. Sadly, we have become a very litigious society and it is therefore important that the law should be as clear-cut as possible.
  As the noble Earl said, the Bill largely comprises hones drawn from the tried and trusted London Building Acts. I understand that some modifications have been made, given the benefit of experience of those Acts. Perhaps the most important feature, as the noble Earl stated, is the statutory requirement of the notice procedures by the building owner to the adjoining owner, and thence the choice of agreement direct between owner to owner or with the help of their respective surveyors; or, indeed, perhaps a single surveyor.
  There are two matters which concern me in that context. First, there is the definition of "surveyor" in Clause 18. I fully understand and accept that the word "surveyor" is very much a generic term, as the noble Earl said. I also fully understand that it does not have the meaning of surveyor as we know it—a chartered surveyor, or whatever. Basically, it means a competent or a relevant professional person. However, it does not say that in the Bill. I find that very surprising when we think of the seriousness of the subject. The Bill simply refers to a "person". That person could be either competent or incompetent. I hope that the noble Earl will look at that point in Committee.
  The second matter concerns the authority of the third surveyor. As I understand it, the third surveyor, to all intents and purposes, acts as an arbitrator. He is appointed at the same time as the two surveyors for either side. That is all good, sensible and effective in its simplicity. But, of course, as we know—and, indeed, as the noble Earl said—when the third surveyor is given his award the case does not end at that point. His award can be referred to court, not just on a point of law but on any ground. The award can be overturned and all the good and fair procedures which have taken place are lost, with the accompanying abortive costs incurred. The litigants then face expensive litigation in the courts. I understand what the noble Earl referred to, but I hope, again, that we can discuss the matter in Committee.
  Under Clause 7, which deals with compensation, there appears to be no provision for building owners to pay compensation within a certain stated time, or, indeed, any reference to enforcing a settlement. I expect that I have missed something or there are perhaps some subtle and simple actions that an aggrieved adjoining owner can take. However, I hope the noble Earl will he able to deal with that point either this evening or at a later stage.
  The Bill is limited to England and Wales. Of course, one understands the position in Scotland which has its separate laws. I gather that in Scotland the term used is "mutual wall issues" and that they are almost invariably
  1542
  settled within the title deeds of the property. However, I wonder why Northern Ireland has been excluded from the legislation. Perhaps the noble Earl will also deal with that point.
  My final point relates to Schedule 1 and the level of fines. Again, I am merely asking for information as to how the level of fines has been arrived at. I should also like to know whether the reference to "each day" means each working day. All those questions are for elucidation and in no way dim my enthusiasm for the benefit that the Bill will undoubtedly bring. However, knowing the scarcity of time in another place, it is most important that the Bill should leave this House in its final approved state. I am sure that the noble Earl will ensure that that will happen in Committee. I congratulate the noble Earl once again and wish his Bill a safe passage through both Houses.
  9.17 p.m.
  Lord Dubs: My Lords, I should also like to congratulate the noble Earl. If this is the first time that he has presented a Private Member's Bill, it was not obvious from the way in which he produced it and, indeed, introduced it. We have before us a very complex measure. I am sure that I cannot pretend to understand all the details and the significance of the legislation. But certainly the noble Earl's expertise shows through in the form in which the Bill appears before the House.
  I should also like to thank the noble Earl for the assistance that he has given me. Indeed, he has gone out of his way to give me background information. He has supplied me with a copy of the green book from the Pyramus and Thisbe Club on party walls and has generally made himself as helpful as possible to ensure that, if I had any questions, I should be able to put them to him. If I include one or two questions in my speech, it is because I think that they are more appropriate for resolution in Committee.
  In keeping with the tradition of most Private Member's Bills, there is no party-political view on the matter. Therefore, the comments that I am about to make are personal and I can assure the House that I shall be brief. I should like to give the Bill a warm welcome. I believe that it would establish a most important principle and I hope that it will be successful in achieving the aims intended; that is to say, that the good legislation that prevails at present in inner London or the old LCC area, together with some improvements to the Bill, will apply to the whole of England and Wales.
  I know that disputes between neighbours can he extremely painful. Disputes over party wall matters must be desperately frustrating, if one is outside inner London, as they cause so much agony, so much conflict and so much heartache to people who innocently find themselves in such difficult situations. I am grateful to the noble Earl because this Bill will remedy what I consider to he a wrong which has persisted for a long time. The Bill will provide a better way of resolving these matters relating to party walls in a way which is, incidentally, much more economical for the people concerned. That is an enormous boon for people. Many of the people who will benefit are not aware of that

  1543
  because they have not yet become involved in a dispute involving party walls. Therefore in a sense the Bill will benefit people who may not know of that benefit; that is, if it passes through both Houses.
  Like other noble Lords, I, too, wonder why this situation has persisted for so long. If, indeed, inner London has, as it were, led the way—I do not know the history of the matter as regards why inner London had better legislation regarding party walls—I cannot for the life of me understand why the rest of the country has not caught up. That is a puzzle and perhaps the answer to it will become clearer. Incidentally, one of the delightful things about the book on party walls from the Pyramus and Thisbe Club is the clear way in which it explains the legislation. I do not think I have ever come across such a clear explanation of legislation. Will government departments please copy that? I do not expect government spokesmen to make adverse comments about existing legislation, as the book does, or about the limitations of that legislation, but I must repeat that the book is a model of clarity. It would be nice if government departments were to consider the book to determine how they can emulate this clear approach to explaining legislation.
  I have two specific questions to put at this stage. They do not concern any changes that the noble Earl has made to the existing law. However, he has not made changes in two respects. It seems to me that he has made a number of sensible changes to the London Building Acts in drafting his Bill and therefore I believe it is right to ask, first, why he has not made the two changes to which I have referred. One of them concerns a point which has bothered me for some time. It may not be totally appropriate to this Bill but I shall ask the question anyway.
  Clause 8 gives rights of entry. As I understand it, one of those rights of entry is the right to erect scaffolding on adjoining premises in order to carry out work. I am worried that unless scaffolding is safeguarded at night it could provide easy access for burglars. That point may be covered by other legislation, but all too often I have seen buildings which are an invitation to burglars because there is such easy access to the scaffolding enabling anyone to climb up it at night and enter the buildings. I would not like any property I might own to be made so vulnerable to burglars through the erection of scaffolding. Is there any way in which one could incorporate safeguards so as to ensure that when scaffolding is left at night it is left in a condition which is as burglar proof as possible?
  Up until last June I worked for the Refugee Council and the building where I worked suffered a number of break-ins. The burglars had entered by means of scaffolding that was erected at the junction of our building and the adjoining building. The burglars got up onto the roof and climbed in. However, this is as great a danger for private buildings.
  My other question concerns exemptions from the Bill. This is a substantial point. There is a list of types of buildings which will be exempt from the provisions of this Bill. I note that the types of building appear to be identical to those mentioned in earlier legislation.
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  However, I cannot understand why all these types of buildings should he exempt. It seems to me that every government building—I assume that that includes DSS offices and the like—throughout England and Wales is exempt. The British Museum is exempt and any Metropolitan Police building is exempt. Presumably the buildings belonging to other police forces are not exempt as they would technically be under the jurisdiction of local authorities. The buildings of the Inner Temple and the other Inns of Court are exempt, as are several others.
  I do not understand why that should be the case. If I happened to have a house adjacent to a police station, a DSS office, or a government department, although that is less likely, I would like to feel that if a party wall issue arose I had the same rights as if my neighbour were another private individual. I wonder whether we can clarify that point. I believe that we could delete the exemptions, unless there is some good reason why we should not.
  Having said that, I welcome the Bill. It represents an enormous improvement for people in England and Wales. I hope that it will have a speedy and effective passage through both Houses.
  9.25 p.m.
  Lord Lucas: My Lords, I have listened with great interest to the debate this evening in this House, and in particular to the most informative and accomplished introduction by the noble Earl, Lord Lytton. I am grateful to him for a most lucid description of what is undeniably a rather extensive Bill, at least by the standards of Private Members' Bills.
  As we have heard, the proposed Bill has origins dating back to the Great Fire of London. The Bill is firmly based on provisions in the London Building Act 1939, and, if enacted, would bring legislation that has been in use in London since that time into the law applicable in England and Wales. On the face of it, it would certainly seem to be beneficial to have in place a clear system defining the rights of all interested parties in matters concerning party walls.
  We agree that the Bill does indeed provide a clear mechanism by which those who wish to carry out building work on a party wall are obliged to give notice of the proposed work to the adjoining owner, and to seek his consent. Any measure which seeks to reduce conflicts is to be welcomed. We also note that, should a dispute arise, the Bill clearly sets out the way in which such differences should be resolved.
  As to the detail of the Bill, it makes provision for the rights of different owners concerning the construction of a new wall along the boundary of adjoining properties, and also details the rights of owners with regard to existing party walls. We are encouraged that reassurance is given to the adjoining owner with regard to making good any damage to his property.
  With regard to the service of notices and counter notices, we note that the provisions of the Bill do not preclude immediate compliance with any notice served under statutory provisions regarding dangerous structures.

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  We see that the provisions of the Bill also extend to cases where there is excavation or construction within defined distances from an adjacent property. Further, the provisions seek to protect adjacent owners or occupiers from unnecessary inconvenience resulting from the exercise of any right conferred by the Bill, and make provision for compensation for any loss or damage arising.
  We see that the provisions include, subject to the service of appropriate notice, a right of entry to adjoining property where necessary. It is noted that existing easements are also safeguarded.
  We note with interest the detailed provisions for the resolution of disputes. We recognise that, although there are provisions for the appointment of up to three surveyors for the resolution of any dispute, the term "surveyor" is given a very wide interpretation in the Bill. We are glad that the Bill is not restrictive in this matter.
  It is appreciated that the handling of matters of expenses, and their security, are considered in the Bill together with procedures for accounts and their settlement.
  We note that there are detailed provisions as to the service of notices, a matter pivotal to the Bill.
  We appreciate the noble Earl's comments as to the provisions with regard to exemption for the Crown, and shall be happy to discuss that further with him. I hope that that gives some comfort to the noble Lord, Lord Dubs.
  We are broadly supportive of the principles embodied in the Bill, but we are aware that, as the noble Earl, Lord Lytton, indicated, the Bill needs some improvement in order to make it acceptable to all. I have listened with great interest to the debate today and to my noble friend Lord Kinnoull and the noble Lord, Lord Dubs, and we shall pay close attention to what is said in the forthcoming Committee stage.
  9.29 p.m.
  The Earl of Lytton: My Lords, I am most grateful to all noble Lords who have spoken this evening, in particular for their kind words and general welcome to the Bill.
  The noble Earl, Lord Kinnoull, kindly gave me notice of the queries that he was likely to raise; and I am grateful for that. He pointed, appropriately, to the fact that many disputes between adjacent owners are out of all proportion to the issues. That is the problem which the Bill attempts to address.
  The definition of a surveyor has been given a certain amount of thought. The difficulty is to provide a test of competence in the Bill. I particularly note what the Minister said about the advantages of the provision being open. I am certainly prepared to consider the matter again. However, it raises problems which may not be easily overcome.
  As regards the competence of third surveyors, the difficulties are that there is no arbitration agreement in the Bill. So far as I am aware—I stand to be corrected on the point—there is no way of statutorily enforcing an
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  arbitration agreement through a Private Bill. Inevitably, there is no way of preventing people from having arguments if they are determined to do so because they dislike their neighbour. It is a fact of life. However, I shall consider the issue to see whether anything can he done, although I am a little doubtful.
  On the timescale, as I understand it, the noble Earl referred to payments of costs, expenses and compensation. That is a perfectly legitimate point. It may well be that the provision should he tightened up so it is beyond doubt that payment will he made within a reasonable time.
  I have already covered the point about enforcement and the difficulties about fettering the courts.
  As regards the exclusion of Northern Ireland, I am in some difficulty in answering that. I had understood that at one stage the Northern Ireland Office was considering introducing some measure of its own. It was not felt appropriate to extend the measure to Northern Ireland, but, again, I am happy to consider the matter again.
  On the level of fines, as I understand it, the current practice is to set a fine at a standard rate for the offence. The Bill provides for a daily fine for continuing the offence. I do not totally understand the import of the working day as opposed to the non-working day in terms of the daily accrual of that daily element. Again, I am happy to consider the matter and write to the noble Earl with some further thoughts.
  The noble Lord, Lord Dubs, said some kind words about the Bill; I am grateful to him. He referred to changes that may be required and in particular to scaffolding under the rights of entry provision. All I say in defence of that is that, if an award is properly made, the security of scaffolding should be one of the issues considered by the surveyors on making the award. Obviously that consideration would he paramount in an urban environment where there was a high security risk. Therefore I hope that the issue would be covered by the best possible practice being applied in relation to the perceived risk. I realise that that may not be an entirely satisfactory response to the noble Lord, but I believe that it is probably the answer.
  Exemptions for various bodies, departments, Inns of Court and so on were considered at an earlier stage. I believe that the Bill offers advantages and that the various bodies would welcome being included since it provides a code enabling them to deal with matters which perhaps might otherwise be more difficult. There may have been a natural reluctance to tread on toes by introducing a measure of that kind from existing legislation, although it is local legislation. I plead that in mitigation. But again I am happy to consider that issue.
  I am grateful to the Minister for his comments. He referred to the reduction in conflicts. That must be the nub of the Bill. It is intended to reduce friction and take the heat out of contentious issues. Where parties are able to agree, they can and will agree and nothing in the Bill will prevent them doing so. But where issues arc destined to be contentious it will provide a mechanism for dealing with them.

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  I cannot say why it has taken so long to apply the legislation to the rest of England and Wales, but I believe that there are particularly difficult cases which arise in the country generally. It is a worthwhile Bill and on that basis I commend it to the House.
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  On Question, Bill read a second time, and committed to a Committee of the Whole House.
  House adjourned at twenty-five minutes before ten o'clock.