Lords Sitting of 4 December 1997

Preamble
The House met at three of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Bristol.

Guardsmen Wright and Fisher
Lord Burnham Lord Burnham asked Her Majesty's Government:
Whether the action taken by the Secretary of State for Northern Ireland with regard to the cases of Guardsmen Wright and Fisher was in conformity with the advice given by the Life Sentences Review Body.
The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Dubs): My Lords, I can assure the noble Lord that the Secretary of State's decision to defer these cases for a year took full account of the board's advice. It also took full account of the materials on which the board had based its advice, including the representations received regarding the cases.
Lord Burnham: My Lords, I thank the noble Lord for his reply, which I hope provides the assurance that we seek; namely. that the decisions have been made purely on a judicial basis. Is the noble Lord aware of the effect on the morale of all military personnel in Northern Ireland, particularly those in the Scots Guards, who see this prolonged imprisonment, which is two years longer than that of Privates Clegg and Thain, as being based on political considerations? Can the Minister assure the House that this will be fully considered and that there is good reason that the imprisonment should be extended two years beyond that of Privates Clegg and Thain?
Lord Dubs: My Lords, I do not believe that our procedures, including the decision of the Secretary of State, can be termed "judicial". Nevertheless, I understand the sensitivities of this particular case. The other cases to which the noble Lord referred are different in kind from these two cases.
Lord Dean of Beswick: My Lords, does my noble friend agree that there appear to be two standards of justice in Northern Ireland? There are people in Northern Ireland who have committed cold and premeditated acts of murder and remain free. Why are these guardsmen being subjected to another form of justice?
Lord Dubs: My Lords, I do not believe that there are two standards of justice in Northern Ireland. The procedures we follow are intended to emphasise that there is only one standard of justice in Northern Ireland and that all individuals are judged on those terms.
Lord Ackner: My Lords, does the noble Lord agree with the observation made by the present Lord
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Chancellor Lord Irvine of Lairg on the 6th November 1989, on the occasion of a debate on the Report of the Select Committee on Murder and Life Imprisonment, of which I had the privilege of being a member, that,
"the duration of imprisonment should be decided by judges in an open process and not by the Executive behind closed doors".—
[Official Report, 6/11/89; col. 522.]
Lord Dubs: My Lords, I hear what the noble and learned Lord has said. However, the procedures that we follow in this case are those of the previous government. Those procedures differ from the procedures suggested by the noble and learned Lord.
Lord Mayhew of Twysden: My Lords, does the Minister accept that the legal offence of murder covers a very broad spectrum of moral culpability? Does he agree that the present law, which requires a mandatory sentence of life imprisonment for all murders, deprives the trial judge of the normal judicial function of sentencing the offender following conviction, having heard all the evidence, in the light of the judge's own assessment of moral culpability? Is not a consequence of that that the Home Secretary, representing the Executive, must decide the crucially important question of when it is proper to release an offender on life licence, always subject to recall, and not the trial judge? The Secretary of State may do that many years later. Therefore, is it not inevitable that suspicions and bitterness will often arise, always in my experience without any justification? Would that not be avoided if the mandatory sentence was abolished and a discretionary one substituted?
Lord Dubs: My Lords, the noble and learned Lord asks a question that goes well beyond Northern Ireland and covers the procedures for the United Kingdom. I note what the noble and learned Lord has said, based upon his long experience. I simply reiterate that the Government have followed the procedures of the previous government.
Lord Stoddart of Swindon: My Lords, does my noble friend agree that the treatment of Guardsmen Wright and Fisher contrasts starkly with the treatment to be given to Gerry Adams next week when he is to be the honoured guest of the Prime Minister?
Lord Dubs: My Lords, we are dealing with two guardsmen who have been convicted by a criminal court. I do not believe that it is helpful to compare them with individuals who have not been convicted by a criminal court.
Lord Tebbit: My Lords, from the views expressed by the noble Lords, Lord Dean of Beswick and Lord Stoddart of Swindon, does the Minister realise that this is not a matter of legal niceties but moral attitudes? Further, does he recollect that Mr. Gerry Adams has also been convicted of terrorist offences? Does the Minister understand that it appears to many people that the standard of justice is influenced by the desire of the Government to reach a political settlement?
Lord Dubs: My Lords, I entirely repudiate the suggestion of the noble Lord. We seek to achieve a

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settlement in Northern Ireland, but that is quite separate from our approach to cases such as these. These individuals are being dealt with in accordance with proper procedures. I express surprise that the noble Lord makes these comparisons.
Lord Campbell of Alloway: My Lords, is the Minister aware that his Answer to this Question, of which I gave notice some time ago, comes as a welcome relief to me? One has the assurance that no extraneous factors were taken into account beyond the recommendations of the review board, and that at a time of political tension. Does the Minister think that that is a welcome and satisfactory relief?
Lord Dubs: My Lords, I thank the noble Lord for what he said. Perhaps I may make clear what happened. The Secretary of State, as I said in answer to the original Question, took full account of the advice of the Life Sentence Review Board. I cannot say whether that was the totality of the influence which led her to make her decision. On the other hand, I can assure the noble Lord that extraneous political considerations did not come into it. This decision was decided properly on the merits of those two individual cases.
The Duke of Norfolk: My Lords, will the Minister explain a simple point? These two guardsmen are being treated as if they were criminals and had murdered in cold blood, whereas it all took place in the heat of battle. That is the distinction that I want to draw, and which many of us on this side believe should be explained by the Government.
Lord Dubs: My Lords, from the information that I have about these two cases, I do not believe that the events took place in the heat of battle. I am not certain that it is helpful to go into the details. The trial judge pointed out that the events took place in daylight, on a bright morning, when the suspect was retreating at all times, and increasing the distance between himself and the soldiers who pursued him over a distance of three streets. I am not sure that "heat of battle" is the phrase that I would apply to that situation.
Lord Burnham: My Lords, with the leave of the House, is it not the case that the man concerned tore the radio out of the patrol's vehicle and was fleeing while carrying a parcel, which I admit was not found, but which could have been a bomb, and was told many times to cease running away?
Lord Dubs: My Lords, I am not certain that it is helpful for me to get into speculation about some of the details. I paraphrased what the trial judge pointed out. I confirm that the man stole the radio from one of the soldiers. I cannot confirm the rest of the details, because I do not have them before me.

European Aerospace Industry
3.17 p.m.
Lord Randall of St. Budeaux Lord Randall of St. Budeaux asked Her Majesty's Government:
What steps they are taking to encourage the restructuring of the European aerospace industry.
The Minister of State, Department of Trade and Industry (Lord Clinton-Davis): My Lords, Ministers and their officials are working closely with the UK aerospace industry and with other European governments to encourage the restructuring of that industry.
Lord Randall of St. Budeaux: My Lords, I thank my noble friend for that Answer. Is he aware that the restructuring of the British aerospace industry must now take place because of the immense changes and the competitive disadvantages that we suffer as against the American aerospace industry? Is he also aware that were we to proceed along the lines being advocated by British Aerospace, we would establish a trans-national European defence and aerospace industry? There is concern that the defence market will change and that will have an impact on our defence procurement policy. Are the Government satisfied that British defence interests will be protected if the industry's proposals go forward?
Lord Clinton-Davis: My Lords, there can be no doubt that it is vital to be able to restructure and consolidate the aerospace industry so that we can compete internationally. The Government are using all their endeavours to achieve that purpose within Europe. In reply to my noble friend's second question, we shall of course use our best endeavours to ensure that in this respect our own defence industry is protected properly and is globally competitive. I believe that that is the objective to which my noble friend is alluding.
Lord Tebbit: My Lords, does the Minister agree that it is not clear that the best options are partnerships within Europe principally because the restructuring which has occurred in this country has not been followed in France? While it is possible to do deals with the Germans which are generally honoured, it seems to be extremely difficult to do deals with the French. Would it not make more sense in many cases to have partnerships with the United States?
Lord Clinton-Davis: My Lords, the partnership which has been created in relation to the aerospace industry has been spectacularly successful. The Airbus has been successful internationally; it has been flown by a wide range of airlines, including American airlines. The allusion which the noble Lord draws is both unfair and inaccurate. Questions of consortia with the American aerospace industry are a matter for the industry to determine.

Disability Benefits
3.20 p.m.
Lord Ashley of Stoke Lord Ashley of Stoke asked Her Majesty's Government:
Whether their review of disability benefits includes tax, means-testing or replacement of benefits by services.
The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, as part of our comprehensive review of spending we are undertaking a fundamental re-examination of the social security system, including those benefits paid to people who are long-term sick or disabled and their carers. The review will inevitably produce a wide range of possible options which we will need to consider very carefully.
Lord Ashley of Stoke: My Lords, is my noble friend aware that I appreciate her long-standing commitment to disabled people and that I support the Government's attempts to help them back to work when they are able? The review is examining the possibility of lowering disability benefits and therefore there is a great wave of anger and anxiety among many disabled people. One can gain an idea of the feeling that exists by looking at the letters I have received from disabled people, not from the organisations. The most common words in the letters are "frightened", "anxious", "distressed", "disbelief', "horrified" and "betrayal". The reason is that the benefits cover the extra costs of disability. Those have not reduced for the individual disabled person; consequently, the benefits should not be reduced.
Baroness Hollis of Heigham: My Lords, I share the concern expressed by my noble friend about the anxieties which may be experienced by disabled people. However, in our view there is a need to review the network of benefits for three reasons. First, the existing benefit system for disabled people has grown up piecemeal. It is a tangle. There are different benefits, with different rates, at different ages and with different linking rules. Some layer on to each other and some are mutually exclusive. Some are contributory and some are not. Some are means tested, some are taxed and some are neither. Most disabled people do not understand their entitlements.
Secondly, I am not confident that money is always properly focused. It is clear from our research that some disabled people continue to receive benefit after they have recovered, while the needs of other disabled people are not met. In some cases, life awards are paid to people who are predicted by their GPs to recover. We must examine that.
Finally, the existing disability structure presumes that disabled people are either sick, in which case they receive one set of benefits, or well, when they receive unemployment benefit. We all know that many disabled
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people are either sick, in which case they receive one set of benefits, or well, when they receive unemployment benefit. We all know that many disabledpeople are between the two. We need to review the benefits because we are trustees of £25 billion and we must ensure that it is wisely and appropriately spent.
Baroness Gardner of Parkes: My Lords, I applaud the idea of reviewing benefits because regular reviews are desirable. However, may I make a special plea for funds which enable disabled people to go to work? Often, young disabled people need not only the moral support but also the therapeutic value involved in being useful in paid or unpaid employment. The mobility allowances have made a great difference in that respect.
Baroness Hollis of Heigham: My Lords, I agree with the noble Baroness. Not only do we accept her comments about the need to encourage people into work by ensuring that they have access to work, but the Government have recently announced their £195 million programme for welfare to work for disabled people. We are working with the organisations to ensure that the right projects are taken on board. Furthermore, my colleagues in the Department for Education and Employment are anxious to ensure the extension of civil rights for disabled people so that employers do not shelter behind false perceptions of their inability to work. Therefore, there can be no dispute around the House that the practice is entirely acceptable.
Lord Higgins: My Lords, I wish to ask the Minister a specific question. She will be well aware that the Social Security Advisory Committee recommended that lone parents losing a disability premium should be treated as still having an entitlement to the lone parent family premium for transitional protection purposes. The Government's answer to that was, "There seem to be very few of them so we won't worry about them." Surely, these people must be among the most distressed of any group in the country. Will the Minister review the matter immediately and do something to help them?
Baroness Hollis of Heigham: My Lords, as the noble Lord will know, people who lose a disability premium because they become fit and well are treated as new claimants.
Lord Campbell of Croy: My Lords, on the principle that employment where possible is better than receiving benefit—a principle to which the Government subscribe—will the Government continue the successful access to work scheme which was launched about four years ago, or is that also under review?
Baroness Hollis of Heigham: My Lords, the access to work scheme is run by the Department for Education and Employment. As the noble Lord will know, partly as a result of the work of the All-Party Disablement Group of which he is a distinguished member, my

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colleagues in the DfEE have recently widened the eligibility of that scheme because they believe it has such an important part to play.
Lord Higgins: My Lords, the Minister totally failed to answer the question!
Noble Lords: Baroness Williams!
Baroness Williams of Crosby: My Lords, will the Minister accept that some people are genuinely disabled and unable to work full time or for more than a short period of time? Will she reassure people who are genuinely disabled that their standard of living will not be undercut as a result of the review?
Baroness Hollis of Heigham: My Lords, I accept the point made by the noble Baroness. We are anxious for disabled people to have the opportunities to work which they tell us they want. But many disabled people are sick; they may have fluctuating conditions, progressively deteriorating conditions and so forth. It is unrealistic and inappropriate to expect that they will re-enter the labour market and it is extremely important that they receive decent and appropriate levels of benefit.
Lord Swinfen: My Lords, will the Minister confirm that direct payments will continue to be made to disabled people so that they may maintain their independence and control their own lives?
Baroness Hollis of Heigham: My Lords, that is a matter for the Department of Health. However, like the noble Lord, I believe that the direct payments issue, which received the support of the entire House, was an important step forward in putting disabled people at the centre of the care system and not dependent on it. Therefore, I have no reason to believe that there is any threat to it. On the contrary, most local authorities are seeking to expand their provision.
Lord Ashley of Stoke: My Lords, my noble friend mentioned the expenditure on the benefits of disabled people. Is she aware that there are two reasons for that? One is demographic and the other is greater awareness. The Government can do nothing about the demographic factors and they should welcome the greater awareness.
Baroness Hollis of Heigham: My Lords, I too am most anxious that disabled people should have the opportunities to work when they can and decent and appropriate benefits when they cannot. However, there is a clear problem in that in some cases there is a mis-targeting of benefit. That is not because disabled people are in any sense abusing the system but because the structures adopted by the department—for instance, life awards—mean that some people are not receiving the money that they should while others are receiving money which they should not continue to receive, perhaps because they have become well, which is good news for us all. That is why we need the review. Given
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the amount of money that is being spent on disability benefits—£25 billion—I am sure that your Lordships would expect us properly to scrutinise that expenditure.

Rail Passenger Safety
3.30 p.m.
Baroness Thomas of Walliswood Baroness Thomas of Walliswood asked Her Majesty's Government:
What are their plans for passenger safety following the publication of the report of HM Chief Inspector of Railways on their safety record during 1996–97.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Baroness Hayman): My Lords, the report of the Health and Safety Executive's Chief Inspector of Railways shows that the long-term improvement in railway safety is continuing. But it also expresses concern, which the Government share, at an increase in vandalism and the danger of operators taking encouraging statistics as an excuse for complacency.
The Government look to the Health and Safety Commission and Executive, as the railway safety regulator, to ensure that safety standards are maintained, and improved where necessary.
Baroness Thomas of Walliswood: My Lords, I thank the Minister for that reply. In his report, the inspector expressed grave concerns, in the fiercest language which appears in that report, about delays in the promised implementation by Railtrack of installation and improvement of various mechanical devices which were supposed to stop trains going fast through signals. I shall not bore the House with all the technical details. The House of Commons Transport Select Committee echoed those concerns last year. Does the Minister agree that such concerns have been fully justified by the early evidence that failure or non-installation of automatic warning systems may have been a contributory cause of the Southall train crash in September? That crash was followed a month later by further instructions from the inspectors as to how the train operating companies should take care of and manage the existing automatic warning systems.
Baroness Hayman: My Lords, on the general issue raised by the noble Baroness, the Health and Safety Executive's report was indeed phrased in strong language and put a very severe warning shot across the bows of the railway companies that they must not put commercial considerations ahead of safety. My right honourable friend the Minister for Transport made very clear in his response to the HSE's report that the Government share that view.
As regards the specifics of the Southall accident inquiry, the Health and Safety Commission's public inquiry will be extremely wide ranging and the report will be published by the HSC, which will advise the Government on the recommendations. Meanwhile, it would be wrong to speculate about the cause of that

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particular accident. Pending the inquiry, the HSE will not hesitate to take any necessary action. That is demonstrated by its prompt action, following the accident, of writing to train operators to clarify the rules relating to defective safety equipment in cabs.
Lord Renton: My Lords, is not the failure of signals one of the principal causes of accidents? Can the Minister say whether the introduction of automatic signalling has led to more or fewer disasters?
Baroness Hayman: My Lords, in general terms, the safety record of rail is very good and one which continues to improve. Railway fatalities, excluding trespassers and suicides, were down to 25 in 1996-97. The number of significant train accidents per million train miles was also the lowest on record.
The issue of automatic train protection has been raised. That will be fitted on the West Coast main line, the Heathrow Express and on the new high speed routes. But the HSC advised the previous government that network-wide installation of the British Rail type of ATP could not be regarded as reasonably practical. It said that alternative safety investments would be likely to be more effective in terms of saving lives.
On the issue of the relationship between casualties and specific causes, perhaps I may write to the noble Lord.
Lord Avebury: My Lords, for many years, aircraft have had to carry black boxes which, if recovered, tell inspectors exactly what happened in the moments leading up to the fatal accident. Why is it not possible to do the same in relation to trains, so that instead of continually having to procrastinate and say that we must await the results of long-winded inquiries—as, for example, in the case of the Southall accident—the Government would be able to announce very shortly after the incident exactly what had occurred?
Baroness Hayman: My Lords, I am not sure that I can accept the thesis which the noble Lord puts forward that it would automatically shorten the inquiry and that we should be certain that we had all the facts simply because of the presence of a black box. The railway inspectorate consists of a body of experts in that field whose membership and staffing has doubled since 1990. They are part of the Health and Safety Commission and Executive to which the Government look for advice as to the actions which should be taken to improve safety on the railways. The latest report shows how seriously and thoroughly that task is performed.
Lord Stoddart of Swindon: My Lords, is my noble friend aware that there is indeed a great deal of concern among the public not only about safety of railways but about the general standard of service offered at present? The Minister rejected my earlier suggestion of renationalisation because of the cost of £4,000 million, which is about as much as we are spending on 22 cases of CJD at present. Can she say now, since she has rejected that suggestion of renationalisation, how the
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commitment in New Labour's manifesto before the election, that the railways would be brought under control, will be achieved and how soon will it be achieved?
Baroness Hayman: My Lords, as I said when my noble friend Lord Stoddart raised this issue before, we have made it quite clear that at a cost of £4.5 billion, Railtrack renationalisation is not a priority for this Government. We must deal with the railway system as we find it rather than as we should have wished it to be.
However, we are committed to establishing more effective and accountable regulation by the rail regulator. We wish to ensure that public subsidy serves the public interest. I accept from my noble friend that there is public disquiet on issues both of safety and regulation in general.
We are also committed to establishing a new rail authority to provide a clear, coherent and strategic programme for the railways so that those expectations are met. Such considerations will be included in the consideration of an integrated transport policy and a White Paper is expected to be published next year. But, as my noble friend will be aware, in November my right honourable friend the Minister for Transport announced an interim railways package and three new measures in order to improve in the short term the regulation of the railways.

Business
Lord Carter: My Lords, at a convenient moment after 3.30 p.m. my noble friend Lady Jay of Paddington will, with the leave of the House, repeat a Statement made in another place on long-term care.
I should like to take this opportunity to remind the House that the Companion indicates that discussion on the Statement, after the end of the Minister's initial reply to Opposition spokesmen, should be confined to,
"brief comments and questions for clarification".
There is a mandatory limit of 20 minutes from the end of the Minister's initial reply to the Opposition spokesmen.

Procedure of the House: Select Committee Report
3.38 p.m.
The Chairman of Committees (Lord Boston of Faversham): My Lords, I beg to move the Motion standing in my name on the Order Paper.
The Second Report from the Procedure Committee deals with a variety of matters, and I should like to draw some of them briefly to the attention of the House.
The report reminds the House of the conventions governing our debates. The Procedure Committee is concerned about the growing number of occasions when noble Lords who speak in debates do not remain to hear the closing speeches. For that reason the report sets out

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the present guidelines; namely, that a noble Lord who is taking part in a debate is expected to attend the greater part of that debate, and that it is considered discourteous not to be present for the opening and winding-up speeches and at least the speeches immediately before and after his own speech. The report also points out that a noble Lord who becomes aware that he is unlikely to be able to stay until the end of a debate should normally remove his name from the speakers' list.
To emphasise those conventions, the committee recommends that the advice in the Companion should be strengthened as indicated in paragraph 4 of the report.
The report reminds the House that noble Lords should remain in their seats and not leave the Chamber during a maiden speech or during the following speaker's congratulations. Those entering the Chamber are expected to remain by the steps of the Throne or below the Bar.
May I say in this connection that the convention that only the following speaker congratulates a maiden speaker is not being observed. I am sure that the House will wish to observe its conventions.
The report recommends that Questions for Written Answer should no longer be printed in the Minute each day until they are answered. It recommends instead that Questions should be printed and published only once, when they are tabled, and only republished if they are altered. This would save about £80,000 a year. A full list of unanswered Questions would be kept in the Minute Room and in the Library of the House, and noble Lords could consult it there.
One matter which the committee discussed is not mentioned in the report: namely, declaration and registration of interests. The committee considered a memorandum by the Leader of the House suggesting that there was a case for a further review of this matter by the Procedure Committee or a sub-committee.
However, the committee noted that there was no suggestion that the sub-committee of the noble and learned Lord, Lord Griffiths, which drew up the present rules in 1995, had overlooked any important matter or that there was a defect in the present system of registration. The committee also felt that two years was too short a period for a proper evaluation of the Griffiths recommendations. So the committee decided not to recommend an immediate review of registration and declaration of interest. The committee will, however, consider the matter again at the beginning of the next parliamentary session.
Moved, That the Second Report from the Select Committee be agreed to (HL Paper 38).—(The Chairman of Committees.)
Following is the report referred to:
1. CARRY-OVER OF BILLS
The Committee considered a proposal made by the Commons Modernisation Committee1, and endorsed by the House of Commons2 that it should be possible for Government Bills to be "carried over" from one parliamentary session to the next in the same way as hybrid and private Bills. The Committee accepts that there is a case for the carry-over of some Government Bills in certain circumstances. The Committee agreed that the Clerk of the
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Parliaments, after discussion with the Clerk of the House of Commons, should prepare a memorandum for the Committee, to be considered at a future meeting, in which the practical details and any necessary safeguards are examined.
2. EXPLANATORY NOTES FOR BILLS
The Committee agreed to a proposal for "Explanatory Notes" on Bills, which was made by the Commons Modernisation Committee and has been agreed to by the House of Commons'. The Notes will be prepared by the sponsoring Department and will combine in a single document accompanying the Bill the material provided at present in the Explanatory Memorandum and the Notes on Clauses, but will extend and improve it. There will also be Explanatory Notes for Acts.
The Committee believes that it is desirable that—
—in order to establish that the Explanatory Notes cannot be amended in Parliament, the Notes should make clear that they had been drafted by the sponsoring Department and have not been authorised by Parliament;
—the Explanatory Notes should be neutral in tone and do not try to promote the Bill or the policy underlying it;
—the Explanatory Notes should be published separately from the Bill (and the subsequent Act), in order to avoid delay in publishing the Bill, to avoid the Bill being too bulky, and to give the public a choice of whether or not to buy the Notes.
3. REPRINTING OF QUESTIONS FOR WRITTEN ANSWER
The Committee considered whether Questions for Written Answer should continue to be printed each day in the Lords Minute until they are answered, up to two weeks after tabling. If Questions were printed and published only when they were new or had been amended, an annual saving of about £80,000 could be made. The Committee recommends that Questions for Written Answer should be published only once, when they are tabled, and only republished if they are altered. A full list of unanswered Questions should be available for consultation in the Minute Room and the Library of the House.
4. ATTENDANCE AT DEBATES AND OTHER CONVENTIONS OF THE HOUSE
The Committee is concerned about the growing number of occasions when Lords who speak in debates do not remain to hear the closing speeches. The Committee wishes to remind Lords of the present guidelines in the Companion that a Lord who is taking part in a debate is expected to attend the greater part of that debate. It is considered discourteous for him not to be present for the opening and winding-up speeches and at least the speeches immediately before and after his own speech. A Lord who becomes aware that he is unlikely to be able to stay until the end of a debate should normally remove his name from the speakers' list (1st Report 1994–95; 3rd Report 1995–96).
The Committee has decided that the advice in the Companion should be strengthened by substituting for the words "A Lord who leaves early cannot expect to be answered by the Minister." the following:
"Ministers cannot be expected to answer, orally or in writing, points made by a speaker who does not stay to hear the Minister's closing speech."
The Committee reminds the House that Lords should remain in their seats and not leave the Chamber during a maiden speech or during the following speaker's congratulations. Those entering the Chamber are expected to remain by the steps of the Throne or below the Bar.
The Committee noted that the expression "the noble Minister" is increasingly being used instead of the correct form "the noble Lord, the Minister". The Committee draws the House's attention to the correct form of address.
5. JOINT COMMITTEE ON STATUTORY INSTRUMENTS: NEW STANDING ORDER
The Committee agreed to a new Standing Order governing the appointment of the Joint Committee on Statutory Instruments in order to reduce and simplify the Motions which have to be moved at the beginning of each session.

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6. BROADCASTING COMMITTEE: TRANSFER OF FUNCTIONS
The Committee agreed that the functions of the Broadcasting Committee, which have become largely formal, should he transferred to the Administration and Works Sub-Committee, who already deal with issues of substance relating to broadcasting, and that the Broadcasting Committee should therefore cease to exist.
7. APPLICATION OF THE ROTATION RULE TO THE SCIENCE AND TECHNOLOGY COMMITTEE
The Committee agreed to apply to the Chairman of the Science and Technology Committee the exemption from the rotation rule which allows Sub-Committee Chairmen to serve for three sessions.
1First Report 1997-98: The Legislative Process (HC 190).
2On 13th November 1997.
3See footnotes 1 and 2.
Lady Saltoun of Abernethy: My Lords, as one who attended the Procedure Committee of the House, should just like to make one or two comments on its report. The Chairman of Committees mentioned the question of attendance during debates and other conventions of the House. It has been brought to my notice that yesterday, when there were, I believe, five maiden speakers, three of them left and did not reappear for the winding-up speeches. It is most important that the various parties should din into their new boys the importance of observing the conventions.
One or two other matters were raised. There has been a certain amount of slackness recently about bowing to the Cloth of State upon entering the Chamber, and also about walking between the Woolsack and the Peer who is speaking. I know that these may appear to some of your Lordships to be trivial matters, but over the years these little courtesies have been the oil which enabled the wheels of business to turn easily and pleasantly. I believe that it is most important for us not to lose sight of that fact.
There is just one other matter that I should like to mention. The first item in the report concerns the carry-over of Bills. The report reads:
"The committee accepts that there is a case for the carry over of some Government bills in certain circumstances".
That means the carry over of a Bill from one Session to another. The idea is that government Bills should not fall at the end of a Session if they have not completed all their stages, but should be enabled to continue into the next Session. The report also says that the committee "accepts" the need for such carry over of government Bills, but I want to point out to the House that the committee was not unanimous in that respect; certainly, three members of the committee were very unhappy about the whole idea. I believe we felt—indeed, I felt so, and I was one of those members—that it was no bad thing for governments to have some hurdles to jump in getting their business through. I should also like to point out to the Government that, one day, they may find themselves in opposition and they may come to regret what they very much want at present.
Lord Monkswell: My Lords, perhaps I may raise the matter of the Register of Members' Interests and the declaration thereof. Unfortunately, we are at a disadvantage today in considering what the Chairman of Committees has reported to us and what the Procedure
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Committee has decided in the interim. I say that because the current Register of Members' Interests is not available in the Printed Paper Office. A number of us were concerned that last year's register of interests did not appear to give a clear and complete indication of a number of Members' interests.
When we consider this particular item, it will he useful to see the current register to ascertain whether it is more complete than has been the case in the past. We also need to bear in mind the fact that, over the past few months, we have had a large influx of new Members to your Lordships' House. If the Procedure Committee were to review this particular issue within the next six months rather than after 12 months, taking soundings from all parts of the House before it deliberated on the matter, we might achieve a situation which does not leave Members of your Lordships' House vulnerable compared with the system which now pertains in the other place.
Lord Monson: My Lords, I should like to put two questions to the noble Lord the Chairman of Committees. The first relates to a matter raised by my noble friend Lady Saltoun; namely, the proposal to carry forward certain government Bills to the next parliamentary Session. That would represent a major departure from our traditional practice and would alter the balance of power to some extent between the Executive and the legislature. If the proposal were ultimately to be agreed to, can the noble Lord say what kind of Bills might be carried forward and how often that might happen?
My second question is on a rather more mundane topic. The report claims that there would be an annual saving of £80,000 if Questions for Written Answer were only to be printed once in the Lords Minute. That equates to a staggering £537 per sitting day, based on last year's figures. That represents about 1,000 copies of no more than 12 A4 sheets containing information most of which is already stored on computer. Periodic alterations should not have to involve the payment of expensive overtime. I wonder whether the taxpayer is perhaps paying just a little bit too much for the Minutes of Proceedings.
Lord Dormand of Easington: My Lords, the Chairman of Committees said that the question of the register of interests had been discussed at the meeting. However, I believe that he also said that it is not mentioned in the report. I understand that that is the normal procedure if no change takes place with the subject under discussion. Nevertheless, it is deeply disappointing that further consideration of the register is to be deferred for such a long time. If I understood him correctly, the Chairman of Committees said that it would be three years before the issue would be reconsidered.
I raise the matter because of the growing concern about the inadequacy of the provisions for registration in your Lordships' House. It is now receiving attention outside the House, not only in newspaper reports but also by those who take an interest in such matters. This has arisen because of the massive publicity arising from

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what has occurred in another place. People are now asking, quite properly and understandably, why there should be different criteria between the two Houses. After all, your Lordships' House is an. essential part of the legislature and just as responsible in every sense of the word as the other House.
However, perhaps the crucial aspect of the matter is the fact that it is generally accepted that many more noble Lords hold directorships, chairmanships and other interests than are also held in another place where they all have to be declared. As I understand it, some of those categories do not have to be entered in the register of this House. In a recent leading article in a newspaper, some noble Lords were named along with the number of directorships and related offices which they held, none of which were included in the register of interests. My impression was that the persons so named were not acting dishonestly but that the article pointed out the glaring inconsistency compared with the strict criteria required in another place.
The behaviour of politicians is now more than ever under the searchlight of the modern media, and television in particular, but also, of course, radio and newspapers. We should not complain about that. Your Lordships' House is frequently praised for the quality of its work. We cannot afford to have any blemish on our conduct. It has to be said that the present system at least has the potential—I say no more than that—to raise doubts, as, indeed, is happening now. I assume that in considering this report today we can ask the Procedure Committee to think again on the procedures relating to the registration of interests. I trust that your Lordships will accept that view. Recently I heard someone ask, "What is the point of bolting the front door if the back door remains unlocked?". That appears to me to be a fair summary of the situation. I believe it to be a matter requiring urgent attention.
Lord Campbell of Alloway: My Lords, the proposal on the carry over of Bills is, as has been said, a substantial departure. As this appears now to be a proposal to be jointly considered between the Clerk of the Parliaments and the Clerk of the House of Commons, it looks as if we could be embarking along a road over which I personally would not wish to travel. I wonder whether in those circumstances—I do not know whether this is possible in this House—before your Lordships' House ever has to consider this matter again, we could have the minority report of those who object in the Procedure Committee so that we all may be advised of the pros and cons of this proposal. I declare my position; I am dead against it.
Lord Brightman: My Lords, may I raise a short question on paragraph 3 entitled,
"Reprinting of Questions for Written Answer"?
The recommendation of the committee was that,
"Questions for Written Answer should be published only once, when they are tabled, and only republished if they are altered".
I fully support paragraph 3. On 3rd December last year there were 72 Questions spread over five pages. This 3rd December there are 186 Questions spread over
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12½ pages. The growth is enormous. At the same rate of growth the millennium should see us each day with some 350 Questions spread over 25 pages. I agree that something must be done to keep the Order Paper within reasonable bounds. I have one suggestion which I would like to make.
At present there is, I understand, a convention that a Question should be answered within a fortnight whenever possible. I would like to suggest to your Lordships that a Question that has been left unanswered for, say, 21 days should be republished daily until it is answered. We all have an interest in the smooth running and the efficiency of the proceedings of this House and indeed I think we are proud of this House's efficiency.
I therefore feel that there should be some spur towards answering a Question within a reasonable time. The knowledge that the attention of the House will be drawn to the fact that the Question is overdue for an answer would, in my submission, be as good a spur as any. Today's Order Paper contains one Question which has been left unanswered for 21 days. I am not concerned in any way with that Question or its merits; I know nothing at all about it. I merely mention that as a fact. I would suggest to your Lordships that the Select Committee on Procedure might consider whether an overdue Question should be republished until it is replied to.
Lord Skelmersdale: My Lords, I was one of those referred to by the noble Lady, Lady Saltoun, as expressing quite a lot of doubt about the wisdom of the carry over of Government Bills from one Session of Parliament to another. As I remember, the noble Lord the Leader of the House, as is his wont, introduced the subject and asked for responses. My noble friend the Leader of the Opposition was what I would describe as lukewarm on the subject, having studied it in the time of the previous government.
I argued against the proposal on the basis that it would increase the power of the Executive—that was exactly the point made by the noble Lord, Lord Monson, just now—by removing the delaying power of either the Opposition of the day in another place or indeed of your Lordships' House as a whole. I recall the noble Lord, Lord Harris of Greenwich, disagreeing with me and saying that the power to delay was somewhat overrated. Be that as it may, I think that it is probably true to say that the offending sentence in the first paragraph to which the noble Lady, Lady Saltoun, drew attention probably reflects the Lord Chairman's summing up.
I recall asking specifically whether the substantive discussion on the carry over of Bills by the Government would be held after the paper by the Clerk of the Parliaments and the Clerk of another place had been considered by the committee. The answer was in the affirmative. I therefore find it difficult to understand how the report can possibly state that the committee accepts that there is a case for it when that substantive

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discussion has not been held. In my view that sentence is at best erroneous and at worst—I am afraid I must say this—misleading.
The Lord Privy Seal (Lord Richard): My Lords, I shall say a few words on one or two of the issues that have been raised, particularly the point raised by the noble Lord, Lord Skelmersdale, and the noble Lady, Lady Saltoun. As I understood the proceedings in the committee, the one undoubted fact that the committee could neither accept nor deny was that the House of Commons had accepted the principle of carry over and that the Modernisation Committee report had been accepted in another place. Thinking back, I am sure that the Procedure Committee took the view that it would be a strange situation in which the House of Commons had accepted the principle of carry over but the House of Lords had not. Although there were some doubts expressed in the committee—I totally accept that; I do not claim that there was a unanimous feeling, nor would I claim that the Leader of the Opposition was particularly warm on this issue—there seemed to be a general acceptance that the principle of carry over should be examined at a practical level by the officials of this House and the officials of another place. When it has been examined it will have to return to the Floor of this House.
If I may lapse into Community jargon, it seemed to me, considering that discussion of the Procedure Committee, that there was an avis favorable to accept the principle of carry over by a majority of the members of the committee. We did not take a vote because, as far as I know, we never do take votes in the Procedure Committee. That was certainly my impression. Judging from the report submitted by the Lord Chairman of the Procedure Committee, that was clearly his impression too. I entirely accept that there were voices in opposition. Of course I accept that the measure is bound to have to come back to the House when the practicalities have been considered.
A number of questions were raised about the register of interests. I do not think that I can advise the House to take any decision on this other than the one which has been reached by the Procedure Committee. I say to my noble friend Lord Dormand of Easington, it is not that it will be put off for another three years; when the Procedure Committee looks at it at the beginning of the next Session, the existing machinery will have been in existence for three years. There will be therefore a greater opportunity for discussion and more data from which the House can come to a judgment as to whether we wish to go further.
At this stage, I accept that that was a sensible position for the Procedure Committee to have taken. I support leaving the reconsideration of that issue until the beginning of the next Session.
I was interested in the mathematics of the noble Lord, Lord Monson, as regards the £80,000 savings. The House of Commons again has adopted this procedure: that a Question for Written Answer is printed only once. As I understand, the savings have been very great. The
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£80,000 figure was a sum produced by those who consider such matters in detail. It seems to me a great saving so far as concerns the expenses of this House.
4 p.m.
Viscount Cranborne: My Lords, I shall not attempt to detain the House long. I merely wish to record my gratitude to the Leader of the House for the guidance he has given the committee and the House this afternoon. I entirely support the guidance he has given us.
The noble Lord is correct in saying that I had some reservations about the issue of carry over, not only as to whether it would impinge on the present powers of your Lordships' House, but also as regards the circumstances in which another place might feel it wanted to introduce Bills being carried over from one Session to another. The Leader of the House was extremely wise, if he will allow me to say so, in suggesting that officials of both Houses should consult together and report back to the Procedure Committee. It will in due course report back to your Lordships' House the results of those consultations. I understand that the original proposals for carry over—perhaps the Leader of the House will indicate dissent if I have this wrong—have been modified. It is now proposed that Bills to be carried over might be of a highly technical nature and would be discussed through the usual channels. Some of the impediments would be drawn to your Lordships' attention just as they would be in another place, in particular with the advantage of advice from officials.
I believe that the Leader of the House is entirely wise in suggesting to your Lordships that we await the report of the officials so that we can discuss this potentially extremely important matter further.
I wonder, too, whether noble Lords might feel inclined to consider, for the reasons given by the noble and learned Lord, Lord Brightman, what seemed an extremely ingenious suggestion which can do nothing but improve in a minor but important way the ability of Parliament to hold the Executive to account. It may well be that the noble and learned Lord's suggestion could be further considered in due course by the Procedure Committee. Subject to the guidance of the Leader of the House, I am disposed to view that suggestion with some sympathy.
On registration of interests, the noble Lord the Leader of the House has done the House a favour. As the noble Lord, Lord Dormand of Easington, pointed out, it is right that a functioning House of Parliament—as is your Lordships' House—should be seen to take these matters extremely seriously. Of late such issues have become increasingly a matter of public interest and concern. It is right that your Lordships should be aware of that and should take these matters to heart, and be seen to do so. Equally, your Lordships will be aware that at present we are not an elected Chamber. The nature of the written Summons to your Lordships' House is different from the qualification that enables Members of Parliament to sit in another place. In many ways the circumstances are different. Thanks to the recommendations of the noble and learned Lord, Lord Griffiths, we have a system which is newly established. So far as I know, there have

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been no complaints. On purely pragmatic grounds there is no prima facie case for altering the present system. Nevertheless, I wholly subscribe to the view of the Leader of the House that these matters should be reviewed at regular intervals. It seems wise that your Lordships should take his advice that we let the present system bed itself in for an appropriate but not excessive period before we consider the matter again. The Procedure Committee may come to the conclusion that the system does not need amendment. Nevertheless, we would be wise to consider the issue if only to assure people outside this House that it is a matter about which we are not complacent.
I am grateful to noble Lords for allowing me to intervene. With those considerations, I hope that your Lordships will feel able to support the Motion on the Order Paper.
The Chairman of Committees: My Lords in view of what has been said by the noble Lord the Leader of the House and the noble Viscount the Leader of the Opposition about carry over and the registration and declaration of interests, I do not propose to add much.
On carry over of Bills, I confirm what the noble Viscount the Leader of the Opposition said. The noble Lord, Lord Skelmersdale, and the noble Lady, Lady Saltoun of Abernethy, referred to the matter. I am grateful to the noble Lord, Lord Skelmersdale, for having warned me half an hour before the House sat today that the matter was likely to be raised. That enabled me to look into the matter. I confirm the recollection of the Leader of the House on the committee's decision. Acting as chairman, I summed up the discussion on that matter. It is my clear recollection that the committee decided to accept the idea of carry over in principle but subject to certain practical matters and safeguards, which are to be the subject of discussions between the Clerk of the Parliaments and the Clerk of the House of Commons.
In that connection, it must be borne in mind that we would not have come to a conclusion on principle if we had not considered the issue of practicalities and safeguards. But, having considered the practicalities and safeguards, if the Procedure Committee is not satisfied, it would be open to it, as it always is in our domestic committees when reconsidering matters, to defer the matter for further consideration or to throw it out altogether. To that extent, perhaps the noble Lord, Lord Skelmersdale, and the noble Lady, Lady Saltoun of Abernethy, will be somewhat reassured.
There is no doubt in my mind that it was a clear decision of the Procedure Committee to come to a conclusion on that matter of principle so that it could consider these other matters.
The noble Lord, Lord Monkswell, mentioned the register of interests. I am sorry that it is not available at present. The register is to be published either on Monday or possibly tomorrow. It should have been published earlier. There were many last minute amendments. If those were to be incorporated, it was not possible to send off the register until Tuesday of
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next week. I suggest one word of compensation to your Lordships. The delay will mean that the register is up to date and complete, although the date on which we had hoped it would be available has passed.
The noble Lady, Lady Saltoun of Abernethy, raised a number of other points. She is right to say that some maiden speakers have not remained in the Chamber for at least part of the remainder of the debate after making their maiden speeches. It was not an isolated occasion this week; it occurred last week too. Since we have also referred to the congratulations after maiden speeches, perhaps I may mention an exodus during congratulations expressed on Tuesday. Two noble Lords withdrew during the congratulatory remarks by the noble Lord, Lord Walton of Detchant. The noble Lord was sitting in his usual seat at this end of the far Benches by the aisle to my right. Those noble Lords passed directly in front of him. That is another transgression which the noble Lady mentioned—namely, passing between the speaker on his or her feet and the Woolsack. She is also right in saying that some noble Lords fail to bow to the Cloth of State on entering. With that gentle reminder on those three points, drawn attention to first by the noble Lady, I hope that noble Lords will remember to observe those conventions.
The noble Lord, Lord Campbell of Alloway, was among those who referred to carry over. When we come to reconsider these matters, the points he made will be borne in mind.
As to declaration of interests, there has been no evidence whatever of wrongdoing in your Lordships' House in the two years since the Griffiths Report, so no matters have had to be referred to the noble and learned Lord, Lord Griffiths's sub-committee. As already indicated, there have been no suggestions that the sub-committee overlooked any important matter.
It may be worth making the further point that in some ways your Lordships' rules are much tougher and tighter than those in another place, particularly so far as categories 1 and 2 are concerned. We face more stringent restrictions. To give one example, if a noble Lord were paid a consultancy fee by a firm, he would be prohibited from speaking in the House on any matter relating to that firm, whereas a Member of another place in similar circumstances would not be prevented from so doing. That is just one example of how your Lordships have instituted tougher rules.
The noble Lord, Lord Monson, mentioned the topic of Questions for Written Answer. We have already had some evidence from the noble and learned Lord, Lord Brightman, about the large number of Questions appearing in the Minute. That is one consideration. Another is the number of copies bought each day and the nature of the contract with the Stationery Office. I appreciate that, among others, the noble Lord the Leader of the Opposition has been attracted by the suggestion of the noble and learned Lord, Lord Brightman, as one to be considered. The great merit of the Procedure Committee's recommendation to your Lordships today is the fact that it is simple and straightforward. The proposal of the noble and learned Lord, Lord Brightman, would involve some additional monitoring and therefore

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some additional administrative work. There is also the danger that, if a Question were taken off the Minute and then came on again, it could cause confusion and might even cause a department which had not answered the Question to regard it as having been tabled afresh and the timing would thus start again. That might not be an advantage.
I suggest that, since the proposal made by the Procedure Committee to your Lordships is a new one, we should wait and see how it works out. As we know from experience, there is nothing to stop the Procedure Committee returning to these matters. Perhaps the suggestion of the noble and learned Lord, Lord Brightman, can be borne in mind so that, when further consideration is given to this matter, we can consider instituting his proposal as well. I repeat in that regard my earlier reservations and words of caution.
I am anxious not to go on for too long; I think I have covered all the points that were raised. If I have not, I shall see that noble Lords who have not received an adequate response are answered in writing or orally.
On Question, Motion agreed to.

Civil Evidence (Northern Ireland) Order 1997
4.15 p.m.
Lord Dubsrose to move, That the draft order laid before the House on 28th October be approved.
The noble Lord said: My Lords, the order implements the report of the Law Reform Advisory Committee for Northern Ireland on hearsay evidence in civil proceedings, published on 27th October 1996. I pay tribute to the expertise of the committee, under the then chairmanship of Sir Robert Carswell, in its work on this difficult area of law reform.
This is a fairly short but very technical order. It effectively abolishes the common law rule excluding the admission of hearsay evidence as far as civil proceedings are concerned. It also abolishes the common law exceptions to that rule, but with certain safeguards which I shall mention. It also re-states the rules of evidence relating to the admission of previous statements of witnesses in proceedings in line with the changes to the hearsay; and it makes provision for the proof of certain documents and records.
The order is broadly similar to the Civil Evidence Act 1995 for England and Wales. That Act implemented the Law Commission's report on the hearsay rule in civil proceedings, published in September 1993. The order is similar to the 1995 Act, but there are some differences in the recommendations of the Law Reform Advisory Committee, which are being implemented in this order, and the order reflects those differences. I shall mention one of the main differences. The order, unlike the 1995 Act, does not contain a specific requirement to serve a notice of intention to adduce hearsay evidence, although the question of notice and its sufficiency goes very directly to the consideration of the court in weighing
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the hearsay evidence. I emphasise that the draft order implements all the recommendations of the Law Reform Advisory Committee.
I turn briefly to the main provisions of the order. Article 2 provides for the interpretation of the order and I draw particular attention to the definition of "civil proceedings". In essence the order applies to civil proceedings in which the strict rules of evidence apply. Article 3 abolishes the common law rule against the admission of hearsay in civil proceedings, subject to the safeguards in Articles 4 to 6.
Article 4 paves the way for other parties to call the maker of a hearsay statement and cross-examine him as a witness. Article 5 sets out guidelines for the court in weighing hearsay evidence and Article 6 contains various rules as to the competence of the maker of a hearsay statement and the credibility of that person.
Article 7 re-states, with amendments, the rules relating to previous statements of witnesses. Articles 8 and 9 provide for the admission and proof of statements in various documents and records. Article 10 re-enacts, for Northern Ireland, provision already contained, for England and Wales and Northern Ireland, in Section 10 of the Civil Evidence Act 1995, which section is not yet in force. The order is a technical but useful measure of law reform. I beg to move.
Moved, That the draft order laid before the House on 28th October be approved.—(Lord Dubs)
Lord Cope of Berkeley: My Lords, the Minister says that the order follows the 1995 Act covering Great Britain. Can he tell us whether the early days of the working of that Act have been regarded as satisfactory by those involved with it in the courts? It seems to me that those of us who are parliamentarians and politicians cannot complain about the use of hearsay evidence since we rely continually on hearsay evidence. Is there any hearsay evidence about the operation of the 1995 Act in Great Britain?
I understand that the reason for the non-admissibility of hearsay evidence in criminal cases is thought to be that it might mislead juries. In Northern Ireland, in the Diplock courts, there are no juries. It is thought possible that the principle of hearsay evidence might be extended to such courts. I think that that would be difficult but I should like to know whether the Government are considering it.
I echo the thanks of the Minister to Lord Justice Carswell and to the committee for its work in preparing the ground for the order.
Lord McConnell: My Lords, I too welcome the introduction of this order. As we were told, it is broadly similar to the Civil Evidence Act 1995. But what puzzles me is why the provisions for Northern Ireland were not included in that Act when it was a Bill before this House and the other place. Why do we need such an unsatisfactory procedure whereby an order, which cannot be amended—not that I seek to amend it—has to be brought separately before the House? The process whereby Northern Ireland legislation is brought before us as an order and we are told to take it or leave it

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has gone on for far too long. It is time the Government reconsidered this procedure which they so frequently bring before us.
I agree that the exclusion of hearsay evidence is no longer necessary in Northern Ireland because in civil cases there is no longer a jury and the decisions are made by the judge. The original idea in excluding hearsay was in case the jury attached too much weight to evidence that was not reliable. When it is being considered by a judge, he will be able to assess the weight of the evidence before him, and therefore this safeguard is no longer necessary.
I join in congratulating the Law Reform Advisory Committee on the work it has put in on this subject.
Lord Molyneaux of Killead: My Lords, I rise briefly to support what was said by my noble friend Lord McConnell and also to say that I particularly welcome Article 8 regarding proof of statements contained in documents. When, in a previous incarnation, I was sitting as a justice of the peace, time and again one was hampered by the unavailability of a certain document. On those occasions when a copy was obtained, I was required by law to reject the document because it was not the original.
I know that technology has moved on greatly since then, with copying and fax machines, and sometimes they need to be scrutinised carefully. But that is provided for in the words,
"in such manner as the courts may approve".
A district court, a county court or a High Court therefore has the discretion at its disposal to judge the authenticity and validity of documents. I have pleasure in supporting the order in general.
Lord Alderdice: My Lords, I too thank the Minister for his description of this fairly technical but nevertheless important piece of legislation. I also tender my thanks to the Law Reform Advisory Committee for Northern Ireland for its work on the matter.
I do not want to refer to the details of the legislation; they are basically welcome, as other noble Lords have said. I want to pick up on a comment made by the noble Lord, Lord McConnell, though from a slightly different point of view, and seek some advice from the current Government on their view.
The noble Lord mentioned that in most senses—not absolutely, but in most senses—this piece of legislation is a reiteration of the Civil Evidence Act 1995. It was asked why such legislation should not incorporate Northern Ireland. I am one of those who is absolutely committed to devolution and obviously there is a case for keeping a separate Northern Ireland statute book.
Given the evidence of the past couple of weeks, which has been positive in terms of the talks in Northern Ireland, I hope that we may be looking towards some kind of legislative body in Northern Ireland within a reasonable time. In the light of that—this may apply to other parts of the United Kingdom—have the Government given any thought to how to approach the question of which pieces of legislation will be carried
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forward by a Bill which refers to England, Wales and Northern Ireland (Scotland has a different form of law) and which will be carried forward separately for Northern Ireland even when Northern Ireland has its own legislature?
I am not sure that the Minister will be able to reply. However, it is an important time. Government have not fully considered the implications of this and should perhaps be giving some thought to it. I hope that it may not be long before it will be very relevant indeed. I await with interest to hear what the Minister says.
Lord Dubs: My Lords, I thank those noble Lords who have contributed to this short but interesting debate. Perhaps I may try to deal with the various questions that were asked.
The noble Lord, Lord Cope, asked what experience we had had with the Civil Evidence Act operating in England and Wales. It is too early to comment fully on the Civil Evidence Act because it only recently came into force. However, we have had no negative feedback, and evidence from other common law jurisdictions suggests that the order should work well in practice. Until we have a longer period of experience in England and Wales I cannot be more helpful to the noble Lord.
The noble Lord asked also about the Diplock courts. The remit of the Law Reform Advisory Committee does not extend to the criminal law in Northern Ireland. Hence that committee made no recommendations on this issue. The Law Commission's report on hearsay evidence in criminal proceedings is under consideration but the Government have no plans to extend the changes suggested by the noble Lord to the Diplock courts.
The noble Lords, Lord McConnell and Lord Alderdice, with a somewhat different emphasis, asked about the use of the procedure of Order in Council legislation. That is an issue which goes well beyond this order and covers a great deal of Northern Ireland legislation. Let me state the principles.
Orders in Council are an established means of making primary legislation for Northern Ireland in the circumstances of direct rule. The Government recognise the defects of the system but it is not practical, nor necessarily desirable, that all the Northern Ireland provisions should be enacted by a Bill at Westminster. However, we are always ready to consider with an open mind whether a Bill should be used to legislate on a matter which might otherwise be dealt with by an Order in Council. For reasons of practicality, that cannot always be the case; each instance is looked at on its merits. The Bill that is under debate in this House dealing with processions in Northern Ireland is a precise example of a Bill that it was thought should go through the full parliamentary process.
Let me also refine the answer in terms of this specific measure. It was decided not to extend the Civil Evidence Act 1995—which was based on a Law Commission Report—to Northern Ireland because at that time Northern Ireland's own independent law reform body, the Law Reform Advisory Committee for Northern Ireland, was examining the subject with a view to bringing forward its own proposals. Civil evidence has

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always been dealt with in Northern Ireland by way of separate legislation and in a number of respects the law in Northern Ireland differs from that of England and Wales.
Against that background of a separate legislative framework, the Law Reform Advisory Committee, under its chairman, now Lord Chief Justice Sir Robert Carswell, put forward recommendations which in some respects differed from the 1995 Act. The Government accepted the committee's recommendations in full. That meant that the most appropriate method of implementing the recommendations for reform in Northern Ireland was by the procedure we have before us today.
The noble Lord, Lord Alderdice, covered the same point but with somewhat different emphasis. The Government are not dogmatic in their attitude towards legislating for Northern Ireland. We look at each piece of legislation on a case-by-case basis. There are benchmarks used in coming to decisions about how to legislate for Northern Ireland that are based on the Northern Ireland Constitution Act 1973. That categorises legislation as accepted, transferred or reserved matters. Civil evidence falls between transferred or reserved matters and as such is suitable for legislation by way of an Order in Council under the Northern Ireland Act 1974.
I appreciate that the noble Lord, Lord Alderdice, was asking more about the future than about the present. It is something that will have to be considered as the talks process develops. But the noble Lord will understand that it is difficult for me to give a broad and significant long-term answer this afternoon, as I was not prepared for his question when he asked it. However, I agree that it is an important and reasonable question at the present time.
On Question, Motion agreed to.

Deregulation (Northern Ireland) Order 1997
4.30 p.m.
Lord Dubsrose to move, That the draft order laid before the House on 28th October be approved.
The noble Lord said: My Lords, the purpose of this order is to introduce measures which will remove burdens on business in Northern Ireland. It follows and builds on the general thrust of the 1996 Deregulation and Contracting Out (Northern Ireland) Order.
The Government are committed to cutting unnecessary red tape by introducing a simpler regulatory system for business. We are also conscious of the burdens regulations place on the citizen and are committed to seeking to improve the regulatory interface in this area. The order is consistent with the thrust of our efforts to improve the quality of regulation. The provisions in the order make good sense. That is demonstrated by the small but valuable response to the consultation exercise. Public comment was invited, and almost 300 individuals or bodies with a particular interest in the order were contacted directly and their
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comments sought. Only 22 responses were received. We have to assume that the rest did not feel strongly about the order one way or the other, or else they were just favourably inclined.
The order contains eight measures to benefit business. Of these measures, six will ensure that parity is maintained with deregulation orders which apply in Great Britain and which were made under powers contained in the Deregulation and Contracting Out Act 1994. The six will remove constraints for new credit unions seeking registration, increase opportunities for the expansion and growth of credit unions and broaden the pool of savings and incomes from which members can directly benefit; they will remove restrictions and reduce costs on industrial and provident societies; they will remove resolution restrictions on private companies; they will increase the number of gaming machines permitted in registered clubs from two to three and allow the Department of Health and Social Services to vary this limit in future by subordinate legislation; they will extend the validity of a vehicle's first MoT certificate; and they will remove redundant controls on the manufacture, storage, sale and use of rag flock for upholstery.
The remaining two provisions are unique to Northern Ireland. Article 9 removes restrictions on the use of pre-payment meters for purchasing energy efficiency goods and services. Article 10 removes the requirement of exporters of potatoes to non-European Union countries to have a potato shipping licence.
The order is a sensible and reasonable provision. It removes unnecessary or outdated obstacles to commerce in Northern Ireland without compromising the Government's commitment to ensuring that adequate protection for the public is maintained. I beg to move.
Moved, That the draft order laid before the House on 28th October be approved.—(Lord Dubs.)
Lord Cope of Berkeley: My Lords, I, like, I am sure, all noble Lords, am in favour of deregulation. The proliferation of regulations is enormous. They are a terrible burden to small businesses, large businesses and government. Regulations grow like weeds. Therefore, the task of deregulation is a completely continuing one, just like gardening.
Some acts of deregulation are more significant than others. Some just tidy up the statute book, or parts of the statute book, which no one uses. Article 8 of the order repeals the Rag Flock Acts of 1911 and 1928. I do not imagine that will_ reduce the burden on business very much. It is probably quite some time since a business filled in a form required by those Acts. That is not a reason for not repealing the Acts if they are no longer required but it means that there is not much saving for business from that article.
There are some more significant changes, as the Minister set out, for credit unions, industrial and provident societies and for companies. They are desirable in themselves. The amendments to the potato marketing Act look to have some significance. However, it seems to me that by the order we are getting rid of most of the Act. Can the Minister say whether

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there is anything left of the potato marketing Act; and, if so, why it has been left? Why not repeal the whole affair?
The order is supposed to allow companies to save £7.5 million. I presume most of it is from the clauses relating to the credit unions, companies and industrial and provident societies, but it would be helpful to know that.
Lord Alderdice: My Lords, the Government are to be congratulated on bringing forward the order. The noble Lord, Lord Cope of Berkeley, made a comparison with gardening. It was the setting up of committees that came most to my mind. Once established, committees, with a constant agenda of apologies, minutes, matters arising and the date of the next meeting, usually have a sufficient agenda to continue even when their purpose has long since been forgotten. It is often the same with regulations. As the noble Lord, Lord Cope, said, some of the regulations were established in 1911 and have continued until now. The Government are to be congratulated on bringing the order forward. We welcome all the changes, not least the fact that there will be estimated savings to Northern Ireland business of £7.5 million. That will be widely welcomed at home.
Lord Molyneaux of Killead: My Lords, I shall be brief in view of the importance of the succeeding debates. I am a little puzzled by the words in Article 7,
"vehicles adapted to carry more than eight passengers".
We all recognise that Orders in Council cannot be amended. However, it would make the legislation more readily understood if we had an explanation as to the meaning of that phrase. Does it really mean "vehicles adapted" or does it mean "vehicles constructed"? It is difficult to envisage how a vehicle could be adapted and also comply with the road traffic and safety regulations.
The phrase I have just quoted also appears in the public processions legislation which is currently before your Lordships. The references in Article 7 will probably become law before the public processions Bill becomes law. I am sure the Minister will agree that it is important from the point of view of the police traffic division that it should have clarification on that point.
Viscount Simon: My Lords, I have one question on Article 7 concerning motor vehicle tests. It says that the first time an MoT is necessary it can last for a period of up to 13 months. Does this continue for ever and a day, which is not said? In other words, on successor periods, can it be a 13-month period or any other time when the test takes place; or does it have to be an exact 12-month period for successor tests?
Lord Dubs: My Lords, I shall try to do justice to the questions that have been raised. The noble Lord, Lord Cope, asked about the financial savings to business. The main savings are on Article 6, dealing with gaming machines, where we estimate that businesses will save roughly £2.5 million; and on Article 9, dealing with electricity pre-payment meters,
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where we estimate the saving will be some £5 million. Smaller sums will be saved on various other measures that we have before us.
The noble Lord also asked about the potato marketing provisions. He asked why we did not repeal the whole of the Act. The sections in the Act dealing with the licences are repealed. However, I should like to look further into the question asked by the noble Lord and write to him.
The noble Lord, Lord Molyneaux, asked about the use of the word "adapted" in relation to public service vehicles carrying more than eight passengers. That word is taken from the legislation that is being amended. It is my understanding that the intention is that it is to apply to all vehicles carrying more than eight passengers. If that is not correct, I shall write to the noble Lord. I shall also have to write to the noble Lord about the other point he raised.
I do not believe that the noble Lord. Lord Alderdice, asked a specific question to which he expected an answer. The noble Viscount, Lord Simon, asked about the extension of the length of the period under which MoTs will be carried out. Again, it is a fairly technical point as regards the time period. Although I believe that I know the answer I prefer to check. I shall write to the noble Viscount when I have had a chance to look into it. I hope that I have dealt with all the specific points that were raised.
On Question, Motion agreed to.

Long-Term Care: Royal Commission
4.41 p.m.
The Minister of State, Department of Health (Baroness Jay of Paddington): My Lords, with the leave of the House, I should like to repeat a Statement made in another place by my right honourable friend the Secretary of State for Health. The Statement is as follows:
"As people approach old age, many become anxious about how they will be looked after, how much it will cost and who will pay. So, at the general election, we promised we would establish a Royal Commission to work out a fair system of funding long-term care for the elderly. Today, I can announce that the new Government are keeping another of their promises. The Queen has agreed to the setting up of the Royal Commission whose terms of reference will encompass the United Kingdom as a whole.
"It is to be chaired by Professor Sir Stewart Sutherland, Principal and Vice-Chancellor of Edinburgh University. I am confident he will bring to the commission the skills and experience necessary to ensure rapid and vigorous scrutiny of the issues involved and practical cost-effective proposals to deal with them. He will be joined by eleven other commissioners: Professor Dame June Clark, Professor of Community Nursing at the University of Swansea; Sir Nicholas Goodison, deputy chairman of the Lloyds TSB Group and former chairman of the Stock Exchange; Dr. Iona Heath, a GP in Kentish

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Town who represents the Royal College of General Practitioners on the British Geriatrics Society; Joel Joffe, a human rights lawyer, founder director and former deputy chairman of Allied Dunbar Assurance and former chairman of Oxfam; David Lipsey, political editor of the Economist and a public interest director on the Personal Investment Authority; Professor Mary Marshall, director of the dementia services centre at the University of Stirling; Claire Rayner, writer, broadcaster and president of the Patients' Association and a former nurse; Paula Ridley, the chair of the Liverpool Housing Action Trust; Professor Robert Stout, Professor of Geriatric Medicine at Queen's University, Belfast; Robin Wendt. the former secretary of the Association of County Councils and a former civil servant at the DHSS; and Len Woodley QC, a Recorder who chaired the Laudat Mental Health Act Inquiry.
"Briefly, the commission's terms of reference will be to examine the short and long-term options for a sustainable system of funding of long-term care for elderly people, both in their own homes and in other settings, and to recommend how, and in what circumstances, the cost of such care should be apportioned between public funds and individuals. I have placed the full terms of reference in the Library of the House.
"The commission will consider the implications of its recommendations for younger people who have long term care needs because of illness or disability and have regard to the Government's review of pensions. The Government want both sound and swift advice, so the commission has been asked to report within 12 months; it will therefore be different from previous Royal Commissions.
"This commission will be different from its predecessors in other ways, too. In the past, some Royal Commissions have included representatives of the pressure groups involved in the topics to be covered. This one does not. The commissioners are not supposed to be representatives. They are there to take a fresh look.
"However, pressure groups and representatives of users and carers should have their say. So the commission will establish a reference group of organisations to help gather views and receive advice. The chairman of the commission is today inviting a whole range of organisations to serve on this reference group. It will include charities and other groups involved in long-term care, the financial services sector, NHS, local government and other service providers together with representatives of the major religious faiths in the UK. By this means the commission will be able to draw on the most up-to-date experience of users and carers.
"The commissioners will also be making visits around the country to listen to other users and carers. They plan to be out and about so that they can really get the full flavour of the current concerns in different parts of the country.
"The task of this Royal Commission is neither simple nor easy but it is important. The present situation cannot go on much longer. People are
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entitled to security and dignity in their old age. So we must find a way to fund long-term care which is fair and affordable for both the individual and the taxpayer. With the independent advice of the Royal Commission, I hope we will be able to establish a consensus from which we can fashion a sustainable system of long-term care which will meet the needs of elderly people well into the new century.
My Lords, that concludes the Statement.
4.46 p.m.
Earl Howe: My Lords, I am most grateful to the Minister for repeating the Statement. The issue of long-term care and its funding is one which, for thousands of families up and down the country, has become an ever-present and personal reality. We on these Benches are in no doubt of its importance. If we look at the demographic position, older people represent the section of the community which is growing the fastest. The proportion of the population aged 85 and over has doubled in the past 25 years to 1.8 per cent. and it is expected to continue rising over the next 15 to 20 years. It is estimated that 5 per cent. of people between 75 and 85 years of age and over 20 per cent. of all those over 85 years of age will eventually require long-term residential care at a cost of £20,000 or even more, each year, for an average of three years.
For the state to fund that cost it is necessary for an individual to prove need on the basis of a means test, a principle which has applied ever since 1948. Many of us know the worry and sense of unfairness felt by elderly people who are sometimes obliged to sell their homes in order to pay for long-term care while those with no assets whatever and who have made no attempt to provide for their needs in retirement pay nothing and receive exactly the same care. We all understand those concerns. Before they were elected, the Government, I believe, criticised the means testing rules, but without a means test the cost to the public purse would be very considerable.
During the last Parliament the means test thresholds were changed substantially. The amount of an elderly person's capital assets, protected under the rules of means testing, was tripled. That was a positive step. But the sense of unfairness felt by many people did not go away. In May last year the previous government published a White Paper called A New Partnership for Care in Old Age which in essence proposed a partnership between government and the individual to encourage people to take out indemnity insurance or annuities to cover the possibility of their needing long-term care in old age, offering them in the process the incentive of having more of their assets protected in any means testing procedure. The proposal that we put forward represented an addition to the programme of care in the community, not a slice out of those programmes.
We felt that the benefit of this approach was that it would enable any amount of protection to be secured—any sum of cover, large or small—and could even be of benefit to those whose need of long-term care might, as it were, be just over the horizon and would not simply

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be applicable to those of younger years. The Community Care (Residential Charges) Bill, prepared by the last government, would have achieved those objectives.
One of my worries about a Royal Commission is that it will take a good many months to reach its conclusions. The Government will then need to take their time to consider those conclusions. The whole matter is one which in any case requires fairly extended lead times to achieve change on any appreciable scale. I hope that the Minister will be able to reassure us that the Royal Commission will be operating strictly to the 12-month timetable that she mentioned.
In the meantime, over and above that, will the Government consider the possibility of bringing back the Bill drafted by the previous government as a government Bill? The Minister may say that she does not wish to pre-empt the Royal Commission's findings. If she does, I would respectfully say that I do not see that as being a satisfactory answer to the many thousands of people who cannot wait for the Royal Commission to report, and for the Government to cogitate, produce a White Paper, and, in due course, publish a Bill.
The issues are clear and salient. The risk of an individual needing long-term care at some point in his or her lifetime is plainly an insurable risk. Do the Government accept that part of the solution, at least, must lie in private provision, perhaps through annuities or as a standard element in pension schemes? Do the Government agree that saving for long-term care is feasible for most people to undertake during a working lifetime? If the Government do agree, what is to stop them pursuing those ideas sooner rather than later, whatever the Royal Commission's conclusions turn out to be? This does not seem to be a matter of mutual exclusivity.
I wish to make a comment or two upon the Royal Commission itself. While, for the reasons I have explained, we on this side doubt whether a Royal Commission is the most appropriate route to take in the current circumstances, nevertheless we join the Government in warmly welcoming Professor Sir Stewart Sutherland to his new post as chairman. We have every confidence in his ability to look at these important matters thoroughly and dispassionately. He is well suited to the appointment. We wish him and his fellow commissioners well in the task ahead of them.
Will the Minister assure the House that Sir Stewart and his commission will examine all the options for schemes which might enable more people to bear the costs of their own care while, at the same time, protecting their assets from the means test along the lines that I have described? Will they look also at the comparative merits of private care and local authority-funded care and the need for a level playing field between the two when a local authority takes responsibility for funding a residential care place?
I repeat my good wishes to the commission. We await its report with considerable interest and anticipation.
Lord Taverne: My Lords, it is hard to find anything in the announcement to criticise. The commission has a
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wide remit. It has good names. It includes studying the question of long-term care for young people. It is to co-operate with other inquiries. I have just one question for the Minister. Will she assure us that it is not just the funding of long-term care at which the Royal Commission will look, but how that care is to be provided and the kind of care that will be most effective?
Baroness Jay of Paddington: My Lords, I am grateful to the noble Earl and the noble Lord for their welcome for the Royal Commission, and, in particular. the chairmanship and membership. I shall respond briefly to the noble Earl on how this matter is to be looked at in the context of earlier proposals, specifically the partnership proposals of the previous government. We made clear early on that we did not intend to go ahead with that scheme: in our view, it was a partial solution designed to help relatively few people. I have no doubt that that might be one of the elements thought to be worth considering by Sir Stewart and his colleagues. I imagine that it will come on to their agenda.
On the more general point as to whether the Royal Commission is, in a sense, kicking into touch some of the earlier proposals and acting merely as a delaying exercise to make it possible to postpone some of the choices and decisions between previous and current suggestions about social insurance and other possible ways of funding long-term care, I reinforce the point that the Royal Commission does not have the luxury of a leisurely timetable. It has a clear and practical remit and the requirement to report in about a year.
The Government have already said that they will respond quickly to the commission's findings and take its recommendations seriously. A prompt report from the commission will allow legislation within the lifetime of this Parliament should that be considered necessary. In response to both the noble Earl and the noble Lord, I reinforce that all is on the table. Various schemes have been proposed in the past by the previous government and other distinguished experts. Part of the remit involved in having these individual contributors to the discussion take a fresh look is to assess those proposals further, both in the context of the demographic needs to which the noble Earl referred and the Government's comprehensive spending review and pension review.
The point made by the noble Lord about the type of care as well as the financing of the care is important. It is a valuable point to re-emphasise. The commission will look at types of residential care, types of care through which people are supported in their own homes, and the kind of care that can be provided by a mixture of funding and within the context of individual contributions and state contributions. There is no pre-assumption about the nature of the care which will be provided. As I said when repeating the Statement, our primary concern is to ensure that people can expect both dignity and security as they get older.
4.56 p.m.
Lord Clark of Kempston: My Lords, I welcome the setting up of the Royal Commission, providing that it

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reports within 12 months, and the fact that the Minister said that long-term savings must be given every encouragement. Will she explain the logic behind raiding pension funds for the elderly by £5 billion a year, cancelling health care insurance for the elderly, and, finally, yesterday making TESSAs and PEPs less attractive than they were under the previous government?
Baroness Jay of Paddington: My Lords, I say, as the noble Lord would expect, that we have taken the position that those provisions which we have introduced are in the interests of the many and not the few. The ISA scheme which the Government have now proposed is designed to extend the ability to save to those people who we feel will be most vulnerable and in most need of protection as they get older.
Baroness Pitkeathley: My Lords, I too welcome the Statement. There are two main reasons. First, payment for long-term care, as everyone in your Lordships' House will be aware, is currently a mess. Secondly, it affects every man, woman, and indeed, child in this country. I welcome also the establishment of a reference group, particularly with its emphasis on consulting users and carers. Does my noble friend agree that it is vital that any proposal made for changes to funding for long-term care must command the support of the whole nation, as did the original proposals in the 1940s? I welcome the news that the commission will be out and about. Will my noble friend give an assurance that the commission's decisions and recommendations will also be put out to the widest possible consultation before final decisions are implemented?
Baroness Jay of Paddington: My Lords, I am grateful to my noble friend, especially because I know that the organisation which she leads (the Carers' National Association) has been approached to be part of the reference group, and, I believe, has accepted. That is a useful beginning towards establishing an authoritative group of people on the reference group. Of course the point she makes about the need to establish a consensus around whatever proposals are made is well taken.
My honourable friend, Mr. Boateng, the Minister with direct policy responsibility for this area in the Department of Health, has talked elegantly about the need to achieve consensus across the generations before any proposed plans are accepted. On the point of consultation, once the Royal Commission has reported, I am sure that there will be a period for consultation, but I am mindful of the points made by noble Lords about not building in enormous delay. There is, as always, a tension between consultation and action, but I am sure that that will be resolved.
Baroness Thomas of Walliswood: My Lords, obviously I have not had time to read the full document in the Library, so may I ask whether the terms of reference will enable the Royal Commission to look at the interface in terms of care between social services and the health service and, in particular, services such as physiotherapy which are available only to the health
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service and which can help to extend elderly people's physical ability to move? Will the Government also bear in mind the importance of preventive care, which has a wider role to play? Finally, will the wider target group include people from the Councils for Voluntary Service which have long experience of co-ordinating various agencies in order to solve problems?
Baroness Jay of Paddington: My Lords, I have the exact terms of reference in front of me. I realise that the noble Baroness has not had the opportunity to read them in the Library. The specific point about physiotherapy is not made, but I would feel that it is encompassed in the term which refers to looking at the strengths and weaknesses of the current arrangements. The one thing that is clear about the delivery of care in the community is the so-called "Berlin Wall" between health and social services. That could be demonstrated to be a weakness of the current arrangements to which I am sure attention will be drawn. With regard to the specific membership of the reference group, the organisation to which the noble Baroness referred does not appear in the list that I have before me, but that does not necessarily mean that it is not included. I believe that the list simply records those who have already been approached.
Lord Borrie: My Lords, when repeating the Statement, I noted the phrase—I believe that I quote it correctly—that the Royal Commission will "have regard to the Government's review of pensions". Does that mean that if the pensions review results in a compulsory element of contribution for the second pension, it will not be appropriate for people to be compulsorily required to contribute towards their possible need for long-term care in old age? If I may phrase the question slightly differently: do Her Majesty's Government agree that there are fewer arguments for compulsion for long-term care contributions because the risk of need for care is less obvious than the risk of need for a pension from the age of 60?
Baroness Jay of Paddington: My Lords, I suspect that my noble friend is asking me to pre-judge some of the intellectual discussions which will undoubtedly form the meat of Sir Stewart's inquiry. My noble friend has put his finger on an important point. At the moment all I can say is that we clearly understand the direct relationship between the Royal Commission and the pensions review. There are obvious links to ensure coherence between the different aspects of the reviews of government policy in terms of the pensions review, a wider look at the welfare state as a whole, and the Royal Commission. As a government we need to ensure that those different groups, all of which are considering the same problem but from slightly different angles, produce a coherent policy in the end.
Lord Swinfen: My Lords, will the Royal Commission consider the position of the dependants of the person who needs long-term care? So often, the cost of such care is so great that it puts the dependants into a serious and difficult financial position which can at

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times have detrimental effects on those dependants' health and, as a result, can cost the National Health Service a considerable amount of money.
Baroness Jay of Paddington: My Lords, that point is covered in the provisions which specifically relate to the interests of both carers and users. It is reflected in the inclusion of my noble friend Lady Pitkeathley in the reference group as a representative of the Carers' National Association. As the noble Lord rightly points out, those who are looking after the frail and elderly should be an important consideration. That point was reflected also in the comments of the noble Earl who referred to those people who have been compelled to sell their marital home when one partner enters long-term care. I am sure that that problem will be addressed and that the general issue which the noble Lord raises will be covered by the broad umbrella remit to look at the concerns of the carers as well as of the users of services.

Financial Consequences of Enlargement: ECC Report
5.5 p.m.
Lord Barnettrose to move, That this House take note of the report of the European Communities Committee on the Financial Consequences of Enlargement (10th Report, Session 1997-98, HL Paper 41).
The noble Lord said: My Lords, I do not think that I have ever been more delighted to be called to move a Motion. I have been asked, uniquely, to give an apology on behalf of my noble friend Lord Bruce of Donington. I have never had to apologise for my noble friend previously, but I do so now because he will be unable to speak in the debate. That apology applies also to my noble friend Lord Kennet.
Before turning to the Motion, perhaps I may welcome our two maiden speakers, the noble Lord, Lord Garel-Jones, and my noble friend Lady Young of Old Scone. I am sure that we all look forward to hearing from them.
I should like to take this opportunity to thank the witnesses who appeared before our committee. I am sure that those noble Lords who have read their evidence will appreciate how valuable those witnesses were in helping us to prepare our report. I should also like to take this opportunity—I am sure that members of my committee would want me to—to thank our Clerk, John Goddard. We have been especially fortunate in the quality of our Clerk in helping us to prepare this report. I thank also the members of my committee because, if we have been fortunate in our Clerk, we have been especially fortunate—I certainly have been fortunate—to have such brilliant and hard working committee members. They have helped to prepare what I hope your Lordships will accept is an excellent report.
We have worked to a tight timetable and I apologise to your Lordships for the delay in publishing the report. As I understand it, the report was available to your
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Lordships in the Printed Paper Office last Friday, although that was not generally known. The tightness of the timetable arises because we felt it right to try not only to get our report out, but to have a debate on the Floor of your Lordships' House, before the Luxembourg Council on 12th December which I hope will not only take note of, but act upon, the points made in our report. If your Lordships have in some way been embarrassed by not receiving the report quickly enough, I apologise, but I hope that when your Lordships have an opportunity to read it, you will realise why we have produced it in this way.
I start by speaking of the structure of our report. The introduction comes in Part 1, but perhaps somewhat unusually we have highlighted a sort of scene-setting paragraph, using the words "coming home" which is what the applicant countries of the eastern European area believe is what would happen if they could successfully become members of the European Union.
Part 2 contains the summary of our opinion and what might be called the bald points. We have put them up front because—I know that this does not apply to your Lordships—there are some outside this House who may not read the whole of the report and such points might help those who suffer from what might be called "report fatigue", of which noble Lords will be aware. Although. as I have said, there are some outside who do not necessarily read reports in their entirety, perhaps after they have read our main points, they will want to read the whole report—I hope so.
Part 3 is the factual background to the report. I hope that your Lordships will find it helpful.
Part 4 is the summary of the evidence of the witnesses to which I have already referred. Again, it brings out the important points in the evidence that we have received from some very good witnesses.
Part 5 is our full opinion, to which I now turn for the main part of my remarks. We believe that there is huge potential to be gained from enlargement in this direction. Successful enlargement of the Community will make for great advantages not only for the applicant countries, but for the existing 15 countries of the European Union. Equally, there is huge danger if we miss this opportunity. There could be a slide towards tension and instability in Europe among those applicant countries. We should like to see a successful enlargement. However, we believe that the financial consequences of enlargement have been inadequately thought through. That is a great worry.
I read with great interest the speech of my right honourable friend the Foreign Secretary during his visit to the Czech Republic. Naturally and quite rightly, he was very pleasant to his hosts. He clearly recognises the need to bring the Czech Republic and others into the Community. Much thought has been given to that by the Commission itself in the excellent report Agenda 2000. That sets out a realistic route for enlargement.
That said, we do not believe that the Ministers of the member states, including the UK, have seriously thought through the financial consequences both to the existing 15 members of the European Union and the countries that we hope will come in. My right honourable friend

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the Foreign Secretary was very enthusiastic and said many things with which I wholeheartedly agree. I am not sure that he discussed his speech with the Treasury. If so I would be surprised if that department had given any thought to the financial consequences, let alone give my right honourable friend any advice. Both in this country and many others within the European Union—I am worried because my noble friend Lord Bruce of Donington nods in agreement—there is concern in government about paying more or receiving a smaller rebate.
The Economic Secretary to the Treasury, Helen Liddell, gave evidence to the committee. She said that our rebate was set in stone. That took my mind back to another lady, Mrs. Thatcher, now the noble Baroness, Lady Thatcher, who said that Britain wanted its money back. I believe that that was the phrase she used. If every member state pursues that line, the chances are that financial success in enlargement will be pretty remote. We all know that it will be difficult. In some countries general elections are imminent. Nothing will be done before the autumn of 1998 and the German elections. I am sure that they would not agree to anything until those elections were out of the way. Win or lose, somebody will be in charge in that country who will I hope be able to make some decisions. Other existing members of the European Union will be holding elections at some time. There is a worry about the ability of the 15 countries of the European Union to reach agreement about successful enlargement of the Community. Even without imminent elections both the Germans and others will press strongly for an alteration to our rebate which many see as unfair. The committee did not discuss it in those terms. The committee wanted to see the UK do well within the Community. One is not speaking about fairness or unfairness in terms of rebates. The committee agrees with the comment of the Foreign Secretary that successful enlargement of the Community would be a great advantage to this country.
How will enlargement be paid for? There are probably three ways in which it can be done. No doubt noble Lords can think of others. The first is economic growth. That is usually regarded as the painless way of paying for a number of matters. Secondly, there is the possibility of raising the own resources ceiling, which at the moment is 1.27 per cent. of the European Union's GDP. To be utterly realistic, the likelihood of that occurring is pretty slim. (I wish that my noble friend would stop agreeing with me. It would be even worse if the noble Lord, Lord Marsh, began to agree with me.) Thirdly, there might be cuts in structural funds and the common agricultural policy.
As to growth, between the years 2000 and 2006 it is estimated by the Commission that the European Union's 15 will grow on average by 2·5 per cent. (I am glad to see that my noble friend is now disagreeing with me. This is not my view but the view of the Commission.) It is also estimated that the applicant countries will grow by an average of 4 per cent. I have never had much faith in forecasts, even weather forecasts. If a forecast were made about tomorrow I would be uncertain. Those growth forecasts for the period 2000 to 2006 may be achieved—I underline "may"—but the committee is
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uncertain whether they will be. The figures are spelt out in paragraphs 79 to 83 of the report. The committee views those figures with scepticism, although not the same kind of scepticism as is sometimes displayed in your Lordships' House.
One important section stands out. Even with an average growth of 2.5 per cent. among the 15 and 4 per cent. among applicant countries, it is estimated that it will take about 25 years for the latter to achieve 50 per cent. of the 15's average GDP. That gives an indication of the seriousness of what we are talking about here. To narrow the gap to that extent will require European Union assistance for at least a generation following accession. Therefore, the financial consequences of enlargement are very serious indeed. It is foolish to disregard the problems that it will create.
If growth does not achieve very much, I come to the other points: the structural funds and the common agricultural policy. We believe that those issues are pivotal to the financing of enlargement. That word is worth repeating because the committee spent some time discussing it. We believe that governments and Ministers have given insufficient thought to the full scale of the required reforms. As to the structural funds, the situation would be difficult enough without economic and monetary union. I do not intend to go into it. The fact is that there will be a significant impact on vulnerable regions within the existing 15 member states, including the UK, in terms of the level of structural fund grants. That will occur whatever happens, because there will be a requirement to cut down the areas within the European Union that are now in receipt of structural funds. I would very much regret that because some of those areas are not far from where I live. It is a fact that they will have to be reduced.
With regard to the common agricultural policy, the committee has deliberately not dealt with the details. It is not an agricultural sub-committee, and that will be dealt with by the appropriate committee. However, if we look at the financial consequences of enlargement, we cannot ignore the fact that the financing of the common agricultural policy as now cannot continue. There must be substantial reforms.
There is a further cost to the applicant countries which has not been considered in any way: NATO enlargement. In his speech in the Czech Republic the Foreign Secretary referred to the hope that some of the applicant countries would become members of NATO. Costs will be applied to those countries which are now applying for NATO and EU membership, but no one has given the slightest thought to them.
Equally, there will be a need to build strong and honest institutions in the applicant countries. That is crucial to the whole question of enlargement. I was pleased to see that we in the UK will be helping them to create decent, strong and honest institutions. There would be serious financial consequences if they did not have such institutions. Some members of my committee went to Athens and to Dublin and saw the difference in the way in which institutions manage sensibly to use the cohesion fund. The same will apply in the case of the structural fund.

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I turn to the opening of negotiations. There are two options. The first is to start bilateral negotiations with all 10 countries. For some reason that is called the "regatta" approach. Perhaps someone may know the reason for that. The second option is to have bilateral discussions at the outset with the five countries which we have listed, plus one; that is, Cyprus. It is anybody's guess what will happen there; I should not like to speculate. I am pleased to note that my right honourable friend the Foreign Secretary recommended that negotiations should start with the five countries. I hope that that recommendation will be accepted at the Luxembourg Council. If its members agree nothing else, I hope that on 12th December they will agree that.
There is a further important factor, to which the Foreign Secretary referred. The other five countries must not feel that they are being overlooked. It is vital that they are not thought to be overlooked. We must convince them that if they achieve the acquis communautaire they could overtake some of the first five countries in obtaining entry to the Community. That point was made to us by Commissioner van den Broek when we were in Brussels, so it is beginning to be recognised. The Commission believes that accession will most likely be in 2002. I believe that that is a little optimistic, given the difficult financial problems that we face.
In conclusion, I have missed much in our report and I am sure that members of my committee will fill in the gaps. I did not wish to take too long in opening the debate, but I believe that I have dealt with the major issues. The clear central issue is that we and other member states do not pay lip service to enlargement, but that we recognise the financial implications. The prospect of enlargement has already stimulated reform in the 10 applicant countries. Any delay and wrangling over what would be comparatively marginal costs to the 15 members of the European Union would do immense damage. Therefore, I hope that the tremendous opportunity of enlargement will be grasped. Indeed, my right honourable friend the Foreign Secretary—I am sorry to refer to him again, but he is the only Minister who has commented on the issue—intends to launch the European conference early in the spring in order to deal with some of these issues. I urge the 15 members of the European Union at their meeting on 12th December and at the conference mentioned by the Foreign Secretary to provide a positive response to the great challenge which enlargement provides. I beg to move.
Moved, That this House take note of the Report of the European Communities Committee on the Financial Consequences of Enlargement (10th Report, Session 1997-98, HL Paper 41).—(Lord Barnett.)
5.24 p.m.
Lord Garel-Jones: My Lords, I have listened to a number of maiden speeches since I came to this House. I hope that your Lordships will not think that it is a routine matter if I say that I and all other noble Lords who entered in what might be referred to as a "bumper bundle" are grateful for the warmth and courtesy of our
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eception from Members on all sides of the House and from the staff. It considerably enhances what would in any event be a great privilege. I and all the new Members are grateful for that.
I rise with trepidation to address your Lordships for the first time, not least because having had some responsibility for European policy I am well aware of the standing of the committee chaired by the noble Lord, Lord Tordoff, and the sub-committee chaired by the noble Lord, Lord Barnett. In another place I had substantial experience of their courteous precision.
Perhaps I may begin by making a few remarks which I regard as entirely uncontroversial; at least I believe them to be uncontroversial in your Lordships' House. The Treaty of Rome, the Single European Act and the Maastricht Treaty were all signed by Conservative governments. I do not regret that, nor do I resile from any of them. I wish to touch briefly on two subjects: monetary union and political union. Monetary union is a high risk strategy. The loss of exchange rate flexibility—the safety valve that has hitherto enabled nations to adjust to underlying divergencies—could exacerbate tensions to a point which would raise a question mark over the political project itself; not to mention a whole range of technical difficulties which must be overcome.
I have no difficulty whatever with the cautious enthusiasm which the Government have expressed for monetary union, hedged in as it is by the conditions laid out by the Chancellor of the Exchequer. Nor do I intend to lie awake at night—for a decade perhaps?—over the cautious scepticism put forward by the Leader of the Opposition. If monetary union works Britain will join. The Leader of the Opposition has left the door open, just, for such an eventuality, and I welcome that.
There are those, some of them in this very House, who believe that a single currency equals a single government. They say that they do not wish to see that at any price. Together with my right honourable friend the Leader of the Opposition, on balance I should prefer to wait and see what that price might be because sovereignty does not reside at any fixed address. Already in 1944, Professor Von Hayek said that the one thing which would undermine the prospects of peace and order after the war would be an attempt by nation states, large or small, to regain unfettered sovereignty in the economic sphere. That was true then and it is truer still today in the global economy in which we live.
If economic sovereignty is a moving target so, too, is political sovereignty. The difficulty is that the debate on Britain's place in Europe has been polarised. On the one hand, there are those who believe that the European Union is some kind of harbinger of a brave new world, where the individual and selfish aspirations of nations can be subsumed in a supra-national structure where Liberals lie down in peace with Social and Christian Democrats. Others have a vision of brave little Blighty sailing an independent course through these increasingly difficult waters.
Charting one's way through these noisy extremes is no easy matter. In recent years, your Lordships' House has been a consistent voice of sanity. This report,

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unlikely as it is to elicit much interest from the extremists, will he regarded as a serious contribution to discussion by those who have the worthy if unexciting ambition of trying to make the European Union work. For those of us who plough that particular furrow, the arguments involved are humdrum; the outcome is uncertain; and the compromises which must be made along the way are difficult. Not for us the simple either/or luxury enjoyed by the extremists.
But if we are to find a balance between the mechanisms for co-operation between nation states without burying that sense of belonging to nationhood which is so important, plough on we must. We must seek to entrench the inter-governmental pillars which emerged from the Maastricht Treaty. To do that, we must try to make them work. That means, for example, in the interior justice pillar, leading the search for new methods of fighting trans-border crime. In the common foreign policy and security pillar, in spite of all the set-backs and difficulties, we must contribute with enthusiastic realism to the search for common positions on foreign policy and security matters. It means sustaining the trans-Atlantic link through NATO and the US leadership of the NATO alliance; and yes, building the WEU but standing staunchly against those who believe that the WEU is some sort of Euro-friendly substitute for the NATO alliance.
In the first pillar—and I believe paragraphs 100 and 101 of the report refer to that—we must be robust, (I think that is the word) in advancing the case for more equitable voting weight to be given to the larger countries; for a reduction in the number of official languages; for annual presidencies led by a troika, headed by one of the large member states; and above all, in the first pillar, we must come forward with new and imaginative proposals for including the democratically elected parliaments of the member states in the legislative process. It is all very well to scrutinise draft EU legislation as we now do in this Parliament, and I wish that all other member states did that, but we need to find a way after that in which to insert the views of national parliaments into that whole complex comitology procedure that takes place between the Commission, the Parliament and the Council. That is crucial and Britain could be in the lead in such an area. The report makes it absolutely clear that, unless we have those bits of plumbing right, that alone could also undermine prospects for the European Union.
But having said all that, it simply is not good enough, as many do, to say, "Oh, I am in favour of a single market. I want a free trade area full stop". If you have a free trade area, by definition, you need regulations to define that area and by definition you therefore need a supra-national body capable of imposing its authority on those regulations by law. The Commission's right of initiative and the authority of the European Court of Justice should be defended staunchly by Britain because Britain is, and I think continues to be under this Government, the standard-bearer of free trade within the European Union.
This is a political project. It will be difficult to find the balance between sovereignty and lost sovereignty. But Britain has no need to subscribe to the dreamy
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idealism of some of our partners to influence the direction of the union. She only has to make up her mind once and for all that that is where she belongs. Once that is acquis, as they say in Brussels, then and then only shall we be in a position to exercise our full influence.
Those of us who have a settled opinion in this matter, as I do, believe that we enjoy one important ally in this matter; that is, the common sense of the British people and their unwillingness to relegate Britain, our country, to the sidelines. In that, as in many other areas, your Lordships' House has been very much in tune both with the interests and aspirations of the British people and I look forward to contributing to your Lordships' deliberations on those matters.
5.35 p.m.
Lord Dahrendorf: My Lords, few things could give me greater pleasure than to congratulate the noble Lord, Lord Garel-Jones, on his maiden speech on behalf of the whole House. The speech was elegant, good humoured and subtle. Those of us who have had the pleasure to know him expected that. It was also the speech of someone who might be described as a natural European, if such a thing exists: at any rate, someone who is at home in Europe, who knows the countries of Europe and who has been able to define his thoughtful approach to things European from the vantage point of his ministerial appointment in the Foreign Office. We look forward to hearing from the noble Lord on many future occasions.
Those of us who have served on Sub-Committee A of the European Communities Committee in recent years have been very fortunate. We have dealt with a number of important subjects. We have had the company of interesting contributors to the debate and, above all, we have had an extremely skilful chairman in the person of the noble Lord, Lord Barnett. We are all grateful to him.
One of his skills was to persuade the committee to agree unanimously on a report, although its members had a whole variety of views on what should follow from that unanimously agreed report. Your Lordships will find that my views on the cost of enlargement are not in all respects the same as those of our chairman or, indeed, I suspect of others who will speak.
I shall make four brief observations. The first is fairly obvious. Ever since I became involved in European Community matters in the 1960s, I have been unable to understand the contrast between "deepening" and "widening". In my view, there is no contrast between the two. Indeed, widening the European Union is an expression of the common interest of the members and in some cases an expression of a rather important and profound common interest.
When Spain, Portugal and Greece were welcomed to the European Community, the community made a small but not insignificant contribution to stabilising democratic institutions and the rule of law in those countries. I have felt since 1989 that we had and continue to have a similar responsibility with regard to the post-communist countries of eastern and central Europe. Indeed, I have felt and continue to feel that the

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European Union has not properly discharged its responsibilities because it is now eight years since 1989 and it should have been possible to hold this debate years earlier.
Indeed, I am one of those who believe that early membership of NATO for those countries is in some ways a substitute for what the European Union has failed to do. It would perhaps have been better if the European Union had been first to welcome the new democracies. In any event, I see no particular problem with respect to the five countries which we are now discussing for accession.
My second observation takes me to our subject, which is the subject of cost. At first sight the cost of membership for the new members or for the candidates is enormous. Those noble Lords who have had an opportunity to read the committee's report will have seen what the Polish negotiator told us. Perhaps I may say in passing that I believe that Poland is the test case among the five. In some ways Poland is the Spain of eastern Europe. It is a country of major importance but also of considerable size and therefore a very important addition to the Community if the negotiations succeed. Those who have read the report will have seen the figures given by the Polish negotiator, Mrs. Danuta Hubner. She has been quoted as saying, and has confirmed, among other things, that Poland would have to spend 3.2 per cent. of its total GNP for each of 10 years to achieve the environmental, health and safety standards alone which the European Union is setting. Indeed, we have not even mentioned the subject of agriculture in our discussions.
This is the subject of reaching the so-called acquis, the level which the European Union has set for its members. It is a large sum but, nevertheless, I cannot help observing that something quite odd is happening here. We say democracy and the rule of law; we say that we want to welcome these countries into a Community which is committed to those values; and we talk details—details which in some cases have literally nothing to do with democracy and the rule of law. The cost that we are talking about so far as concerns the accession countries is, in large part, a burden which is not visibly related either to the stability of democratic institutions or to the functioning of a market economy.
I looked through details of the last entry negotiations and saw that days were spent on subjects like the training of dentists, the provisions for the conservation of wild birds and the introduction of fire-proof doors in houses of multiple occupation. Here we have the European Union, yet the entry negotiations will be concerned with such subjects. I have long found that hard to bear; indeed, it is nearly unbearable. In discussing detail I hope that we shall not lose sight of the objectives which we are pursuing—namely, to have the post-communist countries at the table with us in the context of the EU.
That leads me to my third observation. We also learned that the candidate countries are quite realistic. They do not expect the cost of what they have to do to be borne by the budget of the European Union. Nor, incidentally, do any of them expect there to be a change,
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an increase, in the ceiling of 1.27 per cent. of GNP which the Union is prepared to spend on its affairs. The changes related to the acquis will be brought about by policies which those countries are pursuing in any case, including changes in agriculture.
There are fundamental changes in the agricultural structure of these central European countries going on in any event. Poland is extremely inefficient agriculturally. It is not the great threat which some seem to think that it is to the vested interests of the present members. Some of those changes will be brought about by borrowing, and both the EBRD and the European Investment Bank are aware of the special task that they have in that connection. In other words, it is not the budget of the EU which will have to cover the cost within the candidate countries. No doubt there will be some derogations; indeed, in some areas the countries need more time than the period of negotiation itself.
Basically I can see no reason—I state this briefly and without having the time to produce all the back-up argument required—in terms of the acquis or other conditions why Slovenia and Estonia should not be members by the year 2002 and Poland by the year 2002, 2003, or some such time. Indeed, Slovenia could probably become a member in 1999 if we wanted it and if we thought purely of the necessary preconditions of membership in the terms that we are discussing today.
Of course, that will not happen; and I come now to my fourth observation. They will not be members by the year 2000 or 2002; indeed, I doubt whether they will he members by 2005, the reason being—and this in a sense is my key point—that the cost of enlargement is crucially the cost perceived by present members to themselves of enlargement. The real obstacle is not what potential new members have to do; they can do it. The real obstacle is what present members fear will happen to them; and that is partly political.
In some European countries there is a fear. The noble Lord, Lord Garel-Jones, is better placed than I am to confirm and discuss that aspect, but in Spain there is a fear that the whole European Union is moving north-east and away from the interests of countries in the south. In some countries, like Sweden and Denmark, there is a sense that it was wrong to single out Estonia and not include other Baltic states at an early point. Similarly, in France there is a strong sense that Romania should have been included among the first five.
Above all, there are fears that the cohesion fund money will no longer be available and that the structural fund money will have to be cut. Indeed, the noble Lord, Lord Barnett, gave us some indication of what might happen in parts of the United Kingdom. Then there is the great and almost metaphysical fear in France and in Germany that the common agricultural policy may have to be reformed. That is quite likely to be the case. I argue that that is a greater obstacle to the rapid conclusion of entry negotiations with the new candidate countries than the cost to those countries.
One must fear that the negotiations will be protracted. One must fear that the popularity of the EU will decline in the candidate countries. When the moment comes and referenda have to be held in those countries, one must

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wonder whether there will still be the kind of majority which one would like to see for such an important step for those countries.
I therefore conclude by saying that I very much hope that the UK Government at least will not only start these negotiations at an early date, but that they will also continue to press, after their EU presidency, for the continuation and rapid conclusion of the negotiations with those who are starting after the Luxembourg summit in a few days' time. I repeat what I said at the beginning of my remarks: we have a great responsibility to do what little we can, but to do at least that, in order to ensure that the enormous gain in liberty, in democracy and in the rule of law, which I link to the year 1989, is not lost for reasons which are quite minor in relation to the task.
5.49 p.m.
Baroness Young of Old Scone: My Lords, I very much value my first opportunity to speak in this House on such an important and lucid report. Perhaps I may, first, thank my noble friend Lord Barnett for his welcome and, secondly, for his valiant attempts to get my title right. It is infinitely preferable to be called "old scoon" rather than "old scone", as has sometimes been the case during the past few days. I should very much like to praise the work of my noble friend Lord Barnett and his colleagues. They have put their finger on exactly what is wrong with the Commission's Agenda 2000 proposals and the economics of European enlargement.
The report quite rightly points out that enlargement is vital for the security and stability of all the peoples of Europe. I declare an interest as Chief Executive of the RSPB, Europe's largest wildlife conservation organisation. As an environmentalist I have always thought that the European Union generally was a good thing. Much of this country's more enlightened environmental law and policy is drawn from European law. But I suppose that during the process of thinking about enlargement I began to wonder whether I was right as I thought about some of the costs and benefits of the European Union, and particularly the costs and benefits of the common agricultural policy which comprises half of the European Union budget. If one looks at it in the context of value for money, it is hardly a roaring success. The common agricultural policy is probably the single most significant cause of major declines in European Union wildlife and habitats over the past 30 years. It is closely followed in terms of poor value for money and adverse environmental impact by EU structural fund policy.
The report also recognises the environment as an essential element in the enlargement. If one looks at the accession states, the environmental record there is a bit of a mixed bag. In many cases outdated technologies under past regimes contributed enormous backlogs of environmental damage that will require attention. But in some ways it is the economic inefficiency of the former CEE states that has meant that, unlike the rest of Europe, land uses of forestry, agriculture and water management are considerably underdeveloped by EU standards. Almost by default the rural environment of the central and eastern European states is high quality if one
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measures that in terms of richness of wildlife and habitats which we are losing at a great rate elsewhere in Europe. I shall ignore at this point the pigeon-holing of the noble Lord, Lord Dahrendorf, in relation to the importance of birds when he ranked them with fire doors.
Before anyone thinks that I am talking about protectionism for the central and eastern European states in terms of putting their environments and agricultural and rural economies into aspic, and idyllically thinking of haywains and chaps with scythes, 1 assure the House that that is not the case. I am talking about economic growth both in the rural and industrial sectors of the CEE states having to be environmentally sustainable growth. If I may summarise the situation, we have expensive, environmentally damaging agricultural and structural policies in the existing 15 states of the European Union, with a fast declining natural environment, but a comparatively buoyant natural environment in central and eastern European states. I suggest that we cannot afford financially or environmentally—nor should we wish to—simply to export the policies that we have here in the west to the centre and east of Europe.
If enlargement is to be achieved in a way that is economically and environmentally acceptable, I believe that we must resolve three issues. First, the report rightly points out that reform of the CAP which reduces its financial costs is pivotal. I very much like those words of the report. Apart from needing to release money for other budget lines, the common agricultural policy is quite simply bad value for money. Yet only recently the European Commission has allowed an outline CAP reform to be agreed which will increase the total budget for the common agricultural policy over seven years. We see a proposal that maintains a high level of subsidy in the form of compensation payments to farmers for price cuts.
The CAP has to be made more affordable and more environmentally sound by reducing these compensation payments, by time limiting them and by redirecting some of the money to more positive rural employment and environmental schemes as part of a more extensive greening of the common agricultural policy. In enlarging the Community we must not simply extend this wasteful and environmentally damaging agricultural policy but develop lower cost and environmentally suitable alternatives that fit the economic stage of development of the central and eastern European states.
My second point which I believe needs attention concerns structural funds. Under enlargement structural funds must not be allowed to continue to be the "thugs" of Europe. There is substantial evidence that infrastructure dominated EU funded development such as roads, dams and irrigation schemes—old-fashioned concrete pouring schemes—which we have seen funded from structural funds not only cause environmental damage in existing member states but are often not even effective in terms of creating jobs or promoting regional development. The structural funds certainly get my thumbs down. When we extend these into central and eastern Europe they must be accompanied by much stronger environmental safeguards. Having wreaked

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wasteful destruction in western Europe, we must not let the structural funds do that in central and eastern Europe. In the rural areas particularly the model of big infrastructure development is uniquely inappropriate and damaging. We must focus on developing the special strengths of the rural areas and developing projects which are appropriate in scale and which draw on their skills and natural assets.
Thirdly, I touch on a point that the report rightly acknowledged: namely, that environmental protection is a key element of a functioning market economy. The report acknowledges the difficulties that the accession states will face in meeting the Community environmental obligations under the acquis. I do not believe that it is in the interests of the European environment, nor in the interests of an effective functioning of a single market, for environmental standards in the accession states to be lower than in the rest of Europe for any significant time. There needs to be considerable financial, technical and institutional development expertise injected into the CEE states using the loan process that the noble Lord, Lord Dahrendorf, mentioned, but also by using current aid budgets and certainly by effective targeting of the pre-accession measures.
EU enlargement is vital for the peoples of Europe, but so is a healthy environment. The current common agricultural policy and structural funds are financially and environmentally unsustainable. They must not simply be exported eastwards without considerable reform—reform which, I am afraid, has not been sufficiently robustly begun in the Commission's Agenda 2000.
5.58 p.m.
Lord Bridges: My Lords, it falls to me from these Benches to speak in the name of the whole House and to congratulate the noble Baroness on her maiden speech which I thought was accomplished, relevant and extremely thoughtful. This does not come as a surprise to one who has studied her curriculum vitae because she is a lady of remarkable accomplishments. She has revealed to us that she is the chief executive of the RSPB which I believe to be the voluntary organisation with the largest number of members in the country, which is an extraordinary tribute.
In addition, she has had a distinguished career in her role in the health authorities of this country. She was the chairman and president of the Institute of Health Service Management. She has served on the BBC general advisory council and as a trustee of the National Council for Voluntary Organisations. She is also a member of the Environment Secretary's round table on sustainable development. This is a career of extraordinary achievement and it is evident from her excellent speech today that she will play a prominent part in our deliberations. Perhaps I may be permitted to add that this extraordinary career of achievement makes her admirably suited to be a Member of these Benches. However, I do not hold that against her because her contribution will be to the House as a whole.
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I believe that the report prepared by the sub-committee chaired by the noble Lord, Lord Barnett, is essential reading for anyone who wishes to make a success of the British presidency of the European Union next year, as enlargement negotiations will be a large part of our responsibilities. I have for long believed that the future and character of the EU is more likely to be determined by the number and nature of states admitted to membership than by any other factor. The report is a guide to the problems and possibilities of a financial kind which we shall have to navigate if we are successfully to launch the enlargement negotiations. I shall cover a few of the salient points, and emphasise one or two key issues mentioned in the report, and some additional factors which I believe to be important.
First, I like the catch-phrase at the heading of Part I on page 5. It suggests that accession to the European Union is seen by the CEE states as "coming home". I very much agree with that sentiment. However, I agree also with the converse proposition that without the admission of the CEE states, the Union is not fully European. I regard those countries as being European, whether we are thinking in political, cultural or geographical terms. The strength of my feeling derives in part from personal experience, having spent about one-third of my professional life dealing with the countries of this region.
I began by studying the progress of communism in the infant German Democratic Republic when living in Berlin. In the 1950s, at the height of the Cold War, I spent four years in the Northern Department of the Foreign Office, which dealt with the USSR and its east European empire. After an interval of 15 years spent travelling first in Latin America and then in Greece, I became the counsellor at our embassy in Moscow during what the Russians now call Brezhnev's years of stagnation, an apt description. It was in Moscow that I began to ponder the Europeanness of Russia, a difficult but essential subject. Where does Europe end? In the west, we tend to think instinctively of General de Gaulle's well-known phrase regarding Europe "from the Atlantic to the Urals". But I am not sure that the Russians themselves would agree with that. In Moscow I looked up the definition of "Europe" in the large Soviet encyclopedia. I was surprised by the indeterminate, short and woolly article under that heading. That in itself was intriguing, as the whole point of the encyclopedia was to lay down the party line in a short and authoritative manner. Imprecision suggested uncertainty.
Perhaps I may be allowed to divert for a moment on a personal anecdote. The encyclopedia provided an occasional source of merriment—a real pleasure in that grim environment. One day the embassy received a letter from the publishers of the encyclopedia instructing all subscribers to remove certain pages from the volume dealing with the letter B. On inspection those pages referred to the life and career of the recently disgraced Beria. The letter told us that further pages would follow to fill that missing section. When they arrived some weeks later, they were found to contain an elaborate entry about the Irish philosopher Bishop Berkeley, who had not previously been thought to merit attention.

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That type of thought control could have its Orwellian moments. Some years earlier in Berlin there came into my hands a copy of a circular letter from the Ministry of Education in East Berlin sent to all the major libraries in the country instructing them to return for destruction copies of certain well-known classic German works which were now to be withdrawn from circulation. I do not recall all the books listed, but one was Fichte's classic and seminal work, Speeches to the German Nation. Above all, I remember the place to which those books were to be returned. It was called, "die Zentralstelle fuer Altliteratur". The address of all places, was, Weimar. That was really an Orwellian memory hole. It is worth recalling it at this moment.
I also recall discussing with Russian officials in Moscow the Russian relationship to Europe. Those people explained to me that the USSR was both a European and an Asian power. Of course, as the disciples of a world-wide creed they could not wish to limit their activities to a single continent, or even to two continents. Their mission was global in scope and ambition. Yet when one considers the components of Russian culture, it seems impossible to deny its European characteristics. Russian composers of this century and the last must be classified in that way, and so must the great writers in Russia of the last century. Pushkin, Gogol and Lermontov are all in the mainstream of European writing. I concede that Dostoevsky is more native Russian than European, but interestingly his reputation is less highly esteemed in Russia than in the west. Nevertheless, in a sense the Soviet officials had a point. Russia is too large, too much sui generis to be neatly categorised in one group or another. She is in a separate category of her own among the states in continental Europe—so vast yet oddly amorphous, and with great latent talent and power in every department of life.
I dwell on Russia in particular because there is just one sentence in the report which makes me ponder and pause for thought. It is in the first part of paragraph 1 which states:
"If enlargement is successful the peoples of Europe could enjoy conditions of security and stability without parallel in their history".
In one sense that does not say a great deal. Those countries have enjoyed little of either peace or prosperity for two centuries or more. I certainly hope that enlargement will bring them stability and prosperity. But I suggest that security is another matter.
The key question is how the enlargement of NATO is to proceed. This is not the subject of the report, and discussions about the enlargement of NATO are proceeding separately. The cost of enlargement, as the noble Lord. Lord Barnett, reminded us, is mentioned in the report as another burden to be shouldered and taken into account. But it will be the NATO negotiation which will be critical to the security of Europe in the ordinary sense of the word security. It is a very thorny subject—thornier than any noble Lords have suggested in the debate.
All the CEE states want to join NATO as well as the EU so as to provide for their essential security needs. There is a vacuum in eastern Europe since the collapse of the Warsaw Pact. But there are obvious dangers also in
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extending the NATO umbrella so far as to include the Baltic states which are regarded by Russians as falling within their own sphere of influence, and even of belonging to the historic territory of Russia. The same kind of severe difficulties—although not to quite the same extent—occur in the case of Poland. In this debate it is relevant to pose this question. Do we want to extend NATO membership right up to the western frontier of Russia? That problem is not part of the European Union's enlargement negotiations, but it is closely connected. If we are to establish a new and lasting relationship with the CIS, as we should and must, we need to consider the security issue with great care and seriousness. This is the essential corollary to EU enlargement and should proceed in parallel with it. Indeed, I am almost tempted to call in my aid the extraordinary phrase invented by the late Aldo Moro, when Prime Minister of Italy, who described his effort to create a new and very precarious alliance with the parties of the centre left with their deeply felt historic antagonism, as a policy of "parallelismo convergente"— that is, converging parallelism. Moro's political style was virtually incomprehensible to non-Italians, and was ridiculed by many Italians. But his odd phrase conveys the essential difficulty of the task in front of us.
I should mention one other item on the hidden agenda in this process: the latent divergence between those seeking to bring about the enlargement of Europe to the east and others whose ambitions lie in the south. Some noble Lords have already referred to this matter. There is no doubt that Germany is strongly interested in the accession of the CEEs, where so many of her political and economic interests lie; but other member states—notably, France, Spain and Italy—wish the EU to be more active in the Mediterranean and to expend EU resources in North Africa. No doubt, in order to promote prosperity in the Maghreb, they would like to see us invest in such well known matters as steel mills and airlines. They hope by so doing to stem the flow of migrants from the Maghreb into southern Europe.
The EC's Mediterranean members are also reluctant to forgo the benefits of the structural and cohesion funds which have brought them such prosperity in the past decade. This subject is well discussed in the report and the sensible conclusion is that economies must be made to these funds in order to finance the changes needed in the CEEs to prepare them for accession. But these conclusions will be extremely unpopular in southern Europe, where it is felt that the richer countries of northern Europe should finance the accession of the CEEs. No doubt the recent proposal by the Commission to remove Ireland and the British regions from Category I eligibility for regional funds was made in order to show that the Commission is proposing a policy of equal misery for all.
Sub-Committee A has over the years produced a series of thorough and illuminating reports on key questions, and the latest report is a worthy addition to the list. I hope that the House and the Government will find it as valuable as I have done.
6.12 p.m.
Lord Boardman: My Lords, I hope that the noble Lord will forgive me if I do not follow his line. He has vast experience of parts of the world of which I have too little knowledge to be able to do so and do it justice.
Perhaps I may start by thanking the noble Lord, Lord Barnett, for his chairmanship of the committee. He carried out his task with his accustomed style, experience and charm. He managed to lead the committee—which was not necessarily united on all matters relating to Europe—to produce a unanimous report. I join the noble Lord in the tribute he paid to our Clerk, Mr. John Goddard. who guided us with great ability and was of great value to the committee.
Perhaps I may make one criticism of this system of reports. That criticism does not apply to this report in particular. and I shall say why that is the case. On these matters much of the vital evidence that is required is only obtainable abroad, normally in Brussels: one has to see the commissioners in Brussels to obtain valuable evidence. The rules say—I do not know whether they are rules of this House—that only three or four members of the committee may go. We assemble and we hear valuable evidence from lots of people but we are not allowed to travel abroad to hear the key evidence, which most of us would like to be present to hear. I am sure that in the other place the whole committee troops off to see what is happening on the shores of Barbados, or wherever it might be. This is a matter which I believe deserves consideration. In the present case we were lucky. The noble Lord, Lord Barnett, and the Members who went with him to Brussels gave the committee very full and accurate accounts of what had taken place. I am sure we lost nothing in the process, although one felt that one would have liked to have had the opportunity to ask certain questions.
It became clear that all the applicants for accession are very keen to join. That is obviously because of the economic security that membership would provide, the trading prospects it would open up and the higher standards of living in the Community. I recognise that there are also considerable benefits to the 15 EU members. I should add the reservation that I am perhaps less enthusiastic than some members of the committee about some developments in Europe. I hope to have the opportunity to discuss later the views on economic and monetary union expressed by the noble Lord, Lord Garel-Jones, in his maiden speech. There are differing views, but none are relevant to this report. I was therefore only too happy to be party to the unanimous report.
Serious problems arise, both for the applicants and the 15 present member states. The Commission appears to have tried to cover these in Agenda 2000, referred to by the noble Lord, Lord Barnett, in his opening speech. However, it does not deal with them in depth in that report or say how it will resolve them. There are some very wide gaps, particularly in the financial field, with which we are concerned.
This enlargement is different from previous enlargements. The last one involved Austria, Finland and Sweden—relatively small, rich states without a
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large agricultural sector. The five candidates of the eleven candidates for accession which we have mainly discussed are all large and relatively poor and have very large agricultural communities. They are quite different from the previous candidates and will no doubt present serious problems with regard to the finances of the enlargement.
As the noble Lord, Lord Barnett, said, Agenda 2000 speculated on rates of growth: 4 per cent. for the applicant countries and 2.5 per cent. for the present members. We heard evidence that, even on those speculative projections—and who can say what the rate of growth will be five years ahead—it would be at least 25 years before the applicant countries would achieve even half the standard of living of the present members of the Community. Indeed, some evidence regarded that as a considerable underestimate. It will be a major problem. There must be either a considerable reduction in the benefits that the Community pays to its present members or a considerable increase in our own resources, fixed at the moment at 1.27 per cent. As I believe the noble Lord, Lord Barnett, said, there are only three options: first, to cut down what is being paid out; secondly, to expect the applicant countries to pay the difference between their rates of growth and that of the present members; or, thirdly, to increase our own resources above the 1.27 per cent. One of those options—that concerning the rates of growth—is purely speculative and the other two are very unattractive.
The committee did not deal with the CAP; agriculture was not within its remit. Time did not permit it and the sub-committee was not the appropriate one to deal with the subject. About half the outgoings for the Community are for the CAP. The next highest item is the structural and cohesion funds, which we were unable to go into in depth. Yet agriculture employs something like a quarter of the working population of the applicant countries. For the EU15 it is 5 per cent or under. Agriculture provides 9 per cent. of GDP of the applicant countries; for the EU15 the figure is 2.4 per cent. There is clearly a massive problem in trying to adjust one to the other. Such evidence as we had made it clear that the applicants would not he prepared to accept a second-grade agricultural policy. They do not want to see us continue to enjoy the fruits of the present CAP, albeit reduced by the lower level they would be taking. It is a very real difficulty which must be sorted out by the member states before we can look seriously at how we are going to finance the problems.
The other major areas of finance are the structural and cohesion funds. They are the second largest part of Community finance. The noble Lord, Lord Barnett, referred to it as being "pivotal" and the noble Baroness, Lady Young of Old Scone, in her maiden speech, endorsed that word. I was one of those who said it was "critical" and not "pivotal". I am not sure what the distinction is but I am happy to accept that the way in which we deal with the structural and cohesion funds is nevertheless extremely important.
None of the 15 member states of the Community will willingly accept reductions in their share of the structural and cohesion funds. As has been said. Germany has an election next year and will not

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contemplate any reduction of any kind, and most of the 15 will be having elections during the period when adjustments will be necessary. I therefore find great difficulty in seeing where any saving will come under those two funds.
On a previous occasion the sub-committee was given evidence and formed the opinion that funds from the cohesion fund were only payable to nations whose average GNP was below 90 per cent. of the average of the Community; and it was not payable to any of those if they were also eligible to join monetary union. It now appears that the Commission is having second thoughts and considering that even those who are joining monetary union may be permitted to receive cohesion funds. We could perhaps speculate as to why this sudden change of opinion—if it be that—has come about at this time when support is needed on a variety of matters.
My conclusion is that unless the gross national product of the applicant countries is much better than forecast or the existing members are prepared to give up larger slices of their subsidy from the CAP or from the structural and cohesion funds, or we are all prepared to increase the own resources figure of 1.27 to something higher, serious financial problems will occur. I do not see that they will be easily resolved. It is necessary that the applicants, the members of the Community and ourselves, give whatever thought we can to the problem of resolving those difficulties by sharing fairly in the benefits that would flow from their membership and at the same time persuading our fellow members to accept some of the sacrifices, which I believe will be extremely painful.
6.23 p.m.
Lord Desai: My Lords, I join other noble Lords in first thanking our chairman, my noble friend Lord Barnett, for keeping us in order and making us sign up when he wanted us to sign up, only allowing us occasionally to declare our dissident views from what we signed up to. I therefore greatly welcome this opportunity for debate. I also want to join my noble friend Lord Barnett and the noble Lord, Lord Boardman, in paying tribute to our clerk—Mr. John Goddard—for his excellent helpfulness not only on this report, but also on previous reports.
Today we heard two excellent maiden speeches, both of which were well-informed and detailed. I am sure that those maiden speeches tell us that these new Members will be a great addition to our Chamber and we look forward to hearing them in the future.
On 13th March 1996, the noble Lord, Lord Wallace of Saltaire, introduced a debate on enlargement. I believe that I was the only person to say, at cols. 866 to 868 of Hansard, that I was not sure that it was a good idea. I have always felt that people go into enlargement in a rather emotional, romantic way. The fall of the Berlin Wall following the tremendous misery suffered by the eastern European countries somehow brought about the idea that Europe should be one. We are very explicit in the first paragraph of the report when we say that it is all about "coming home." Indeed, I wanted the report to be called, "The Cost of Coming Home". It is the aspect I shall discuss this evening.
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My noble friend Lord Dahrendorf said that he could see no contradiction between deepening and widening. I see huge contradictions between the two. When enlargement was first pushed powerfully by the UK, among other countries, it was precisely to weaken the deepening of the Community which was then on order. The retreat from the deepening of the Community, which we have seen paradoxically since the Maastricht Treaty, will be further damaged by widening. Some of the problems that we are discussing—problems for the 15, not just for the five coming—are caused because, in order to sell the Maastricht Treaty, certain limitations were accepted on the size of the budget.
I know of no confederation of such a large size that can survive on 1.27 per cent. of GDP. Wasteful though it may be and full of fraud, it is one of the cheapest confederations in history. The total budget of the EU in 1999 will be less than 70 per cent. of the social security budget of this country. The CAP costs less than the interest the UK Government pay on their debt. Wasteful though it is, we must keep it in perspective.
We are accepting this arrangement without having even yet sufficiently absorbed the three newcomers, Spain, Greece and Portugal. The doubts we have about the structural funds indicate that. We are going to add five, plus one other country with perhaps another five standing in the background. It has been difficult enough to absorb four poor countries among 15. If we look at the full expansion—we can leave Cyprus out for the time being—it means that there will be 14 poor countries out of 25.
I see no public financial arrangement which can, on the one hand, say, "We are not going to spend more money on the total budget", and, on the other, "We will still absorb these countries." Indeed, as is well known, before the Second World War there was no idea that Europe could be a political union. After all, the British Prime Minister thought Czechoslovakia was a far away country with which we were not concerned. Now suddenly we feel that union is urgent—imminent and urgent. It is not just that it is a good idea; it is imminent and urgent.
As many noble Lords pointed out, the difficulty is not with the five or the 10; the difficulty is with the 15 that exist. One of the saddest consequences of the Maastricht Treaty has been the strains of convergence. I was a wild single currency enthusiast, if I can put it that way. Over the years one has seen the costs of convergence, which were not foreseen, place a tremendous strain on the Community spirit among the 15. That is not only why the UK is always conscious of its rebate and what it gets out of the system, but also why Germany announced that it too is not sure that it is getting enough out of the system.
No federation can survive when all the members of the federation want to be net debtors to the general budget. The simple idea that the richer countries should voluntarily make a positive contribution to the budget has eroded already, even before we consider enlargement. Therefore, all the various things we list about the difficulties of enlargement have to be seen from the perspective that, as we prepare for enlargement

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in a rather uncritical and enthusiastic fashion, which troubles me very much, the communitarian spirit has eroded very badly. Indeed, we have seen in the dash for convergence that countries have not co-operated at all. They have followed separate deflationary policies. They have run beggar-my-neighbour policies. And that is among the old six; it is not among the 10. If the old six now run economic policies with no community spirit, as we have seen, we shall put a great strain on the Union.
However, I think enlargement will go ahead. I have spent a lifetime thinking that things should not happen and they then happen. What I think will happen is that the budgetary constraints will be acute. It has not yet dawned on many local authorities in the United Kingdom and elsewhere that they will not receive any structural funds. They will have to start zero budgeting. I said that to a local authority conference about four months ago. I had to talk about a report on structural funds. The people there looked at me as if I were a mad man. I said, "I've seen the future and I am telling you. You are not going to get any money and you had better start preparing for zero budgeting." The days when East Anglia could be classified as a region deserving European aid are numbered. I do not think the UK should get structural fund aid at all. Certain areas will get it because that is how the European Union works. But I do not think that it should work in that way, certainly if we are to absorb 100 million extra people.
The European Union 15 will have to get their acts together if they think that within the current budgetary constraints they will be able to absorb the new countries. As there is no climate for expanding the budget, we shall have to fall back on the prospect of cutting the structural and cohesion funds or cutting the money spent on the common agricultural policy. I wake up every day surprised that the CAP was not abolished the night before. The Berlin Wall has fallen but the common agricultural policy goes on. It is no less an injustice not only for Europe but for the third world as well. There we are. It is in the politics of the Union that the reform of the CAP will not be done if only to make members agree to enlargement. That is the paradox of the situation. And, of course, the CAP benefits the richer countries of the Union.
I do not want to go on with this long and sorry tale. What the report points out—I hope the Government will take note of this—is that there is serious trouble ahead if we are to take enlargement on board. Unless we say early on that the cohesion funds have to go—except perhaps for Greece—and that the structural funds will have to be drastically re-ordered so that only deserving regions get them, and unless we say that the common agricultural policy should be halved, if not totally eliminated, by the year 2002, enlargement will not be an easy process. In an ideal world we would all see enlargement as being of great benefit. If it were only a political union, there would be no problem. If it were only a union to encourage democracy, there would be no problem. But it is an economic union. There are serious consequences from having an economic union. I do not believe the major players have recognised what the consequences are.
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I shall make one more point. We have not considered the economic consequences of enlargement. We have considered only the financial consequences. The idea of getting 100 million more people in a single market with free movement of labour will have drastic consequences for the labour markets of western Europe. One is absorbing 100 million relatively cheap but skilled labourers. Wages in western Europe will suffer. It may still be that enlargement is a good idea, but people who talk about it should say that this is one of the likely consequences. We have to be prepared for it. If we are to have enlargement, we have to prepare now for that consequence. With that happy thought, I shall sit down.
6.36 p.m.
Lord Haslam: My Lords, having been ceremoniously transferred from Sub-Committee A to Sub-Committee B before my former colleagues started on this study, I knew they would produce an excellent and readable report. It has in fact exceeded even my high expectations. As ever, the masterly chairmanship of my noble friend Lord Barnett shines through.
I shall be brief as I have only one point to make. I agree wholeheartedly with the main conclusions of the report, but would particularly like to emphasise the views already expressed by the noble Lords, Lord Barnett and Lord Desai, that the reform of the common agricultural policy, with the objective of reducing its costs, is pivotal to the financing of the proposed enlargement. It seems to me that enlargement creates a splendid opportunity for a root and branch review of the CAP, and that this should not be missed.
The process of enlargement will undoubtedly add to the existing serious unemployment problems in the European Union. With this in mind, I believe that the opportunities should be seized to boost the finances of the structural funds at the expense of the CAP, with the outcome that the former funds will quickly exceed the latter. I was somewhat perturbed, therefore, when I read on page 13 of the report that the financial framework proposed by the commission for 2000-2006 in no way represents such a radical re-shaping, and indeed the two funds barely converge during this period.
As has been evident in many member states, and particularly in Ireland, Portugal and Spain, the structural and cohesion funds can obviously be deployed on a much broader canvas and for much more deserving causes in generating durable employment opportunities. This was very apparent to me as a member of Sub-Committee A when we studied the structural and cohesion funds earlier this year. In contrast, the CAP is focused on a narrow front, in what I believe has always been a very privileged sector for far too long. One has the feeling that the Commission's financial framework reflects too much what it believes it can persuade the German and French governments to accept, and thereby, I believe, does not meet the really radical approach that is so badly needed.
Finally, as a naïve industrialist, and as a non-farmer, I have never understood why agriculture should uniquely benefit from a form of permanent state aid whereas industries and other businesses have constantly

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to re-shape their activities to respond to their evolving competitive environment. This strengthens my belief that the current CAP should be the pivotal contributor to the cost of financing enlargement.
6.40 p.m.
Lord Grenfell: My Lords, I begin by once again thanking my noble friend Lord Barnett for his chairmanship of the committee. It is always a pleasure to work with him. He does it extremely skilfully. He has a very good, human way of holding our noses to the grindstone. We usually end up, certainly under his chairmanship, with a very good report, with a great deal of thanks going to our Clerk, John Goddard, whose support to us has been absolutely vital.
I also preface my remarks by endorsing what my noble friend Lord Barnett said about what really worries us, which is that the financing has simply not been thought through. It worries us because of what we wrote in paragraph 7 of the summary of the opinion of the committee:
"Enlargement, if successful, could lead to unparalleled security and stability for the peoples of Europe. If the opportunity is missed there could he a slide towards the tensions and instability which have so disfigured Europe in this century".
That is not just something merely to be desired; it is an absolute imperative.
So the question of financing has to be taken extremely seriously. The Secretary of State of the German Foreign Office came to see us and reminded us that the German taxpayers had so far forked out 176 million deutschmarks to help pay for crisis management in the successor states of Yugoslavia. He sensibly added a comment that if enlargement made these crises less likely, it was a bargain at half the price. I thoroughly agree with him.
That brings us to this question: will the much talked about 1.27 per cent. ceiling be enough? That depends on who one talks to. If one talks to Treasury Ministers of the net contributor countries, one will be told that they will insist that the cost to the EU budget for all 10 applicants up to the year 2000 will be under the 1.27 per cent. ceiling. That is very much the view of our own Treasury.
The Commission is a little less dogmatic. Part III of Agenda 2000 contains this statement:
"There are various indications that it should be possible to cover the development of priority measures to be financed from the Community budget over the period 2000 to 2006 without raising the own resources ceiling".
It is to be noted that it refers to the priorities and not the total cost.
But let us now turn to what the genuinely sceptical have to say. The European Parliaments Committee on Foreign Affairs produced a working document in which it said:
"Do the financial resources required for enlargement exist or will the ceiling need to he revised? The probable reply is that they do not exist. It would appear extremely difficult to cope successfully with the impact of the accession of II countries which have such widely varying levels of development and are lagging so far behind the current levels in the member states unless the appropriate financial efforts are made".
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The subsequent draft report of the committee says that it believes:
"that the gulf between the political, strategic and economic importance of enlargement and the exiguous resources available to carry through this large-scale operation, which will change the face of our continent and the Union's position on the international scene, are just too exiguous".
The Budget Committee of the European Parliament also had something to say on this which is in much the same vein. It said:
"The existing margins for financing enlargement are to a large extent based on virtual savings bound with an uncertain decision-making process spread over a period of time".
When one sets that against the insistence of Treasuries that the 1.27 per cent. ceiling cannot and must not be broken, one can see that there is not exactly a consensus.
Of course, governments will have the last word. But that does not mean to say that they will not in the end be proven to have made a disastrous decision. No wonder Hans van den Broek in his evidence to us said in connection with the funding:
"This discussion, in fact, is still developing and I find it difficult to see where exactly we are going to end up".
I do not blame him! The cost is probably not calculable. But at least the basis on which the availability of funds to meet those costs is calculated should be realistic and transparent, and it is not.
What I find interesting is that, if one looks back to recent enlargements, the financial packages were accompanied by the raising of the own resources ceiling as a result of an assessment of the requirements. But this time there seems to have been a reversal of approach. Rather than being the outcome of a process, the ceiling has become a given "a priori", and worse, to be financed with a package of uncertainties.
The European Parliament's Budget Committee working document of September 1997 put the matter this way:
"The existing margins for financing enlargement are to a large extent based on virtual savings".
I repeat that from my earlier quotation. It is important to bear in mind that it is talking about virtual savings. As my noble friend Lord Barnett has pointed out, two-thirds of the expenditure within the ceiling is to be met from supposed economic growth rates of 2.5 per cent. in the 15 member countries and 4 per cent. in the applicant countries. As we point out in the report, that is highly speculative.
Some IMF figures quoted in today's Financial Times show that the annual average GDP growth in the OECD area between 1990 and 1995 was 1.9 per cent. But now of course we have the Asian crisis. There is now serious restructuring to be done in those affected countries and their economies. The transition will be lengthy and painful. It is bound to have an impact on western economies, as demand for imports weaken in Asia and Asian currency values fall.
We should also be on the alert for a possible liquidity crisis and higher interest rates as the stabilisation programmes mop up money on a massive scale. After all, 55 billion dollars for Korea is certainly not chicken-feed. Let alone the EU 15, the central and

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eastern European applicant countries and the Baltic states need the spill-over effects of this crisis like a hole in the head. We should not count on 2.5 per cent. or 4 per cent. Of course, they may turn out to be achievable rates. But why are we gambling the security and stability of an enlarged Europe on such a string of uncertainties?
The remaining one-third of the costs are to be met from the reform of Community policies, as we have been told. We examined that in some detail in the report and I shall make only a couple of brief comments. First, we had better get on with these reforms. Time and again I have heard officials and parliamentarians from the applicant countries expressing their fears that foot-dragging on reforms which, as the report points out, must take place before the accession of new members is in fact a tactic to delay enlargement. The EU 15 must demonstrate their good faith in this matter and show that that is not so. It was pretty depressing to hear President Chirac say in Salamanca the other day, at the Franco-Spanish Summit, that he was not willing to accept an EU which called into question the interests of France and its farmers. He had the grace to go on to say after that that we should have the courage to put the reforms through. But the two different remarks did not sit too well together.
The German Agriculture Minister is reported to have said that the Community's proposals on reform of the common agricultural policy are simply unnecessary. So far, Chancellor Kohl has not refuted him and probably will not do so until after the elections in 1998. So much for the sense of urgency!
Here, in parenthesis, I draw the attention of my noble friend on the Front Bench to a matter concerning the cohesion fund which needs settling since we are talking about the fund. It had long been understood that the cohesion fund was a convergence fund. That was the popular interpretation of what it was all about. It was there to prepare countries to enter monetary union. That has been the belief. As we recorded in the report, when we were in Brussels and spoke to Commissioner Liikanen, the Budget Commissioner, he said that the lawyers in the Commission had now come to the conclusion that it was not a convergence fund. If that is so, the countries that are entering EMU will be allowed to continue to draw on the cohesion fund—I repeat, "if that is so". However, it is very important that we get it clear once and for all. Her Majesty's Government would do well during their presidency to insist on that being clearly, finally and definitively settled.
There are just too many doubts about the financing of the enlargement. The report sends out some clear warning signals. To be so uncertain how resources will be mobilised to meet a known cost is bad enough; so clearly to underestimate the cost, as I am convinced is the case, only makes it worse. It is simply not good enough to say that the European Union will have to be satisfied with whatever measure and quality of enlargement can be bought within the 1.27 per cent. ceiling. As our report insists in paragraph 84, the financial perspective to be agreed for 2000-2006 should contain a provision for review before 2002 of the own resources ceiling. Of course, I accept that there will be
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other sources of finance from the international financial institutions. But the 1.27 per cent. ceiling looks to me to be pretty fragile.
I turn now to two non-financial aspects of enlargement: the time-frame and the negotiating process. Applicants are naturally in a hurry. As the noble Lord, Lord Dahrendorf, pointed out, all this should probably have happened long ago. Many countries have populations which will all too easily turn against the idea of accession if it is seen to be pushed off into the distance, but in their own interests they need to be given a more realistic assessment of the timescale. Hungary's Foreign Minister, Laszlo Kovacs, says that negotiations with his government can be wrapped up by 2000, with accession one or two years later. However, Commission officials are saying that negotiations with Hungary could well take not two but three or four years.
Poland's Prime Minister, Buzek, says that negotiations can be completed by 2000, with accession the following year. His president says that it will not take even that long. However, the Commission is saying that Polish entry by even 2003 is an ambitious target. The chairman of the European Union Parliamentary Foreign Relations Committee agreed with that when he met us. Again, Prime Minister Buzek says that five years will be enough to complete the agricultural transition in Poland. Commission officials are unofficially saying that it might take up to 10 years.
Those are just three examples of widely varying perceptions. We need greater transparency, more realism, but no unnecessary foot-dragging, which could be highly counter-productive and eventually more costly. With negotiations beginning at the end of next March, we can reasonably expect the first accession or accessions in 2003. But even that does not leave much time for the EU's own reforms to be completed.
What of the negotiations themselves? As my noble friend Lord Barnett and other noble Lords have pointed out, our report endorses the five-plus-one approach. I endorse it too, but with some misgivings. From a practical point of view, for the EU 15 it makes sense, but it lays a heavy responsibility on them and on us to ensure that the remaining five are not left feeling out in the cold. That, unfortunately, is what they do feel and it is essential to counteract it. It is essential to minimise the damage to their efforts to achieve regional solidarity. The Madrid decision to select a few starters does some damage to those efforts. Moreover, as those countries say, it goes somewhat against the spirit of what was earlier agreed in both Essen and Copenhagen.
A country like Bulgaria knows that it is not ready for accession—and it says so—but why, it asks, cannot a serious negotiating process start now. The so-called "structural dialogue" proved to be no more than embarrassing formalities and empty exercises in protocol observance. That is Bulgaria's view. Why is not the European Union more directly and continuously involved in helping to prepare those countries for an eventual start to negotiations? As a former Foreign Minister of Bulgaria put it to me last night at a meeting in Paris, "Must the European Union keep us at a safe distance until others, like the IMF or the World Bank,

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have declared us economically fit to be considered ready to start negotiations? This is politically divisive in a region of vital importance to Europe's stability". I agreed with him that the proposed European conference must serve to include the next wave in a meaningful, substantive process, leading to the opening of negotiations at an appropriate time. Such countries must he on this side of the door waiting to come to the table. not on the far side of the door in the corridor, waiting for the door to be opened to them. That, to my mind, is a political imperative.
I yield to no one in my conviction that enlargement is an imperative, not an option. This is surely the most significant, complex and absolutely necessary enterprise that Europe has undertaken in its long process of post-war construction. In this continent's long history, the great geo-political enterprises have always had both winners and losers. Indeed, many had that as their objective. However, in this case we are in an enterprise where there are supposed to be only winners. If we fail to finance the enterprise appropriately, promptly and adequately, there will he losers—perhaps all will be losers, even those who think they are at least temporarily winners. The effect will be felt far beyond the borders of the Union and for far longer than any of us is here. We simply cannot afford that.
6.56 p.m.
Baroness Ludford: My Lords, I very much welcome this debate today and the fact that it is taking place on the eve of the Luxembourg summit and the United Kingdom's presidency of the European Union during which the first negotiations are expected to start. The committee has done this House and the European Union a great service by the speed of its deliberations, considering that the Agenda 2000 document was only published in July.
As has been said, it is now almost exactly eight years since the tearing down of the Berlin Wall. I was unable to visit Berlin at the time and had to be satisfied with watching events, transfixed, on the television. I therefore treasure as no other a gift that I was given by a friend in January 1990—a tiny piece of concrete from the demolished Berlin Wall. So I plead guilty to the charge expressed by the noble Lord, Lord Desai. I have an emotional wish to bring such countries home to Europe.
It is because I grew up on Cold War rhetoric and believed what we said about liberating central and eastern Europe for freedom and democracy that I believe that we have a moral duty to complete a successful enlargement. However, even that is not the major reason for expanding the European Union. The principal motive is our own self-interest in stability and security. We also need to change for our own sake. We need to change the European Union to be more democratic, more relevant and more effective. We should therefore welcome the dynamic impact of enlargement towards those ends.
The report does not pull its punches, noting that enlargement is a challenge of momentous consequence, but that national governments do not appear to recognise its sheer scale. The report warns of the absence of the
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political will that is needed to accomplish the necessary reforms to the policies and institutions of the European Union. The committee commends the realistic route plotted by the Agenda 2000 document, so the task is to persuade our member state governments to face up to the implications and for them to persuade our citizens that enlargement must happen.
While Agenda 2000 may be a route to the start of negotiations it is not a strategy for the accomplishment of a reformed European Union. It is perhaps an overworked cliché that history will not forgive us if we blow this opportunity, but I believe that it would be a misjudgment of huge consequence if we failed to seize the chance to reunite Europe and lay the foundations for unprecedented peace, prosperity and partnership on our Continent. Far from being an opportunity that is difficult to afford, it is one that we cannot afford to bungle if we really care about making our citizens safe. Here I disagree with the noble Lord, Lord Bridges. Security does not encompass merely military security through NATO; it includes economic, environmental and civil security through the European Union.
One of the points made in the report is that the institutional reforms must be agreed before the first accessions are ready. One of the major disappointments of the Amsterdam Treaty was that the heads of government ducked such issues as the need to streamline the Commission probably to one per member state and reweight the votes in the Council. Mr. Tony Blair was reported at the time as saying something to the effect that institutions were boring. I take issue with him since a citizens' Europe must mean effective, democratic and transparent decision making as much as tackling unemployment or crime. It is strange that a government who at home are rightly keen on constitutional reform, because they believe that that leads to better government, should be so shy of it on a European level. We know that the European Union will simply seize up if there is no streamlining of the institutions.
I was encouraged by the reports of the speech of the Foreign Secretary Mr. Robin Cook in Budapest on 26th November. In terms very similar to the committee's opinion, he said that,
"without reform, enlargement will remain beyond reach".
He urged all member states,
"to accept that our common interest in a modernised and expanded Union outweighs narrow national interests".
We know that words must be translated into reality. However, according to reports, his speech was calculated to convey a message of complete and unequivocal British support for enlargement. The Foreign Secretary indicated that it was the intention of the Government not only to push hard the Agenda 2000 package of reforms but to shake up the decision-making machinery. I hope that he includes the machinery of the common foreign and security policy because enlargement will make that even more important.
Further, I am glad to note that the Foreign Secretary distinguished this Government's approach from that of the previous Conservative Government. The latter was suspected of promoting widening of the EU through enlargement only as a Trojan horse to scupper

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deepening in a federalist direction. One matter to note is that if monetary union fails enlargement will be derailed. I add that the Foreign Secretary did not say that. While I am sure that unfortunately it is wrong to conclude that the Foreign Secretary is a closet federalist, I admit that his approach to enlargement causes my regard for his somewhat austere intelligence and integrity to recover after his decision to continue the delivery of Hawk aircraft to Indonesia.
Many noble Lords have said that reform of the common agricultural policy is top of the list of policy reforms. In particular, I congratulate the noble Baroness, Lady Young of Old Scone, on her maiden speech. I am a mere townie, but I listen avidly not only to "The Archers" but also "Farming Today". I admit to being bemused by the operation of the CAP. I have enormous sympathy with the terrible difficulties being suffered by beef farmers, made worse by yesterday's announcement, apparently related not only to the frustrations occasioned by the BSE crisis but also to the collapse of prices.
Perhaps it is time that we townies had greater leverage over the CAP. Where on earth do all of these subsidies go? The CAP costs taxpayers £28 billion a year. To the noble Lord, Lord Desai, that may not be very much, but it is £28 billion. We have some clues. Since 1992 cereal farmers have received up to £12 billion excess subsidy due to a failure to anticipate record high cereal prices. The annual cost of set-asidepaying farmers to produce absolutely nothing—is almost £1 billion.
It is perplexing to read these figures and then hear of the undoubted distress of small farmers. It does not take any great agricultural knowledge to work out that the money is not going to the right places. Very little of it appears to be going to support rural development, small family or hill farms, organic production or environmental improvements, and rather too much goes on another Mercedes for the cereal barons or the City types who own the big farms. I understand that we also spend £715 million a year to subsidise tobacco production. That demonstrates a somewhat bizarre conflict with today's meeting of EU health Ministers considering a ban on tobacco advertising.
We cannot carry on like this. I commend my own party's proposals for replacing price support with targeted income support and countryside management contracts to encourage sustainable farming and land management responsive to the concerns of taxpayers who foot the Bill. These reforms are vital in themselves, but unless something radical is undertaken the rapacious financial demands of the CAP will torpedo the chances of successful enlargement. There must be headroom in the EU budget to ensure sufficient aid for accession. That aid must be directed especially to infrastructure investment such as transport networks. I accept the point made by the noble Baroness, Lady Young, that it must be sustainable and environmentally friendly investment. We must help them to meet environmental standards and build up the quality and capacity of public administration and law enforcement as well as the financial and banking services in the applicant states. But we must be able to demonstrate to all citizens in
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the existing 15 member states that the European Union delivers value for money. We must be able to squeeze value out of every last penny of expenditure and see what can be cut, reformed or funded differently.
In his tour of Hungary, Poland and the Czech Republic the Foreign Secretary made clear that the UK supported the view, which the committee also expressed, that negotiations should be commenced with the five-plus-one rather than adopt the regatta approach. It is vital that even if there is differentiation in the timing of the talks it should not be permanent differentiation. To borrow a phrase usually used in the context of European Monetary Union, they must be "pre-ins" rather than "outs". There should be no velvet curtain to replace the iron or concrete one; otherwise, the confidence necessary to attract the direct private investment which is so vital will not be present. The European conference of all the applicants which is to be launched in February is designed to demonstrate the inclusiveness of the enlargement process and must not be a public relations exercise. It must be real.
The enlargement of the European Union is an investment in our future. We will boost our prosperity by the enlarged trade opportunities and assure our own security if our close neighbours and partners are democratic, prosperous and respectful of the rights of minorities. This debate is about financing enlargement, but the cost to EU countries and the United States of the Bosnian war is a reminder of the expense of instability and conflict.
I am grateful that this debate has taken place today. I hope that the message we send to the Foreign Secretary, other existing member states and future member states is that we are determined and enthusiastic to make a success of enlarging the European Union to almost 500 million people. But the United Kingdom Government must have a firm strategy for the kind of European Union that it wants to achieve. As all noble Lords have recognised today, this issue is highly political rather than technical. It may be 10 to 15 years before all of the current candidates are fully integrated. We had better get cracking and keep up the momentum. A successful enlargement offers the prospect of a transformed European Union and a major contribution to European stability in the 21st century.
Lord Bridges: My Lords, before the noble Baroness sits down, with the leave of the House, perhaps I may suggest that she misunderstood what I was trying to say about security. Of course economic security is vital, but it is surely also important that a country in this part of Europe should be able to live securely within its own frontiers without fear of being gobbled up by its neighbour. That is what has happened in this part of the world for the past century or two. That is what I am seeking to draw to your Lordships' attention. I hope that that may clear up this misunderstanding. I happen to believe that a conventional military pact of the NATO kind is not at all appropriate to this area of Europe.
7.10 p.m.
Lord Shore of Stepney: My Lords, it is my most agreeable first duty to congratulate the noble Baroness on her maiden speech. I congratulate her most sincerely.
Lord Barnett: My Lords, it was a good speech, but it was not a maiden.
Lord Shore of Stepney: My Lords, I thought that it was the noble Baroness's maiden speech. It covered the ground and I am sure that what she said about the CAP, and the eloquent defence that she put up for enlargement will have been greatly appreciated in all parts of the House.
I turn now to the report. I find myself substantially in agreement with a large part of the critique of what is basically Agenda 2000. The Select Committee's report is largely a critique and comment upon that document. It is a useful critique because the whole approach of the Commission, which authored the document, has been to try to reassure the existing 15 members of the Community that no real problem faces them as a result of the enlargement and the introduction of the new member states.
The Commission managed somehow to convey that reassurance by choosing a questionable growth rate of 2.5 per cent. per annum in the EU itself and 4 per cent. in the applicant countries. If that were achieved, the increase in own resources would be such that no serious problem would face existing members. It is extraordinary how neatly the increase in own resources, given those growth rates, matched the particular problems of existing members of the Community. It retained the ceiling of 1.27 per cent. That is hardly a sanctified sum, but nevertheless it retained that ceiling.
Secondly, the existing members can go on enjoying the cohesion and structural funds with a slight decrease towards the period 2003-2006. The extra resources generated are sufficient, apparently, to meet the needs of the much poorer countries which will be coming aboard during the period covered by the report. Finally, and this was a triumph, it even managed to say that, although the CAP would have to change in the period up to 2006, there would be increased expenditure under the CAP head for existing members, as the emphasis of the CAP moved from guaranteed prices to structural changes and the other part of the CAP.
I believe that it was the noble Lord, Lord Dahrendorf, who said that the greater difficulty in accommodating a substantial increase in the membership of the EU lay with the present 15. That is not to say, however, as I am sure he would not for a moment argue, that there are not serious problems for the applicant countries and the existing member states.
The applicant countries, as we have heard from different speakers, are poor. Compared with the average standard of living in the 15, they are woefully behind. We should not minimise the weight of the obligations that the acquis will impose upon the applicant countries. My mind goes back to when we first applied to join the European Community, as it then was. We had to accommodate—it was a difficult enough problem then
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to digest it—the, as it were, legislative achievement of some 15 or 16 years of Community life, together with the basic treaties (the Rome Treaty, the ECSC Treaty, the Atomic Energy Treaty) as well. But now here we are 40 years, as it were, after the main event, and the applicant countries have not merely to absorb the basic treaties, with which we had some difficulty, but in addition we now have the Single European Act, the Maastricht Treaty and the Amsterdam Treaty.
The noble Lord, Lord Dahrendorf, again quoted the figure aptly, but to achieve the same environmental and health and safety standards as exist in the Europe of the 15. and to which the applicant countries will be bound to adjust themselves, something like 2.3 per cent. of their GDP per year for 10 years will have to be spent on that exercise alone. There is no question of the task which has been set the applicant nations being in any way an easy one.
As for the 15 members states of the EU, I agree with and should like to reinforce the scepticism that my noble friend Lord Barnett, the chairman of the Select Committee, expressed about the achievement of their crucial growth rate. I looked up, quite naturally, what the growth rate has been in the 15 during the past two decades. I had to make some adjustment because all the members were not there. I take 1979-88 as the first decade. The GDP growth on average was 2.3 per cent. in the Europe of the 12, or whatever it was at that time. In the subsequent decade—that is, from 1989-98, and obviously making an estimate for the last year—the growth rate will be 2.1 per cent. on average.
We now have a document based upon a much more ambitious target of 2.5 per cent. That is a substantial difference. I wish to emphasise more strongly the distance that the EU has to go to make that growth rate not just achievable but credible. I looked also at the growth rates of the three major continental economies—Germany, France and Italy—for the past three years. I was struck when I found that the average growth rate during that three years in Germany was 1.4 per cent.; France, 1.3 per cent.; and Italy 1.2 per cent. That is a major difference between the assumed 2.5 per cent. upon which the credibility of the Agenda 2000 estimates depend.
It is worth considering why the growth rates have fallen so remarkably. I refer now to a document by the IMF entitled World Economic Outlook of October 1997. It is a recent document. It has this to say:
"The unsatisfactory economic performance of the three major economies of Germany, France and Italy cannot be blamed on the external environment'".
It continues:
"The sources of weakness have been internal, and in fact domestic demand has expanded by less than I percent a year in these three countries combined over the past five years".
I come to the point which I know will cause great unhappiness to my noble friend Lord Barnett. Why have the German, Italian and French growth rates plummeted so much? We all know the answer, but many people do not have the honesty to face it—I am sure not my noble friend. It is the almost desperate effort of those three

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countries to meet the convergence criteria laid down in the Maastricht Treaty and to achieve below 3 per cent. GDP borrowing requirement by 1998.
Your Lordships should not dismiss that point—it is very serious. I know that on the whole this House is sympathetic to the European project and does not like to look too critically at some aspects of it, but this is a serious point. It is worth reflecting on whether all the pressure of compression of demand, which is well below their actual GDP, will change when we reach 1999 when the single currency comes into effect.
I am sure that that is the hope of everyone concerned with the problem of the growth of the European Union, but I can see no reason why it should be any better in 1999. First, the convergence reached with such effort—that is, below 3 per cent. GDP by 1998—must be continuing. A country cannot suddenly go above 3 per cent. If it does, it is in for trouble because there is the stability pact with its substantial impositions of deposits and fines. In addition, as was properly pointed out earlier, the world economy is not looking as healthy as we should like, particularly with the repercussions of the international financial crisis. Against that background and combined with expansion of 2.5 per cent., sustainable convergence seems to me to be almost impossible.
Therefore, there is no reason to believe not just that we are unlikely to achieve the 2·5 per cent. growth of GDP during the period covered in the report, but there is every reason to be seriously worried about a continuing pressure on internal demand which will affect the growth rate in the years which lie ahead. The main consequence of an inadequate growth rate has been the massive rise in unemployment in western Europe in the past few years and therefore we must turn our minds once more to the whole construction of economic and monetary union and see whether, having done without it for the past 30 or 40 years we cannot somehow stagger on in the future without it. I hope that there will be the most urgent reconsideration of that as the most major way in which we can assist in achieving a proper growth rate in the European Union.
Finally, as regards the consequences of being unable to achieve the growth rate that we need, we must re-examine the whole business of the financing of the Community. I do not believe that one can do a great deal with the funds which are already raised. Expenditures look unlikely to fall in the years ahead. We must examine the whole issue of financing and whether further financing resources can be released or found. We must examine the whole not-very-thought-through system of Community taxes which have grown up higgledy piggledy over the past 30 years.
7.24 p.m.
Lord Middleton: My Lords, I join other noble Lords in congratulating the noble Lord, Lord Barnett, and his Sub-Committee A on their admirable report. During the time I served on the Select Committee on the European Union it produced three reports on enlargement. Two were the work of Sub-Committee D during the time that
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I had the privilege of being its chairman. Therefore, I have an interest to declare in the subject. I find it especially gratifying that the line taken in this new report is wholly consistent with the line taken by our 1994 and 1996 reports. That line has been encapsulated in the report's opening paragraph:
"If enlargement is successful. the people of Europe could enjoy conditions of security and stability without parallel in their history".
Speaking at the Madrid European Council two years ago, the then Prime Minister said that he believed that enlargement was the most important task facing the European Union. The promotion of enlargement was at the top of the previous Government's foreign agenda. I shall be grateful if in reply the Minister will tell us whether that policy objective is being given the same priority by this Government. If it is the case that the UK Government will continue to take the lead in working for enlargement, it must be recognised that, in the words of the report:
"The enlargement now foreseen is a challenge of momentous consequences".
In the two reports for which I was responsible, Sub-Committee D concentrated on the challenge to enlargement presented by the common agricultural policy. We stressed the urgent need for CAP reform and told the Commission how it ought to be done. The report of the noble Lord, Lord Barnett, takes exactly the same line. He described CAP reform as "pivotal" to the financing of enlargement. Numerous other speakers today support that view.
Before dealing with the problem of the CAP, I should mention one other problem which must be overcome. The EU is almost fanatically protective when it comes to trade in agricultural products. We found that to be abundantly obvious when my sub-committee looked at the trade agreements with the CEE countries in 1994. Those countries were being treated abominably, and so far as I know they still are. As regards this trade, the old Iron Curtain still stands and remains virtually impenetrable by farm and food products from the east. That must be put right.
I return to the reform of the CAP, which is crucial if enlargement is to proceed. I understand that Agenda 2000 assumes with admirable confidence a reformed CAP by 2006, which will apply only to the present EU 15. Pre-accession aid is to be given to the CEE 10 and estimates are given. The report is not,
"convinced that national governments have yet thought equally hard"—
that is, as hard as the Commission—
"about the way ahead or faced up to the sometimes uncomfortable decisions which will have to be taken".
I am sure that that is right. But I fear that in respect of CAP reform some member states have thought hard and that there will be continuing resistance by some member states and by politically strong organisations within them.
I remember well a trip to Brussels during the previous inquiry of Sub-Committee D in order to attend a conference on CAP reform and enlargement. It was attended by representatives of all member states and CEE countries. After the representative of the French

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farmers' union had his say, I wondered why the Polish and Hungarian representatives, whom we had met previously in Warsaw and Budapest, did not hurry back home to tell their governments to forget about enlargement and seek refuge instead in some resurrected eastern alliance. They did not do so because desire for accession among the CEEC 10 is immensely strong. Those countries are willing to show great patience. Nevertheless, the report is right in its final paragraph to utter a note of warning that delay imposed, for example, by an EU unwilling to reform the CAP might breed disillusion, putting the whole enterprise at risk.
The lack of a really robust set of recommendations for CAP reform in Agenda 2000 reflects the lack of enthusiasm on the part of some member states referred to by witnesses to the committee chaired by the noble Lord, Lord Barnett. When my sub-committee looked at the MacSharry 1991 proposals for CAP reform, we criticised them and said how it should be done. Those recommendations were endorsed by our own government and were produced as an option in the Commission's 1995 CAP reform document. But they were not adopted because they were too radical.
Agenda 2000 presents a new set of reform proposals which come a bit nearer to what the UK would like to see. Once again the Commission shies away from what is necessary because, quite understandably, it recognises that there will be almost guaranteed resistance from some member states.
The need for CAP reform seems to present the biggest challenge of all. I am led to believe that this Government—and I should he glad to have this confirmed by the Minister in due course—continue to adopt the robust line on CAP reform taken by the previous government. Therefore, I am sure that the Government will do all they can, but they will not receive much support in Council except from perhaps two or three other member states. The only hope is that sufficient pressure from the renewed round of WTO talks in two years' time may loosen up the logjam. Unless it does, the dire consequences of failure to achieve enlargement which are so well expressed in this report will follow.
This is a most stimulating report on the financial aspects of that enlargement, on which the future stability of Europe depends. It complements and extends the views held consistently by your Lordships' Select Committee, which have up to now been supported by all sides of the House. From what I have heard during this debate, in the main that support continues.
7.33 p.m.
Lord Hussey of North Bradley: My Lords, it is with some diffidence that I rise since I have not long been a Member of this House and for an even shorter time a member of Sub-committee A, to which I bring more enthusiasm than knowledge.
First, I must say, although this will be well-known to your Lordships, how much I have been impressed, not just by the wide and detailed experience of my colleagues but by the respect with which the committee is held universally. We do not receive many refusals if
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we ask anyone to come and talk to us. Much of that is due, no doubt, to the charm, experience and skill of our chairman. That is no surprise to me as he served long and patiently at the BBC under my chairmanship. I can only say that I have learned more in my seven months under his chairmanship than he learned in seven years under mine. Moreover, we are all indebted to the skilful work of our Clerk who has an unfailing eagle eye for the right phrase or telling quote.
The European Union and the part we play in it is the most important issue facing this country today. The prospect of enlargement of the existing 15 countries by a further 10 has been described by the Foreign Secretary as an historic opportunity which must be grasped to end the divisions which have soured our continent since the last war, and to enhance security and prosperity throughout Europe.
I was born in 1923. I am younger than some, although far from all, of your Lordships. My family, like virtually every other in this country, lost close relatives in the First World War. I sensed the increasing anxiety of that generation as it saw the inevitability of the Second World War. Although we were spared invasion, we suffered grievously and we should willingly pay a high price for a Europe which will reduce the likelihood of a third world war.
Of course, the history of our country is very different from that of our continental colleagues. The last invasion we suffered, as we all know, was in 1066, nearly 1,000 years ago. All our wars have been fought overseas—away fixtures, if you like. I believe we under-estimate the appalling memories of the many countries in Europe which have suffered invasion at least once every century, and many of them, like Poland and the Low Countries, more often than that. For them, there is no price too high to pay for stability.
In the first 50 years of this century, the threat to peace stemmed mainly from central Europe. But during the second 50 years, it came primarily from the east. The Community embraces already a large proportion of western and central Europe. The latest enlargement, including Poland, Estonia, Hungary, Slovenia and the Czech Republic, makes heavy inroads into eastern Europe. Dangerous and challenging boundaries are being eliminated. For that reason, if no other, their accession is hugely beneficial to the whole of Europe.
But what will be the financial costs? They are imponderable and the difficulties formidable. We look at the forecasts. Like many I have seen—and, quite frankly, like a few I have presented—they are extremely optimistic. The budget is very tight, but it may not be sufficiently tight. All expenditure rises alongside the Community's growth. The only thing that falls is the reserves. Growth rates are forecast at 2.5 per cent. for the Community and 4 per cent. for the accession states. That is not necessarily impossible. In 1995, the candidate countries averaged a growth rate of 5.2 per cent., more than double that of the European Union. But, as we all know, forecasts of growth rates are notoriously unreliable, not necessarily through any fault of the forecasters: they are subject to so many differing and unforeseen or even unforeseeable factors. The whole edifice depends on those targets being achieved.

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Like the noble Lord, Lord Grenfell, I too found the report of the European Parliamentary Committee disquieting. It stated that it believed that the projected growth of 2.5 per cent. was over-estimated and stated that the current ceiling of 1.27 per cent. of GDP for own resources was not necessarily inviolable, a view from which our Government and the governments of Germany, France and the Netherlands strongly dissent.
The budget depends on two issues: the first is the growth rate; the second is the reform of CAP and the structural cohesion funds which amount collectively to 80 per cent. of Community expenditure. In that context, reform means that some will receive less or others will pay more. It will be no surprise to your Lordships to hear that we have not detected any great enthusiasm for either of those policies, partly, of course, because of the startlingly contrasting interests of the northern and southern member states. It is a simple equation: if the growth rates are not achieved, either there are further cuts in expenditure or we increase our own resources to fund expansion. Solving that equation is—I use an adjective which has been used frequently this evening—a pivotal problem. One member of the Commission staff commented that the accession of so large a number of new applicants raised the question of whether the Union has the ability to carry through such an ambitious project, to tackle either the agricultural and cohesion policies, or to take the financial measures necessary for a union of 20 states to achieve its objectives.
On the other hand, there is a contingency reserve—what Commissioner Liikanen called "a margin for surprises". I am sure we all hope that the reserve turns out to be bigger than the surprises. Overall, the impact of past enlargements has been positive but they are not neutral; their impact goes further than simply extending the scope of the European Union. New members lead to new attitudes and new areas of interest. Incidentally, we must remember that the last two enlargements were eased by the raising of own resources, which is not at present on the menu.
I am an optimist, although the noble Lord, Lord Desai, may think that I am a romantic. I also hope that this enlargement will be positive. In my opinion, there is no alternative way to achieve stability, cohesion and prosperity in Europe. Whatever the difficulties and uncertainties—and some of these have been exposed with startling clarity by your Lordships—I believe that the effort must be made. The history of the European Union is the history of awesome difficulties in some unlikely fashion being ultimately resolved. We all believe and hope that this will now happen again. It is certainly in all our interests that it should.
7.42 p.m.
Lord Elis-Thomas: My Lords, there has been a nice mixture of optimism, realism and scepticism in today's debate. I am sure that that is down to the quality of the report which is before us. I should like to add my thanks, as a member of the European Communities Committee, to the sub-committee and in particular to my noble friend Lord Barnett. Of course, my noble friend is so
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far mainly famous for his excellent formula, of which I suppose I am a personal beneficiary. I am certain that he will become equally famous throughout the EU for the incisive nature of these reports. That is a serious compliment and I trust my noble friend is aware of that.
I should like to emphasise that my contribution will be on environmental standards and the cost of compliance with them, arising out of the points made clearly in paragraph 91 of the opinion of the committee. The committee emphasised that the:
"way ahead should be for maximum help to be given to the applicant countries in terms of advice and access to investment capital and for accession to be followed by transitional periods which may need to extend over ten or more years".
My worry is that that objective of ensuring compliance with the environmental acquis communautaire over 10 years, using the target figure that has already been mentioned—for example, in the case of Poland, an increase of 2 to 3 per cent. of GDP just to meet that level—may not be realised and that that in itself will create disaffection and concern both within the applicant countries and within the existing 15 countries.
In the whole area of sustainable development, we face changes of attitude and of implementation which have been very difficult to overcome so far in the 15. We are in danger of trying to apply standards of environmental management and targeting in the five that we are not yet successfully implementing in the 15. In particular, when one looks at the area of sustainable regional development, it must be clear that we need a combination of resources from the commercial/private sector, as well as that significant amount of public investment which is always required in order to ensure infrastructural standards. In some of the calculations set out in Agenda 2000, it seems to me that we are in danger of forgetting that necessary balance between public resources and private investment, especially in levering for successful development.
In addition, there are the serious costs of enforcement of the environmental standards. We have already seen within our own experience in the 15 how difficult it is to get consistency of enforcement of such standards. We need to ensure that in the whole area the five have the benefit of the pioneering work of the European Environment Agency in Copenhagen, which some of us had the pleasure in visiting last year, along with other members of a sub-committee.
When we consider the resources which will be required to meet the environmental objectives, it will be seen that it will require investment from World Bank sources and from the private sector. There is a tremendous opportunity in investment in environmental sector technology in order to improve standards. That is a major opportunity for manufacturing companies in the existing 15 in partnership with the applicant countries. Indeed, we have the benefit in Bridgend in South Wales of one of the most advanced companies as regards the development of cellular technology for solar energy. That is merely an example of the way in which the developing technology in the 15, in partnership with the five, can create employment opportunities throughout the expanding Union.

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However, that means that we need to have ways of thinking about sustainable development throughout the whole Union which go beyond the approaches that we have taken in the past. It is in that context that we must see the shifting of resources from structural funds and regional development in the existing 15 into meeting environmental and other objectives in the five not only as a widening of European Union standards but also as a deepening of our own technological skills, especially in the environment technology industry.
I am concerned that the targets for transfers set out in Agenda 2000 will be difficult to achieve. I know that I am beginning to sound like a Eurosceptic, so I shall try to conclude my remarks on a more jolly note in a few minutes. But looking at the cuts suggested in Agenda 2000—namely, 0.5 billion ecu in agricultural policy, which is a 1.2 per cent. reduction, and also at that I billion ecu per annum cut in structural funds, which is a 3 per cent. cut—which are intended as transfers into accession states, I foresee political difficulties not just within the agricultural sector but also within regions in the 15 as regards obtaining political agreement for such reductions. When one looks at the transfer of funds of 10.5 billion ecu in PHARE, that again will require a clear targeting if it is to be successful in its implementation.
Therefore, when we consider what is set out in Volume I of Agenda 2000—namely, an attempt to create a twofold approach by way of partnership with the European Union and long-term realistic strategies for alignment within the accession states—and when we look at the proposal for the matching of domestic and foreign financial resources, they all seem to me to be a little aspirational. I want to see the UK presidency taking a lead as these negotiations develop seriously to ensure that funding is in place, not only matching funding from the current EU resources and from the own resources of the accession states but also from within the private sector throughout the Union and Europe for developments of that kind. If we do not get that leverage and that balance, these targets will be worse than aspirational; they will appear unachievable.
As we try to adapt our own sustainable development strategies, the integration of the environment along with other economic and social policies, and as we extend that to the accession states, that will require an imaginative approach in terms of implementation. In doing that it is important for us to pay tribute—as the noble Baroness, Lady Young of Old Scone, did—to the achievement of the accession states in biodiversity and nature conservation, which certainly puts to shame the achievement of many of us in the 15.
There are environmental gains and benefits from enlargement. However, I must issue a warning that on the current performance I do not think we have sufficiently assessed the amount of expenditure involved or the extent of the task ahead. I add my warning to that given earlier by the noble Lord, Lord Dahrendorf. I hope that the Government will take this matter seriously as part of the initiatives of their presidency. It might indeed be called "Declaration Cardiff— because it looks these days as if that is about all we shall get in Cardiff.
7.51 p.m.
Lord Shaw of Northstead: My Lords. I, too, wish to congratulate the two maiden speakers today not only on the speeches that my noble friend Lord Garel-Jones and the noble Baroness, Lady Young of Old Scone, made, but also on the fact that they will have realised that enlargement is a continuing process. We have had earlier debates on this matter and we shall certainly have many more. I look forward to hearing from them in those future debates. The more our debating team is strengthened, the better.
At this stage of the debate it is almost inevitable that one will overlap with some of the points that have already been made. I shall try to keep that to a minimum. However, I am bound to repeat something that others have said; namely, how much we have appreciated the leadership that we have always enjoyed from our chairman. I welcome the fact that he has managed to persuade the committee to produce a report so quickly. This morning I heard certain critical comments from a noble Lord who is not present this evening. He criticised the speed with which we had worked and said how much better the report would have been had we taken a little more time. I disagree with that view. As I say, this is not the first report, and it certainly will not be the last, on the financial aspects of enlargement. It is important that we state a critical view—it is bound to be critical—as quickly as possible to try to urge a closer appreciation of the problems connected with enlargement.
The opening paragraph of the report states,
"Enlargement of the European Union to bring in the Countries of Central and Eastern Europe is no longer a dream".
That may be so. The report continues,
"there is now a practical and immediate opportunity to set a course which will re-shape the political, economic and social life of the whole continent".
Opportunities arise but they are not much good unless they are adopted and driven forward. The whole purpose of our inquiry is to see how we can change opportunity into practical steps towards realising that opportunity. I have noted a strong feeling that the member countries have not yet got down to spelling out the tough decisions and consequences that are bound up with any such enlargement, particularly the financial consequences of enlargement, on the individual national economies involved.
One has only to look at the present working of the CAP in that connection. This has been considered several times by my noble friend Lord Middleton, who has had much experience of these matters when serving on his committee. Paragraph 87 of the report states that,
"The CAP has long been in need of reform",
and that such reform is,
"pivotal to the financing of enlargement".
Yet, as our chairman has said, we are told that it is no use talking about changes in the CAP until after the German elections next year. That is true, but, of course, those are not the only elections. Elections will take place from country to country. Someone will always find it

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inopportune to discuss the CAP unless we are careful and unless there is a will to bring about the change. That will not be easy.
Similarly, changes are also required with regard to the structural and cohesion funds. Whatever benefits may derive from the reform of those funds, and however necessary they may be, they will not be achieved easily. The reforms and disciplines connected with enlargement must be spelt out clearly because, once enlargement takes place, it is much more difficult to change the conditions that have been set out than it would have been to get them right in the first place. However, there is a practical problem here even without enlargement. As regards the CAP. the structural funds and the cohesion funds, necessary changes must be agreed between the existing 15 members whether or not enlargement takes place. I am not quite sure whether there will have to be two stages, with the existing members agreeing on changes and then discussing them with the applicants, or whether there should be one stage of negotiations.
However these problems may be tackled, there has to be a willingness for the present 15 members to provide agreed assistance to the applicants. Equally, there has to be a willingness by the applicants to ensure that such assistance is properly used. That leads me to something that has not been mentioned so far but which I always return to because I think it is so important—I am afraid that I have mentioned it probably too many times in this place—namely, the financial discipline in the Community itself. The Court of Auditors' annual report for the financial year 1996 has just been published. Paragraph 0.8 on page 8 states:
"Almost all chapters of this Report (and five special reports to he taken into consideration for the 1996 discharge) include observations on administration and control weaknesses which demonstrate how far the development of appropriate systems of accounting and financial management, in particular in the Member States, has failed to keep pace with the expansion of Community activities and with their diversified nature".
We have to face the fact that in the Community as it now exists there is far too much misapplied aid and downright fraud. In presenting his annual report to the MEPs the president of the Court of Auditors, Bernard Friedman. has told us that the court had covered many irregularities and cases of fraud amounting to 5.4 per cent. of the 1996 budget, which itself was 77 billion ecu. That amounts to a total figure of fraud of 3.7 billion ecu. If my mathematics are right, that is about £2.5 billion. The president continues that the court was not able to give the Commission a clean bill of health for its management of funds.
The truth is that, although we have strengthened the hands of the Court of Auditors and the Commission, much still needs to be done to ensure a proper control of Community funds. In seeking enlargement we do not want to open the door to further misuse of EU funds. We have to remember that member states are responsible for the handling of some 80 per cent. of EU funds and are themselves in large measure responsible for the proper
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management of them. That is why at paragraph 95 of the report we stress the importance of developing,
"strong, capable and honest administrations in all the Member States and applicant countries. The judiciary and the civil service are key institutions whose capabilities will determine the effectiveness of the implementation and enforcement of Community law and practice".
How good it was to hear the Polish representative stressing the great steps Poland was taking to improve its administration and Civil Service.
Enlargement clearly will demand a steady progress and a continuous encouragement. In no way can it be a quick-fix operation. One has only to remember that it will take 25 years or so at reasonable rates of growth for the CEECs to bring their average per capita GNP up to roughly half that of the EU 15, we state at paragraph 15.
I fully support my noble friend Lord Dahrendorf in his more cheerful view of events. It is good to have a cheerful view; we are somewhat critical. Nonetheless, it is right to emphasise that the greatest spur to progress in those applicant countries is that we keep alive the hope that they will come into the Community. Towards that end, I am much in favour of something that we mention in the report; namely, the idea of a European conference at which we can continue dialogue with those applicants. We can keep the hope alive and progress towards entry within their view as well as our own.
Finally, I have always stressed the paramount need for financial regularity if the long-term success of the European Union is to be secured. But the other great need is to retain a flexible approach to the problems that must continually arise as we go forward. I am glad to say that I believe that such an approach has a good deal more general support than might often be supposed. In support of that. I conclude with three quotations. First, at the CBI conference on 10th November 1997, William Hague stated:
"Let us not have debates about who is pro or anti European. We should all he pro European. Pro about a Europe that is flexible, not rigid; that is about diversity not uniformity: that is outward-looking, and does not turn itself into a fortress".
The second quotation is by Joachim Bitterlich, Chancellor Kohl's national security adviser. At a recent German Government conference in Berlin he said:
"I am not an integrationist. I look at what works".
Finally I cite Dr. Hans Von Ploetz. He made a wonderful witness before the inquiry. He is the top civil servant at the German Foreign Office. He was speaking at the same conference in Berlin. He said:
"After Maastricht, Germans were no longer prepared to let power flow down a one-way street to Brussels. The burden of proof had shifted.
Now we have a British element—if it ain't broke—don't fix it".
8.5 p.m.
Lord St. John of Bletso: My Lords, first and foremost, like all other members of the sub-committee I wish to thank the skilful leadership and the skilful charm of the noble Lord, Lord Barnett. I wish also to join in the thanks for the able guidance of our clerk, John Goddard. I was heartened when I heard the opening comments of my noble friend Lord Bridges: he

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thought that the report was essential reading for anyone who had an interest in Britain's presidency of the European Union next year. It is an extremely interesting report. Like the noble Lord, Lord Hussey, I considered myself to be one of the most junior and naïve members of the committee. It was a steep learning curve for me.
There is clearly an overwhelmingly strong case for the advantages of enlargement of the European Union in terms of peace and security as well as economic growth and development in Europe as a whole. I say that as one of the younger noble Lords who has been fortunate enough not to have been involved in a world war. It is a small price to pay. However, it is clear from the report that there are major financial and political hurdles to overcome, and that the timetable outlined in Agenda 2000 is unlikely to be met. As the Economist in a recent article headed "Welcome to Europe" stated,
"it would be hard to find a European project that arouses so many suspicions and yet produces such beneficial results".
The report highlights a number of substantial adjustment pressures, both political and economic, that accession countries will have to face in order to comply with the acquis communautaire, including the enormous challenge of promoting environmental conformity with European Union standards which is likely in several countries to have a crippling effect on their GNP. The point was made by the noble Lord, Lord Dahrendorf, and my noble friend Lord Elis-Thomas. The noble Lord, Lord Dahrendorf, mentioned that Poland would need to spend 3.2 per cent. of its GNP for 10 years to achieve the environmental acquis. It is not just the money to be spent on seeking to achieve the environmental acquis, but also the challenge of the enforcement of the environment acquis.
Of course the first questions posed by the sceptics of enlargement are these. Who pays? How much? How will it affect our national economies? Paragraph 11 of the summary states,
"National governments, conscious of their electors and their approaching elections, will not wish to pay more to, or receive less from, the Community Budget than they do at present".
The point has been made about the forthcoming German elections. Clearly a key to the success of the exercise will be the need to stimulate sustained economic growth if the Community policies are to remain affordable. The figure of 2.5 per cent. has been cited. As a consultant to Merrill Lynch, I asked our chief economist whether or not that figure is achievable. While noble Lords might feel that economic predictions are unreliable, I am pleased to say that the chief economist of Merrill Lynch assured me that, even though he is a Euro-sceptic, he felt quite confident that the economic growth rate of 2.5 per cent. was achievable. Reform of the CAP is, in the words of the report,
"pivotal to the financing of enlargement".
What is evident from the report is that the relative poverty of central and eastern Europe will impose unpopular extra demands on EU farm spending and the budget for regional aid. In fact, many believe that
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the biggest obstacles to EU enlargement are the existing 15 countries. I again cite the noble Lord, Lord Dahrendorf. He said,
"The real obstacle is what present members fear will happen to them".
It is apparent that enlargement is entangled with the rest of Europe's unfinished business—namely, the single currency and the need for reform of the CAP. However, ahead of the forthcoming Luxembourg European Council meeting next week, it is encouraging to see that the enlargement debate is moving to centre stage.
While the Copenhagen criteria provide a sound screening process for applicant countries likely to be admitted to the European Union. it is important—as the noble Lords, Lord Barnett and Lord Grenfell, mentioned—that those applicant countries that did not qualify for the first phase should be encouraged to be admitted as soon as possible and not feel snubbed, thus creating potential divisions in central and eastern Europe.
I welcome the Foreign Secretary's recent announcement that, when Britain holds the EU presidency next year, it will host a special European conference to which all applicants — I stress all applicants—for membership will be invited.
While the Copenhagen criteria and the acquis require new members to take on board most EU regulations and to observe the Maastricht financial disciplines. I. like most noble Lords who have spoken today, am concerned that, if that is rigidly applied, it will not only lead to lengthy delays in new members joining the Union but also impose on applicant countries economic, monetary and environmental costs inappropriate to their need for rapid economic and political transformation. I believe that only if the EU is flexible about these pre-conditions and reasonable transition periods are allowed will the full economic and political potential be tapped and costs of enlargement contained. I stress that CAP reform is essential.
I have read estimates that up to £50 billion could be needed to integrate the five potential members in the first phase compared to the relatively low cost of NATO enlargement. I have not seen the figures for NATO enlargement but I imagine that they are substantially lower than those for economic enlargement.
A key point made by several of the witnesses, including Mrs. Hubner, head of the European Integration Office in Poland. was the importance of foreign direct investment into the applicant countries, such as Poland. Mrs Hubner mentioned how foreign direct investment into Poland had resulted in the promotion of political and economic reform and the adoption of the acquis. Should the timetable for applicant countries joining the EU be delayed too long, the potential result could be a drop in foreign direct investment in the applicant countries, which could have devastating effects. It is to he hoped that, in the words of Commissioner van der Broek:
"It is not the if. hut the when of the applicant membership that is important".

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In conclusion, although the attraction of NATO's defence guarantee is obvious, after decades of Communist misrule, what embattled citizens want most of all is economic stability, and for that they will look to the European Union. Those unimpressed by the historical opportunity for Europe should think of the practical benefits. In the words of the recent Economist article:
"The new democracies of Central and Eastern Europe need to shake up and deregulate their economies in order to prosper in a tough competitive world, whether they manage to join the EU or not".
If the enlargement process is postponed or delayed, the success of this much needed political and economic enterprise will be at risk. Our target must be a stable Europe that is open to the world.
8.15 p.m.
Lord Randall of St. Budeaux: My Lords, I believe that the report we are debating this evening is a good one. It was prepared in what seemed to me record time in order to be available for the EU Council meeting in the next few days in Luxembourg.
The report is special for me because it is the first substantial piece of work in which I have participated since being introduced into this House in October. I challenge the claim of the noble Lord, Lord St. John, to be the baby of the committee; I believe that I am. The calibre of the committee impressed me immensely. It would be tasteless to draw comparisons with the other place where I spent 14 years, but I should like to say how highly I regard this kind of committee work which shows the value of your Lordships' House in our parliamentary system.
The members' profound knowledge of the workings of the EU, particularly the financial aspects, and their experience and judgment made this for me an exciting and challenging project. Our chairman, the noble Lord, Lord Barnett, upon whom praise has been heaped this evening, played a key role. He created just the right sort of ambience for a complex project of this kind. Sometimes we were deeply analytical and serious; on other occasions we had a good laugh. Our chairman must take great credit for the report. Perhaps I should say that the rumour that the report will be officially called the "Barnett Formula Mark 2" is quite untrue.
I associate myself with the comments of the noble Lord, Lord Barnett, about the committee Clerk, Mr. John Goddard, who did an extremely good job. The report could not have been produced so expeditiously without his superb help and guidance.
One of the main political reasons for enlargement is to diminish the threat of war or conflict from those countries to the east of the EU border. Security of the European continent must, in my view, be a top political priority for the European Union. Consequently, enlargement must proceed and be effective, although it will be very costly. Those high costs will lead to great political pressure to limit the scope of enlargement or to delay its progress. If that is allowed to happen, aspiring member countries could become disillusioned, with very
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worrying consequences. We could be risking the security of Europe. None of us should forget that the war in the former Yugoslavia is an example of how close conflict can be to us in the European Union, even in the 1990s. We should never take our national security for granted. We must always be vigilant. We should never forget the enormous loss of life, both military and civilian, amounting to about 60 million people, in the last two world wars. Many were children. The waste of lives was indescribable.
I passionately believe that enlargement is the best tool at our disposal for reducing the risks of war and conflict in Europe. Enlargement results in the coming together of nation states and their becoming institutionally bound to the EU. But that binding process is not just limited to the institutions of the EU. It also includes NATO. I am pleased to see this joining of the EU and NATO going hand in hand.
It is encouraging also that so many countries wish to join the EU. Those countries accept that before they become eligible to join they have to meet certain standards; for example, in terms of human rights, democracy, institutional reform and the environment. Those strict requirements are laid down in two key EU documents; namely, the acquis communautaire and Agenda 2000. The conditions are very stringent and demonstrate the huge difference between the EU 15 countries and those in central and eastern Europe wishing to become members of the EU, referred to in the report as the CEEC 10.
The report we are debating today illustrates the difference between the economic performances of the EU 15 and the CEEC 10. The statistic quoted by a number of speakers is the one which makes reference to that part of the report which says that to bring the average GDP per capita of the CEEC 10 to just half that of the EU 15 would take about 25 years. It is an extraordinary statistic.
What all this adds up to is that enlargement is absolutely vital to ensure the security of Europe but at the same time the preparation of the applicant countries to meet the mandatory conditions will be very costly and will take perhaps a generation to complete. The commitment required from the EU 15 countries will be enormous, but we must not be deflected from the path of enlargement.
How do we move forward? Several things need to be considered. First, the member states of the EU 15 need to be fully aware of the scale of the financial commitments that are going to arise from the enlargement programme. I attended the Labour Party European conference a week or so ago in Eastbourne, where one very informed MEP described enlargement as,
"a make or break issue for the European Union."
That is a very strong statement. Is it reasonable? The committee felt that the financial perspective of the European Union for the period 2000 to 2006 was such that the budget allocated to enlargement would be very tight. There is a very limited built-in contingency in the budget, to which my noble friend Lord Shore referred.

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Next, the political pressures within the EU 15, particularly from Spain and Portugal, to allocate additional structural and cohesion fund money, will create conflict when it comes to allocating funds to the applicant countries of the CEEC 10 and Cyprus. That conflict will have to be reconciled. The CAP budget is unquestionably the single largest source of money which, if diverted, could fund enlargement. The Commission and the Council of Ministers have brought forward plans for CAP reform, which is very welcome. However, that reform on its own is inadequate. The CAP budget must be substantially reduced.
The question that arises is whether such substantial reductions in the CAP budget would be achievable. The committee felt that political pressures from elected Ministers are such that member states would not countenance such reductions, certainly in the foreseeable future. In addition, the committee felt, after interviewing various witnesses, that the possibility of increasing the Community budget by raising the EU GNP ceiling from 1.27 per cent. was remote.
My own view on funding is that since many of the applicant countries are proceeding with privatisation programmes which potentially can free up enormous sums of money and other valuable resources, then those countries should be encouraged to use as effectively as possible some of those resources to attract private financial institutions to invest in their countries on structural, environmental, social and other costly projects which must be carried out in order that such applicant countries can join the European Union. I stress, however, that such a potential contribution from these countries to enlargement should not diminish the EU 15's commitment to helping them make good progress in joining the EU.
I think the House of Lords committee has done a worthwhile job in highlighting some of the financial and political dilemmas associated with enlargement. I hope the council meeting in Luxembourg will give careful consideration to how those dilemmas can be dealt with.
8.26 p.m.
Lord Wallace of Saltaire: My Lords, this is an excellent report and we have had an excellent and expert debate upon it. I pay tribute to the noble Lord, Lord Barnett, for the amount of work he has done and the speed at which it has been reported. I have a healthy respect for the European committee in this House; indeed, I also have a long family association with it. Michael Wheeler-Booth used to delight in reminding me that my wife was one of the first ever witnesses to the committee when it was formed and that he had given her a double gin and tonic to steady her nerves before she started her evidence.
I was once a special adviser to the committee and, if I remember correctly, it was on the subject of enlargement which meant Spain, Portugal and Greece at the time. I held the then chairman, Lord Trevelyan, in great awe. As I recall, the entire committee went to Brussels with its special adviser and met a number of commissioners and had an excellent lunch. So something has gone wrong between 1978 and 1997 in
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the way that things happen now. As it is rightly said, we travel in twos and threes, carefully selected on these occasions.
As a new member of the Select Committee I have been parachuted into the chairmanship of the junior sub-committee, if I may so describe it. The third pillar is now one of the most sensitive and active areas of the European Union. We were told, when two of us were allowed to travel to Brussels in July—I went with the noble Lord, Lord Kingsland—that a third of the paper currently going through the Council's secretariat and more than a third of the meetings were now on the third pillar. Papers are coming out on the impact of enlargement, on justice and on home affairs and—heaven knows!—asylum, immigration and organised crime. That is a large number of issues which we are trying, in our small way, to investigate.
What I most liked about the report was the balance it achieved between the strategic objectives and the hard detail. That seems to me to be the most important thing about approaching enlargement. The noble Lord, Lord Desai, talked of not getting over romantic about this subject. But there are powerful interests at stake in making a success of enlargement. I remember in the mid-1980s—as I am sure the noble Lord does—the Cecchini Report on the costs of non-Europe, which powerfully argued the case that completing the single market through the 1992 programme was in our clear economic interest. One can imagine how one would now set about a report on the costs of non-enlargement.
We were spending a great deal more on defence up until 1989 than we are today. As my noble friend Lady Ludford pointed out, we are spending a great deal on Bosnia, having failed to manage the transition in Yugoslavia. The Germans and the Italians in particular are spending a great deal on half a million refugees from Yugoslavia, Albania and elsewhere. So there are costs in non-enlargement as well as in enlargement. There is also certainly a moral obligation, which we all feel, that matey of these countries have suffered from the results of World War II and the failure of the western powers "resolve resolve the consequences of World War II. There is also the question of what we mean by a European community or a European identity. In this respect one has to talk in rhetorical, romantic and emotional terms. The pace of enlargement, the way in which we lock the peoples of these countries into a broader European community, European society, European family of democracies, European market and European economy, matters. That is why the pace at which we approach the process of enlargement matters.
In his opening remarks, the noble Lord, Lord Barnett, said that he did not quite understand what was meant by the regatta principle. As a young man I belonged to a rowing eight. The concept is entirely clear to me. In modern Olympic regattas, eight crews start at the same time but one or two of them reach the finishing line long before the slowest ones. But watching this process, I have a different image. It is what I used to do—tideway rowing. You rowed very fast down the Thames when the tide was with you and back extremely slowly. I fear that what we are doing with these countries is asking

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them to row up the tideway against the tide. It is important that we should provide a rather warmer flow of water than we are currently providing.
It is the characteristic style of west European governments in approaching European negotiations, to become lost in the detail. That, unfortunately, is the way in which the European Community was designed and is the way in which all governments, including our own, tend to behave. The record of the Commission on enlargement, as on most other matters, is slightly better than that of member governments. Agenda 2000 is a creditable report. It sets out a number of hard choices which most member governments do not want to accept. I do not think it is too strong to say that most member governments are in denial over enlargement. They want to put it off for as long as possible. They come up with phrases like "first reform, then enlargement", meaning that they are not too sure about reform of agriculture, institutions or whatever it may be. Attitudes in Germany are affected by the high and unexpected costs of unification. Attitudes in France are affected by the tremendous crisis of society, state and economy through which the country is going. If we look at our own record. I remember a former British Minister of Agriculture proudly announcing in another place on the conclusion of the Europe agreements that he had safeguarded the interests of Scottish raspberry growers in the course of the negotiations. That is going a very long way down into detail when talking about the future stability and security of Europe.
I find it very saddening that the Community as a whole has taken so much less generous an attitude to this enlargement than it did to the Mediterranean one. We were willing to increase spending for Greece, Spain and Portugal. We were not put off by the extent to which Portugal was an undeveloped country—more like Romania than the Czech Republic in 1977-78. Portugal has made a tremendous success of being in the European Union since then. We were also extremely generous to Spain. We ought to be reminding the Spanish Government of that now as they set out to do their best to block all economic and financial generosity to the new entrants. We are in severe danger, as Polish Ministers have said on many occasions, of asking the applicants to adjust—and they are adjusting remarkably rapidly and well—without being willing to adjust ourselves.
Perhaps I may remark on a few points which the report did not flag. The costs of the future stability of Europe do not stop with EU enlargement. Most governments have their own national programmes. Most generous are the Germans who have given a great deal of bilateral assistance to Russia and the Ukraine. We have our own small programme. The Know-how Fund is not particularly large, but from what I have seen in central and eastern Europe, it seems to be one of the most effective training programmes. Various noble Lords have mentioned NATO enlargement, the cost of which has now been reduced to within the range which the US Senate is prepared to accept. There is also the
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question of Turkey and of stabilising those other countries which will not join within the foreseeable future or may never join—Ukraine and Russia itself.
I recall at the Barcelona Conference in November 1995 the announcement of a very large package of aid for the Mediterranean countries which I thought at the time was unlikely ever to be disbursed and I assume—perhaps the Minister in replying can tell us—has not yet been disbursed. It was to be of the order of two-thirds of the assistance provided for the Europe agreement countries over the next 10 years.
How do we pay for this? We should not get hung up on whether we can expect 2 per cent. growth or 2.5 per cent. growth. Incidentally, my understanding is that the Polish economy grew by between 6 and 7 per cent. last year. So some of them are doing better than expected rather than worse than expected. If we are to be tough about how we pay for it, we have to insist—I hope the British Government and presidency will set out to insist—that governments graduate from the structural funds, that the cohesion funds must shrink. and that Ireland, having done extraordinarily well-8 per cent. of GNP and now rapidly approaching the same GNP per head as the United Kingdom—must of course graduate away from the structural funds. So must much of Spain, and so, necessarily, must much of Britain. I shall regret no longer having such things as that wonderful notice we have had for the past 18 months as one walks down to the station at Saltaire which says,"Your new footpath, paid for by the European Union", and all those little badges one sees scattered across northern England. But perhaps that is what we shall have to do without in future.
We also need to reform the Union's own resources. The committee's report just touched on that. One of the biggest scandals in the European Union is that Denmark is still a net beneficiary of the Union budget. I also regard it as deeply hypocritical that the Dutch have suddenly discovered that the European Union costs them money since they have now at last become a net contributor. Various people, including the leader of the Dutch Liberal Party, now go around saying, "We cannot afford to pay any more". Clearly, the Dutch. as a relatively wealthy people, ought to be paying more.
We need to have a wider definition of burden sharing. I have just seen a paper prepared for some transatlantic discussions on burden sharing which links together how much each European state is paying towards the European Union budget, towards development assistance and towards defence. Placing things in that wider context is not only fair but is also of some advantage to this country in the overall picture since we are one of the larger payers on defence. But we shall achieve that kind of redefinition only if our political leaders are prepared to redefine the issue and if we can place the details within the wider context. What distresses me most about the governments of western Europe, our own included, is the failure of imagination, the failure to understand that we are engaged in the reconstruction of a wider Europe and the construction of a stable democratic and prosperous Europe, and that it is worth spending a certain amount of money in order to achieve that larger goal. Rhetoric—even

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romanticism—has a role to play in catching the public imagination and in persuading politicians of all parties and the broader public that this is a goal worth pursuing and an investment worth making. We need to have our political leaders making speeches on that at home as well as abroad.
This is a challenge for the British presidency. It is something we may hope to see in the statement of objectives of the British presidency which is due at the end of this week. If leading Europe means anything in terms of language, this is the direction in which the United Kingdom should be leading it. That message should be addressed very clearly to the rest of the European Union as well as to the British public.
8.40 p.m.
Lord Higgins: My Lords, I join with all those who have spoken in this debate in congratulating the noble Lord, Lord Barnett, and the members of Sub-committee A on producing something which clearly is a remarkably helpful report, particularly so given that it has been produced in a short time on the eve of the Council meeting in Luxembourg. I hope that those at the meeting will have the opportunity of receiving the report. Perhaps the Government will consider ensuring an adequate supply of the document in Luxembourg—one might even suggest that copies of this debate should also be available. If one were convening a conference to discuss these issues on a Europe-wide basis, then perhaps one should take into account that many or even all of those who have spoken today have such a degree of expertise that their views are of considerable importance in dealing with what is an immensely difficult problem.
Everyone who has spoken has come out strongly in favour of enlargement, with the possible exception of the noble Lord, Lord Desai, who had some qualifications. Equally, everyone has recognised that there are immense difficulties regarding the financial arrangements.
Perhaps I may be parochial for a moment and take up a point made by the noble Lord, Lord Boardman. For the past three Parliaments, as chairman of the Liaison Committee in the House of Commons which consists only of chairmen of Select Committees, I have had the rather unusual task of allocating the very scarce funds available for overseas travel. The result is that I probably do not have a friend left in the place. I have always taken the view that, if a Select Committee is travelling, if at all possible—and I know that the noble Lord, Lord Shaw, will agree with me—it is very important that everyone on the committee should travel together. If it is the case that in this House limits are imposed whereby only two or three go, that is an absurd economy and something to which this House should give attention. It is not simply that if some go and others do not, the ones left behind do not understand exactly what the situation is, but also they do not have the opportunity of getting together and taking part in discussions. Therefore, I urge those responsible to look at this matter very carefully indeed.
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I congratulate both the maiden speakers. My noble friend Lord Garel-Jones brought to the debate his experience at the Foreign and Commonwealth Office. He has always had a very clear view on the issues that we are discussing today. We congratulate him for that. The noble Baroness, Lady Young of Old Scone, made a speech which was perhaps a little more controversial than is sometimes the case with maiden speeches.
All those who have spoken have made very important contributions and have recognised that this is a matter of the utmost importance. The previous Conservative Government did so; they were among the first to call for enlargement of the European Union and the Conservative Party vigorously supports enlargement. Enlargement will undoubtedly enhance the security and prosperity of everyone in Europe and we want it to be successful, sustainable and affordable.
Perhaps I may now pick up a point made by the noble Lord, Lord Wallace of Saltaire, regarding the jargon. This is a subject which is slightly bedevilled by jargon. There seems to be a distinction between whether it was a five-plus-one kind of arrangement which the committee favoured, or a so-called regatta approach. My experience of regattas is confined to sailing very small sailing boats rather than rowing. One can have a regatta of two kinds. There is one where everyone starts simultaneously (which I gather is what the jargon implies) but there is also the regatta with a handicap and where some start ahead of others.
If we are to have a five-plus-one system where some have a start, then it is tremendously important that the time difference and the handicap which the others suffer is not so great that they become disillusioned, despondent, and one might almost say dangerous. The noble Lord, Lord Grenfell, made a very powerful speech on that point. He stressed how important it was that we should ensure that all potential applicants should feel that they are involved in a process which, whatever the timing may be, is one in which they are participating. As has been pointed out by the noble Lord, Lord Barnett, it may be that those who start at the back reach the finishing tape before those who start ahead of them in the first stages.
The report refers briefly to institutional reform and particularly whether there should be a change in the number of commissioners and the voting on the council. That is not primarily what we are concerned with tonight. We are concerned primarily with the question of costs. Three possible sources were identified in the report, although the noble Lord, Lord Shaw of Northstead, managed to produce a fourth—namely, if fraud, and so forth, were dealt with properly by the Court of Auditors, one might find an amount of about 2.5 billion ecu, a not inconsiderable amount, could be put towards the objective that we are seeking to address this evening.
As regards growth, the noble Lord, Lord Shaw, dealt with it in very considerable detail. Clearly, the assumptions which have been made may turn out to be invalid. Therefore, that is a very serious problem. Similarly, on the own resources issue and raising the limit, the report stresses the very real political

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difficulties arising from that matter. The other source mentioned was of savings on agriculture or on other funds.
In that context I pick up one particular point. The committee stresses very much the size of the task ahead of us. In its opening paragraphs it stresses that,
"The enlargement now foreseen is of a different order of magnitude from any that has happened in the past. It is a challenge of momentous consequence".
That is certainly the case. The report continues,
"National governments, conscious of their electors and approaching elections, will not wish to pay more to, or receive less from, the Community Budget than they do at present".
So there is here a very real problem. It is hoped that the Council of Ministers meeting in a few days' time will do something to help. It is true that national governments have not recognised, as the committee does, the sheer scale of the enlargement undertaking. I quote from the report at paragraph 28. The committee emphasises very clearly the size of the problem. The report states,
"Using figures for 1995, if enlargement brought in to the existing Union of fifteen Member States all ten of the applicant countries of Central and Eastern Europe, the Union's population would grow from 371.6 million to 476.9 million; and the area of the Union would expand [enormously]: both population and area would expand by roughly one third".
I believe that that gives us some idea of the scale of the problem.
The report continues—and this is important—
"In terms of GDP per capita and of the proportion of the workforce employed in agriculture the differences between the EU 15"
and the 10 are enormous. The difference in purchasing power is pointed out. If one took the figure in 1995 as 100, the figure for the applicants is only 30. The percentage employed in agriculture was 5.3 per cent. among the 15 countries and 22.5 per cent. among the 10. That is very important.
Coming to this matter fresh (as I do in a way which members of the committee do not) as I have listened to the debate I have been a little puzzled. Many noble Lords have said that the important thing is to make economies in the CAP. That is certainly an important issue and perhaps I may expand on it for a moment. When the question of Britain first joining the EEC, as it then was, arose—and on balance, I came down strongly in favour—it seemed that there was a trade-off between the advantages of the single market for most things and the disadvantages of the EEC with regard to agriculture. It has always been a great puzzle that any first-year economics student would have no difficulty in explaining the appalling problems which arise from the present system of agricultural support through the CAP but, however overwhelming those first-year economics arguments may be, politicians have never taken any notice. As an economist, I have always regarded that with great regret. In this context, the figures that I quoted earlier are important. The number of people employed in agriculture will increase enormously. Therefore, the political pressures on the agricultural side will also increase considerably.
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We are left with a strange situation which I do not think the committee fully addressed. On the one hand, we are saying that we must find economies in the CAP in order to finance enlargement; but, on the other hand, those who are applying for membership believe that there will be great advantages in joining the CAP. However, the voting pressure, if I may put it that way, will be to spend more, not less. I found no analysis in the committee's report of how that will balance out. I found no reference to how the reduction in the cost of the CAP for existing members relates to the likely increase in costs for the new members.
Paragraph 51, on page 15, contains a most interesting statement by Commissioner Liikanen, pointing out the disruptive effects which would follow the application of the present CAP to Poland: agricultural income would go up by 47 per cent. "overnight" and investment would move from services and industry to agriculture where, given the strict quota system for production, the price of land would be forced up:
"it would fully collapse the structure there"—
that is, in Poland. I shall not expand the argument any further, but I do not think that we have given sufficient attention to the relationship between the CAP for the existing members and how things might look if enlargement is eventually successful, as we hope.
Generally speaking, I very much welcome the move towards a more efficient CAP with lower consumer prices, a move towards world market prices and a move to direct income aid. However, I still hearken after the system of support that we had in this country before joining the EEC which did not put up consumer prices and where we knew exactly what it was costing the taxpayer and the consumer. Despite the excellence of this report, I believe that we shall still need to consider such issues in greater detail on a future occasion.
I turn now to the move towards economic and monetary union. The committee did not deal with this in great detail, but I think it is true to say that the move towards economic and monetary union has, as the noble Lord, Lord Shore, pointed out, had a serious effect on the level of economic activity in a number of other European countries as they seek to meet the Maastricht criteria. My own feeling is that it is important to remember the fundamental argument against the single currency, which is that one is giving up for all time the major means of adjusting for differential movements in costs and prices. If one goes ahead without an adequate degree of convergence, one will find either that there is perpetual unemployment in some areas or that one has to make massive subventions from one country to another. If that is so, I fear—and this is a personal view—that if the Union goes ahead on schedule and with the present degree of convergence, there is a serious risk that it will not work and that it will break down. As has already been pointed out, that would be disastrous for the prospects for enlargement and for our economies generally. I feel that the great pressure to go ahead towards economic and monetary union for, I think, political reasons, should be viewed, in the context of enlargement, with considerable concern.

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If the single currency goes ahead and does not break down, clearly some countries will be members while others are not. That poses a problem with regard to the unity of the Union. Clearly, those members which are now applying to join EMU, or which wish to join, will find the problems facing them in the foreseeable future very difficult. The report points out the stark reality of the extent to which those countries are out of line with the other 15. That is a cause for concern, but at the same time it will be a very long while before they converge sufficiently for them to be able to join a single currency if, indeed, it goes ahead and if it is successful.
Finally, I believe that all noble Lords who have spoken are in favour of enlargement. The report has been helpful in highlighting the real problems that we face, but perhaps we should recall the words of the noble Lord, Lord Dahrendorf: we need to press on with this in a direction which we believe is essential and important for our future security as a country, and despite all the difficulties, do all that we can to solve them.
8.57 p.m.
Lord Whitty: My Lords, I begin by echoing the widespread thanks that have been paid to the committee for its thorough, clear and exceptionally timely report. I thank also my noble friend Lord Barnett for his cogent exposition of the report. The reputation of your Lordships' House and of its Select Committees is continuously enhanced around Europe, even at the highest level, by the quality of such reports. This is a great addition to that record.
I am delighted to add to the congratulations paid to the noble Lord, Lord Garel-Jones, on his maiden speech in this House. It demonstrated his vast experience of European matters which will doubtless inform and enlighten the House in the months to come. I even agreed with much of what he said.
I pay very special congratulations to my noble friend Lady Young of Old Scone for her forthright and effective maiden speech, giving an environmental dimension which was perhaps absent from some of the other contributions. When I was general secretary of the Labour Party and we were trying to increase the party's membership, I was constantly reminded that the Royal Society for the Protection of Birds had three times as many members. The Labour Party has since increased its membership, but the RSPB still has three times as many members. I do not think that that has anything to do with the British public's preference for cuckoos over canvassing; it has more to do with the quality of the RSPB's chief executive.
Enlargement is one of the most awesome projects facing us in the modern world. The UK Government, like their predecessors, support enlargement of the Community. I agree with the noble Lord, Lord Wallace, that the European Commission has done extremely good work in pointing out the difficulties and the strategy in Agenda 2000. The Government endorse the Commission's recommendations and agree that there are five countries ready to begin formal accession talks.
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During our presidency we shall work to secure the opening of those accession talks. I refer to the five central European countries plus Cyprus.
At the same time, the Government believe that the enlargement process should be all-inclusive; it should include the other applicants. The European conference proposed to be held in February should be open to all applicants who aspire to EU membership. A reinforced pre-accession strategy is required to ensure that all applicants remain fully engaged in that process. For example, countries like Slovakia could, with relative ease, catch up with some of the so-called first wave applicants. In the case of Slovakia, much is in its government's own hands. Principally it is the lack of democratic and political credentials that blocks its inclusion in the first group. In other cases it will be more difficult. Very strenuous efforts will be required to deal with economic, environmental, administrative and legal matters in Romania, Lithuania and Latvia. Despite the terrible recent economic performance of Bulgaria, it is possible that during the process of negotiations that country can catch up.
Therefore, the European conference is not a one-off event but an inclusive process. Earlier my noble friend Lord Barnett showed a regrettable lack of knowledge about voting techniques. That has been put right by noble Lords on two Front Benches opposite. The regatta approach requires that everyone starts at the same time if at different speeds. It is beyond the elite of European politicians to find an appropriate sporting term for the alternative which is to start at intervals. Without indulging in puns, we thought that motor racing and pole position were relevant here. However, perhaps motor racing is not the most favourite topic on this side of the House at the moment.
Nevertheless, the process is clear. As my noble friend Lord Grenfell and the noble Lord, Lord Dahrendorf, emphasised, those who are not in the supposed first wave are still part of the process. It is very important that whatever sporting term is used everyone is in the race. Therefore, the other five countries, including Turkey—in a slightly different capacity—must participate in the conference.
Enlargement can enhance peace, democracy, stability, prosperity and human rights; it can stimulate economic growth and competitiveness both for the west and eastern Europe. It can reduce potential migratory pressures. Although it will cost money, it can engage substantially in the environmental clean-up that is needed in eastern Europe. But there is a cost. As my noble friend Lord Barnett and others said, we cannot meet the costs of enlargement without radical reform of the way in which the European Union currently does business. No one is ever enthusiastic about paying more, and that applies to both governments and people. But I believe that there is a universal understanding among the governments of Europe that enlargement will have a net cost for almost all existing member states. The concern is to keep that cost to a sensible and affordable level and to ensure that no single member state faces a disproportionate burden.

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To keep the costs affordable we must put the European Union's policies and institutions in a fit state for enlargement. National governments have very difficult decisions to make. For example, it would not be sensible or affordable for the common agricultural policy in its present form to be extended to the new members, even over a long time scale. For the reasons explained, it is not in the interests of Poland to increase the income of the Polish agricultural sector which that country recognises is in need of restructuring and modernisation. Therefore, one is talking about long time scales for transition but also about reform within that time scale domestically inside existing European Union countries. All of this means that the Agenda 2000 negotiations are even more difficult than discussions on any previous EU financial package.
There are some in this country who believe that any increase in cost is to be condemned. We reject that view. Despite its budgetary costs, enlargement is likely to be a good deal for the UK even if the reckoning is kept to economics. The benefit of trade with burgeoning new markets in the east will outweigh the budgetary cost. More importantly, there is a common realisation of the wider security, economic and military benefits of enlargement which mean that ultimately all existing member states will be prepared to face up to the financial cost. However, that financial cost must be managed and limited. To do that will require policy reform.
The Commission's Agenda 2000 has been examined by the Council of Ministers for the past few months. That examination has revealed broad, although as yet not unanimous, agreement that radical reform of the Union's agricultural policy and the structural funds is needed. The political will to make those changes is increasing but it is not yet fully there. Both the committee and noble Lords have commented upon the CAP. The Government are absolutely committed to radical reform of the CAP. As my noble friend Lady Young and other noble Lords pointed out, there is no point in exporting the cost and the damage that the existing CAP can do to eastern Europe.
The Government agree that EU funding will need to be augmented by resources from the international financial institutions. We agree with the committee that the building of strong, honest and democratic institutions should be given high priority. We also agree with the committee on the need for further institutional reforms as soon as possible and the importance of private investment and trade and capital flows.
However, there is one rather substantial area of disagreement with the conclusions of the committee. I believe that it is a matter of tactics rather than strategy. We agree that the own resources ceiling is not likely to be increased above the 1.27 per cent. of Community GNP for the period beyond 1999. But we also believe that, provided the decisions are taken on policy reform, that ceiling will prove adequate. We have not yet reached that ceiling. A very substantial growth in the process and a very substantial underspend in some of the budgets now and, as the noble Lord, Lord Shaw
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of Northstead, pointed out, adequate application of the Court of Auditors' recommendations would find further money within that budget.
Therefore, we cannot agree with the report's conclusions that we should now decide to have a review of the own resources ceiling before the year 2002. There are different ways in which the Union can deal with the financial challenge of enlargement. The first is to postpone enlargement purely on financial grounds. But if additional resources must be found the Union has the choice of increasing total resources or making the existing total go further. We believe that by suggesting a mid-term review of the own resources ceiling, the committee is ostensibly trying to keep open both options. We believe that that would put off reform rather than accelerate it.
Baroness Williams of Crosby: My Lords, I thank the noble Lord for giving way. On that point, does he accept that if the growth figures over the next two years fall short of the assumptions made by the Agenda 2000 report there might then be the necessity for a review; otherwise the limited funds that are now required for expansion would not be there?
Lord Whitty: My Lords, I was coming to the estimates for growth, and I shall deal with the point now. The report estimates growth of 2.5 per cent. It is clearly prudent for us to have some contingencies around that figure. We do not believe that the figure would fall substantially below 2 per cent., but even with a slight variation there would obviously be greater pressures on the budget ceiling than there are in the mainstream estimation within the report. That seems to increase the necessity for ensuring that reform takes place whereas a declaration now that we will review in 2002 seems to take some of the pressure off the necessity for reform.
We do not agree with the committee's recommendation for a mid-term review of the ceiling. Obviously, if circumstances change, a review may well be necessary. To declare it now would, as I said, take the pressure off the need for reform. The Government therefore insist that there can be no increase in the own resources ceiling. In that we are in good company. The great majority of member states have a similar view. It is one of the strongest levers we have to press for policy reform which, as the committee suggests, is essential for enlargement.
We agree with the committee that governments must look closely at all the figures. They must tell their own electorates the implications of the figures. We do not want to do anything that will reduce the pressure for reform.
I shall deal with one or two of the other points raised during the debate. The receipt of structural funds has clearly been of great benefit to many UK regions, as in other countries. I do not believe that the outcome of the current negotiations will be as cataclysmic as my noble friend Lord Desai suggested, but there will be changes. We do not yet know the outcome of the negotiations.

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There will clearly be pressures not just from the UK regions but from Spain, Portugal, Greece and Ireland on those fronts.
On cohesion funds, the Commission proposes no increase from 1999-2006. We agree that there is a problem in relation to the definition of what cohesion funds are for. We should not over-estimate their significance. Even by 2006 the figure will be under 7 per cent. of total structural and cohesion fund expenditure.
A number of noble Lords referred to the recommendation that more co-ordination should be adopted by western European countries on the expansion of NATO and the EU. I agree that the costs of both should be considered and that there is a vital security dimension to the expansion of EU and NATO. The costs of NATO will be much lower than the cost of EU enlargement. Those costs have been assessed recently. The Government will shortly be able to give further details of them.
I need to respond to my noble friend Lord Desai who accused some of us who advocate enlargement of being romantic and emotional. I confess to being a little romantic and emotional about these things. When I was a young man I travelled quite extensively. In the early 1960s I visited rural Ireland, autarkic and fascist Portugal, and communist Czechoslovakia. Many parts of Ireland and Portugal were virtually third world. Czechoslovakia, although apparently more advanced, was repressed, albeit with a slight air of hope which all too soon was taken away by Brezhnev's tanks.
As has been said in the debate, Ireland is now at 90 per cent. of the EU average, on a par with the UK. Portugal, like Spain, is a burgeoning society committed to democracy and with an impressive economic record, much of that due to the efforts of its own people. A large part of the economic improvement and the consolidation of democracy in Portugal, Spain and Greece has been aided immeasurably by their membership of the EU. Regrettably, Czechoslovakia, like the rest of central Europe, went backwards from the 1960s both in terms of its economy and human rights.
In the way that we helped Ireland, Spain, Portugal and Greece, we owe it to the Czechs and the other countries of eastern and central Europe which have suffered 40 years of communist repression, fascist repression and, before that, war, to help them to come into the democratic world of western Europe. In the end, it was not western pressure; the people of those countries defeated communist governments in a remarkable and almost bloodless revolution. We spent 40 years spending vast sums of money on military hardware when we thought they were pawns in Soviet expansionism. I find it difficult to reconcile that with being begrudging about the relatively small sums of money which we need to find in order to bring those countries into the European Union.
The Government wish it to be on record that they agree with the committee on the potential costs of enlargement and the uncertainties surrounding it. We do not in any way regard those uncertainties as reasons for delay. Quite the opposite. Enlargement negotiations and
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ratification will take time. Even successful outcomes will be subject to lengthy transitional periods. Internal institutional and financial reform must take place in the interim, but we must start this process now.
In a few days' time, the Prime Minister will go to the summit in Luxembourg seeking progress on at least the principles for that institutional and budgetary reform. But it will be under the British presidency that we will see the first momentous steps in the European conference and in the bilateral formal negotiations towards creating a common European home for eastern and western Europe. The Prime Minister will be launching that British presidency tomorrow and enlargement will be central to his themes. This Government stand ready to undertake their historic responsibility in that respect, but at the same time we are humble enough to continue to take advice from your Lordships' committee and from my noble friend Lord Barnett.
9.15 p.m.
Lord Barnett: My Lords, I thank my noble friend for those final remarks. I am delighted to hear that the Government will take note of all but one of our recommendations. I thank all noble Lords, particularly members of my committee, for their kind and generous remarks about my contribution. It was the committee's work, and I was delighted and honoured to have the pleasure of chairing such distinguished and able colleagues.
I thank the maiden speakers. When I listened to the noble Lord, Lord Garel-Jones, I thought that I was in the wrong debate. European monetary union was only briefly mentioned in our report, but he and my noble friend Lord Shore could not resist mentioning it. We had the single currency argument all over again. I am grateful to the noble Lord, Lord Garel-Jones, because I agree with him. However, my noble friend Lord Shore knows that I agree with him on most issues but I disagree with him entirely on anything to do with the EU. I disagreed with him again today. I thank both maiden speakers for two excellent speeches. My noble friend Lady Young of Old Scone was good on the environment. I am sure that the House was delighted to hear both maiden speeches and the non-maiden speech of the noble Baroness, Lady Ludford.
I am delighted by the way in which the House received our report because I like to think that it was an excellent report. Perhaps I may make one comment to my noble friend Lord Whitty about his disagreement with our recommendation on a possible review of the own resources issue. Although I was not happy, I was not too surprised to hear what he said. In some ways, I was pleased because it means that the Government may have read the report. I was worried that they may not have done so. It elicited from my noble friend an answer to a question asked by the noble Baroness, Lady Williams, which included the words "if circumstances change". I noted those words carefully in a speech by my right honourable friend the Chancellor of the Exchequer in another context. I hope that they will enable us to join a single currency well before a fixed time of five years. But that is another matter. I assume

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that my noble friend used the words "if circumstances change" with the authority of the Cabinet itself. I see him smiling in agreement and I hope that I am not upsetting him too much. I do not want to see him sacked because he is a good Minister.
The noble Lord, Lord Higgins, speaking from the Opposition Front Bench, reminded me of the days when we used to debate across the Floor of another place. I was not surprised to hear a highly intelligent contribution. He referred to the problems of agriculture and what they might be with the incoming countries. I did not refer to it before but it is worth quoting a reply from Mrs. Hübner. It is Question 39 on page 11 from the noble Baroness, Lady Williams. Mrs. Hübner was an excellent witness and she said that:
"there is a myth of Polish agriculture which is based on the real agriculture of Poland that we had in the past. The last census, the 1996 census, I think shows that Polish agriculture is not as it is presented very often. First of all, it is not for example, 28 per cent. of the population, it is just 25. Out of the 25, one third, more or less, depends on the income from agriculture. Around 50 per cent. work".
That demonstrates to me that one should be extremely careful about the use of statistics. The plain fact is that when it comes to agriculture in Poland, the people are not selling what they produce. They produce for the family and one member of the family or another works elsewhere. So that destroys many of the statistics we often take too much for granted.
I learned my own lessons this evening from the noble Lords, Lord Higgins and Lord Wallace of Saltaire. They gave me an explanation of the regatta approach, to start negotiations with the 10, rather than the five plus one which we should prefer. I had not realised—and indeed the noble Lord, Lord Wallace of Saltaire, obviously did not realise—that it could be a handicap race. The noble Lord, Lord Higgins, is a former senior athlete in other fields. He knows about these matters and he said that it may be a handicap. I hope that it will not be a handicap when we come to start negotiating on a bilateral arrangement.
It has been an absolutely excellent debate and I am obliged to everyone who has taken part in it. I hope it will be helpful and I hope that it will be read widely. I hope that somebody will take note of the recommendation that copies of our report should be made available to those attending the meeting of the Council in Luxembourg on 12th December. It will be extremely good reading for them. I hope that they will take note of the majority of our recommendations. We know that at least one recommendation will not be accepted by the Government. If they take note of our report, I hope and believe that that may contribute to a successful enlargement which will be to the benefit of all concerned.
On Question, Motion agreed to.

Equal Opportunities in Companies
9.22 p.m.
Baroness Turner of Camdenrose to ask Her Majesty's Government whether they will amend the Companies Act to include a requirement for companies to set out in their annual reports their equal opportunities policies in relation to age, disability, gender and race and what steps they are taking to further those policies.
The noble Baroness said: My Lords, I rise to commend to the House a modest measure concerning equal opportunities. In doing so, I apologise to the House that we are debating this measure much later than I had originally thought.
Our economy and society is weakened and damaged if people are excluded from opportunities in employment simply on the basis of arbitrary and unfair stereotypes and preconceptions, whether they are on grounds of age, gender, race, disability or for any other reason. We have had measures on the statute book for more than 20 years in relation to discrimination based on race and sex. More recently, we have acquired regulation of discrimination on grounds of disability.
When in opposition, my party made known its intention to introduce legislation concerning age discrimination, in which I have taken a particular interest, notably in supporting the work of the Carnegie Third Age Programme. I was one of several who spoke in your Lordships' House as long ago as 1994 in a debate on the Carnegie Report on the Third Age introduced by my noble friend Lord Stallard. In that debate noble Lords from all parties joined in condemning the waste and folly of debarring experienced and willing older people from work simply because they were over a certain age. That report was widely welcomed and respected for the quality of its research and analysis.
If the intentions relating to age become law, we shall have in place a comprehensive set of statutes regulating the major causes of discrimination which will fill the present unfortunate vacuum created by the exclusion of age from legislative attention. It will remove any last impression that ageism is a form of discrimination which is seen as less important in the eyes of Parliament.
Let us not assume that this is an insignificant problem. The total number of registered unemployed people of all ages today is 1.46 million; that, of course, is the claimant count and many of us believe that the actual number of unemployed is rather higher than that. The number of people over 50, but under normal retirement age, who are either registered unemployed or classified as economically inactive—and I emphasise the phrase "economically inactive"—is 2.8 million.
Although the passing of legislation against age discrimination would represent good and valuable progress, we may have to wait quite a long time to see it enacted. In requiring companies to set out their equal opportunities policies in annual reports I believe that the Government would be sending out a clear signal of their intentions. It would be an early warning, a precursor to change that employers should prepare for and heed.

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The various statutes which are already in place have served us reasonably well, both in outlawing the worst forms of discrimination and in acting as a deterrent to employers. But none of us can be satisfied with progress when we look around us. Ethnic minorities still experience much higher rates of unemployment and hold a lower proportion of skilled jobs than white people; women are still seriously under represented in senior managerial jobs, as well as in Parliament.
For some six years I was a member of the Equal Opportunities Commission. The commission did and still does valuable work in enabling both men and women to enforce anti-discrimination law, but inequalities still remain. While on the subject of the EOC, I was somewhat concerned to receive a letter from the chairman in the past two or three days indicating that the commission is under the impression that its grant-in-aid could be cut. That would be a great pity because, as I understand it, the commission was given the impression a year ago that its grant-in-aid would not be cut, or reviewed, for another two years. It is quite obvious that the equality programme of the present Government requires the assistance of a body like the EOC. I shall be glad to hear from my noble friend the Minister what the situation is in relation to the commission's grant-in-aid.
My proposition to your Lordships is based on my belief that legislation to deal with these matters is necessary but not sufficient. Parliament has the power and responsibility to influence both behaviour and attitudes through the statutes which it approves. However, real changes in attitudes and behaviour will only come about if employers are convinced not only that it is legally prudent but also that it is in their business interest to eradicate all forms of unfair discrimination from their businesses.
My proposal is that the Companies Act should be amended to require employers within its scope (those employing over 250 people) to include in their annual reports a simple statement covering the employer's equal opportunities policy—namely, the policies relating to gender, race, age and disability—and the steps being taken to further it. At present, the Act requires employers to give information on their policies concerning disabled employees and on the steps being taken to encourage and implement employee involvement and participation. I suggest to the House that this is a partial, though important, treatment of discrimination and that the measure I propose would represent an opportunity to encourage employers to view equal opportunities in a much more integrated and comprehensive way. Such a requirement would also constitute a regular reminder to businesses that these are matters which merit attention and policy at the most senior level.
I have been encouraged in considering whether to put forward the proposal by the knowledge that it is unlikely to be seen as either controversial or unduly onerous. These policies already exist in many forward-looking, enlightened businesses. Where they do not exist, they should. This measure would be an important spur to their creation.
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I also draw noble Lords' attention to the decisions which have been taken by many leading employers to include such statements of their own accord and without any statutory requirement to do so. I refer, for example, to such employers as SmithKline Beecham, Northern Foods, the BBC, Booker and Zeneca. We shall not rectify the damage caused by unfair discrimination through laws alone, important and essential though they are. We need action on several fronts, gradually and steadily bringing it home to employers that the arbitrary exclusion of people from employment for reasons which have nothing to do with their ability to do the job in question is totally unacceptable and has no place in the modern workplace. Not only are such practices inequitable and deeply frustrating for those affected by them; they also deprive employers who practise them of the real business benefits of a diverse and balanced workforce and of the widest possible range from which to select and recruit.
The House may agree with my view that unfair discrimination is rarely practised out of malice or prejudice, although I acknowledge that neither is unknown. Much more frequently it comes about through ignorance and neglect. Carnegie's work on age discrimination, for example, reveals that it often occurs as a result of relatively junior recruitment staff using age limits as an effective but unfair way of cutting down long lists of applicants. Sometimes, too, it occurs because those making appointments are worried about having people working for them who are older than themselves and who may show them up through their greater experience and maturity. Neither practice stands up to any objective scrutiny. They ignore the examples of intelligent employment of older people, for example, as mentors and trainers, as a source of recruitment when younger people are not available, and as the all important memory of an organisation without which the lessons of experience are dangerously ignored. But the abuses and prejudices are likely to be eradicated only if a business has in place a genuine set of policies and practices endorsed at the most senior level and reinforced by example and monitoring.
The measure which I propose is aimed precisely to bring that standard of employment policy into place on a much more widespread basis. It is, moreover, a proposal which has been specifically endorsed and welcomed by the TUC and its affiliated unions. It would represent a standard against which good practice could be audited and measured by employers themselves, by organisations representing their employees and by interested external organisations. It is not an artificial, externally imposed standard but one designed by the individual business to suit its own circumstances.
I commend this measure to the House as a valuable means of maintaining momentum in the promotion of equal opportunities. This is a topic which requires regular stimulus and promotion. It calls for many different actions both inside and outside organisations to keep it on the agenda. There has been an enormous and welcome change in attitudes over the past 20 or 30 years. Discrimination against people on gender, ethnic origin, disability and, increasingly, age grounds, is widely seen as unacceptable, and yet it still happens.

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The Government have repeatedly and, I believe, sincerely said that they seek a fairer society. This measure is a small step along that road. In that context I commend it to your Lordships.
I look forward this evening to the maiden speech of the noble Lord, Lord Dholakia. I am pleased that he has chosen this subject on which to speak tonight because I know that he speaks from a wealth of experience in this area. I commend the measure to your Lordships.
9.33 p.m.
Lord Dholakia: My Lords, I consider it a great honour to contribute in your Lordships' House. I do so with all humility but also with a sense of pride that the composition of your Lordships' House now reflects, to a small extent, the multi-racial and multi-cultural society we live in. Of course, there is a twinge of nervousness on my part as would be the case with anyone contributing for the first time in this historic place.
The noble Baroness, Lady Turner, and I serve on the council of Save the Children Fund and I am well aware of her concern for justice and fairness, whether on the grounds of gender, race, disability or age. My involvement in race relations goes back over 30 years. I joined the National Committee for Commonwealth Immigrants set up by the then Prime Minister, Harold Wilson, and continued with the Community Relations Commission and the Commission for Racial Equality. I make no secret of the fact that in those early years of colonial encounters, in many cases with the remnant of the master-servant relationship that existed then, it was difficult for many of us who wished to make our homeland in this country to make a happy start. There were those who exploited race for political purposes. Equally, others fought for justice and fairness. It is right, therefore, that we pay tribute to the many who have helped to shape our multi-cultural society.
I remember working in the early 1960s with my noble friend Lord Lester, who has an even better record than I have. I worked with him in campaigns against racial discrimination in the 1960s. His record of fairness is ably demonstrated by his work on race relations legislation and now on human rights legislation.
I shall fail in my duty if I do not put on record the valuable contribution of my noble friend Lord Jenkins of Hillhead, whose foresight and concern about equality resulted in race relations legislation during his time as Home Secretary in another place. His definition of integration is as valid today as it was in 1966 when he addressed a gathering of voluntary liaison committees. I remember this distinctly because I was present. He said that integration was not a flattening process of assimilation but one of equal opportunity, accompanied by cultural diversity, in an atmosphere of mutual tolerance. How right he was then and how right he is now. Equally, we should not forget the contribution of the late Lord Bonham-Carter who chaired the Race Relations Board and the Community Relations Commission. It is a great delight after all these years to see the contribution of all those people who fought for justice and fairness.
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For as long as I can remember I have expressed my concern about the rights and plights of the minority communities: the right to live in peace, to receive an education, to get a job, to raise a family free from fear, and, above all, the right to be treated fairly without reference to race, colour, national or ethnic origins. Those are the issues at the core of everything that needs to be done. They stand at the heart of every issue. No longer can a society live at peace with itself or prosper in all ways if an individual or an establishment denies minorities the right to those ideals by directly or indirectly discriminating against them.
Even after 50 years of ethnic minority settlement in this country, many agencies are unwilling to give credence to the fact that the system might treat people from different ethnic backgrounds in an unequal manner. The slogan often bandied about is that fairness, after all, is blindfolded and therefore colour blind and impartial. Trends in race relations show that racial discrimination is still persisting at a depressingly high level. Successive annual reports from the Commission for Racial Equality make it clear that minorities are still to be found disproportionately among the poor, the unemployed, the homeless, those who have never worked, those who are stopped and searched, in penal and mental institutions, among the under-achievers in schools and as victims of racial harassment and violence.
The response of the noble Baroness, Lady Turner, is timely. There are sound reasons for amending the Companies Act so that we are all aware of what steps are being taken to further equal opportunity policies within companies.
Perhaps I may cite just three reasons. It is in companies' interests to convince potential employees, clients and customers of their intention to act fairly. It is in their interests to value the potential, ability and needs of all sections of the community. Public high profile statements are a key element. They have a major public relations value and no company acting in the public or private sector can afford to underestimate that factor.
The self-interest or business case argument is important. We cannot ignore the key moral and social responsibility argument, which is supported by both the Government and the Liberal Democrats. It fits well with the social cohesion and the good corporate citizenship role which companies can play.
This one amendment in the Companies Act would provide a significant reinforcement of current non-discrimination legislation. It would increase the public accountability of companies with regard to the relevant laws and the corresponding codes of practice.
For too long, equal opportunities policies have been strangled by the gulf between what we want to achieve and what we have actually done. My colleague, Sylvia Denman, a prominent black woman, who until recently was a member of the Criminal Justice Consultative Council, recently said:

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"Equality and quality are inseparable. Making sure that we treat everyone with respect, dignity and fairness is not something that you do today and forget tomorrow. I wonder if some of the impetus from the disturbances of the early 80s has been lost because there is a tendency to think it has all been taken care of".
One of the arguments often advanced is that measures such as those proposed by the noble Baroness, Lady Turner, are likely to put an additional burden on companies, which still have to comply with a lot of bureaucratic paperwork. I am afraid that that is a very weak argument that smacks of doing nothing. People are this country's greatest asset. Race and colour have no significance in people's ability to provide a service. That fact has been recognised by the Commission for Racial Equality. Let me pay tribute to the chairman of the CRE, Sir Herman Ouseley, and his staff, who have continued to identify equality targets, despite all the adversity and hostility they suffer. It is indeed a credit to them that they have never compromised on issues of racism and racial discrimination.
The CRE has issued a leadership challenge, which invites people in positions of influence in all areas of society to give a personal lead in promoting the principle of racial equality, together with the practical action that will make it a reality. The leadership challenge invites leaders to use their positions on committees and boards to put racial equality issues high on the agenda. It invites them to report on issues concerning racial equality and its achievement in their annual reports, public statements and speeches. There is a positive benefit to companies in ensuring that they and their organisations are at the forefront of best practice. It will encourage leadership among their colleagues and demonstrate the success of their equality programmes.
A large number of organisations, including those of employers and trade unions, have accepted this challenge from the Commission for Racial Equality. They cannot all be wrong. The publication of company records will demonstrate their employment practices. Acceptance of the challenge will allow people's talents to be used to the full and ensure that selection decisions are based on objective criteria. It will allow a company to become an employer of choice, to get closer to customers and understand their needs and to operate internationally with success. It will help sustain a healthy society, make a company more attractive to investors and avoid the cost of discrimination. Companies should accept this challenge because it is the basis on which they could provide a high quality of service, free from discrimination.
The bottom line of my contribution is that equality and fairness are the cornerstones of the democratic process that we are all used to. If at any time we deny an individual the fairness and equality he or she expects, we have no right to claim those ideals for ourselves. Thank you, my Lords, for your patience.
9.43 p.m.
Baroness Dean of Thornton-le-Fylde: My Lords, I rise to support my noble friend Lady Turner. Before turning to the discussion, I should like, on behalf of all noble Lords, to extend the very sincerest congratulations to the noble Lord. Lord Dholakia. He praised many of
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his colleagues, and he was right to do so; but his contribution was born out of his own personal experience and his commitment over many years when people chose not to discuss this topic publicly but to close their eyes to it. The noble Lord has made a powerful and thoughtful contribution to that topic this evening. We look forward to hearing many more contributions from the noble Lord.
In addressing the issue before us tonight I shall concentrate on ageism. In so doing I wish to declare a retrospective interest. I was a member of the Carnegie committee of inquiry into the third age. I must confess that when I joined the committee I was not into the "third age"—I was just under 50—but our work took us so long that I was into the third age when we finished.
We discussed the issue of how to persuade companies to address this problem. We had to bear in mind that there was much that mitigated against people as they grew older. Pension schemes were often used by employers as an excuse not to employ someone in the older age bracket; or perhaps the lack of ability to become multi-skilled or an inability to take on the new information technology with which we increasingly work.
We considered calling for legislation to ban discrimination on the grounds of age and looked to the experience of the United States, which was ahead of us in that area of employment. We came to the conclusion that we would not call for legislation; we would see how the report percolated through society. We felt sure that responsible groups would face up to the issue.
What happened is what often happens in reality: good companies responded; bad companies did not, nor did companies which preferred to turn their faces against it. Without anticipating what may be said by the Minister when he declines to accept this Motion, I should like to share with the House some of my experiences over the years in representing individuals and looking at many company annual reports. Since I left the trades union movement I have been a non-executive director for Plcs. I know how the process works on the ground, round the boardroom table.
Companies go through their reports with a fine-tooth comb. It is the only connection they have with their shareholders and the outside world, and is an indication of where they stand on certain issues. I fully accept that a company report is a retrospective financial statement of a company, showing how it has performed, what the directors are paid and other financial aspects. But some of the first good practice we saw was a declaration of health and safety policies. It did not bring down companies. It did not turn the world upside down when they had to consider and print those policies. We have also seen introduced on the statute book the Disability Discrimination Bill which places requirements on companies.
Another aspect of my work was to be a founder member of Target 2000, which concerned discrimination and equal opportunities for women. One of the requirements of a company joining was that annually it would monitor, and publish the results of that monitoring, its own internally set targets for bringing

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women through the system. Surprise, surprise! After two years of that requirement being introduced, companies started publishing voluntarily in their annual reports their equal opportunities policies. Good companies did that. Why? Because they saw it as an asset and the badge of a good employer.
What is the difference between all those examples and a company publishing its employment policies on ageism? How does it approach that issue? I suggest that in this world, where we talk of the interconnection between various aspects of our lives—our business or our personal lives—and we talk about the interconnection of good education flowing through to good health and so forth, there is also an interconnection for our community when we consider the fact that 2.8 million people over 50 years of age in Britain have either retired early or are not economically active in our society.
Is it not also a fact that the longer you stay active the less dependent you are on the community? And the less dependent people are on the community the less money is required from the community to look after people who are not active. Many companies which have these forward-looking employment policies based on healthy ability and an all-round view recruit people from the older age group as well. In my experience, the best kind of workforce is not one from a particular age bracket but one from across the ages, with people working as a team. That is what helps a company to succeed. We frequently hear these dreadful terms "down staffing", "letting people go" and "releasing people", all of which mean making people redundant. This leads to companies losing their memory bank, which is damaging those companies. How different it would be if companies applied equal opportunities policies based on the ability to do a job or the ability to be able to retrain when companies are going through change.
I believe that this is a small measure to ask for. Many companies publish their employment policies in their reports; not many publish their attitude to ageism. Perhaps that is because they have not been confronted with the suggestion. As good companies take these changes on board, we shall see a drift towards such policies. Not much has really happened since the Carnegie third age report was published. I hope that the patience over the years of the noble Lord. Lord Dholakia, and his contribution to the mainstream of society will mean that he will not need so much patience in this area. I hope that we do pick it up and run with it. We have now a new government full of vigour and energy. Impatience gets places. I hope that my noble friend the Minister will be able to respond positively to the debate.
9.52 p.m.
Baroness Thomas of Walliswood: My Lords, my first and very pleasant task is to second the words of the noble Baroness, Lady Dean of Thornton-le-Fylde, and welcome my noble friend Lord Dholakia to these Benches and thank him for a remarkable speech. Nothing is ever better in this or any other House than to hear someone speaking from their own experience. Not
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only that, but he reminded us of a fundamental human truth. We are all harmed by other people being harmed by discrimination. It is a canker in society. If we can be discriminating to other people, who is to say that one day that weapon will not be turned on we who do the discriminating? We all look forward to future contributions from my noble friend in the debates in this place.
It is a great pleasure for me also to speak in the debate. I come to it from a slightly different background. I have been involved for many years in my party in policy-making in terms of equal opportunities for men and women. Indeed, with Polly Toynbee, I chaired the first policy group to make a policy decided by both the SDP and the Liberals when we were in alliance. That is one of the best things I have done, and it was on the subject of freedom and choice for women. So we did something that was worth doing.
I wish to reinforce one or two points which have already been made. Sometime ago I had the opportunity to take part in the appointment of doctors. I asked one of my colleagues, "It seems to me that we get a number of very good women candidates reaching the last hurdle and then we never employ them". Incidentally, I could have said the same about doctors from different racial origins. The very senior person to whom I was speaking replied, "Well, I do not believe that that is discrimination quite yet because many of these women do not have the same background as the best of our men in terms of the research that they have done", and so forth. "However", he added, "if it is still going on in five years' time"—that is about a year from now—"then it will be discrimination because the younger doctors coming up are quite the equal of their male counterparts".
I do not know what is happening in the medical profession, but at that time I remember hearing the phrase, "A good Tommy's man is always a good Tommy's man". That was justification for offering a post to an individual doctor. I thought to myself, "Keep your ears open on this one because there is something going on here". That is just a little example.
I wish to reinforce the point made about the importance of leadership. As many noble Lords know, I come from local government. It has made such a difference there when leading members of an authority have backed efforts to be extremely careful in their recruitment policy or to be absolutely rigorous in ensuring that people are not discriminated against, for example, because they are disabled. I remember the enormous pleasure that people working in my county council felt when they achieved the two-tick symbol for their employment policies towards disabled people.
These factors reinforce each other. It will not happen often in any organisation. One will not get equality of opportunity unless one has leadership from the top. But when you have that, it is amazing how quickly organisations adopt new practices to the benefit of everybody.
I support very much what is said in the Question before us today. It would be of great use to all of us if we knew more about the recruitment, selection. training,

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remuneration, promotion, holiday and leave allocations and pension policies of major companies. Not only that but, as other noble Lords have said, these matters, presented attractively, are of positive benefit to the company involved, not only because it enables the company to recruit the best people available but also in these days of ethical investment there will be a number of people who will be more likely to invest in such companies because they are pursuing ethically respectable policies and are openly doing so and declaring themselves—in other words, nailing their colours to the mast.
That is what one does when one talks about one's policies in the annual report. One is saying, "This is us. We are these people. We manage these things in this way". How much better it would be to make these declarations than simply to make the normal, traditional, complimentary remarks about the hard work that the staff have done in the past year—and well done, chaps! That is not enough in these times when, as the noble Baroness reminded us, employment security is by no means what it was some years ago.
Finally, I have been concerned about the rights of women. Employment patterns for women have traditionally been different from those for men as regards level of salary, the job done and so on. Women's careers have been interrupted in ways that men's careers traditionally have not been. But the situation is changing. Even a man can no longer assume that he will start work at 16, 18, 23 or, indeed, at any age and remain in employment for the rest of his life. Moreover, some men now positively want to share the joys and difficulties of child-rearing. In a few years' time I think that we shall see men's career patterns become increasingly similar to those of women.
Some men, like some women, will be strong career people. They will put their careers first. They will push their way through any glass ceiling or difficulty to have the job and career pattern on which they have decided. Others, however, will not—and for a variety of reasons. All the employment practices that we have encouraged in order to enable women to play their full part in employment may also be welcomed by men in the workplace. For all those reasons, I am delighted to support the noble Baroness and the terms of her Unstarred Question.
10 p.m.
Baroness Blatch: My Lords, I join other noble Lords in recognising a most excellent maiden speech from the noble Lord, Lord Dholakia. He clearly spoke from what seemed almost a lifetime of experience before coming to this House. We shall be the beneficiaries of all that expertise. I look forward—if my noble friends were with me tonight they would also look forward—to hearing very much more from the noble Lord in future debates.
I have a difficulty with the debate. I find it difficult to take issue with almost anything that has been said in terms of employers' obligations, not only to their staff, but also to their potential staff and to that reservoir of talent which is out there among women, the ethnic minorities, disabled people and those of us who happen
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to be on the wrong side of 50. However. I am reading the wording of the Unstarred Question and I shall address the very specific proposal that is now before the House, so anything that I say does not detract one iota from my recognition of the importance of these issues.
As the noble Baroness, Lady Dean, noted, the primary purpose of annual reports is to record key financial and economic information. Many companies use their annual report both to reflect on the previous year and to look forward to the coming year. I believe that it is absurd to require by law statements of policy and of progress towards achieving the aims and objectives of that policy in relation to equal opportunities to appear in annual reports. Presumably, if we are talking about legal requirements, there will also be sanctions for failure to meet that requirement.
The noble Baroness, Lady Turner. said in passing that the requirement would relate only to those companies with 250 or more employees. That is not made clear in the Unstarred Question and it is a new understanding for me. If the aim is to benefit the aged, those with disabilities and the ethnic minorities, and to enhance the equal treatment of men and women, the restriction of the measure to companies with 250 or more employees discounts more than 80 per cent. of our companies. A very large percentage of companies employ many fewer than 250 employees. If we are now to accept that the Unstarred Question relates only to companies with 250 or more employees, we have a difficulty.
I hope that your Lordships will forgive my cynicism, but whenever I hear the suggestion that something is just one more "small" additional task for companies, I am reminded of the continuous cry "Just one more penny on income tax will solve all ills." I do not accept that a company that does not specifically address its equal opportunities policies in its annual report is failing to meet its obligations to non-discriminatory practices.
The noble Baroness, Lady Dean, made a very important point, and on that I rest my case. She referred to the extent to which companies have moved along the road to doing things voluntarily. I believe that that is the best way to encourage companies to address these issues more publicly and to communicate their policies to the wider community. Equal opportunities is an important issue for the reasons given in the excellent maiden speech of the noble Lord, Lord Dholakia. Companies have made great progress in pursuing equal opportunities policies. In the case of gender, race and disability, employers already have an obligation under the law, and there is redress for any aggrieved employee.
My principal objection to the matter before the House today is the compulsory nature of it. This is to be imposed upon companies. That can be the only interpretation placed upon it because the word "requirement" is built into the Question. When the Prime Minister recently addressed a gathering of representatives of European Union member states to discuss the problems of unemployment across Europe and to search for solutions, he was in the happy position of having inherited the lowest rate of unemployment—

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and still falling—throughout Europe. At that time the Prime Minister emphasised the need for flexibility and minimal regulation of business. I say "Amen" to that.
However, when one considers the additional burdens to be imposed on business, or being actively contemplated, the idea of adding a further requirement in the form of this measure is unthinkable. Future burdens on businesses include measures in the Competition Bill now before this House; the application of the minimum wage; the adoption of the social chapter, including matters such as the part-time and temporary workers directive; a directive which shifts the burden of proof in sex discrimination cases on to employers—in other words, following an accusation by an employee the employer would be deemed guilty unless and until innocence was proved—the possible extension of works councils to companies that employ as few as 50 employees, with sanctions against an employer who fails to conform; and the entitlement of employees to three months' unpaid maternal and paternal leave on the birth or adoption of a child. Another measure is the working time directive. All of these measures add costs to business.
It is all very well for the Government to say that they oppose some of these measures, for example, the possible extension of works councils to very small companies. However, where qualified majority voting applies, this country can be out-voted. As if all of that was not enough, an additional clause in the Teaching and Higher Education Bill, which is to have its Second Reading next week, gives 16 and 17 year-olds an entitlement to time off work with pay for studies at the expense of employers. I believe that the cost of that is between £80 million and £120 million.
The issue of equal opportunities is a very important one, but to take the superficial, almost box-ticking approach, of using the annual report to address this area of policy is no answer. Why stop at equal opportunities? What about health and safety, fire regulations and endless other areas of policy where there is a legal requirement to address these matters in annual reports? Certainly, there is a legal obligation to deliver health and safety and non-discriminatory policies. There are endless, very important policy areas without any requirement to address them on an annual basis in the report. What information goes into an annual report should be a matter for the company itself. Already a number of requirements must be met.
The Hempel Committee has some interesting comments to make in its interim report on corporate governance. The report agrees that it is no good just ticking boxes. All that does is create an air of cynicism. If the Government believe in flexibility and minimal regulation to allow companies to flourish, expand and thereby create yet more opportunities and jobs, then they will reject this measure.
10.10 p.m.
Lord Haskel: My Lords, I am most grateful to my noble friend Lady Turner for introducing the debate. Despite the fact that we were reminded this afternoon
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by the Lord Chairman that it is only the speaker who comes after the maiden speaker who congratulates the maiden speaker, I should like to say a few words to the noble Lord, Lord Dholakia, about his contribution, and welcome his important and extensive experience in a multi-racial society. What he said struck a chord with me because I, too, am an immigrant into this country. I came here as a child. Many of the things that he said reflected my experience. To have someone like him with us in the House of Lords will make an important contribution to a greater understanding of the problems faced by those who come here as immigrants.
Noble Lords have raised many issues. The Government take them seriously, but we do not believe that statutory reporting requirements are, in general. the answer to those issues. The reason is a practical one. Non-financial reporting requirements are notoriously difficult to define. They are also difficult to audit and enforce. That non-financial reporting, in my experience, tends to define low and minimum standards. There is sometimes a place for legislation to establish minimum standards, but there is a much better case for encouraging rather than prescribing good practice in those areas to encourage higher standards.
The Companies Act is concerned with core reporting requirements for companies and minimum standards. During my 30 years in business I found that higher standards come from peer pressure and peer example and from the economic need to secure a competitive and flexible workforce. I say to my noble friend Lady Dean that it is the ethos that directors create which is important or, as the noble Baroness, Lady Thomas. put it, the leadership that they show.
In most cases therefore direct policy action by government, or the promotion and dissemination of best practice, will be more effective in raising standards in a particular area. What are the Government doing about that? We are pursuing a package of positive and complementary policy strategies which will help to underpin best practice. We are working to encourage companies' own efforts to develop that best practice. It seems to be working.
I warmly welcome the lead which business organisations such as the Employers Forum on Age is providing to its peers in promoting the benefits of a mixed age workforce. I join my noble friend Lady Turner in applauding the fact that on the reporting issue some UK companies are already developing policies of the kind she suggested as a matter of best practice. She mentioned Northern Foods, SmithKline and Zeneca. They are all examples of companies which, I believe, have done so. Those firms confound some of the points that the noble Baroness, Lady Blatch, put to us.
I should like also to compliment and thank those many organisations such as the EOC, Age Concern and the Race Relations Board which have helped companies to adopt best practice by preparing a well thought out code of practice for them.
The Government are not in any sense complacent about the problem. It remains to be tackled. We agree that discrimination in employment is wrong, wasteful, unfair and makes bad business sense. The employer who

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operates in that way will lose out, as many noble Lords have told us. That employer will lose out to competitors who take a modern and inclusive view and approach to employment practice. The economy will also lose out because all companies are not performing to the same high standards as our best companies. Hence the Government's concern.
The Government are therefore actively developing a framework that will help to deliver these objectives. Our strategy is to look further than measures which simply target a particular problem, vital though these are. We aim to tackle those root causes of company underperformance which limit job opportunities; and we aim to help companies develop their own best practice strategies.
It is UK competitiveness which is at the heart of the Government's campaign for jobs. Dynamic and inclusive relationships between companies and the whole of the workforce are central to the competitiveness agenda. And we believe that an important element of this competitiveness is that every individual in work should have the right to decent minimum standards of fairness at work, enforceable by law. We have already begun to deliver this aim. It is not an additional cost and regulatory burden, as the noble Baroness, Lady Blatch, suggested. It is a contribution to making the economy more competitive. We have set up the Low Pay Commission, we are preparing a National Minimum Wage Bill and we are preparing a White Paper on fairness at work.
The noble Baroness, Lady Turner, has rightly drawn attention to practices which continue to lead to division in society. In her Question she speaks of age, disability, gender and race. I would like to set out briefly what we are doing about each of these.
In the area of gender, the Equal Opportunities Commission is undertaking a statutory review of the Sex Discrimination Act 1975 and the Equal Pay Act 1970. The commission will report its findings to the Secretary of State for Education and Employment in April next year and the Government have given a commitment carefully to consider any recommendations put forward by the commission.
My noble friend Lady Turner asked about the equal opportunities grant in aid, and I thank her for giving me notice of that question. There is no question of grant in aid to the Equal Opportunities Commission being discontinued. We expect the level of grant in aid to the commission for next year to be announced in the near future.
The Government are also deeply committed to racial equality. The Government believe that the Race Relations Act is a well regarded piece of legislation which works well. However, we have promised to keep the legislation under review. A number of recommendations have been received in relation to the Act and the Department for Education and Employment is looking at these as part of its overall race relations strategy.
We have also taken action in relation to the disabled. In his Budget the Chancellor announced an additional £195 million set aside from the windfall tax to fund a
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range of measures, as the final element of the Government's welfare to work strategy, to help disabled people and those with long-standing illnesses into work and training.
About 25 per cent. of all disabled employees work for employers currently excluded from the Disability Discrimination Act; that is, those with fewer than 20 employees. Yesterday the Government launched a consultation exercise to gather views and evidence on whether the threshold should be reduced so that the Act's employment rights can be extended to more disabled employees and job applicants.
The Government are firmly opposed to unjustified age discrimination in the labour market. I agree with my noble friend Lady Turner and others that older workers are a valuable resource and the Government recognise both the contribution which they can make to society, and the experience and reliability which they can bring to their jobs. My noble friend Lady Dean called it "memory". I share also her experience and feeling towards ageism. Of course, it makes good economic sense to keep people employed as long as possible. But it is important to ensure that any action to tackle age discrimination in employment will bring real and lasting benefits.
In that regard, we have already taken some action. The Government's new deal for the unemployed will benefit older workers. From June next year, the new deal will offer payments of £75 per week to employers who recruit people aged over 25 who have been unemployed for two years or more. That will include a number of older workers. There will also be opportunities for study—and there is no age discrimination on that—for up to 12 months in employment-related courses which are designed to reach an accredited qualification. The life-long learning White Paper will be a statement of the Government's commitment to that.
There are other examples of important work. The noble Baroness mentioned the Carnegie Third Age Programme. I am aware that that has done much to raise awareness of third age issues and age discrimination; for that it is to be congratulated.
There is no quick fix to the problem of discrimination or unfairness in the workplace. There is a need for further concerted action and persuasion in relation to those issues. There is still a need to change some deeply entrenched attitudes and expectations among employers and individual workers. I hope that in setting out today the Government's strategy on employment issues I have been able to illustrate and convince noble Lords of our deep commitment to equal opportunities in the workplace. The Government sympathise entirely with the very good intentions behind the noble Baroness's suggestion. That is why we are taking direct and comprehensive action on a number of fronts to end discrimination in the workplace and to promote employability.
House adjourned at twenty-one minutes past ten o'clock.