Lords Sitting of 10 December 1997

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Lincoln.
Lord Glanusk—Sat first in Parliament after the death of his father.

The Lord Chancellor: Leave of Absence
The Lord Chancellor (Lord Irvine of Lairg): My Lords, before the commencement of business, I take the opportunity to inform the House that I am to attend a meeting with the Prime Minister and the Cabinet on Thursday morning, 18th December, when the House will sit. Accordingly, I trust that the House will grant me leave of absence.

Message from the Queen
The Earl of Airlie: My Lords, I have the honour to present to your Lordships a message from Her Majesty the Queen, signed by her own hand. The message is as follows:
"I have received your Address praying that the Summer Time Order 1997 be made in the form of the draft laid before your House. I will comply with your request".

GDP Annual Growth: Policy
2.39 p.m.
Lord Barnett Lord Barnett asked Her Majesty's Government:
What is their policy for annual growth of GDP, with particular reference to the instructions given to the Governor of the Bank of England on inflation.
Lord McIntosh of Haringey: My Lords, the Government's central economic objective is to achieve high and stable levels of growth and employment. The monetary policy objectives of the Bank of England, as set out in the Bank of England Bill, are,
"(a) to maintain price stability, and (b) subject to that, to support the economic policy of Her Majesty's Government, including its objectives for growth and employment".
Lord Barnett: My Lords, I am obliged to my noble friend for that Answer, but it is not quite what the Chancellor of the Exchequer wrote to the Governor of the Bank of England in his letter. He stated:
"Without prejudice to this objective"—
that is monetary policy—
"to support the Government's economic policy".
If it is the Government's central economic policy to go for growth and higher employment, is not that coming second best to the monetary targets? Indeed, is that not
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proven by the Chancellor's economic forecast for the rest of the century, which is well below 3 per cent? In those circumstances, would it not at least be an improvement if the central economic objective was on a par with a monetary target?
Lord McIntosh of Haringey: My Lords, the difference between the letter quoted by my noble friend and the Bank of England Bill, which I quoted, is a matter of semantics rather than of real difference. As regards his second question, the Government believe that only within the context of a stable price policy and stable inflation is it possible to achieve the targets of growth and employment which are the ultimate aim of the Government.
Lord Mackay of Ardbrecknish: My Lords, would the Minister fly in an aeroplane in which there was only one instrument measuring only one factor of the plane's health and in which the pilot had only one lever with which to control one aspect of the plane's flight? I am sure that the noble Lord would not. Is not that exactly the same as asking the Bank of England to run the economy of the United Kingdom with only one measurement—namely, inflation; and only one instrument with which to do anything about the trim of the plane—namely, interest rates?
Lord McIntosh of Haringey: My Lords, I would not wish to diminish the importance of short-term interest rates in macro-economic policy, but they are not the only element or the only instrument available to us. We have said that the Bank of England, with its responsibility for short-term interest rates, should act according to the Government's targets for inflation. However, as I said in response to the Question, it should also support the economic policy of Her Majesty's Government, including their objectives for growth and employment. I do not call that flying on only one instrument.
Lord Bruce of Donington: My Lords, is the Minister aware that in the United Kingdom unemployment is running at some 2,800,000? How do the Government reconcile their ambitions to reduce that figure to a more manageable level of 3 to 4 per cent. with pursuing policies which will produce exactly the opposite result?
Lord McIntosh of Haringey: My Lords, I contest that view. The Government are pursuing many policies, notably their welfare-to-work policies, which are designed to decrease unemployment. Our policy towards investment is designed to make it possible for the private sector to create more jobs. Under those circumstances, we do not believe that a stable interest rate will act to increase unemployment. Quite the contrary—we believe that investment and sensible business decisions are more likely to occur under conditions of continued stable inflation rates.
Lord Boardman: My Lords, are not this country's economic policies decided largely by two levers: one being the interest rate, which is now delegated to the

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Bank of England; and the other being taxation, which is retained by the Chancellor? Does the noble Lord consider it sensible that there should be that division? Does it not show already that difficulties are arising for the Chancellor?
Lord McIntosh of Haringey: My Lords, I am grateful to the noble Lord, Lord Boardman, for asking me that question because it enables me to point out that, although short-term interest rates have risen since May by 1.25 per cent. because of the decisions of the Bank of England, long-term interest rates have declined by nearly 1 per cent. as a result of the Government's wider macro-economic policies of pursuing longer-term stability. It is our success in convincing the markets that longer-term stability and low inflation is possible and will result from our policies that has led to that decline in long-term interest rates.
Lord Stoddart of Swindon: My Lords, does my noble friend agree that one of the obstacles to a higher level of employment at present is the high value of the pound, which is restricting our exports abroad? Under those circumstances, is it not foolish to increase interest rates when, in fact, they should be falling?
Lord McIntosh of Haringey: My Lords, I do not believe that it is by any means clear from the evidence that the high level of the pound has resulted in a decrease in our exports, still less in a decrease in employment in our exporting industries. That might well be the case if it were to continue indefinitely, but the evidence at present is still by no means clear.
Lord Ezra: My Lords, following on the question of the noble Lord, Lord Boardman, can we assume that there is close and continuing contact between the Governor and the Chancellor to ensure effective co-ordination between monetary and fiscal policy?
Lord McIntosh of Haringey: My Lords, we can indeed be sure of that. It is among the provisions contained in the Bank of England Bill which is now before another place and which specifies the nature of that close relationship.
Lord Ewing of Kirkford: My Lords, does my noble friend agree that as the Government have been in office for only seven months, it is rather early to be passing those kinds of judgments on their economic policy? Does he agree with me that as well as instruments being important in flying an aircraft, the pilot is of equal importance? Those of us on this side of the House have absolute and total confidence in the pilot, in the form of the Chancellor of the Exchequer, and those judgments can be made at a later date?
Lord McIntosh of Haringey: My Lords, I am grateful to my noble friend for those comments. I agree with him that it is premature to rush to adverse
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judgments on the Government's economic policies. However, I am confident that it is not too early to say that they are moving in the right direction.
Lord Rotherwick: My Lords, does the Minister agree with me that the high interest rates have made our currency so strong that the farming industry has had great difficulty in exporting grain? That has caused the income of farmers this year to suffer terribly.
Lord McIntosh of Haringey: My Lords, while I always sympathise with difficulties in any sector of our economy, I notice that it is always the farming industry which comes to the fore in making complaints about any change in economic policy.
Noble Lords: Oh!
Lord McIntosh of Haringey: My Lords, I thought that that would identify the farming interests in this House. I stick to my view that it is far too early to make any judgment that the existing level of interest rates has affected exports.

Green Belt: Development Pressures
2.48 p.m.
Lord Marlesford Lord Marlesford asked Her Majesty's Government:
Whether they intend to protect the integrity of the Green Belt from the mounting pressure for development in England and the growing number of proposals by local authorities for large scale release of Green Belt land for development.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Baroness Hayman): My Lords, the Government are committed to the Green Belts and have no current plans to revise the policies set out in Planning Policy Guidance note 2. Adoption of Green Belts and the determination of boundaries are, however, primarily a local matter. Where changes to Green Belt boundaries are proposed, we would expect all non-Green Belt alternatives to have been fully explored.
Lord Marlesford: My Lords, I thank the Minister for that Answer. I declare my interest as chairman of the CPRE. Will the Minister confirm that she is effectively rescinding the statement made by Mr. Richard Caborn, one of her ministerial colleagues, on the "Today" programme on Radio 4 on 30th October that the Green Belt is up for grabs? Nevertheless, does she recognise that there are nine urban centres whose Green Belts are under major threat at present? Can she assure the House that the Government will make certain that any proposal for development in a Green Belt, whether it comes from local authorities or private developers, will be called in so that it can be determined centrally by the Secretary of State with the appropriate national consultation and publicity?
Baroness Hayman: My Lords, I am very happy to make clear to the noble Lord the Government's

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commitment to the Green Belt and to reiterate it. There remains a presumption against inappropriate development in Green Belts, and the Government's policy is as set out in Planning Policy Guidance No. 2. The fundamental aim of Green Belts is to keep land around urban areas permanently open and to prevent urban sprawl. It has been made clear—and I reiterate this—that Green Belt boundaries should only be changed in exceptional circumstances. Any changes proposed by a local planning authority would need to he subject to full public consultation. In addition, the department would need to be satisfied that all opportunities for development within the urban areas contained by, or beyond, the Green Belt had been fully considered. It is within that framework that any proposals for change would be viewed by the department.
Baroness Nicol: My Lords, does my noble friend the Minister recall that in a debate earlier this year she told the House that her department was preparing a list of available brown-field sites with definitions and targets for their use? Is my noble friend in a position to say whether this review—if I may use that term—will shortly be available?
Baroness Hayman: My Lords, we are certainly looking at the possibility of using more brown-field sites for development than was previously the case. Any sensible government committed to revitalising inner cities and making them vital and attractive places in which to live, and indeed to protecting the countryside, would be committed to using the maximum number of brown-field sites available. We are considering our policy on planning for household growth, which will take into account the public consultation earlier this year. We hope to be able to announce decisions in that respect in the new year.
Earl Peel: My Lords, is it not striking that the Government's plans to increase rural building come only a few days after the Deputy Prime Minister announced the emasculation of the Rural Development Commission, which many of us on this side of the House in particular very much regret? Further, does the Minister agree that it was quite deplorable that the Deputy Prime Minister remarked in another place, when announcing the changes, that,
"the rural areas will be better off without him".—[Official Report, Commons, 3/12/97; col. 361.]—
the "him" being my noble friend Lord Shuttleworth, who chaired the Rural Development Commission with such great distinction?
Baroness Hayman: My Lords, I believe noble Lords will recall that I was asked a question from the Front Bench opposite about the resignation of the noble Lord, Lord Shuttleworth, and that I answered it during the discussion on the Statement regarding regional development agencies. In repeating that Statement, I tried to make clear the Government's commitment to the health and well-being of rural areas. I also tried to make clear that our decision to include the regeneration
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budgets of the RDC within the RDAs was because we believed it would be to the benefit of rural areas. I accept that not everyrone in the House or elsewhere shares that view. However, it is shared by many other organisations; and indeed, by many of the people who responded to the consultation on RDAs regarding the proposal that regeneration budgets for rural areas would be ring-fenced in terms of the budgets within the RDAs, and that there would have to be members of the RDAs with experience of rural matters.
I should make clear to the noble Earl that there are no plans to increase rural building. The Government have not taken any final decisions on what the targets might be to meet household growth figures. In the meantime, I should point out that the previous government's target of 50 per cent. on brown-field sites is one to which we are keeping.
Lord Dean of Beswick: My Lords, is my noble friend the Minister aware that most of the larger conurbations are totally against this type of development outside the cities? Where such development has taken place in the past, it has had a tremendously detrimental effect on other conurbations which are trying to restore their city centres. Is that still one of the Government's priorities?
Baroness Hayman: My Lords, I can tell my noble friend that it is still a priority to restore the vitality of city centres and make them places where people will want to live, work, shop and enjoy leisure facilities. That is why the very clear guidance in terms of out-of-town developments and shopping centres is being adhered to by the Government. We are looking first and foremost at town centre alternatives rather than out-of-town alternatives for development.
Baroness Seccombe: My Lords, in view of the reported statement of the planning inspectors that it would be detrimental for the environment if more houses were built in West Sussex than those prescribed by the county structure plan, can the Minister explain how the Government can, on the one hand, organise and ask that 13,000 houses above the Sussex plan be built and, on the other, say that they are a friend of the environment?
Baroness Hayman: My Lords, I believe that the Government's credentials as regards being a friend of the environment will be proved in many areas of policy throughout the lifetime of this Parliament, and beyond. In terms of West Sussex, it is correct that there was an intervention in the structure plan regarding the planning for household growth. I understand that those concerned in West Sussex have now announced that they are seeking a judicial review of the Secretary of State's

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decision to intervene. Pending that legal action, I am sure that the House will understand that it would be inappropriate for me to comment further.

Trident
2.56 p.m.
Lord Jenkins of Putney Lord Jenkins of Putney asked Her Majesty's Government:
Whether the Written Answer given by Lord Gilbert on 12th November (WA 3 8) referring to the Government's commitment to achieving verifiable reductions in nuclear weapons means that they have withdrawn from their earlier commitment to work urgently for the elimination of these weapons.
The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): No, my Lords. As we promised in the manifesto, we will retain Trident and press for multilateral negotiations towards mutual, balanced and verifiable reductions in nuclear weapons. When satisfied with verified progress towards our goal of the global elimination of nuclear weapons, we will ensure that British nuclear weapons are included in multilateral negotiations.
Lord Jenkins of Putney: My Lords, I thank my noble friend the Minister for that response. I am very glad to know that the Government have not withdrawn their commitment to press for the elimination of nuclear weapons. Is my noble friend aware of the information that has come recently from the United States? That says that criminals are now in possession of a tactical nuclear weapon. Does that not press the case that the only way to ensure that we are not blackmailed by groups of criminals from all over the world who have nuclear weapons is to get rid of the things entirely? Surely we should make it impossible for anyone or any government to be able to hold any other part of the world under duress. In those circumstances, does my noble friend the Minister agree that it is urgent to press on with the matter and to seek a meeting of nuclear states so as to take forward such a policy urgently?
Baroness Symons of Vernham Dean: My Lords, I am aware of the reports highlighted by my noble friend in his supplementary question. We take all such reports seriously. However, we have no reason to doubt that the nuclear weapons states are able to ensure the security of their weapons. Our work to prevent nuclear weapons falling into terrorist hands is part of a wider commitment to prevent proliferation of all weapons of mass destruction.
My noble friend also asked about implementation and about the urgency of the matter. Our examination of how best to implement our commitment to press for multilateral negotiations on nuclear weapon reductions will include an assessment of what action we might take
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at the conference on disarmament in Geneva, which next meets in January. We are examining all these questions in terms of the strategic defence review.
Lord Burnham: My Lords, perhaps I may take the Minister a little further on the matter. She said that it was the Government's intention to maintain the Trident system. Can the noble Baroness say whether it is the Government's intention to keep the number of boats on patrol the same as it is at present, and also to keep the same timing of such patrols?
Baroness Symons of Vernham Dean: My Lords, I recognise the importance of the question. I refer the noble Lord to the answer I have just given in response to a previous supplementary question. These matters will be considered in the defence review. I hope that next year we shall be able to answer fully such detailed questions as the noble Lord has asked. It is in the context of the defence review that they must be answered.
Lord Chalfont: My Lords, is the Minister aware that is not an entirely satisfactory reply to the previous question? The maintenance of a certain number of Trident boats on patrol at any given time is an essential element of a credible deterrent. Will the Minister confirm that whatever may happen in the Strategic Defence Review, it remains the clear and unchangeable policy of Her Majesty's Government that this country will retain a credible nuclear deterrent?
Baroness Symons of Vernham Dean: My Lords, I hope that I have made clear that we shall retain a credible nuclear deterrent until such time as we have verifiable balanced reductions of nuclear weapons. Our examination in the Strategic Defence Review and elsewhere of all aspects of our nuclear policy will of course include an examination of nuclear warheads and boats on patrol. If we conclude that the circumstances allow reductions in the number of warheads while maintaining a credible deterrent, we shall make those reductions. However, I am afraid that while this work is still in progress I cannot comment any further on numbers.
The Earl of Carlisle: My Lords, can the noble Baroness inform us how many nation states currently possess nuclear weapons, and how many nation states are expected to possess nuclear weapons in the next 10 years? What are Her Majesty's Government doing to prevent the spread of nuclear weapons?
Baroness Symons of Vernham Dean: My Lords, as your Lordships' House is aware, the number of nation states in possession of nuclear weapons is not necessarily verifiable at the moment. I shall make inquiries in relation to the question that the noble Lord asks to see whether I can obtain any more detailed information. The noble Lord asked about the spread of nuclear weapons. In this House we have recently debated the comprehensive test ban treaty. That measure is now before another place. As I am sure the noble

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Lord knows, the P5 countries have already signed up to the treaty, and over 130 other countries have also put their names to the treaty.
Lord Jenkins of Putney: My Lords, is my noble friend aware—and is she in a position to say—that it is the Government's policy to press for a convention so that nuclear weapons can at least be put in the same category as chemical and biological weapons; namely, that of banned weapons?
Baroness Symons of Vernham Dean: My Lords, we are examining a number of different ways to make good our commitment to press for multilateral negotiations on nuclear weapons. A number of different measures are being pursued.

Wales: Gross Domestic Product
3.3 p.m.
Lord Roberts of Conwy Lord Roberts of Conwy asked Her Majesty's Government:
What steps they are taking to increase GDP per head in Wales.
The Parliamentary Under-Secretary of State, Home Office (Lord Williams of Mostyn): My Lords, the Welsh Office is currently consulting on An Economic Strategy for Wales. The consultation document is in the Library. It sets out the Government's proposals to increase and spread prosperity throughout Wales. It sets a framework and identifies priorities with the aim of ensuring that the public and private sectors work together in a partnership that is underpinned by sound teamwork. Inward investment is a good example of where the quality of Team Wales has achieved a large measure of success. We intend to create an economic powerhouse—that is, the merger of the Welsh Development Agency, the Development Board for Rural Wales and the Land Authority for Wales—to provide a simplified institutional framework to lead on co-ordination of economic development strategies. We are also undertaking a comprehensive spending review to determine how the resources of the Welsh Office can best contribute to increasing economic prosperity for people in all parts of Wales.
Lord Roberts of Conwy: My Lords, I am grateful to the noble Lord for that reply. In view of the exchange at the beginning of today's Question Time, will he give a firm assurance that as Wales is near the bottom of the regional league table of GDP per capita, average earnings and disposable income, the Government will give the highest priority to raising the standard of living of the Welsh people by promoting investment and the creation of worthwhile jobs? Furthermore, does the noble Lord agree that as the farming community is a substantial contributor to GDP in Wales, the Government should give urgent consideration to falling incomes as a result of the strong pound and the
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continuing BSE crisis, especially as I understand that some surplus European funds are available to give assistance?
Lord Williams of Mostyn: My Lords, all the points which the noble Lord, Lord Roberts of Conwy, identifies are valid points. It is true that Wales is low in the league. Wales has 83.3 per cent. of UK GDP; it was 84 per cent. in 1994. Therefore the figure has declined further. As the noble Lord rightly implied, apart from Northern Ireland, Wales has the lowest GDP in the UK. There is no doubt at all that a high priority of this Government is inward investment into Wales to produce worthwhile, high quality jobs of value. The noble Lord rightly referred to that point. We believe that the Welsh Assembly, which we shall discuss in the New Year in your Lordships' House, will have an important part to play in that area. The farming community has a special place in the life of Wales, not simply a special economic place but also a cultural place. I assure the noble Lord and your Lordships that the Secretary of State for Wales is well alive to the problems of the farming community in Wales.
Lord Mottistone: My Lords, is the noble Lord aware that the Isle of Wight has a lower GDP than Wales and a similar unemployment figure? For the past 20 years I have pursued successive governments to try to persuade them to accept that fact. In his original Answer the Minister spoke of all the nice things he intended to do for Wales. When will that happen in the Isle of Wight which, although always classed as part of the prosperous south east, has in fact a similar framework to that of Wales?
Lord Williams of Mostyn: My Lords, I have an eyeglass but even using it I cannot detect that the Isle of Wight is entirely within the scope of the noble Lord's Question as tabled. All I can say is that, as always, I shall note carefully what the noble Lord said and transmit it to the appropriate quarter.
Lord Islwyn: My Lords, is not the real answer for the Government to encourage the development of indigenous industries in Wales through tax and investment incentives? Does the noble Lord further agree that investment in public transport could provide greater mobility and help those people from the valleys and rural areas who are anxious to seek employment?
Lord Williams of Mostyn: My Lords, there is no doubt at all that the transport facilities in Wales which this Government have inherited are not entirely suitable for the needs of a modern economy. No one who knows Wales or who has tried to travel from north Wales to south Wales by motor car could dissent from that proposition. We need to develop what is presently indigenous to Wales and to benefit—I readily pay tribute to the previous government in this respect—as we have significantly, from the efforts of the Welsh Development Agency in encouraging and securing inward investment of high quality in Wales.
Lord Hooson: My Lords, without in any way disparaging the inward investment which has been so

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important in Wales, will the new development agency have the right or the power to take equity in indigenous companies to promote them? I have had some experience of seeing indigenous companies develop in Wales. Those companies are then taken over and have their headquarters moved outside Wales. Often the highest salaries are paid to employees of those companies who are not in Wales. Is it not possible for the new development agency to have a strategy to deal with the problem of encouraging indigenous industries and of retaining a certain degree of control over them through taking equity?
Lord Williams of Mostyn: My Lords, that is one of the aspects which the economic powerhouse will have in mind. I referred to that a moment or two ago. It is, of course, one of the reasons that we issued our consultation document, An Economic Strategy for Wales. I can assure the noble Lord, Lord Hooson, that the remarks he made are entirely apt and will be given the greatest possible scrutiny.

Late Payment of Commercial Debts (Interest) Bill [H.L.]
3.10 p.m.
Lord Haskel: My Lords, on behalf of my noble friend Lord Clinton-Davis, I beg to introduce a Bill to make provision with respect to interest on the late payment of certain debts arising under commercial contracts for the supply of goods or services. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(Lord Haskel.)
On Question, Bill read a first time, and to be printed.

Consolidated Fund Bill
Brought from the Commons endorsed with the certificate of the Speaker that the Bill is a Money Bill; read a first time, and to be printed.
Scottish Agricultural College Order Confirmation Bill
Brought from the Commons; read a first time, and (pursuant to the Private Legislation Procedure (Scotland) Act 1936) deemed to have been read a second time and reported from the Committee.

Business of the House: Debates this Day
The Lord Privy Seal (Lord Richard): My Lords, I beg to move the Motion standing in my name on the Order Paper.
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Moved, That the debates on the Motions in the names of the Lord Crickhowell and the Lord Hindlip set down for today shall each be limited to two-and-a-half hours.—(Lord Richard.)
On Question, Motion agreed to.

Mental Incapacity
3.12 p.m.
The Lord Chancellor: My Lords, with the leave of the House, I would like to make a Statement on mental incapacity.
In my answer to the noble Lord, Lord Peston, on 23rd October, I indicated that it was the Government's intention to issue a consultation paper on the subject of mental incapacity. I am pleased to announce the publication of a Green Paper today. It concerns the law in England and Wales. It examines a wide range of issues concerning the legal rights of people who are unable to make decisions for themselves or who cannot communicate their decisions as the result of disease, disability or injury.
As it currently stands, the law affords little protection either to mentally incapacitated adults or to those who care for them. The law is confusing and fragmented. Many carers in particular are expected to make decisions on behalf of incapacitated adults without a clear idea what legal authority there is for those decisions. Everybody will know of a friend or relative whose life is affected by the unsatisfactory state of the current law. Let me provide just three examples. The first is a young man with a learning disability who has reached the age of 18 and wants to be able to make some decisions for himself, such as what clothes to wear or where to live. A second example might be a young woman, formerly a high-flying banker until a severe car crash caused brain damage, making her incapable of taking all but the simplest decisions about her life, health or welfare. A third example would be an elderly woman who is now suffering from dementia. She is in a home, and currently there are concerns about how her finances are protected. The present law does not provide sufficient guidance or safeguards for each of the people I have mentioned, nor for those who care for them. The Green Paper invites views on the need for a framework for decision-making on behalf of people who lack mental capacity.
I must make clear to your Lordships at the outset that the paper does not seek views on euthanasia. Euthanasia is a deliberate intervention undertaken with the express intention of ending a life, at an individual's own request or for a merciful motive. The Government are absolutely opposed to euthanasia in any form. The Government fully support the view of the House of Lords Select Committee on Medical Ethics in its report of February 1994 that euthanasia is unacceptable and cannot be sanctioned in any circumstances. Euthanasia is illegal now and will remain illegal. So let us not be side-tracked by this.
The current law lacks coherence because it has developed piecemeal. It is unsystematic and full of glaring gaps. It has many areas of uncertainty, and fails

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to offer adequate protection either for mentally incapacitated adults or for the people who look after them. The scale of this problem must not be underestimated. The range of people who are let down by the current law is considerable. They include adults with learning disabilities; victims of accidents, such as road traffic accident victims who develop brain damage; those who lose capacity as a result of a stroke; and those who lose mental capacity later in life (for example those who suffer from dementia).
The Government acknowledge two debts—first, to the Law Commission. Its work in this area culminated in the publication of its report, Mental Incapacity, in 1995. The paper published today is based closely on the wide-ranging and coherent set of recommendations contained in the Law Commission's final report. The Government's second debt is to the House of Lords Select Committee on Medical Ethics, chaired by the noble Lord, Lord Walton.
I recognise that many of the issues raised in our Green Paper are sensitive and attract strong ethical views. This is a Green Paper that seeks the broadest range of responses before policy can be settled. With the exception of our absolute opposition to euthanasia, the Government have taken no fixed or final views on any of these questions.
The areas covered by the Green Paper include definitions of incapacity and of the best interests of an incapacitated person. The paper also considers the need for a more informal framework for those making day-to-day decisions on behalf of an incapacitated person. The paper looks at the possibilities open to someone who is able to make arrangements for a time when mental capacity may be lost. It examines the law relating to the making of advance statements and proposals for a new form of power of attorney that would cover healthcare and personal welfare issues as well as financial issues. The independent supervision of medical and research procedures is also considered, as is the possibility of increased protection under public law for people with a mental incapacity and any others at risk. Finally, the paper looks at a possible judicial and administrative framework to supervise and regulate all these arrangements.
The first set of issues examined in the Green Paper are the key principles which underpin the Law Commission's recommendations. The first of these is the need to replace the variety of different tests of capacity with a single, straightforward statutory definition. Such a definition would introduce certainty and clarity. The proposed test of capacity would be focused in each particular case on the decision which has to be taken and on the ability of the person concerned to understand the nature of the decision required and its implications. This would avoid unnecessary intrusion into an individual's personal affairs and would enable him or her to have as much involvement as possible in the decision-making process. It would, for example, allow a person to continue to make everyday decisions—for example, how their finances should be organised or what presents to buy for
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Christmas—even if such a person was deemed incapable of making a decision about, for example, whether a particular form of medical treatment was appropriate.
The second central principle is that decisions on behalf of people under an incapacity should be made in their best interests. In determining whether a decision is in a person's best interests, the decision maker should take account of a number of factors. These include the ascertainable past and present wishes of the individual concerned; the views of others whom it is appropriate and practical to consult; and whether the purpose for which the decision is required can be achieved as effectively in a way that is less restrictive of the individual's freedom of action. Decisions taken on behalf of a person lacking capacity would therefore require a careful focused consideration of that person as an individual.
The Green Paper seeks views on the practical application of these criteria. For example, there may be differences of opinion between those who are to be consulted and conflicts of interest may arise. It may be, for example, that two close relatives differ about where a person should be looked after—a spouse might wish to continue to care for the patient at home, while a son or daughter might favour nursing home care.
The Law Commission also proposed that a legal framework be established to govern the many informal day-to-day decisions that are made by carers, family members or treatment providers on behalf of those under an incapacity. This legal framework would include a general authority for decisions to be taken on behalf of an incapacitated adult, provided those decisions are reasonable and in the person's best interests. The Government accept these proposals in principle but remain concerned that any system of this kind should have adequate safeguards built in to ensure that incapacitated people and their assets are protected against abuse. The Green Paper therefore seeks views on the additional safeguards that would be needed.
One area of the Law Commission report which has raised particular concern in some quarters is that concerning healthcare decisions intended to have effect when a person loses mental capacity. These decisions are commonly known as "living wills", but a more accurate term, "advance statement", is used by the Law Commission and in the Green Paper.
There is a misconception that the Law Commission's proposals would make legal provision for advance statements for the first time. This is not the case. Valid advance refusals already have full effect at common law. This means that a person who is worried about the potential for a particular form of medical treatment already has the right to refuse that treatment by way of an advance refusal. A Jehovah's Witness, for example, can already refuse to receive a blood transfusion. That refusal cannot be overruled.
An advance statement enables people to leave instructions about their medical treatment in anticipation of a time when they are no longer capable of making decisions or communicating them. The sorts of decisions which can be made are only those which a fully competent adult is allowed to make. When mentally

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competent, each of us has the right to consent to or refuse any form of medical treatment. The instructions included in an advance statement would enable exactly the same decisions to be made, and can therefore include both consenting to treatment or refusing it. As is the position for competent adults, however, advance statements cannot force a doctor to give a particular type of treatment. Nor can they ask a doctor to do anything which is illegal. An advance statement could not, for example, ask a doctor deliberately to end life. The blunt truth is that if a doctor took such action he would be exposed to a charge of murder.
What an advance statement would be able to do, however, is allow patients with cancer who know that they may at some future time lose capacity to consent to treatment or to communicate that consent to provide that consent in advance. It could even allow the patient to consent to the use of new drugs on a trial basis, if that is what the patient wanted. Equally a terminally ill patient could request that treatment is provided to sustain life for the longest possible time, even if the resultant treatment would normally be considered overly burdensome.
The Government recognise that the Law Commission's proposals on advance statements raise complex issues on which many people have strongly held personal, religious and ethical opinions. For this reason, the Green Paper specifically seeks views on whether legislation in this area is appropriate, and, if so, what its objective should be.
The Law Commission took the view that some types of serious medical procedures, including sterilisation and donation of tissue or bone marrow, should receive additional independent supervision to make sure that the best interests of the incapacitated individual are properly protected. This supervision could take the form of consideration by the courts: an independent second medical opinion; or certain other types of supervisory mechanism.
In certain limited circumstances the Law Commission suggested that a departure from the best interests criteria, which I mentioned earlier, might be justified. One of these relates to the withdrawal of artificial nutrition and hydration from a patient in a persistent vegetative state. In view of the different opinions which exist about whether these patients can, in fact, be said to have best interests, the Government believe that it is important that the criteria are considered very carefully in every case which arises. The Green Paper seeks views on the vital ethical considerations which must be addressed in reaching decisions on the discontinuation of artificial nutrition and hydration in these cases.
The Law Commission also considered that there might be a case for departing from the best interests criteria in the area of medical procedures and research for the benefit of others. The commission recommended that it should be possible for these procedures to be authorised in relation to a person without the capacity to consent to them if the procedure would not cause the person significant harm and would be of significant benefit to others.
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An example of this type of procedure is the removal of samples of blood or taking a mouth swab from the patient to investigate his or her genetic make-up. This could be of significant benefit to other members of the patient's family in identifying and treating inherited conditions. Procedures of this nature could also extend to non-therapeutic research into conditions from which the patient is suffering for the benefit of others suffering from that condition. The Law Commission suggested that this research should be justifiable only where the procedures involved minimal risk for the patient.
The Green Paper seeks views on whether research of this kind is ethical and reasonable and on whether the conditions for research proposed in the Council of Europe Convention on Human Rights and Biomedicine provide adequate safeguards for patients unable to give consent.
The Law Commission also proposed an extension of the existing legal framework for enduring powers of attorney to include the concept of a "continuing power of attorney". At present, it is possible for people to make enduring powers of attorney to enable their property and financial affairs to be looked after if they become mentally incapable. The Law Commission's proposals would enable a person with capacity to appoint somebody to make decisions on their behalf if that capacity was ever lost. Under these provisions the decisions which could be taken would cover healthcare and personal welfare matters in addition to financial matters.
The House of Lords Select Committee on Medical Ethics expressed concern that the decisions of attorneys are unlikely to be completely objective—for example, an attorney might find it difficult to decide whether to approve costly medical treatment or nursing care if he or she is either paying the bills or entitled to benefit from the patient's estate. Equally, given the changing nature of relationships, the choice of attorney might quickly become out of date and by the time an attorney is asked to act he or she might have lost the close rapport which once existed with the patient. The Law Commission has attempted to take account of these concerns by proposing safeguards and by listing a number of areas where an attorney should not be able to act on behalf of a person without capacity. However, here too there are different views. The Green Paper therefore seeks responses on whether legislation in this area would be appropriate, as well as seeking comments on the Law Commission's detailed proposals.
The Law Commission also considered the need for new laws to ensure that a broader group of people are protected from abuse and neglect. This group would include people who may not be able to protect themselves, such as the elderly or those with serious physical illnesses, as well as those suffering from mental incapacity. In particular, it recommended that social services authorities should have a new duty to investigate cases of possible neglect or abuse; and should have short-term powers to protect people in these cases.
The Government believe that, although there may be merit in some of the Law Commission's recommendations concerning these new provisions,

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there may not be a pressing need for reform in the light of powers which already exist in this area. The consultation paper therefore seeks views on the need for legislation and on the practicalities of the proposals.
The Law Commission's proposals in each of these areas clearly have substantial implications for the legal and administrative systems which would be needed to manage and supervise their operation. The commission therefore recommended a new court jurisdiction which could deal with personal welfare and healthcare issues, as well as property and financial matters. The latter are currently dealt with by the Court of Protection and the Public Trust Office. The Law Commission's proposals would require a substantial extension of their jurisdiction, as well as offering an increased role for the civil courts.
The Government can see the advantage in having a unified jurisdiction in this area, but there would clearly be considerable implications for the court system, both in terms of resources and practicality. The consultation paper invites views on the structure proposed by the Law Commission and on the form and extent of court jurisdiction that would be appropriate in particular areas.
This Green Paper raises many issues of great sensitivity, complexity and importance. They need addressing to ensure not only that the interests of incapacitated persons are adequately protected but also that those who have to make decisions on their behalf have a clear legal framework within which to do so.
The Government are determined to make progress in an area in which those who lack mental capacity and those who care for them are not adequately protected under the law today. They are equally determined that any reform should command the widest possible public support. The Government have not yet made any decision to legislate. Any legislation would be of wide-ranging social significance and of comparable scope and sensitivity to the Children Act. I therefore hope that the paper will generate a wide range of responses from all those with an interest in this area, whether professional or personal, to help the Government determine the best way forward.
3.30 p.m.
Lord Kingsland: My Lords, the Statement by the noble and learned Lord the Lord Chancellor this afternoon raises, as I am sure your Lordships will all agree, issues of great ethical, scientific and social importance. Those issues are not subject to the disciplines of party politics. Indeed, if we were to measure your Lordships' views about each of the issues that the noble and learned Lord has raised, our conclusions would portray a very different pattern in your Lordships' House.
The Green Paper has only just been released and I, for one, have not had an opportunity to read it. My reflections on what the noble and learned Lord said will therefore be subject to my reading of the paper. I understand that it is to form the basis of consultations. That must be the right approach. Indeed, considerable consultations have already taken place. The Law Commission has been reflecting on these issues for
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some years, its reflections finally bearing fruit in its paper of 1995. Your Lordships' House has also been reflecting on these issues in its Select Committee on Medical Ethics. So to some extent your Lordships' House has already taken views on the most important of these issues.
Perhaps the first and most important question that the noble and learned Lord has to consider is whether, at the end of the day, we ought to legislate in this area at all. So far these extraordinarily difficult decisions have been taken by an alliance of medical practitioners, the family and, on occasions when things have not gone quite right, the legal profession. The medical and legal professions have been taking decisions within their professional codes. Since, in my experience, the vast majority of doctors and lawyers are fundamentally decent and sensible people, most of the decisions taken have been the right ones. There have been exceptions, of course, and it has tended to be those exceptions that have received publicity.
I hope that the noble and learned Lord will agree with me when I say that he must be satisfied, at the end of the day, that it is more likely than not that legislation will improve the current situation. There is merit in clarifying the issues; but each of the hard cases in this area will depend on the particular facts of the case. We have to ask ourselves whether giving statutory expression to something that has emerged in a peculiarly British but on the whole satisfactory way will improve things.
My second point relates to the noble and learned Lord's statement about euthanasia, with which I entirely concur. Indeed, your Lordships' House has already expressed its view in the debate on the report of the Select Committee on Medical Ethics.
Anyone who glances at the Law Commission's report on mental incapacity must come to the view that some permutations of the solutions proposed therein would in effect result in the permitting of euthanasia. It is extremely important that, if we have legislation, those permutations which are permitted under the law do not amount to euthanasia. I know that the noble and learned Lord has had that very much in mind in formulating his Statement; and I say it not because I do not think he will be aware of the point but simply to express the strength of my party's feelings on the issue.
Thirdly, there is the question of measuring the best interests of the incapacitated party. It seems to me that the starting point for measuring the best interests must be the family. However, the family will not always be the institution which best expresses the interests of the incapacitated party. There may be circumstances in which there are conflicts of interest within the family, and we shall need a system for dealing with that.
There are also limitations on the system of living wills. When someone makes a living will, a certain set of circumstances is foreseeable; but time passes, circumstances change and medical science advances. At the moment of incapacity, is the will relevant to what is happening to the unfortunate party? The relevance of a living will and the weight given to it will depend on a range of facts which cannot be anticipated.

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I have given a flavour of some of the thoughts that noble Lords on the Opposition Benches have about these matters. Many of your Lordships who know far more about these issues than I will be able to contribute more richly to this important debate.
Lord Lester of Herne Hill: My Lords, I should like to begin by congratulating the noble and learned Lord the Lord Chancellor and the Government on this full, sensitive and wise statement on mental incapacity. I eagerly look forward to studying the Green Paper. I should like to echo the noble and learned Lord's tribute to the excellent work done by the Law Commission and by the Select Committee on Medical Ethics. I am sure that the noble and learned Lord would join me in paying tribute to the work done by the courts in seeking to grapple with very difficult problems, using the sometimes incomplete instruments of common law.
I entirely agree that the law as it stands affords too little certainty and protection to mentally incapacitated adults and those who care for them. I also agree that carers are expected to make decisions on behalf of incapacitated adults without a clear idea as to what legal authority exists for those decisions. I agree too that insufficient guidance and safeguards exist in some areas.
My experience in this area comes largely from acting as amicus curiae in Bland, the case of the PVS patient who would never recover consciousness. That case illustrated to me, and undoubtedly to the courts, the terrible dilemmas faced by those who care for individuals lacking mental capacity. Several Law Lords in that case—notably the noble and learned Lord, Lord Browne-Wilkinson—indicated the unsatisfactory state of the law and the desirability of law reform in which Parliament played a role.
For reasons which I entirely recognise and respect, as the noble and learned Lord the Lord Chancellor has made clear, the Green Paper will not seek views about euthanasia. However, as I believe the remarks of the noble Lord, Lord Kingsland, indicate, the underlying issues raised are bound to be controversial and difficult and will border upon what some would regard as euthanasia. For example, there are some in this House who regard the Bland decision as amounting to euthanasia.
The reason why these issues are so sensitive and complex is that one is seeking to reconcile several different and sometimes conflicting basic human rights and interests: the right to life; the right to be treated with humanity and dignity; the right to live in dignity and to die with dignity; the right to personal privacy, including the patient's right to personal autonomy; the right to refuse medical treatment; and the right of doctors and nurses to refuse to give inappropriate treatment. Those are some of the basic rights and freedoms involved in the subject matter of the Green Paper.
As the noble Lord, Lord Williams of Mostyn, and others know well, I do not believe that the current state of the criminal law or, for that matter, professional guidelines are adequate in this area. There is confusion surrounding the, in some respects, casuistical
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theological doctrine of double effect in terms of the relevance of primary intent, secondary intent, motive, causation and what is known to criminal lawyers as the Nedrick doctrine which teaches that if the consequence of one's actions is to cause death or serious bodily injury and that is a virtual certainty, one is deemed to have a specific criminal intent.
All the legal scholars I have read in the standard textbooks say that in that difficult area the law is not clear and satisfactory. One recalls particularly the helpful example of the noble Baroness, Lady Warnock, in relation to her cat and the dandelions. She pointed out that if she used weedkiller to kill her dandelions knowing that it would also kill her cat, most ordinary people would think that she had responsibility for killing the cat as well as the dandelions, but not apparently according to the use of the double effect doctrine to circumvent a difficulty in the criminal law. I do not know to what extent it will be necessary to address any of that legal minefield. I know that the Government consider the criminal law to be clear, but I am not convinced.
I particularly welcome the passage in the Lord Chancellor's Statement in regard to advance directives or advance statements with which again I wholly agree. I also agree about the need for adequate safeguards. Advance statements provide a vital means of giving security to patients, to doctors, to nurses and to the relatives of people who lose mental capacity, without in any way sanctioning illegal conduct, including culpable homicide.
To speak on a personal note for a moment, I am sad that my former client—Annie Lindsell—whose funeral took place yesterday, did not live long enough to hear the Lord Chancellor's Statement. She was a brave and doughty champion of the rights of patients, doctors and nurses in the context of humane palliative care of the terminally ill who may lose their capacity, mental or physical, and the right to take decisions in accordance with their wishes and their best interests.
I welcome the proposal to create a new unified court jurisdiction, as the Law Commission recommended. I admire greatly the work done by the Family Division under the leadership of Sir Stephen Brown as President. But it is a curiosity that for reasons only legal historians could explain the Family Division has come to be regarded as the appropriate division in which sensitive decisions about medical care of those who lack capacity are taken. Speaking for myself, I welcome the chance to have a unified jurisdiction all under one roof with qualified judicial experts.
I recognise the complex, personal, religious and ethical issues raised by the Green Paper. I therefore sadly accept that further consultation is needed. I say "sadly" because the Law Commission, as the noble Lord, Lord Kingsland, indicated, consulted for three or four years before drawing up its wise proposals. However, I see that the way ahead is to obtain what the Statement describes as the widest possible public support for any reform. I hope that in the consultation process the subject will not be captured by dogmatists or absolutists of an extreme kind on either side. It seems

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to me that this is not an area in which one can dogmatise or pronounce with any kind of absolutism. We are weighing and striking a balance between competing public interests. For those reasons I welcome what has been said from the Woolsack.
The Lord Chancellor: My Lords, I agree with the noble Lord, Lord Kingsland, that these are issues of huge ethical, scientific and social importance. I welcome his saying that they are not party political issues; certainly they are not. On all these issues I was at pains to make clear that the Government retain an open mind. Par excellence this is an area for consultation. I do not believe that the consultation which the Law Commission undertook can now be regarded as sufficient. This is a highly sensitive area on which the Law Commission's formulated recommendations should now be the subject of further discussion.
As the noble Lord, Lord Kingsland, said, the critical issue is whether there should be legislation. That is undoubtedly the basic issue. Your Lordships may be interested to know that when this matter concerned your Lordships' House in its judicial capacity in the case to which the noble Lord, Lord Lester, referred, the noble and learned Lord, Lord Browne-Wilkinson said this:
"It seems to me imperative that the moral, social and legal issues raised by this case should he considered by Parliament. The judge's function in this area of the law should be to apply the principles which society, through the democratic process, adopts; not to impose their standards on society. If Parliament fails to act then judge-made law will, of necessity, through a gradual and uncertain process, provide a legal answer to each new question as it arises. But in my judgment that is not the best way to proceed".
That was a strong plea from the higher judiciary that Parliament should be the appropriate forum to address this point.
The Green Paper merits the fullest study. There are many points of difficulty on which we will consult. The noble Lord, Lord Kingsland, raised one—the point that an advance statement may be fine at the time it is made but becomes outmoded by change of circumstances. That is an important point and one on which I do not doubt views will be expressed in consultation.
3.47 p.m.
Lord Campbell of Croy: My Lords, I welcome the fact that this difficult subject is now being tackled and that the first wide consultation period is starting. Can the noble and learned Lord say whether mental illness is included in the Green Paper as distinct from mental handicap, also known nowadays as having learning difficulties? Both mental illness and mental handicap are disabilities that can induce mental incapacity. The noble and learned Lord spoke of elderly people suffering from dementia. But mental illness can afflict people of all ages; for example, schizophrenia and manic depression. I hope that the noble and learned Lord can confirm that mental illness is included in "incapacity": he did not refer to it in his Statement.
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My second question is extremely simple and probably expected by most noble Lords. The Statement applies to England and Wales. Will a similar Green Paper be issued for Scotland where law and health are, and have been for many years, completely devolved?
Lord Cledwyn of Penrhos: My Lords, why was not the House given proper notice of this discussion on the Green Paper? It is delaying an important debate on Wales.
The Lord Chancellor: My Lords, I welcome the noble Lord's acknowledgement that the Government are tackling a difficult subject. The Green Paper addresses mental incapacity regardless of cause. Therefore, if it is something which qualifies as a mental illness that results in mental incapacity, the Green Paper addresses all forms of incapacity regardless of other causes. I entirely agree that the reference to the elderly suffering from dementia was illustrative. People of all ages can suffer from mental incapacity. Yes, there is consultation in Scotland.
Lord Waddington: My Lords, does the Green Paper address in any way the problem of young people who suffer from schizophrenia but are no menace to society provided they continue to take the drugs prescribed for them? It is surely no kindness to these young people to allow them to give up treatment and therefore to become incapacitated. Should not, for instance, the law allow the parents of someone who is schizophrenic some say in his welfare so as to bring influence to bear on that person even though he has become an adult in order to prevent his becoming incapacitated and a menace to both himself and the public?
The Lord Chancellor: My Lords, I see the force in what the noble Lord says. That issue is certainly within the ambit of the Green Paper but it is one on which the Government reserve their position until consultation is concluded.
Baroness Young: My Lords, I have one concern which is central to this serious issue. The noble and learned Lord said several times that there could be no question of euthanasia. However, my noble friend Lord Kingsland pointed out one example of where this might be possible—the question of living wills and people changing their view and also a conflict of evidence as time has gone by.
There is surely another concern with regard to any prospective legislation. When the Abortion Act was going through Parliament a great many promises and statements were made which subsequently have not proved to be the case. It would be of great concern to us if it were thought that something we were doing would ultimately lead to euthanasia.
The Lord Chancellor: My Lords, I certainly appreciate that states of affairs which are permitted by doctors can be viewed by some as euthanasia and can be viewed by others as proper medical treatment. The Government are opposed to euthanasia in any form. The

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correct judgment to apply to a variety of medical procedures will be one which the consultation will address.
Lord Milverton: My Lords, with our scientific and technical knowledge continuing to grow, we need to be aware that in keeping a life going we are not really helping the dignity and worth of that sick person or even the dignity and worth of his or her close relatives. Many doctors, in sincerity and truth, will give an overdose to relieve the pain of the patient, knowing that it will quicken the time of his or her death. I know from close experience that this happens. Doctors are doing it with care and thought and not recklessly.
The Lord Chancellor: My Lords, I would be the first to agree that this subject addresses acutely the dignity of the incapacitated and their families. The noble Lord raises a difficult question—again, one that will be addressed in the consultation—that that which is done by a doctor to a patient may confer a benefit on him in a medical sense but may also be thought to have the shorter term effect of abbreviating life. This is an acute problem.
The Earl of Lauderdale: My Lords, I apologise to the noble and learned Lord for not being present for the Statement. I was delayed in getting back from hospital where I had treatment in connection with my pacemaker. Does the Green Paper make reference to children who may be born with a great disability? I think of one child who is suffering from hydrocephalus and another aged 10 who has cerebral palsy. These are terrifying situations for the families as well as for the victims. I shall be glad to hear if the Green Paper addresses those situations. Iapologise again for not having heard the Statement.
The Lord Chancellor: My Lords, in essence the Green Paper covers three groups: those who have never had capacity and have now, say, reached the age of 18—people with learning disabilities; secondly, those who have lost capacity, for example, as a result of an operation or a road traffic accident; and, thirdly, those who lose capacity later in life. I gave as an illustration those suffering from dementia. The Green Paper has the widest ambit. The noble Earl will therefore see that children are covered.

Wales
3.57 p.m.
Lord Crickhowell Lord Crickhowell: rose to call attention to economic and social progress in Wales and to consider the good governance of Wales within the United Kingdom; and to move for Papers.
The noble Lord said: My Lords, in moving my Motion, I declare three interests which I think are relevant. I am a director of Associated British Ports, chairman of HTV and president of the university in Cardiff.
There is much talk at present in government circles about a new Britain and, by implication, a new Wales; and therefore it seems a good moment to consider the state of Wales and the remarkable transformation of Welsh economic and social conditions that has taken place over the past 30 years. We should be clear about where we have got to and what our priorities might be before we begin to transform the government of Wales.
This is not a Second Reading debate, but hope the Motion will provide an opportunity to identify some broad principles against which the Government's proposals can be judged. From soon after the end of the First World War Wales had suffered the devastating consequences of the decline of the old basic industries on which its economy depended. When I entered Welsh politics 30 years ago the final painful phase of that process was about to begin.
Just before the Conservatives came into office in 1979 the Labour Government had been forced to accept the closure of the steelworks at Ebbw Vale and at East Moors in Cardiff. Shotton, in North Wales, was under grave threat, and the two great strip mills at Port Talbot and Llanwern were part of one of the most inefficient and uncompetitive steel plants in the world. The hike in energy costs was to be the final knock-out blow for much of the heavy industry that remained. Today Port Talbot and Llanwern are among the most efficient plants of what is probably one of the three best steel companies in the world.
Wales, with about 5 per cent. of the UK's population. has, year after year, attracted about 20 per cent. of its inward investment. These foreign companies have formed a nucleus of modern, high tech. industry, around which the indigenous economy has grown. But the overwhelming majority of the workforce are still employed by British companies in the public service or self employment.
There has been an astonishing improvement in the unemployment statistics. For most of my lifetime unemployment in Wales has been among the highest anywhere in the United Kingdom. The October unemployment figures for parliamentary constituencies, which can be found in a publication in the Library, now paint a picture that I would have hardly dared to believe possible in the early 1980s. There is not one Welsh constituency in the top (that is the worst) 100 in the United Kingdom. The Rhondda, with male unemployment at 8.7 per cent., ranks 187th. In Alyn and Deeside, which in the 1980s suffered so heavily from the closure of the Courtauld plants and Shotton, it is only 4.9 per cent. Total unemployment at 5.7 per cent. is less than 1 per cent. above the UK average.
Black spots remain, particularly in west Wales and the north west. BP's lubricants plant near Swansea is now to be added to earlier oil refinery closures around Milford Haven. There is declining employment in agriculture now brutally hard hit by the Government's ban on the sale of beef on the bone. As we heard at Question Time. GDP per capita remains stubbornly below the UK average. In part, the difference is accounted for by the concentration of financial services in London and the south east and partly by the kind of

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vortex effect which seems to drag resources out of the peripheral regions. There is much still to be done in attracting financial services; in increasing the range of goods and services that can be obtained in Wales; and in raising skills and wages. But despite these real and significant problems, it is still a remarkable transformation.
It is not only the employment situation which has changed; but the transport infrastructure, the housing stock and the environment in the old industrial areas have had equally beneficial change. The M.4 across south Wales, including the second Severn crossing, and the A.55 in north Wales have been completed except for the final section across Anglesey. Modern roads from the M.4 into the south Wales valleys have replaced the old, tortuous lanes. The condition of the valley railways, which was also referred to at Question Time—the lines which run down to Cardiff—has been enormously improved. I believe that those were the right priorities over the past two decades or so to strengthen employment and economic conditions. But I note from the remark made by the noble Lord, Lord Williams of Mostyn, that there are those who will now demand a great through road from north to south. I warn him of this: the new assembly will find that there are big financial and environmental obstacles in the way.
Those who knew the industrial valleys 30 years ago would hardly recognise many of them today. Tips and dereliction have largely disappeared as a result of the greatest programme of derelict land clearance in Europe. The urban landscape looks very different as a consequence of a succession of housing improvement schemes. Town centres which were run down and depressing have been much improved by a succession of valley's initiatives. In the lower Swansea valley and in Cardiff Bay other initiatives have turned once-polluted deserts into what is indeed a new world.
Nowhere has the transformation been so substantial as in the health service. There is a myth propagated about cuts; but the reality has been a huge programme of hospital and community health building. By the end of the 1980s there were six new general hospitals as well as several new community hospitals. There has been a growth in the facilities for heart surgery; the development of what is probably the best renal dialysis service in Europe; and a major initiative for better care in the community of mentally handicapped people. There was a large increase in the number of doctors and nurses in my time at the Welsh Office. When I turned up the statistics in the Library last week I found that once again there had been a substantial increase over the past five years.
I have talked about the infrastructure and social conditions. I could have talked about the language, so vigorously and successfully supported over 18 years by Conservative Governments, and the arts, which have also thrived. But I shall conclude what I have to say about the state of Wales by pointing to the transformation of morale and attitude. Not surprisingly, in the 1970s Wales lacked confidence. There was a sense of hopelessness. There was what
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I used to refer to as the "begging bowl" mentality. Today it is different. There is an atmosphere of confidence. It already feels like a new Wales.
It is at this moment that the effective instruments forged across the party barriers in the shape of the Welsh Office and the role of the Secretary of State, are to be smashed to smithereens and replaced. A huge responsibility rests on those who propose these changes. By no stretch of the imagination can they claim to have the wholehearted endorsement of the Welsh people. The referendum proved in many ways even more unsatisfactory than some of us had feared, and leaves behind a divided Wales.
However, I firmly believe that, narrow though the margin was, the verdict must be accepted. In my judgment this House and my own party would make a profound mistake if they sought to overthrow the Bill that is now before the Commons. It would be an action that would not be understood and would be resented by very many in Wales, and not just by those in favour of the assembly.
However, we are fully entitled to amend the Bill and to improve it, particularly in view of the unprecedented decision of the Government to take all but six of the 149 clauses and 14 schedules of this constitutional measure, off the Floor of the House of Commons and upstairs to a committee despite the Opposition's offer of an agreed timetable of seven days in Committee on the Floor of the House and two days on Report.
If we are to have an assembly, I believe that it is our job to make it work effectively. I hope that my own party will want to make it strong, not weak; and in due course will play a very active role in the work that is undertaken.
My Motion refers to the,
"good governance of Wales within the United Kingdom".
An assembly which is effective and whose functions and relationships are clearly defined, is much less likely to risk the unity of the Kingdom than one which has serious inadequacies that create tension and disillusionment.
So one principle that should guide us will be to create clarity about where responsibility lies. That is not just a matter of functions. We need to have an electoral system and a structure that leaves us with no doubt where executive responsibility lies; providing the electorate with the opportunity to form a judgment and deliver a verdict.
What is proposed at present—namely, an executive that consists of the leaders of the subject committees—essentially replicates a local government system that pretends to be inclusive, but which in reality obscures accountability and drives decision making underground to the party group. The most important single change that is needed, and for which this House should press, is for the kind of Cabinet model suggested in the 1996 Constitution Unit's report An Assembly for Wales. I welcome the indication given by the Secretary of State in his speech in another place at Second Reading that his mind is not

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closed on the issue. But it is odd that he should say that he does not want the Bill to be too prescriptive on this issue and that,
"That [matter] must he allowed to evolve".—[0fficiulReport, Commons, 8/12/97; col. 680.]
when the Bill appears to be precisely prescriptive.
It is odd as well that in setting up a national assembly advisory group to prepare guidance on the way in which the assembly should operate, the Secretary of State has personally selected the individual who is supposed to represent the Conservative Party, without proper consultation. That is not an acceptable basis for inter-party co-operation. The unfortunate individual so selected—we do not yet know who he is—cannot, in the circumstances, have authority to speak on behalf of the Conservative Party: he will speak only for himself. The committee is apparently to advise the Secretary of State who will, in his turn, advise the statutory committee. It is a pretty shabby charade.
We should not be lured either by the siren voices of the recent report from the Institute of Welsh Affairs, Making the Assembly Work, which wants 80, not 60, members or by the Western Mail, which wants them to be full-time. Sixty members are quite enough; and if that means having fewer committees, so be it. Quality is of importance; and I shall argue on another occasion why it seems certain that an insistence on full-time membership would have a devastating impact on quality. In my view, the proposed party list system, even if it is confined to additional members, is unlikely to compensate in terms of quality for its other grave deficiencies.
Cabinet government; clarity of responsibility; and quality are my first three principles. There is a fourth: there must he practical means of involving the assembly in negotiations about policy with Westminster and Brussels, and of settling disputes. Already the warning shots are being fired over the Barnett formula and regional policy. It is not enough simply to refer to the Barnett formula as a sacred text. I sat through quite enough passionate discussions in Cabinet about possible over-funding for Scotland not to know that the outcome is essentially political. Indeed, it is clear from the Treasury note placed in the Library this week, which refers to the need for an in-depth study of reliable spending requirements and for full consultation before there are substantial revisions, that revision is possible and that we must be prepared to consider a situation in which they are proposed or imposed. Already the English are demanding them; already studies have begun and Select Committees are examining those issues.
Somehow, before the Bill becomes an Act, we have to find better means of resolving those fundamental problems—"better" that is than the Government's present scheme which places the Secretary of State in a wholly absurd and unsustainable role. The report of the Institute of Welsh Affairs, to which I have referred, is worth reading on that subject. Mr. Ted Rowlands in another place yesterday was right to concentrate on the relationships between the assembly and Parliament and
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between the respective civil servants because if those relationships break down, the unity of the kingdom will be at risk.
I have one final principle. We must effectively protect the interests of those institutions which span the border and which cannot be solely dependent on an assembly with a narrow Welsh interest. I can think immediately of two examples: the Environment Agency, where practical considerations and environmental impact demand a wider perspective; and the University of Wales. The majority of the university's students come from outside Wales. It has to compete on a level playing field with other British universities. We must be certain that the new arrangements do not weaken higher education in Wales.
An immense responsibility rests upon Parliament in the coming weeks. As we put aside the arrangements which have achieved so much, we must be certain that we build well and on solid foundations.
My Lords, I beg to move for Papers.
4.13 p.m.
Lord Prys-Davies: My Lords, I should like first to welcome the noble Lord, Lord Roberts of Conwy, to his place on the Official Opposition Front Bench where he is to speak on Welsh affairs. We know that the noble Lord comes to the Front Bench with immense experience of Wales and of the working of the Welsh Office.
I am sure that we can all unite in thanking the noble Lord, Lord Crickhowell, for having launched us on this very wide-ranging debate, drawing in the need for economic progress, social progress and good governance. I believe that we can also all agree that we wish to see economic and social progress and the good governance of our society. I am sure that there is support for that principle in every part of the House.
The first aspect of the Motion addresses economic progress. The experience of the Welsh economy since the mid-1980s has been presented by the Conservative Party and again today as an unconditional economic success story. Nevertheless, it is correct to say that it has been the eastern corners of Wales which have mainly benefited from the economic success to which the noble Lord referred. I therefore welcome very much the Welsh Development Agency's recent evidence to the Select Committee on Welsh Affairs that the WDA,
"is increasingly requiring results to be achieved outside the relatively more prosperous areas of the M4 and A55 corridors".
The WDA has to encourage development right across Wales. That conclusion also emerges in the study, Winner or Loser in the New Europe, by Dennis Thomas of the Department of Economics, University of Wales, Aberystwyth, which was published early last year.
I shall not deal with the weaknesses in the Welsh economy, which were touched upon at Question Time today, but I should like to refer to two aspects of the Welsh economy. A number of speakers with profound knowledge and expertise of rural Wales will, I am sure, speak with considerable concern about the declining employment in agriculture, compounded by the BSE crisis and, in South West Wales, by the closure of

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refineries. I share those concerns and I shall, of course, welcome wholeheartedly any comfort which the Minister can give. Indeed, the answers given earlier by my noble friend Lord Williams of Mostyn seemed most encouraging.
I should like to say something about the industrial valleys of South Wales. The report published last year by Mr. Dennis Thomas, to which I have referred. concluded:
"The circumstances of many valley districts in industrial south Wales are critical and their prospects are still bleak".
I can recognise that scene. Indeed, last Saturday's weekend section of the Guardian identified one such district, the Gurnos Estate in Merthyr Tydfil. It is one of the largest housing estates in Europe. It was described as still suffering,
"the worst of the economic and social blight when the traditional industries of coal and steel were closed clown in the Eighties".
I shall not pray in aid the facts relating to the estate, in so far as they were facts, found by Mr. Justice Sachs in the Cardiff Crown Court earlier this year, except to say that it seems to me that he was describing a grave social situation where hope had been all but extinguished. I have little doubt but that the WDA had such an estate in mind when it reported to the Select Committee on Welsh Affairs that there,
"are individual areas of particularly high unemployment and socio-economic deprivation".
When asked how the Government can cope with the massive economic and social problems at the Gurnos Estate, I hasten to add that there is prima facie evidence that there are other large housing estates in the valleys of South Wales where the problems are just as great. The new Government have inherited this problem. The Welsh Office is working hard and consulting on the proposed economic powerhouse and the economic strategy for Wales. I very much hope that the Government will urgently press forward with analysing the very real needs of the valley communities and produce a solution.
Many concerns have been voiced by industry about the failure of the education and training system to deliver workforce skills and qualifications. This problem has been on the agenda for years. In his paper, Mr. Dennis Thomas cites examples. One major international company reported that only three out of 200 applicants for apprenticeships in Cardiff were suitably qualified. That story speaks for itself. To a disproportionate extent the unskilled make up the long-term unemployed. We must concentrate on making the unskilled skilled. The pursuit of economic and social progress is a vital aid to good government. We want policies that produce greater employment, prosperity, fairness and unity.
This brings me to the third aspect of the Motion; namely, the good governance of Wales. I believe that that is one of the fundamental principles on which the rule of law depends. I believe that an elected Welsh assembly will strengthen progress towards the social and economic goals that all of us have in mind.
4.22 p.m.
Lord Hooson: My Lords, the noble and learned Lord, Lord Simon of Glaisdale, has told me that he does not intend to take part in this debate. I mention it to indicate that there may be a little more time available to the remaining speakers. I reiterate the remarks of the noble Lord, Lord Prys-Davies, in welcoming the noble Lord, Lord Roberts of Conwy, and congratulating him on his position on the Front Bench. A lifetime of political differences has never separated us in our personal friendship. We look forward very much to his contribution to this debate.
I congratulate the noble Lord, Lord Crickhowell, on his wisdom in finding such a wide subject for the Motion before the House today. After all, the House of Commons has spent the past two days considering the good governance of Wales within the UK. I do not intend to follow that line at this particular moment. I shall concentrate on the so-called economic and social progress in Wales particularly as regards rural areas.
I declare an interest. I am a hill farmer and I live in the heart of rural Wales. My area and similar areas in Wales have been plunged into despondency by the crisis in agriculture, the bedrock of the rural economy. In my judgment it has been aggravated by government measures that show little understanding of the real factors involved. If the present state of affairs is allowed to continue unalleviated there is a foreboding of disaster for areas such as my own in Montgomeryshire. One must remember that the slump in the 1920s, as opposed to the later slump, began in agriculture.
Farmers and their families, shopkeepers, butchers, those involved in the web of supportive and dependent industries like machinery manufacturers, suppliers of agricultural tractors, cars, etc.—all those whom I meet when I return home every weekend—tell me that they are feeling the pinch. Banks are restricting credit to farmers. In particular, younger farmers who have borrowed a great deal of money are up against it. They wonder whether this winter it will be possible for them even to feed their breeding stock because they do not have the resources to do it. From today's events in the other place and the lobbying and canvassing in Parliament Square as we came here, we know about the Government's much-vaunted policy of moving people from welfare into work. Unless the Government show greater appreciation of the nature and depth of the crisis in the rural economy, aggravated by the rumoured closure of rural manufacturing industry including that in my own area, they may soon be presiding over a programme in rural Wales of work-to-welfare. What people there require are not incentives to work—because the employment figures show that they always find employment if they can—but guarantees and safeguards to preserve the sources of work.
The basis of the current farming situation is, first, the BSE crisis. I expressed the view in the previous Parliament that this was dealt with in a hopelessly inept and unenlightened way by the previous government. They aggravated the problem that arose from that crisis. Secondly, because of the strength of sterling this year beef and lamb imports have been sucked into our

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country because it is a lucrative market to those who export to this country. It also means that lamb exports from our country to Spain, Italy, France and so on have become prohibitively expensive for importers in those countries. Recently, an exporter told me that a lamb had to be at least £12 cheaper in the market this year compared with last year for the foreign importer to have any hope of buying it at a reasonably economic price. Thirdly, the crisis has been aggravated by inept government reaction which has proved to be the final straw for the patience and hopes of many farmers and their dependants.
BSE was a great misfortune. A very strong pound—there are arguments against it—is something of which farmers like the rest of the business community must bear the brunt. Sometimes it works in your favour, sometimes against. But the other factors are brutal and unnecessary wounds inflicted without due thought or consideration by the Government's own action. BSE is experienced throughout Europe and in other countries to a greater or lesser degree. It is now accepted that probably only Australia and New Zealand do not have BSE. We are importing beef from those countries where the safeguards come nowhere near the standard applied in this country. For example, how much of the beef now imported into this country comes from animals under 30 months of age? There is no means of discovering how much of the beef goes into prepared hamburgers for supermarkets. For example, some of them are prepared in the Republic of Ireland. How much of that comes from cow meat as opposed to animals under 30 months of age? How do those countries deal with the offal that cannot be used at all in our country? We have no means of knowing.
The Government have not provided a level playing field for the home beef farmers as opposed to their foreign competitors. This lies at the heart of the angry reaction of farmers which we have witnessed in the past fortnight or so. Surely, the restriction on British beef is in the interests of health. That should apply also to the importation of beef. British hygiene requirements and so on should be followed to ensure that imported meat meets the standards imposed here.
The decision to ban all but boneless meat is the final nail in the coffin. It appears to be a knee-jerk reaction. I shall quote from an article in The Times today, which gives the estimates:
"The scientists estimated that no more than three out of the 2.2 million cattle slaughtered for consumption next year might carry infection … they said there was a 5 per cent. chance that one person in the entire population might be infected with BSE by eating beef from these animals".
So the chance that anyone eating beef on the bone would contract BSE is roughly one in a billion! How does that justify the reaction of the Minister of Agriculture? What right has Big Brother to prevent British customers from exercising their traditional right to buy beef on the bone?
The additional costs of dealing with offal and paying for inspectors have been heaped on the farmer and the abattoir owner. Mr. Rooker recently made an announcement. The handout that accompanied that
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announcement claimed that British taxpayers would be relieved; that £40 million is to be provided by the farming industry to deal with the inspection of sheep, goats and cattle. That will amount to an extra cost of £1.44 per lamb next year and a similar increase for cattle. Of that £40 million, £26 million will cover the bill for sheep and £12 million for cattle. That is an extra cost.
Baroness Farrington of Ribbleton: My Lords, I wonder whether the noble Lord could keep to the time.
Lord Hooson: My Lords, I will. Next year the costs will be increased enormously. At the same time, there are no controls on imports to satisfy any of this country's public health requirements. I know that the Secretary of State saw a delegation of Welsh farmers recently. They were impressed by his reception of what they said. They suggested action that could be put into operation straightaway to try to help the farming community. In the interests of the Welsh rural community, something must be done to help very quickly.
4.32 p.m.
Lord Stanley of Alderley: My Lords, the Motion of my noble friend Lord Crickhowell calls attention to economic and social progress in Wales and how good governance can be maintained. At the moment, in north Wales the latter is in disarray. Like the noble Lord, Lord Hooson—I agreed with 90 per cent. of what he said, especially when he talked about the pedigree of the Holyhead-landed beefburgers—I shall consider how the Motion will apply to the farming community in north west Wales. Before doing so, I have to admit to farming in Anglesey.
As opposed to the scenario of south and east Wales, painted by my noble friend, farming in north Wales and Anglesey has changed relatively little. Indeed, the economy and social life have changed relatively little compared with, say, Oxfordshire where I also farm. The farms are small. They are owner-occupied. That has resulted in a different social structure which has relied, and does rely, much more upon the farming community than occurs in England.
If that community collapses, which it looks like doing today, the Welsh culture and language will suffer a blow. The Government may say, "So what?" I should be sad. The Welsh farmers' present unrest has been brought to a head by the collapse of beef and sheep prices—the only farming commodities produced in Wales. That has been due to the UK Government refusing to take up EU rebates, whereas all other hard currency countries have. The Irish, for instance, are £50 per beast better off than Welsh producers. This is a UK Government self-inflicted wound. It is no wonder that feeling is running high.
Although 99 per cent. of farmers are against violent or unlawful action, there has inevitably been some. It would have been much worse but for the restraining action of farmers' leaders and the commendable action of the North Wales police. The Government should not continue to rely on their remaining patient forever. I fear

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that the situation will be further aggravated by today's announcement that bones must be removed from lamb over 12 months. That is a final nail, if I may say so. Some action must be taken to alleviate the immediate problem of the playing field being unlevel.
Noble Lords may feel that the Holyhead action resembles the Boston tea party. There has been a total failure to understand the long-term problem of Welsh farmers. The Government should understand the rural way of life. Their attitude does not lead to good governance. It is more likely to lead to the Highlands clearance scenario, which is most unpleasant.
We were told by the Prime Minister before the election, and he has reiterated time and time again since, that he would listen, act and create a one-nation society. Sadly, and I fully recognise that the noble Lord, Lord Williams, does not fall into this category, the Government appear neither to listen nor to act when problems occur in the countryside. The Prime Minister sent no message to the countryside rally in Hyde Park, which was thoughtless to a degree bearing in mind that he had done so to homosexuals the week before. The Government appear to be taking a similarly thoughtless attitude to country sports. What is most important to me, they have deliberately made an unlevel playing field which gives the Irish producer £50 per beast more than the Welsh. They also, as the noble Lord, Lord Hooson, said allow in 30 month-old beef. I cannot understand that.
The Government appear determined to make those who work in the countryside second class citizens, further setting town against country. That has resulted in militant action by my neighbours, which I regret but fully understand. What else can they do when driven up against the wall? Do they join the already long dole queues in Holyhead?
A sorry state of affairs has not been helped by the Government's huge majority which has allowed them to ignore those of us who work and try to earn a living in the countryside, and north west Wales in particular. The Government are showing the worst face of democracy. Such an attitude will lead only to impossible governance. I fear that as the Welsh assembly will inevitably be urban-dominated it will not help. We must bear in mind, as my noble friend said, that only 25 per cent. of the electorate voted for it. I agree with my noble friend that your Lordships should not reverse that narrow decision.
The present unrest and picketing may well continue. My neighbours say that it will. It may well spread; indeed, it has. It was instantaneous in Anglesey. When it ceases, the criticism, the suspicion and, yes, the hatred will remain unless the Government take action to show that they understand our rural problems, both financial and social, as the noble Lord said. I know that the noble Lord, Lord Williams, understands that. I hope that he will be able to persuade his colleagues of our problems.
4.40 p.m.
Lord Aberdare: My Lords, I thank my noble friend Lord Crickhowell for giving the House the opportunity to debate Welsh affairs. Happily, I agree with everything he said, in particular about our attitude to the assembly.
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We must accept that there will be an assembly, but I was alarmed when I read the report of the Institute of Welsh Affairs, Making the Assembly Work. It did not sound as though itwould work in the way which the institute suggested.
The letter, published with the report, stated:
"The Assembly will operate through a complex network of committees. There will be at least nine Subject Committees… In addition the White Paper requires there will be a Secondary Legislation Scrutiny Committee, an Audit Committee and an unspecified number of Regional Committees…there will be a European Committee and…a Finance Committee…there will undoubtedly he sub-committees…there might he as many as 30".
I believe that we would be in danger of creating a juggernaut if we were to go down that path.
In my brief intervention, I wish to speak, under the social progress heading, in particular about the problems of young people in Wales. Although they suffer from the same problems as young people in this country, those in some localities suffer badly. I instance the former mining valleys of south Wales where youth unemployment is still at a totally unacceptable figure of almost 10 per cent. That is compounded by serious unemployment in the rural areas, as explained by the noble Lord, Lord Hooson, and my noble friend Lord Stanley. As a result, young people tend to move to the towns in search of work. The next problem that arises for them is that of homelessness. Even worse, they may take to drugs or alcohol in their disillusion.
A number of dedicated voluntary bodies in Wales are dealing with those problems. I do not wish to detract from their work but to point out that my interest is with the YMCA. I am honoured to be its president and I believe that it does an excellent job. Perhaps I may give an example. My nearest town in Wales is the small market town of Llandovery with a population of almost 1,400. It has 15 pubs. Until recently, they were about the only places where young people could go in their spare time. Now, thanks to the initiative of one young lady, Jill Tatman, there is a flourishing YMCA. She gathered around her a few young people meeting once a week in the school hall and formed a YMCA. It was immediately clear that she had hit on what was needed because many young people attended. Of course, one day a week in the school hall was not satisfactory. Now, thanks to generous sponsors and a grant from the National Lottery, she runs a very active YMCA with some 90 members three days a week in a refurbished church hall. There are many similar instances throughout Wales.
Nevertheless, the YMCA has considerable problems due, as always, to lack of funds. Each local YMCA is independent but is affiliated to the national council which offers advice and support. Each YMCA depends on one fully-trained youth worker who forms the catalyst around which there grows a circle of volunteers recruited and organised by him. Without such a central, full-time organiser, it is very difficult for volunteers to be recruited and used to the best purpose.
In some areas, we have found a helpful local authority to pay the salary of a full-time youth leader, but in others, unfortunately, we are not receiving the same level of support, in particular from the new unitary

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authorities. In fact, the Vale of Glamorgan and the Caerphilly councils have entirely withdrawn their support. That has resulted in the serious loss of four trained leaders.
Despite those difficulties, the YMCA is continuing to help young people. We have more affiliated clubs than at any time in the past 25 years and they are used by more members and regular users—approximately 32,000—which makes us the biggest organisation in Wales. We offer temporary homes for the homeless, training for the unemployed, no-alcohol bars to provide a social meeting place and a wide range of sports facilities.
Perhaps I may give Cardiff as an example. We run two direct access hostels near the city centre, providing accommodation, meals and support services, including job training. The YMCA caters for 120 men, women and children every day of the year and frequently receives referrals from social services, the Probation Service and other care agencies.
We are certainly not old-fashioned. In Llandrindod Wells, a grant from the National Lottery has resulted in a no-alcohol bar, fully equipped with information technology. There are four computers and ancillary equipment so that young people can browse the Internet for information on training, travel, jobs and leisure pursuits and can be linked with other young people "on the net". Some 35 young people use the facility four evenings every week.
A recent innovation which shows considerable signs of success is a YMCA partnership with the South Glamorgan Probation Service, originally funded for three years by the Welsh Office. The YMCA's participation is to provide an accommodation officer to develop a network of private landlords or landladies willing to offer accommodation to young people on probation. More than 100 vulnerable young people have been successfully re-integrated into the community by this means and, I am happy to say, the South Glamorgan Probation Service has now agreed to fund the continuation of the scheme from April next year.
In conclusion, I wish to express our gratitude to the Welsh Office for its help and support. I hope only that any new Welsh assembly will be fully conscious of its responsibility for young people in Wales and generous in its support of the voluntary sector.
4.48 p.m.
Lord Thomas of Gwydir: My Lords, I do not claim to be up to date with the intricacies of Welsh affairs. Perhaps once upon a time I would have made that claim. It is now more than 27 years since I was appointed the first Conservative Secretary of State for Wales. My predecessors in that office were three great Welshmen. There was the redoubtable late Jim Griffiths; Cledwyn Hughes, now the noble Lord, Lord Cledwyn of Penrhos, who I was happy to see in his place; and George Thomas, who later became Viscount Tonypandy and who sadly died a short time ago.
I was in that office for four years. My Parliamentary Private Secretary was the noble Lord, Lord Roberts of Conwy, who I am delighted to see sitting on the
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Opposition Front Bench of this House. Shortly after came several successors. One was my noble friend Lord Crickhowell, who for eight years held office with great distinction and success. I know that the House is grateful to him for having introduced this Motion and for the splendid speech which he made.
On the whole, the speeches have been on the economic and social side of this Motion. I intend to deal more with the good governance of Wales. I accept what my noble friend Lord Crickhowell said, that we must now accept that the Government are going ahead with the assembly. Nevertheless, I find difficulty in accepting the value of that and I think it is quite right that one should express one's worry.
The Welsh Office, headed by a Secretary of State with a seat in the Cabinet, is now 33 years old. It is a tried and tested system of government which has served Wales well, as my noble friend Lord Crickhowell pointed out. What is proposed by the Government of Wales Bill is not only a diminution of the standing of the Welsh Office and the service it provides to all parts of Wales, but also the obvious ultimate demise of the Secretary of State as a member of the Cabinet.
I do not intend to debate today the issues raised by the Welsh assembly Bill. The Second Reading debate over the past two days in the Commons indicates how very contentious its passage through Parliament will be. All I shall say now is that it proposes a major constitutional change and that no responsible government should endorse such a change unless satisfied that it is the wish of the majority of the people of Wales.
The Government appreciated that their overwhelming election result in Wales, with the assembly in their manifesto, was not a sufficient indication of such support. Therefore, they legislated for a referendum. As the House knows, that referendum took place on 18th September. Shortly before that, Scotland had voted on a similar referendum and the result in Scotland undoubtedly demonstrated the wish of the Scots for constitutional change. The Government have every right to proceed with a Bill for a Scottish parliament.
The referendum result in Wales, however, was starkly different: 75 per cent. of the electorate did not support a change. I remind the House of the details of that referendum. About one-quarter of the electorate voted yes; about one-quarter of the electorate voted no. The yes vote secured a derisory majority of 0.6 per cent. Eleven unitary authorities voted for the assembly; eleven unitary authorities voted against. The authorities which voted against included the important areas of Cardiff, Monmouthshire, Newport and Wrexham. There was an overwhelming no vote along the Borders with England.
No one can say that the referendum established a settled will of the Welsh people, and to claim that the result was a mandate for a proposed assembly is not only wrong but irresponsible. To force through an assembly which three out of four Welsh voters failed to endorse is not only undemocratic but, I repeat, irresponsible. The Government threw everything into their campaign for a yes vote. They ensured that there

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was inadequate debate. But their campaign lost steadily throughout the referendum. I am sure that the Government know that had there been a vote a week later, the result would almost certainly have been a no vote.
The morning after the referendum result, the Prime Minister admitted that the Welsh people had genuine concerns about the Government's proposal and he promised to address the fears that had been expressed. He appears to have broken that promise. The Government, with their large majority, are determined to force the Government of Wales Bill through Parliament. So be it. I forecast that in its passage through Parliament the imperfections of the Bill will be increasingly exposed and the concerns and fears of the Welsh people will be increasingly apparent. I predict that the Government may then be forced to do what happened in 1979 and have a post-legislative referendum. We shall then know what the people of Wales really think.
4.56 p.m.
Lord Geraint: My Lords, this is the first time that I have had an opportunity in this House to thank the Government. I am a proud Welshman and I am delighted that at last we are to have a Welsh assembly in Wales. Again I thank the Government for putting those proposals before us. I am delighted also that less than 25 per cent. of the people of Wales voted against the proposals at the referendum.
Before I turn to agriculture, I must declare my interest. As your Lordships will be aware, I am a worn out and tired farmer. However, I must blame the previous Conservative Government for their mishandling of the BSE crisis last year, which is the main cause of the disastrous decline in farmers' incomes. For the agriculture industry it was one of the greatest political blunders of all time.
The present Government are not very forthcoming either. What proposals do they have to help the industry in its current crisis? In my view, it is impossible for our farmers to compete on equal terms with their counterparts in Europe and I hope sincerely that the Government will see sense by taking immediate action to tackle the desperate situation.
First, I suggest that the Government should increase the price they pay per head of cattle under the cull scheme. Before BSE, a 10 hundredweight fat cow was worth approximately £520. Early this year the price dropped to £410. The present Government have seen fit to decrease the price further to a mere £310. Do the Government honestly believe that farmers can survive on such a paltry return?
In my view, leading supermarkets control the future destiny of Welsh agriculture. Many people may disagree with me, but, if I am right, I urge the Government to have more consultations with the chairmen of the leading supermarkets forthwith. Perhaps the Prime Minister inadvertently misinformed the other place last week when, in reply to the leader of my party, Paddy Ashdown, he said:
"This year, with the over-30-months scheme and other measures, some £1.4 billion will be spent on providing support".
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In my view that £1.4 billion does not support Welsh or British farmers at all. That is the amount of money paid to farmers for compulsory slaughtering of cattle over 30 months. Therefore, it is in no way a support or any measure of help to the industry.
I turn now to a few more facts. I have with me comparative figures for stock prices at auction sales in Wales for the first week in December for the past three years. It is no wonder that the farmers are going to the ports and rallying support. In 1995, beef cattle sold at 116.38 pence per kilo. By 1996, the price had decreased to 106.34 pence per kilo. Worryingly, by the end of last week, the price had gone down to 91.39 pence per kilo.
I shall move on to the price of fat lambs. In 1995, they fetched a price of 120.34 pence per kilo. In 1996, it was 135.46 per kilo. By last week, prices were down to 93.65 pence per kilo. Moreover, calf prices are down approximately £100 per calf on last year. At the farm gate, the milk price was 25 pence per litre whereas it is 19 pence today. On the other hand, milk doorstep delivery in rural Wales is approximately 70 pence per litre. Perhaps I may advise the Minister to have a word with the chairman of Milk Marque, and other organisations, regarding the big difference between the purchasing and the selling price of milk. I honestly believe that the dairy farmer will be squeezed out of business unless the Government intervene soon.
I should like to ask the Minister a few questions, which I hope he will be able to answer at the end of the debate. First, what steps are the Government taking to support the dairy industry in the short term? Secondly, have the Government made an assessment of the impact of both the strength of sterling and of the green pound on farm incomes? If so, what are the conclusions? Thirdly, what plans do the Government have to restore confidence in the sheep industry and among hill farmers in particular? Fourthly, what progress has been made, if any, on lifting the European ban on the export of British beef? Further—and this is a most important question—why have farm incomes dropped by nearly 40 per cent. this year? Do the Government intend to compensate British farmers from the EC fund? If not, why not? I have been told that the Government of the day have until 15th January to apply for that money.
In my view, the Government must take steps to compensate farmers for the adverse effect of the green pound. Every other European government have understood that it is necessary to compensate for movements in currencies. Why must our Government stand out against it? Why go to war against the farming industry when it is well known that the whole economy of rural areas, especially in Wales, depends on its survival?
I turn away from agriculture for a moment. I should like to take this opportunity to pay tribute to the excellent work carried out by the Development Board for Rural Wales. It has achieved so much in terms of jobs and investment in mid-Wales. I congratulate the current chairman, David Rowe Beddoe, on his contribution. I am still not convinced that the work of the board should be taken over by the WDA, or any other organisation. I regret the fact that the Government

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of Wales Bill sets out to transfer its powers. Why the hurry? I believe that it should be the job of the Welsh parliament to consider the future of the Development Board for Rural Wales and to evaluate its work in the context of the new government structure in Wales.
I have been involved in local government at national and local level. When I entered politics as a county councillor in 1952, we considered the disastrous figures regarding the population of Cardiganshire at that time. According to the census, in 1901 there were 61,078 people living in Cardiganshire. By 1951, the population had decreased to 53,278. However, because of the excellent work of the development board, by 1991 the population had increased to 63,940. By 1996 it had increased to 69,545 and today it is over 70,000. That is indeed an achievement on the part of the Development Board for Rural Wales. I honestly believe that the Government should consider leaving the board as it is until we have our own Welsh parliament.
I have a few further matters to raise. When first elected, I remember calling for the restoration of the railway line between Carmarthen and Aberystwyth. I do not believe that it is too far fetched to reconsider the feasibility of that route. I also urge that government encouragement should be given to the improvement of the rail routes between Machynlleth, Tywyn and Pwllheli as well as the mid-Wales lines. There are also the Dollgellau-Bala, and Wrexham routes, all of which are particularly valuable to the tourist trade.
Baroness Farrington of Ribbleton: My Lords, perhaps I may remind your Lordships that there is insufficient time to allow noble Lords to overrun the eight-minute limit allocated to each speaker. I have carefully checked the position with the Clerk. However, while speaking, perhaps I may declare an interest as someone who would use one of the railway lines to which the noble Lord just referred.:
5.5 p.m.
Lord Griffiths of Fforestfach: My Lords, it is a great pleasure to take part in today's debate on Wales. It is indeed a timely debate and, like others who have spoken, I should like to express my gratitude to my noble friend Lord Crickhowell for introducing the Motion. It is also a pleasure to follow the noble Lord, Lord Geraint, whose wisdom and knowledge of Wales I greatly admire. I know very little about farming. However, after listening to noble Lords this afternoon who do know something about it, the recent behaviour of farmers became readily understandable to me. One does not think of farmers behaving in that way.
As the Motion is so far ranging, I should like to confine my remarks to the good governance of Wales and, in particular, to some issues raised by the referendum vote on devolution and the proposed national assembly for Wales. The reason I said that it is such a pleasure to take part in the debate is that I strongly support the proposal to establish a national assembly for Wales. I must be frank and say that, in the past, I have had reservations on devolution: that is partly because it would he the creation of another tier of
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government; partly because it could easily become a body dominated by old Labour; and partly because I thought that it could put in jeopardy the ultimate sovereignty of the Parliament of the United Kingdom.
However, I have changed my view, although I recognise that there are still issues which need to be addressed. In my judgment, the critical question which must be answered is: are the people of Wales better governed with an assembly than without one? I believe that they are for a number of reasons. First, the assembly will provide a better and more informed debate on Welsh issues because there will be more people involved in that debate with first-hand knowledge of Wales and there will also be more time than there is at present to discuss such issues. In addition, the assembly will also mean that all those unelected bodies in Wales will be required to be more transparent and accountable than they are at present. I cannot help but think that that was one prospect which spurred on the movement for devolution. Most important of all, I believe that the very existence of an assembly at the heart of Welsh political life must strengthen the identity of Wales and its language which, in my judgment, are important, if not critical, for the preservation of Welsh culture.
Like my noble friend Lord Crickhowell, I believe that we on this side of the House, despite the small size of the majority in favour of a Welsh assembly, should accept the result and not seek to re-open the debate over devolution. Naturally I would have been happier if the turnout had been higher and the majority greater. But in view of our poor showing in Wales at the previous general election, even if we thought it right to do so, we frankly have a rather weak basis on which to mount an opposition platform. I believe therefore that Wales has for too long been a kind of sidecar to England and has gone in a direction and at a speed which was not entirely reflective of the wishes of Welsh people. This, I believe, is an historic opportunity to put that right.
However, while I strongly support the Government in their proposals to create a national assembly for Wales, that does not mean that I do not have real concerns. One is that in the current euphoria over devolution it is important to recognise the limits of what the assembly can achieve according to what I have read in various documents and heard in debate. Take, for example, the issue of job creation. Jobs are most effectively created in free markets in which investors and business people are prepared to take risks and are allowed to make commercial decisions with minimum regulation, restriction, bureaucracy and so on. The evidence we have from the United States—the most successful economy in the world in terms of creating jobs—is a good example of that. Of course the Government—in this case Westminster—have an important role to play in maintaining low inflation, low interest rates and low taxes; but it is business left to itself which creates jobs.
However, as I read the White Paper, and the role it envisages for an enlarged WDA—what it calls "the new economic powerhouse"—and the role of the assembly in laying out the new economic agenda for Wales, I could not help feeling that it was government not private enterprise which was to be the engine to create jobs and prosperity in Wales. Frankly, I have to say that

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I am sceptical of that. It seems to me that the one thing which the Welsh Assembly can do is to raise standards in schools and to put something in place—which we have never succeeded in doing in these islands of ours—to replace the old apprenticeship system. There it could really help in job creation and wealth creation, but I feel that the role of the assembly is limited.
Another concern I have relates to other forms of devolution: grant-maintained schools, hospital trusts and housing action trusts, all of which I was intimately involved with when I was head of the Prime Minster's policy unit. With all their shortcomings, I nevertheless believe that they have great strengths at least partly because they were an exercise in devolving power and responsibility to local communities and those more closely involved in schools, hospitals and housing. However, I recognise also that striking the right balance between the powers of the assembly, the powers of local government and the powers of these other bodies is not easy. In the White Paper there is an absence of discussion of that; there is much too much emphasis on the power of the assembly in partnership with local government.
My final concern has to do with the impact of the assembly and the Scottish parliament on England. We dare not underestimate the historic significance of the effects of Scottish and Welsh devolution on the United Kingdom. These proposals mark a decisive step forward but it is into uncharted territory. The dangers of an English backlash need to be thought about seriously. I am not sure that I fully understand the Government's proposals to establish regional development agencies and regional chambers. To the extent that I do, I doubt whether they fully answer the problem I raise. The transparency in calculating the block grant is welcome; but answering the problem may well involve more radical proposals regarding England in which for the first time we may have to face up to the issue of federalism.
I conclude by saying that despite these reservations, I still see great value in the national assembly. I believe that Welsh people are naturally rather conservative. I fully expect that through the elections to the assembly we on this side of the House may be able to capture that sentiment not only in the interests of our own party but also in the interests of Wales.
5.15 p.m.
Lord Elis-Thomas: My Lords, I, too, endorse the thanks that have already been conveyed to the noble Lord, Lord Crickhowell, for initiating this debate. We have had a wide-ranging discussion of social, economic and governance aspects. I shall throw in a few comments about sustainability and the environment because I think that relates to them all. Before I do so, I thank the noble Lord, Lord Griffiths of Fforestfach, as it was a great pleasure to be present at the public confirmation of his conversion. I mean that seriously because to have the head of the policy unit at No. 10 extol the virtues of the national assembly while also warning us of the practical problems that we face in relation to the role of Welsh business is an important contribution to the debate. I thank him for it.
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It will be no surprise to your Lordships that I want to support what has been said on behalf of my older and newer neighbours in the farming industry in my previous constituency, Merionnydd Nant Conwy. I wish to support what has been said already in relation to agriculture. We are now of course back where we were 23 and 24 years ago with the crisis at Holyhead. Those of us who have been concerned at the development of commercial relationships between Ireland and mainland Europe across Wales are deeply saddened by these events. But we must understand that we must support our farming community which is suffering a reduction of 37 per cent. in farm incomes according to official figures last week. Indeed the reduction is 47 per cent. if we include the family labour within the industry. The Government must address this issue urgently.
We know what the problem is. It concerns the strength of the pound, the green pound mechanism and the UK rebate. The noble Baroness, Lady Thatcher, when Prime Minister, negotiated rebate. What we now see is a direct consequence of those rebate arrangements. The UK Government cannot say, on the one hand, that they are proud of the rebate understanding achieved with other Community countries while at the same time denying British farmers the opportunity of competing on the same basis in terms of the level of income.
Currently the Irish Government are paying £25 million to their beef, dairy and cereal farmers, with a further £68 million coming through the European Union. Where is this Government's responsibility for one of our most important of managed industries? Agriculture, after all, is a managed market. The role of the public sector both at member state level and European Union level in managing this market is absolutely crucial. The member state of which we are a part—the United Kingdom Government—cannot deny its responsihility. Those Ministers, including the Prime Minister, who lecture Welsh farmers about their moral responsibility should look to their responsibility. There is no need for that kind of lecture. The people who work in agriculture in rural Wales are people of the highest moral calibre whose contribution to maintaining the integrity of our rural life should not be gainsaid by any government. The Government should realise the depth of this crisis.
I pay tribute to the Secretary of State for Wales because he has tried to negotiate in Cabinet and certainly in discussion with farmers. Mr. Ron Davies, as Secretary of State, laid the foundation stone of the magnificent National Botanic Garden of Wales at Middleton Hall in Llanarthne in Carmarthenshire on Friday. While standing in the middle of that magnificent Carmarthenshire countryside, where I hail from, the Secretary of State said that the landscape was a symbol of the important contribution that Welsh agriculture has made to the environment. He indicated his commitment to the environmental contribution of the farming industry. I hope that his colleagues in Cabinet will respond in a similar way. I mention the National Botanic Gardens and the environment because they link with my other theme; namely, the need to look for sustainable development in the context of the Welsh economy and

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society. That is unfortunately missing from the Government of Wales Bill which has had its Second Reading in another place.
It is important for us to be clear on the issues of inward investment. We are concerned about the recent discussion in the media on the concordat between the industry department and the Welsh Office in relation to inward investment. There must be a strengthening of the existing COP procedures in terms of overseas promotion—we understand that—but there must also be a clear balance of regional interests in the whole field of inward investment. The role of the WDA in this area must not be reduced in any way as the new assembly progresses. That role of inward investment relates also to the whole question of sustainable development and the effective balance of such investment both geographically and in terms of sectors of industry. I emphasise the importance of the environment technology industries. We have recently seen the important growth at Bridgend of one of the industries related to solar cellular technology. Its importance to the future of the Welsh economy cannot be overemphasised.
Sustainability also includes the need to emphasise a general environmental duty on the assembly. When the assembly is established it must have a remit not only for the social, economic and cultural well-being of the Principality but also for those environmental overviews which relate clearly to the European Union and its increasing environmental obligation for the whole of Europe as we move towards enlargement.
That brings me neatly to the issue of governance. I was not a little pleased to see the form of words by which the assembly is now being christened. Noble Lords will remember our debate on the Third Reading of the referendum Bill on 29th July when we discussed the nomenclature of a national assembly. I received wide support from all sides of the House. I am grateful to noble Lords for their support. We now have such a description.
I move from the nomenclature to the reality. After long and careful consideration, I have decided to come down in favour of Swansea. That should not surprise many of your Lordships who know that I was born in Carmarthen. I believe that a national assembly has to be a national institution. I think of a national assembly in that magnificent Guildhall building, with the wonderful surrounding scenery of Swansea Bay, but with the important links of technology throughout Wales and other public centres. I am impressed by the case for Aberystwyth to be the on-line equivalent of the Library of Congress for the national assembly. I am impressed by the suggestion of the Secretary of State in the consultative document that there should be centres in Aberystwyth, Bangor and even Cardiff and Mold, to provide links with the assembly. All this is at a capital cost of £10 million and a running cost of £2 million to £2.5 million.
More than that, I am impressed by the commitment of Swansea. I walked through Swansea the other Friday, by accident or design, and there was Vivienne Sugar, the chief executive of the City of Swansea, signing people up for a petition to have the assembly in
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Swansea. Although I have great respect for both the chief executive and the leader of Cardiff, I cannot imagine them standing in shop doorways requesting signatures for petitions.
That indicates to me the enthusiasm of Swansea. Swansea is only 45 minutes by high speed train from Cardiff. It has all the necessary links and the building. It will be a sign that we are not about creating a 19th century nationalist state in the City Hall in Cardiff, with its magnificent statues of Llywellyn, Owain Glyndwr and the rest of them. I have no interest in creating a Wales of the 19th century. I want a Wales of the 21st century. Swansea seems to me to be its capital.
5.23 p.m.
Viscount St. Davids: My Lords, I thank my noble friend Lord Crickhowell for giving us this opportunity to debate Welsh matters this afternoon. I ask for your Lordships' indulgence if much of what I have to say lies outside the intended interpretation of the Motion, but I would not make this speech if I did not believe it to be of importance to Wales, and to one of its institutions in particular. I have to declare an interest as I am both a member of the Council of the University of Wales, Lampeter, and a governor of the Welsh College of Music and Drama.
The Prime Minister has put at the centre of government policy "education, education and education". The former Prime Minister, my right honourable friend Mr Major, wished to create a "classless society". In Wales we have long known that the classless society is born in the classroom; that the pathway to personal advancement and fulfilment is through education. Thus in Wales we have an education system in our primary and secondary schools and in our universities of which we are justifiably proud. Wales is, of course, also the land of song, of music. These two themes, education and music, take me into the heart of what I want to say today.
In the wake of the recent Oxford and Cambridge debate in your Lordships' House, no Member need be embarrassed by special pleading; and my plea this afternoon concerns one of our national institutions—a plea from poverty and not from wealth. I know that you will all share my dismay when I tell your Lordships that I have to call into question the financial viability of the Welsh College of Music and Drama. Unless the Higher Education Funding Council for Wales has a radical change in its funding policy, the Welsh college will not survive beyond the period for which students have already been enrolled. As our national assembly opens its doors, so will the Welsh college close its doors and thus Wales will enter the new millennium with a new system for its government but without the ability to teach that for which it is most famed.
To start my story at its beginning requires a brief history of the college, for in that history lie the seeds of today's tragedy. Founded in 1949, the college was at first situated in Cardiff Castle and moved to its present purpose-built premises in 1974 when its administration passed from the City of Cardiff Education Authority to the County of South Glamorgan. During 1991–92 it was

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controlled directly by the Welsh Office, and since 1992 the college has been funded by the Higher Education Funding Council for Wales. It is from this period that our problems arise; they have their origin in the comparison that the funding council made when deciding upon the level of funding per student.
The cynical, or perhaps the realist, would say that the council chose the cheapest option when it decided upon Rose Bruford, drama, and Trinity College, music. The most direct comparison would have been with the Royal Scottish Academy of Music and Drama. In the current year the Welsh college receives £4,600 per funded student; the Royal Scottish Academy, £5,989; the Royal College of Music, £8,230; and the Royal Academy of Music £10,327. The two London colleges have around 400 students each and the Welsh college 494. To be fair, the two London colleges do not also teach drama. Your Lordships will note that the Welsh college receives £1,389 per student less than the Royal Scottish Academy, equal to 30.2 per cent. of its present grant from the funding council.
The history of the college shows that at no time could any surplus fat have been built up. Over the past four years the college has achieved efficiencies against the RPI of 18 per cent., a period in which the income per student has fallen by 2.4 per cent. The total budget for the current year is £3,695,000 of which the funding council provides £2,268,000. If the funding council were to add £250,000 to its current grant and maintain the total in real terms, the Welsh College of Music and Drama would survive and flourish. Without that commitment, I would have to advise my fellow governors that the college should have no commitment to a student beyond the year 2000.
The first call by the accountants in the funding council to merge has been heard. Little do they understand the nature of an institution that teaches the playing of music or the teaching of the dramatic art. No merger of a conservatoire into a university has ever worked. If the funding council doubts this assertion, it should study the recent Australian experience and also talk to those who teach the performance of music and to those who teach the theory and history of music as an academic subject. No, I do not suffer from the Mandy Rice-Davies syndrome. If I thought that the college would survive within the framework of one of our Welsh universities, I would most certainly say so.
The loss of identity and the loss of mission will ensure a rapid decline in enrolment. Let us not forget that students are intelligent young people who will now have to make a substantial contribution to their study. Why should they choose to attend a college which is funded at a lower level than one in England or Scotland and one that a merger would define as a hybrid?
I pray that the noble Lord, Lord Williams of Mostyn, does not think for one moment that I blame the Government, for this is a problem which they have inherited. I know that what I have said about the college will cause him personal grief, and I wish to place on record the great service that the noble Lord has given to both the Welsh College of Music and Drama and the University of Wales. The service that I ask of him today is to bring these matters to the personal attention of his
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right honourable friend the Secretary of State. Your Lordships are among the foremost opinion formers in Wales. I ask you, too, for your aid.
I thank your Lordships for your indulgence and again apologise to my noble friend if I have used today's debate for a purpose other than that for which it was intended.
5.30 p.m.
Lord Harlech: My Lords, I am grateful to my noble friend Lord Crickhowell for initiating this most important of debates. The subject is one about which I care deeply. Before I continue, I should he most interested to know from the Minister whether the Welsh Office has intentions in progress of making cross-party appointments to the committee on the Welsh assembly; and if so, how advanced those plans might be. Perhaps he will write to me.
In principle, I shall restrict my contribution to the rural economy of Wales, my interest being declared as a farmer and landowner in the Principality. I was born there; I live there; and I shall probably die there.
The rural economy of Wales is, by definition, an inter-connected socio-economic structure consisting of farms, markets, towns, transport, goods and services. education and health. Enormous numbers of citizens are affected.
A sustainable economy—social progression—relies on an inherent sense of security that all businesses and the people affected thereby are reasonably assured of profitability as a result of a policy which initiates their long-term trust in the investment they make. Assured security and profitability, my Lords. Tentative support is not the right way.
Let us take, for example, the slow and tortuous decline of the British fishing industry, or of mining, and the effects on communities. I do not say that this would happen, but it could be argued that the removal of subsidies and support might give rise to an economic-driven effect of, for example, much larger agricultural units, cheaper land and property prices, and efficiency without support. Or it could be argued that a drip-fed system of support would not sustain, but would deplete, an economic system. If, for example, it had been judged prudent last century to invest in support of, for instance, the wheelwrights industry, then making tens of thousands of wooden wheels—the point is obvious; the metaphor is clear—it would now be an embittered and depleted profession, and therefore extinct.
I therefore urge that the jeopardy to profits and income, indeed to social cohesion, means that today we must, and will, make clear, workable policies which encourage human endeavour rather than defeat it by marginalisation, and which allow the investments of today to reap benefits tomorrow for a proud people and a beautiful country.
5.33 p.m.
Lord Thomas of Gresford: My Lords, I thank the noble Lord, Lord Crickhowell, for introducing this vital debate. I welcome his commitment to making the assembly work and to accepting the result of the

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referendum. I join with him in hoping that the assembly will be a strong assembly and that there will be clarity of responsibility and members of quality to serve in that assembly.
The noble Lord, Lord Elis-Thomas, made a pre-emptive strike for Swansea. The people of Cardiff should realise that if you do not live in, or come from, Cardiff, there is no particular emotive drive for the assembly to be situated there. They should bear that in mind. No doubt the noble Lord, Lord Crickhowell, will put in a plea for Crickhowell House in the bay there, which I understand is one of the proposed sites.
I have to disagree with the noble Lord, Lord Thomas of Gwydir. It causes me some pain to do so since I have the same warm regard for the noble Lord as I am sure all noble Lords have, and I recognise his great contribution to Wales. He spoke about the value of the assembly. It occurred to me that had there been an assembly where the problems of Welsh farmers could have been openly discussed and openly aired months ago. where the crisis could have been foreseen, we should not all have been taken by surprise when farmers found that the only way in which they could draw their plight to the attention of the media in this country was to throw hamburgers into the harbour at Holyhead. I know that those farmers, led by a friend of mine, Peter Rogers, would not wish to behave in that way. It was a course to which they were driven. As the noble Lord, Lord Griffiths of Fforestfach, said, now it is readily understandable. Had there been an assembly the situation would have been understandable months ago and the problems faced by those farmers would have been aired to the public as a whole. They were discussed by the two hill farmers who surround me, the noble Lords, Lord Hooson and Lord Geraint. I must congratulate the noble Lord, Lord Hooson, on obtaining a first position at the Royal Welsh Agricultural Show winter fair last week. I should tell your Lordships that a beast reared on the pastures of the noble Lord, Lord Geraint, also obtained a first. It will not surprise the House to know that the beast in the case of the noble Lord, Lord Hooson, was in the lightweight division while that of the noble Lord, Lord Geraint, was in the heavyweight division.
I do not share the picture presented by the noble Lord, Lord Crickhowell, of the current situation in Wales. It is rather like reading in the English press an account of a Wales-England game: you wonder whether the writers were actually watching the same game! Unemployment is consistently higher in Wales than the UK average. As was stated earlier, the GDP per capita is 83 per cent. of the UK average, a decline of some 5 per cent. since the Barnett formula was fixed. There are areas of prosperity, but they are patchy. They are to be found along the M.4 and A.55 corridors. Job creation and the safeguarding of jobs is urgently needed outside those areas.
Inward investment has played a vital role. One must congratulate successive Secretaries of State, the Welsh Office and the Welsh Development Agency on the enormous work that they have done in projecting Wales and obtaining that inward investment. However, the focus must not always he on inward investment.
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Certainly, that is important, but it is unlikely to continue for the foreseeable future, and for two major reasons. The first is the collapse of the tiger economies in the Far East and the need for those economies to rebuild themselves at home. The knock-on effect of bank collapses in Japan and the demise of large corporations in Korea is certain to engender a more cautious approach in most countries to investment abroad in places such as Wales. Even in Hong Kong—I am travelling there tomorrow—small cake-shops and large multi-stores owned by the Japanese have recently closed. So let us not expect that the Far East will come to our rescue for ever and a day.
The second reason is the weak-kneed approach of this Government to the decision on European monetary union. Toyota denies that that is the reason it has chosen to move to northern France rather than to expand in Derby. But is that truly correct? We have got rid of trade barriers within the European Union; but are we not erecting currency barriers, with all the uncertainties that they create? The strong pound is a disincentive to industry just as much as it is to agriculture.
Hence the vital need for the future economic powerhouse is to take decisions which will improve indigenous industry and put the necessary investment into that field. Investment is essential for creating the framework for development of indigenous industry; for reclaiming derelict sites and dealing with hazards thereon; for preparing the physical and industrial infrastructure; for co-ordinating local organisations and assisting in the setting up of businesses; and for communicating with training organisations to ensure that there is a skilled and adaptable workforce. No doubt that work will be carried through with the merger of the Welsh Development Agency, the DBRW and the Land Authority for Wales. The exciting aspect is that there will be a national assembly for Wales which will be able to give further focus, direction and leadership to that work.
The major priority of the national assembly will be to improve the economic prosperity of Wales. GDP per capita will be the touchstone by which the success of the assembly in this field will be judged. The noble Lord, Lord Griffiths of Fforestfach, need not fear. I believe that there will be a new self-confidence in Wales which will of itself encourage enterprising young people to come forward with ideas for the 21st century. But, as always with the entrepreneur, there must be support and guidance. They will need access to capital; they will need the help of the new economic powerhouse through its services, such as Business Connect, Source Wales, and so on. It is the creation of a new spirit of adventure in business in the economy which will enhance the identity of Wales and ensure a prosperous future for the Welsh people.
5.41 p.m.
Lord Roberts of Conwy: My Lords, there is no doubt that the entire House is grateful to my noble friend Lord Crickhowell for initiating this wide-ranging debate. I am personally very grateful to Members who welcomed me to the Front Bench and who participated in the debate.

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Not surprisingly in view of recent events, and particularly today's news from Brussels, agriculture has loomed large in the debate, almost every speaker having raised the subject. As the Minister acknowledged earlier, the farming community is very important to the people of Wales. Over 90 per cent. of our farms are livestock, and our farmers face hard times, with falling incomes as a result of the strong pound and the continuation of the BSE crisis. I hope that the Minister, who is shortly to reply to the debate, in his own eximious fashion, will be able to enlighten the House as to why the Government do not draw on the substantial Community funds which are available to help those farmers in greatest need, among whom, surely, the farmers of the Welsh uplands must figure prominently.
The contribution of my noble friend Lord Crickhowell to the development of the economy of Wales and the life of its people during his tenure of office as Secretary of State was truly immense, as I know well, having had the honour to serve under him throughout that time. I doubt whether that honour would have been given to me had I not served my apprenticeship as a PPS to my noble friend Lord Thomas of Gwydir when he was Secretary of State.
The initiatives which my noble friend Lord Crickhowell took and drove to fruition were astonishingly varied—social and cultural, as well as economic. But if I had to single out one achievement from the many to which he could properly lay claim, it would be the progress made during his time as Secretary of State in laying the foundations of the new Welsh economy and giving it the modern manufacturing base we are familiar with today. It was a difficult task, undertaken in difficult times, and Wales is greatly indebted to him for his indomitable zeal and spirited persistence in pursuit of his goal. Wales was the only region of the UK where the proportion of male employees in manufacturing rose and was higher in 1995 than it was in 1981.
No man can be paid a higher tribute than that his successors should follow in his footsteps, and that is what happened when my noble friend left office in 1987. My noble friend Lord Walker of Worcester, who brought his own inimitable talents, energy and flair to bear on the problems of Wales, was succeeded by my noble friend Lord Hunt of the Wirral, whom I am glad to see in his place. Both of them strongly promoted inward investment and sought to strengthen Welsh small and medium-sized businesses by encouraging their efforts to secure orders in export markets worldwide. Much the same policies were pursued by their successors, culminating in the huge Korean investment by LG in Newport. I very much hope that that projected investment is safe, in spite of the financial problems in Korea.
It is clear from the thumbnail sketch that I have given and from what others have said during the course of the debate that the main thrust of the Conservative government's policy in Wales over the past 18 years was to promote economic development on a sound and profitable basis. That was complemented by very substantial investment in infrastructure of all kinds.
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We had some solid success in those endeavours. Wales no longer depended for its prosperity, as it did in 1979, on heavily subsidised, nationalised industries which, as the last Labour government realised only too well, were becoming unbearably uneconomic and more anachronistic by the day.
None of us who participated in government during that time would claim that the transformation which we had promoted was complete. There was and still is a great deal to be done to improve the condition of the Welsh people. What we now fear is that the priority which we attached to that task has somehow been displaced by constitutional reform.
We had a foretaste of the constitutional debate in some notable speeches—by my noble friends Lord Crickhowell, Lord Thomas of Gwydir, Lord Thomas of Fforestfach and others. All I shall say on that issue is that we surely have to accept the referendum result. Even though the majority in favour was small, there was a majority in favour. A majority of one is enough. If I may put the opposite point of view, one thing is certain: the decision arrived at by the Welsh people in that referendum cannot be overturned.
It is obvious that the Government of Wales Bill, which the other place has been discussing for the past two days, will be the subject of considerable discussion in this House. I am also impressed by the fact that it will fully preoccupy the Secretary of State for many months to come, and possibly for years. Even assuming the successful passage of the Bill through Parliament that a large Commons majority and a manifesto commitment usually ensure, the implementation of the Bill and getting the assembly bedded down in proactive, worthwhile work will take a great deal of time. I am not sure that that is time which the Welsh economy can afford if it is to be improved as we all wish.
Many issues arose during the course of the debate and I hope that the Minister will be able to enlighten us as to the nature of the competition for inward investment between the regions in future and the concordat under central control by the Department of Trade and Industry. The position is unclear, to say the least, as the noble Lord, Lord Elis-Thomas, indicated.
We would also look for some comment on the future of the Barnett formula. Even the noble Lord, Lord Barnett, suggests that it may be time for Barnett formula mark II. I do not believe that he is totally inspired by an aspiration for political immortality when he calls for that formula. After 20 years the circumstances of the different regions have changed and the changes should be taken into account in any re-examination of the formula.
There is a great deal of talk about promoting the growth of indigenous business. I am all for that if it is done on a sound basis. We heard today at Question Time what the Government proposed to do about the comparatively low GDP in Wales. If this debate achieves nothing more than to instil a sense of urgency into the need to raise standards of living in Wales and the levels of prosperity among Welsh people, it will have been well worth while.

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However, with a lower rate of economic growth anticipated in the United Kingdom as a whole over the next three years, the prospect of declining support from European structural funds following enlargement of the Community and reduced inward investment from the Far East, to which the noble Lord, Lord Thomas of Gresford, referred, I am not sanguine about our prospects. As ever, I remain hopeful that things will turn out better than I feared. But one thing is certain. Wales will be clearly dependent on its own endeavours, on its own efforts.
5.52 p.m.
Lord Williams of Mostyn: My Lords, the noble Lord, Lord Crickhowell, made a remarkable introductory speech. As always, it was disciplined, focused and rigorous. I say it was remarkable because I found much in the content with which I could agree, and these are not the usual cosmetic thanks I offer to the noble Lord. It occurred to me that if the Welsh assembly had one-tenth of the ability and quality reflected in the speeches this evening, it would be doing rather well in its first year or two.
I entirely agree with what has been said. This is an extraordinary opportunity for a country. I take the noble Lord's words: confident and optimistic. It is an opportunity for which many people in this House and outside have worked for far longer than I. Ultimately everything depends on the quality of the membership. Whatever regime is adopted, after whatever degree of scrutiny in both Houses, it is the nature of the members which will matter.
I must hark back to what was said on behalf of the Government in a constitutional debate two years ago; that is, that we deliberately set our minds not to produce a consequence which would have been monolithic Labour. We know perfectly well the disadvantages of what had virtually become in many parts of Wales a single party regime. As the noble Lord indicated, the Conservative Party, despite having 20 per cent. of the Welsh vote in the last election, has no Welsh MPs. Under the present scheme, on any sensible construction of the model, if the Conservative Party obtains 20 per cent. of the votes for the new assembly, it will have 12 seats; in other words, a perfect accommodation between the number of votes and the number of seats.
I do not want to dwell on this, but there was a time when the Conservative Opposition were rather niggardly in their acceptance of what was undoubtedly to happen. It is not only for this evening that I welcome what was said by the noble Lord, Lord Roberts of Conwy. As long ago as early October he and I were interviewed on the same programme on Welsh radio. He said in early October—not a late convert—"I want to see an effective assembly properly run, efficient and really responsive." It is a great benefit to the constitutional arrangements of new Wales that we have the official constitutional spokesman for the Conservative Opposition from the Front Bench making his support as unambiguously clear as he did.
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We have an opportunity to run our affairs differently. We can use modern technology in the ways described generally by the noble Lord, Lord Elis-Thomas. There is no reason to be static; to have a system to which we are all accustomed on the Westminster pattern. Some would say—whisper it low—that the Westminster pattern does not always produce perfect solutions.
The major aspect of this evening's debate focused on farming. I reiterate what I said in answer to the noble Lord, Lord Roberts of Conwy, earlier at Question Time when time was short. We regard the interests of the farming community in Wales as extremely important. It is not the simplistic comment that jobs are involved; it is infinitely more important and subtle than that.
The farming community in Wales is a significant cultural underpinning; and the linguistic heartland of Wales in many areas depends on the farming community. They are decent and good people and one sympathises with what has driven them to their present unlawfulness. There is no one in government who does not sympathise. Your Lordships will rightly say that sympathy pays no bills.
I am obliged for the comment about the Secretary of State. He is taking forward discussions as vigorously as he can. The Secretary of State issued his statement deprecating unlawfulness. He met the farmers' unions and individual farmers. The discussions in relation to monetary compensation are still continuing. I am not in a position to give any conclusions. In any event, the Secretary of State for Wales, powerful though he is, has no open cheque book on every occasion. However, it is the fact, which I readily reiterate, that the Welsh farming community has an informed and engaged champion in Ron Davies. He is doing his utmost to see that a proper outcome is brought about.
Specific questions were asked in regard to transport links. The noble Lord, Lord Crickhowell, raised one. Proposals have been made for improving rail links between the south and the north. I take his cautionary point about road developments being destructive in environmental terms and being extremely expensive. But we welcome the suggestions that there will be improved rail links between north and south Wales.
It is the fact that the BSE crisis has been long running and that that has not been the responsibility of the present Government. However, we must deal with matters as they stand. It has been mismanaged in the past. The situation has been compounded by the strength of sterling and the consequences on the green pound compensation payments to farmers have been adverse. None of those matters can be overlooked and I do not overlook them for a moment. Nor do I pretend that as of this evening-10th December—when negotiations between various government departments are still continuing, I can offer any solutions. All I can promise, yet again, is that we take it extremely seriously. It is not just pounds, shillings and pence. It is much more important than that.
The noble Lord, Lord Aberdare, raised the specific question of the YMCA schemes, particularly in mid-Wales, south Wales and Glamorgan, of which I have more knowledge. He will be encouraged by two

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things. First, that type of voluntary scheme is one which we entirely endorse. The success rate—to put it in crude terms—is 98 per cent. plus in the sense that those who are assisted to receive the accommodation of which he spoke do not revert to crime and do not breach their probation orders.
I can give the noble Lord some comfort. We specifically took his point on board before he made it. In Clause 111 of the Bill the duty is laid upon the assembly to work with the relevant voluntary organisations and produce plans of the sort that he described. I hope that that is of relevance and of assistance to him.
The noble Lord, Lord Prys-Davies, raised specific questions about employment prospects in west Wales. I am able to say that an offer has been accepted today from Omega Air in respect of the base at Trecynon which will probably result in 400 to 500 new jobs in aircraft maintenance. That is another piece of good news. The noble Lord also referred to skill shortages. That is extremely important. We want to work in partnership with courier service companies, employers locally, education authorities and local authorities. We have to work co-operatively to attack this problem.
The noble Lord, Lord Hooson, raised the question earlier, when my time was more limited, of indigenous small companies. That is dealt with in paragraph 4.6 of the consultative document, An Economic Strategy for Wales, published in October of this year, I think to general welcome. It states:
"Greater emphasis will … he put on developing indigenous small and medium sized enterprises".
That point was touched on also by the noble Lord, Lord Thomas of Gresford. The document goes on:
"This will be important in strengthening economic development throughout Wales, including in the more peripheral and rural areas where it is inevitably harder to attract inward investment".
As I understood the point made by the noble Lord, Lord Hooson, one cannot simply rely on the headline inward investment successes, many of which there have undoubtedly been. I paid tribute earlier, so I do not need to repeat it, to the work done by the noble Lord, Lord Crickhowell
—
Lord Hooson: My Lords, I asked earlier whether there was a possibility of the development association, or whatever it is called, taking equity in those companies.
Lord Williams of Mostyn:: My Lords, if the noble Lord has an opportunity to read paragraph 4.6 in full he will see that various suggestions are set out. They deal with smaller businesses which are looking for less than £250,000 capital, particularly when those businesses are looking for equity and not debt. Paragraph 4.6 concludes:
"Views are invited on how best to strengthen Business Connect and more effectively focus support on developing the potential of indigenous SMEs".
The answer to the noble Lord's question is that this is genuinely intended to be a consultative paper. Any experience which the noble Lord or anyone else wishes to contribute to the discussion will be more than welcome.
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We have inherited, as is notorious because a number of noble Lords referred to it, a situation where we have a lower GDP per head, poor housing and poor health. There have been success stories, but I take as well made the point that there remain sad estates and that a child born there, it is literally true to say, has virtually no prospect of bettering himself. For parents too there is the gloomy consequence in their own minds that the normal ambition of their children having a decent opportunity for a better life than they have had does not exist. These are gross blots. We believe that they should be attended to in a Welsh context.
A good deal of Wales now, partly because of media concentration and partly because of film and entertainment, is modern. It is looking to the next century; it is confident and it is optimistic. It is confident and optimistic in a way—I entirely echo what the noble Lord, Lord Crickhowell, said—which was absent perhaps 30 or 40 years ago when we were. to our own cost and ultimate detriment, far too inward looking. A good section of Wales now is looking outwards and is proud of itself—rightly proudly of itself I say without parenthesis—but is proud of itself in a way that is not aggressive, that is not harsh, and that does not say that because England is different England is worse and that because England is different England is harmful to us. We are convinced ourselves, and we believe that subsequent history will demonstrate our conviction to be soundly based, that the assembly will offer a new regime within the United Kingdom. If I had any doubts that it might lead to the break-up of the United Kingdom I would certainly not be standing here.
We believe that the United Kingdom—I have said this before but it bears repetition—is a civilised place to live. It is capable of accommodating understanding and encouraging diversity. What Wales is looking for is a different set of arrangements. We are different. Our history is different. As the noble Lord, Lord Stanley, said, our farming regime is different in part. Our landscape is different in part. Not least, our culture and language are different. No one who speaks Welsh or enjoys a conversation with the noble Lord, Lord Geraint, in the corridor in Welsh thinks that English is any the worse for that. All we look for is a decent recognition that diversity can often be good and can sometimes improve the human condition.
We have the extraordinary opportunity that many here thought would never come. If we lose it, and if in a notional referendum in 20 years' time we get less than 50.3 per cent., it will be all our own fault. I do not pretend that the majority in Wales was as redoundingly successful as it was in Scotland. That would be folly. But that is a challenge as well as an opportunity. We must make it work. If we do not, on our own head be it. We shall revert then to the backward and inward looking Wales which the noble Lord, Lord Crickhowell, so eloquently described.
All these things therefore mesh together—the grand headline inward developments, the financial opportunities that no one could have dreamt about and the physical regeneration of south Wales which I know well because I practised in Swansea. The noble Lord, Lord Elis-Thomas, forgets that the real attraction of

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Swansea as the capital base would be that it is conveniently adjacent to Fforestfach. The fact is that five or 10 years ago we would never have contemplated that we might be having this discussion because it would all have been theoretical; almost surreal—shall it be Cardiff, or shall it be Swansea; shall we have a satellite spur, of the kind described by the noble Lord, Lord Elis-Thomas, on a video link to Aberystwyth, that centre of excellence?
Talking of a centre of excellence, I must chide myself because I failed to declare interests which are well known and recorded and have been referred to. I am Pro-Chancellor of the University of Wales and I am president of the Welsh College of Music and Drama. Both of those positions are honorific. I retain them only on the basis that I make no contact between them and the Government. That is as well stated openly. All I can say in respect of the eloquent plea of the noble Viscount, Lord St. Davids, is that what he said will be transmitted to the appropriate quarter. But he will recognise what I am about to say next with a sense of gloom, descending on his heart with a chill. The appropriate authority is really the HEFCW in the first instance. I shall see that that is transmitted, but I wish to make our own position perfectly plain.
Those are the strands: the headline developments, the centres of excellence at the university, the farming community, the language. I cannot entirely agree with the noble Lord, Lord Crickhowell, that previous Conservative governments have always been at the forefront of protecting, developing and enhancing the position of the Welsh language. Occasionally, some of us fairly thought that it was too little, too grudging and too late. But there we are.
We have new opportunities now. Five hundred thousand people are speaking the language. Young people are interested in it and are producing pop music and films of the highest possible quality in it. S4C has done fine work, despite its unfair critics and despite its uninformed detractors. We have these opportunities not only to be Welsh but to be European, to recognise fully that we are not—I take this graphic word because I have not heard it before—the sidecar of England and we are not the sidecar of Europe either. We want to be what we can be—a full nation, attending to our own affairs within the proper parameters of them, grateful to be within the United Kingdom but recognising that we are part of a greater western civilisation which presently calls itself Europe.
6.10 p.m.
Lord Crickhowell: My Lords, it would test the patience of this House considerably, particularly after the excessively long Statement that we had earlier in the afternoon, if I were to add very much to what has been said during the course of this debate, except that I would like to thank all noble Lords who have taken part in it. In particular, I would like to thank the Minister for his courteous and considerate reply. I would add only one other comment. He spoke of his confidence in the future role of the assembly. He thanked those of us who said that we now accepted that there was to be an assembly.
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But it must be strong and effective. I beg him and his friends in government to listen most carefully to the criticisms and anxieties that we and others have expressed and will express further, because that assembly will only work and gain the confidence of the people of Wales if it is structured on the basis of full consultation with and consideration of all interests and with a willingness to listen and to amend. Having said that, I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

International Art Market
6.11 p.m.
Lord Hindlip Lord Hindlip: rose to call attention to the importance of London's leading position in the international art market; and to move for Papers.
The noble Lord said: My Lords, I must declare an interest as chairman of Christie's, currently the largest auction house in the world. During the 35 years that I have worked there London has had a thriving art market. It is in serious danger of losing it. But this debate is not a narrow issue about London; it is about a world market, about Europe and how Europe should seek not to disadvantage itself against the rest of the world and particularly against America. The British Art Market Federation recently published a report which has prompted my Motion. We must all welcome the Government's response to it. The Department of Trade and Industry's press release of 11th November was, as far as it goes, very encouraging.
The report shows that the British art market comprises 10,000 businesses; it employs 40,000 people; it turned over last year £2.2 billion; it contributed over £450 million in taxes and £250 million in revenue to restorers, framers, insurers, printers, shippers and other peripheral industries. It also encourages foreign visitors. It may come as a surprise to noble Lords to learn that the art market, according to the DTI's own figures, rates ahead of concerts, opera—it is a lot cheaper and less controversial—ballet and sport and is the prime reason given by visitors for coming to Britain.
The report paints, on the one hand, an encouraging picture of an industry which benefits both the cultural and economic life of the country and one in which British firms dominate the world market. On the other hand, it points out two serious threats. They are, first, VAT on the importation of works of art and its proposed increase and, secondly, the introduction of artists' resale rights, or droit de suite, as it is known in France.
VAT was discussed in your Lordships' House a year ago. But the position is worse than it was then, as the figures will show, and the time to remedy it is even shorter. When Britain joined the EEC the Government agreed to levy VAT on auctioneers' commission and on dealers' profits but not on the works of arts themselves—the so-called "margin scheme"—with a zero import tax. They recognised the global nature of the art market and the damage that restricting it with an import tax would do. However, the seventh directive on the harmonisation of VAT introduced a tax on the

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import of works of art into the Community. As the country with the only major art market, the United Kingdom was allowed a lower rate of 2.5 per cent. import tax, to be raised to a minimum—I stress "a minimum"—of 5 per cent. in 1999.
Since that tax was introduced, even at 2.5 per cent., imports of works of art into Britain from outside the Community have almost halved. If that trend continues, in two years' time there could be almost no imports whatsoever. While this decrease is not wholly attributable to the introduction of VAT on imports—there are other factors—it has been a major contributor to this decline in trade. The further increase to 5 per cent. will do more and irreparable damage. What is worse is that this decline comes at a time when there is a perception that Europe as a whole, and London in particular, is nothing like such a good marketplace as America.
I need hardly remind your Lordships that VAT is a complicated tax. No harmonisation will simplify it. And it is one which many of our foreign consignors do not understand. If there is a choice—and there is—where to buy or sell a work of art, we know that clients will choose the freer option: they will go where VAT does not apply. That provides a European collector with a positive incentive not to bring his purchase to Europe but to keep it at an address overseas. It seems particularly ill-advised, when all European governments are worried about the export of works of art, that they are busying themselves ensuring the export of the entire market. Our industry, like all responsible businesses, realises that government have to raise revenue, but the European Commission ought to understand that VAT on the import of works of art works against that end as less and less will be sold in Europe.
The only other country with an international market is France, but so little do the French Government understand the international nature of the market that all foreign auctioneers, including those from other EU countries, are still barred from holding sales in France. The promised legislation to open up the French market has yet again been postponed. I hope that the Minister will address what he said last year, which I know he sincerely believed. He said that harmonisation has opened up the French market. It has not.
Will the Minister also tell us whether he can use the review on the effect of the seventh directive on the art market which has to take place by the end of next year, and also our presidency of the European Union, to press for us to revert to zero import VAT which will ensure that business continues to come into Europe as a whole?
The second threat to the London market is the proposed introduction next year of artists' resale rights (droit de suite). The rate proposed by the European Commission varies from 2 to 4 per cent. Needless to say, this droit de suite does not apply either in the United States or in Switzerland. Britain again will be the biggest loser. We will be the hardest hit.
I shall not repeat the points made in your Lordships' House last year by the noble Lords, Lord Strabolgi, Lord Gillmore and Lord Freyberg. I expect that they will
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make such points again—and much better than I can. However, I repeat that the people who will suffer from this imposition are the smaller European dealers who do not have offices and premises in the United States through which they can negotiate sales that will probably take place in Europe.
What can the Government do to help? Last year my noble and learned friend Lord Fraser of Carmyllie, speaking from the Front Bench, said on llth December:
"this measure is ill-directed and the sooner it is confined to some dusty shelf for eternity the Netter".—(Official Report, 11/12/96; col. 1178.]
Sadly, it has not happened, although it clearly should.
The introduction of droit de suite is not a fait accompli. Last year the Minister said that this is perhaps a clear case for subsidiarity. The noble Lord was absolutely right and I ask him whether he will confirm and expand on that point later. Can the Minister also, in his discussions with his European partners. emphasise that there is absolutely no point in having a level playing field in Europe if no one other than Europeans wish to play on it and if the whole international art market is driven from Europe to America?
That would be a sad example of Europe's failure to consider global competitiveness when legislating for a European market. The price of failure will be that the best creations of European art will be sold outside Europe and they will never be brought back. That is surely against the interests of the whole of Europe culturally, economically and politically. To prevent that happening is a cause worth fighting for. My Lords, I beg to move for Papers.
6.22 p.m.
Lord Sandberg: My Lords, in a previous incarnation as chairman of a bank I made my maiden speech to my shareholders at their annual general meeting—and I viewed it with far less trepidation than I do this maiden speech in your Lordships' House. I was then able to promise an increased dividend, a bonus issue and an optimistic future to cover my shortcomings. Here, I can only appeal to your Lordships' tolerance. Perhaps I may say how very much I appreciate the tolerance that I have already received from your Lordships and the staff. All have treated my requests, as a new boy, for information with nothing but kindness and helpfulness. I am most grateful. I had heard of the courtesies of your Lordships' House before, but needed to experience them to appreciate them fully.
I do not pretend to have the depth of knowledge of the noble Lord, Lord Hindlip, on the position of London as an international art market, but I do have some idea of London as the repository of an enormous number of treasures of all sorts and as a traditional market place for art. When I was a student—alas, many years ago—London was not only the capital of a vast empire and a financial centre par excellence, but it was also regarded as the world's leading art market. What, for instance, in those days could compare with the British Museum, which was even mentioned in song by those eminent Americans, Ira and George Gershwin? Can anyone imagine substituting the words "The Smithsonian

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Institute" in that song? Who then could stand up to the London auction houses of Christies and Sotheby's? Now, I am told that New York auction rooms account for 40 per cent., and growing, of the world's art sales while London accounts for 30 per cent., and falling. We need in this country to be globally competitive and for London to regain the leadership that it has traditionally commanded.
I am afraid that I shall have to repeat some of the points already made by the noble Lord, Lord Hindlip. It seems to me that we must look carefully at two impositions on the art market. The first was levied in 1994. I refer to the introduction of VAT at 2 per cent.—not very much, one might think, but I shall try to show the negative effect that that has had. Although there is a sales tax in New York, it works quite differently from VAT and can in any case be vitiated by such entirely legal means as after-sales purchases. There is no VAT as such in New York. We shall soon have to brace ourselves for a review by the European Commission in 1998 of whether the 2; per cent. should be increased to 5 per cent. or, almost unbelievably, to an even higher percentage. Traditionally, as we all know, reviews of tax generally lead to increases.
Now we are faced with the other levy to which the noble Lord referred, droit de suite. It entitles visual artists to take a percentage every time their works are sold and on-sold while their heirs continue to have that benefit for 70 years after the death of the artist. Droit de suite to a living artist can, I suppose, be seductively argued to be something which is due to a visual artist—that is, to a painter or a sculptor. However, the fact is that such an artist is paid in full when his work is sold, as opposed to, say, an author or musician. An author has to rely on royalties on each book sold. He does not receive any more if his work is sold a second time, perhaps in a second-hand bookshop. In other creative fields, an architect does not expect to receive extra payment if the building that he has designed increases in value. In any case, I am told that in most instances the administrative cost of such a scheme is so high that very few artists—certainly, very few of the needy ones—receive any cash at all. It is estimated that in France, where droit de suite, as one might understand by its very name, is collected, the vast majority of such money is divided among only six families in the whole country.
The European Commission is now proposing a directive which would make droit de suite mandatory throughout the EU at a rate of 2 or 4 per cent. If such a levy were to exist here, it would be more advantageous for some 90 per cent. of the Impressionist market and not far short of that percentage of the value of contemporary art presently sold in London to be shipped for sale in New York or Geneva where, naturally, such a levy does not exist.
Perhaps I may give your Lordships some idea of the size of the London market and of what it is worth, not just in terms of money but of employment. It surprised me to find that nearly 40,000 people are employed in this country in the art market, which has a turnover of £2.5 billion annually, as your Lordships have already
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heard. Another surprise is the number of visitors to our shores who have given the art market here as one of the main reasons—frequently, the main reason—for their visit. Two years ago, in 1995, those art lovers spent nearly £3 billion in this country—not only on art, of course. I do not see any reason to think that that figure has declined. Your Lordships can imagine the benefits which the tourist industry, not to mention the Exchequer, has already gained.
But—and this is a big "but"—since the apparently small VAT rate of 2; per cent. was imposed, imports of fine art into this country have fallen by no less than 40 per cent. as people around the globe have looked to other markets for their sales and purchases. That loss has been mainly to the market in New York and, to a lesser degree, to that in Geneva. Indeed, the import of goods from Switzerland and the US because of the imposition of VAT has decreased by 65 per cent. and by 17 per cent. respectively between 1994 (when VAT was first imposed) and 1996.
Harmonisation of tax and other levies is something at which we should all aim. I am not suggesting that we in Britain should have some favoured position in Europe, but we need globally to have that overworked phrase—we have heard it several times today in your Lordships' House—a level playing field. We do not have a level playing field at the moment and I hope—I urge this on the Government—that we shall strive to ensure that the European Commission looks carefully before imposing droit de suite. Similarly, I hope that the Commission will look carefully at the question of VAT on art. I should like to see not only no increase but an abolition of this self-defeating tax before our playing field has a slope as notorious as that of Lord's. Of course, I refer to the cricket ground of the MCC, not this revered House.
I am most grateful that I have been allowed to speak on what I believe to be an important matter to this country.
6.30 p.m.
>Baroness Rawlings: My Lords, the honour falls to me from these Benches to congratulate in the name of the whole House the noble Lord, Lord Sandberg, on his maiden speech. It was outstanding by any standards. He had no need for trepidation. But this does not come as a surprise to anyone who knows the noble Lord or has studied his curriculum vitae. He is a most distinguished new Member of your Lordships' House, with a remarkable banking career and many other accomplishments behind him. He was chairman of the Hong Kong and Shanghai Banking Corporation—the largest bank in the world—and the British Bank of the Middle East. He was a member of the Hong Kong Executive Council and treasurer of the University of Hong Kong. He is a Fellow of the Royal Society of Arts, Freeman of the City of London and Liveryman of the Company of Clockmakers. In addition, he is a notable sportsman as steward and chairman of the Royal Hong Kong Jockey Club and a member of cricket clubs, including the MCC and the Surrey CCC. This is a career of extraordinary achievement which is all too evident from his excellent speech today. We all hope that he

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will play a prominent part in your Lordships' House and that we shall hear a great deal more from him on this and many other subjects.
Before making my modest contribution I thank my noble friend Lord Hindlip for giving your Lordships' House this timely opportunity on the eve of the British presidency to hold this debate. I too pay tribute to my noble friend for his superb and unsurpassable mastery of facts and arguments in this notoriously complex matter. I cannot but endorse his arguments. The statistics are by now well rehearsed and I declare the next few minutes to be statistics free. However, I should like to emphasise that this is not an issue which divides your Lordships' House; nor is it an issue where Britain is the odd man out, fighting to hang on to some peculiarity. It is a truly European issue, with the Commission's inclinations and the narrow national interests of some member states both conspiring to damage the whole of Europe. If Britain loses this battle the whole of Europe loses it.
As an MEP I followed the convoluted and tough negotiations on this subject in the early 1990s, so I am well aware of what a thorny issue it is. Britain succeeded in persuading the Commission and the other member states that sales of works of art required special VAT treatment by way of the margin scheme, but it failed to win the argument that imports of such goods should be exempt from VAT. The Commission's initial proposals recognised the importance of such exemption but then succumbed to fiscal purism. The compromise solution of a concessionary rate over a limited period only rather than an unlimited period was a thinly disguised climb-down.
The Commission in pursuing the completion of the internal market—very much a British initiative—is now driving harmonisation towards an ideal of clarity and consistency which does not sufficiently take into account our real interests. Other member states perceive the concessionary VAT rate applied by this country and the absence of droit de suite as discriminatory, and by pursuing their narrower interests lose sight of the larger picture. The British Art Federation, so ably chaired by Anthony Browne, has kept the vital importance to our economy of the British art market in the public eye. I am grateful to him for his relentless efforts.
The increase of VAT on imports to 5 per cent. and the introduction of droit de suite would destroy the British art market and the European art market too. The British art market is by far the largest and the only truly international one in Europe, so the effect of these rules would be to divert works of art on to the Swiss and US markets. Both still enjoy more favourable tax regimes than we do. It would also discourage the repatriation of works of arts to Europe, not just the conservation of the European cultural heritage. It would also damage London as a magnet for high spending foreign visitors.
I welcome what the Government have done so far and encourage them to persist in this line. It is in tune with the priorities of the British Presidency, which are to improve the employability of the European workforce and at the same time not impose costs on business, as the Prime Minister said last Friday. In particular,
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perhaps the Secretary of State can press the Commission to link its review of VAT arrangements with an impact study of droit de suite at this crucial stage of the European legislative process. We should encourage him to pursue the fight against the introduction of droit de suite by forging alliances with those who want to repeal it in their own countries and by convincing other member states that it damages artists, museums and collectors as well as the arts trade. It is a battle for the concessionary VAT rate not to he a temporary British privilege but the European norm.
The Secretary of State has taken up the challenge of making London not just a world city but the world city of the new millennium. If the Government are true to these words they will fight these battles with the utmost determination and our full backing. I therefore urge the Government to view these issues together, because in this case what is good for London is good for the country and Europe.
6.37 p.m.
Lord Naseby: My Lords, it is a little strange for a parliamentarian to confess that this is his first speech for about six years. Your Lordships will know that in my previous incarnation speeches were most definitely not in order for the post that I held. My task was to keep order and somehow to make progress. The mention of "order" causes me to reflect on the joy in your Lordships' House to find that self-regulation works. It is a joy to see no lack of action or conviction on any of the Benches but a sense of common courtesy and fair play. As a newcomer I welcome that enormously.
I believe that I am the first Lord Naseby. Naseby is a village in Northamptonshire and the site of a battle of direct relevance to the debate this evening. Your Lordships will be aware which side won. Your Lordships may also know that the wounded from all sides of that battle went to Northampton, a town that I had the privilege to represent in another place for 23 years. Noble Lords will recall that that battle was the turning point in the Civil War, probably leading directly to the rise of Cromwell to a position of power. If one looks back on that time perhaps one can argue with conviction that it was Cromwell who created the London art market. It will be recalled that there was the Sale of the Century: the Commonwealth sale, the particulars of which were prepared some three weeks after the death of King Charles I.
If one reads the recordings of that time, one will see that the logic of the sale was to a certain extent irrefutable. The king had expensive debts which legitimately someone should meet. And of course in the words of those days, which ring so true today, there was a need also for funds for public uses, at that time of the Commonwealth, or public uses for the Exchequer, as we would recognise today. The Act to allow the Commonwealth sale to go forward was passed on 26th July 1649.
No one knows what were the total proceeds of that sale, but they must have been in the order of some £50,000 at prices prevailing then. That would be the equivalent of something over £ billion today—just

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think of the commission and VAT on that sale! The proceeds were far, far in excess of the record sale of old masters which took place a week ago at Sotheby's which I understand amounted to £29 million.
There were many lots in that earlier sale. There were 1,500 pictures and other items. Some were negotiated, some bid for and some sold sight unseen. If one wants to see the best pictures today one has to go to Vienna, the Louvre and the Prado. They are the pictures which used to reside in this country. Thankfully, some remain in our great museums and galleries.
So much for that period. Another fillip was given to the art market by Her Majesty Queen Victoria when, to celebrate her jubilee, she said that she just wanted to see recorded in written form the history of our country; and in particular the Victoria County History of the counties of England. It is commonly known today as the VCH. I am proud to be the chairman of Northamptonshire VCH and now to be on the national committee of that organisation. I pay tribute to your Lordships' House for amending the National Heritage Bill last November so that the VCH could be eligible for lottery money. I hope that when it comes to apply for a lottery grant it will be successful.
As we have heard this evening, today's art market faces another challenge. In a previous incarnation—again, long before I was in politics—I was in advertising. I was a director of the advertising agency responsible for the advertising for one of the big four auction houses. We prepared advertisements and catalogues. I remember discussing with the directors of that house just how sensitive a market the art market can be. There is no market more sensitive to changes than the art market. Therefore that market, and the pressures it faces, should be taken extremely seriously by everyone in this land.
None of us should forget that it is not just direct exports of our manufactures which are so important; it is the money earned by way of invisible. The art market, and the work done by the many people in it, is a prime source of invisible earnings. Other noble Lords have explained in detail the threat from New York and Geneva. I shall not go into any of that detail. We face the threat of a rise from 2.5 to 5 per cent. on importation and the levy of the droit de suite.
I entered politics—in a phrase—to try to right a few wrongs. To that ambition I would now add, to prevent going wrong something that is going right. I urge Her Majesty's Government to continue to resist the proposed changes which will so adversely affect the London art market.
6.45 p.m.
Lord Strabolgi: My Lords, it is a great honour, on behalf of the whole House, to congratulate the noble Lord, Lord Naseby. on his highly interesting and brilliant maiden speech. It is one which managed to be non-controversial, in accordance with the traditions of this House. As we know, the noble Lord has had a most distinguished career in another place as the Member for Northampton, South for nearly 25 years, I think,
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culminating in being Chairman of Ways and Means and Deputy Speaker. I have had the pleasure of knowing the noble Lord for many years. I would like to renew my congratulations, as one of a panel of Deputy Speakers, to someone who has been the Deputy Speaker, and to express my hope that we shall hear from him on many future occasions.
I am sure that we are grateful to the noble Lord, Lord Hindlip, for tabling this important Motion for debate. As the noble Lord said. the UK art market is the most important in Europe. It is second only to New York in the rest of the world. The market in fine art and antiques brings into the Exchequer about £500 million a year in taxes and VAT. It employs about 40,000 people.
When VAT on domestic sales became necessary some years ago, it was agreed, mainly on the instigation of this country, that that would be levied only on the auctioneer's commission or the dealer's profit margin and not on the selling price. That arrangement is accepted by all. Before February 1994 there were no import taxes, as the Treasury agreed, very sensibly, that a free market was greatly to the benefit of the UK economy. We are now obliged, at the behest of our European partners, to levy VAT at 2.5 per cent. of the eventual hammer price on all art imports for auction. That is to be increased to 5 per cent., as the noble Lord, Lord Hindlip, said, after the end of June 1999.
The VAT of course is refunded if the item is bought by a foreign buyer for re-export but not if it is sold to a buyer in this country. That imposition must surely be a disincentive to EU collectors to bring back some European works of art from overseas. We hear a great deal about the drain of Europe's heritage to the rest of the world, in particular to the US, and one would have thought that any encouragement for collectors here to bring back works of art from the US would he something to be commended.
The policy assumes that a level playing field will allow our European colleagues, mainly the French, to have a better chance of competing on the American market. It will not work out like that. The result will be—I stress this in particular to my noble friend Lord Haskel who is to reply—that the EU will lose out altogether. Sales of highly important paintings will move to New York where there is no import VAT and no droit de suite. Freight costs across the Atlantic will often be less than any droit de suite levied here.
Why should a Swiss collector, for example, send his important Impressionist paintings to London or Paris when he can have them auctioned in New York or Geneva without extra taxes? I emphasise therefore that it is not a case of European countries competing against one another, but of Europe as a whole, shackled by taxes, competing against the US.
That is not all. There is an additional threat, as has been said. The European Commission has proposed a directive to make droit de suite applicable to all sales throughout the Community at rates between 2 and 4 per cent., depending upon the value of the art work.

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That is a romantic, if somewhat naïve, attempt to help young artists at the beginning of their careers. I doubt whether they will get much out of it. On a £1,000 painting, which is what a young artist can expect to receive, the droit de suite of 4 per cent. will be only £40, from which will be deducted the collection costs of 40 per cent., leaving about £25.
However, when we come to the heirs of some of the greatest artists of this century, whose paintings fetch vast sums, the situation is very different. An important Cubist painting, for example, selling at about £2 million—I am sure that the noble Lord, Lord Hindlip, will agree that that is a conservative estimate for some of the important paintings of that period—will earn at 2 per cent. a droit de suite of £40,000. That is repeated each time the painting is sold during the 70-year copyright period, to the considerable further enrichment of the heirs of the artists' estates. Those families are already extremely rich. I believe that in France 75 per cent. of the droit de suite collected went to only six families.
At present, the United Kingdom does not operate this levy. I am informed that had it existed in 1995 it would have been financially more advantageous for 90 per cent. in value of the Impressionist market and 85 per cent. in value of contemporary art sold in London that year to have been shipped for sale in New York. Imports of works of art for sale here have fallen by 40 per cent. since the introduction of import VAT and there will be a further fall if that is increased to 5 per cent. Droit de suite in this country would lead to a loss of £68 million in revenue and 5,000 people could lose their jobs.
I understand that the European Commission is to conduct a review for the Council of Ministers of the VAT directive and its impact on the art market and to report before the end of next year. I should be interested to hear from my noble friend what representations have been made by the Government. This is not a party matter in any way. The previous government stood firm against these ill-considered proposals—and I speak as a staunch pro-European—and I hope that the present Government will be equally resolute.
6.53 p.m.
Lord Renton: My Lords, the noble Lord, Lord Strabolgi, has enabled me to shorten my speech by emphasising the economic and financial factors which arise. They have been so well deployed by my noble friend Lord Hindlip, the noble Lord, Lord Sandberg, and others.
I join the noble Lord, Lord Strabolgi, in his references to the maiden speech of my noble friend Lord Naseby. It is a convention of the House to congratulate maiden speakers only once, so I must not be accused of congratulating him. However, it was a pleasure to hear him refer to a former Member for Huntingdon, Oliver Cromwell. He was a Member for only a few years because he had an awful row with the burgesses of Huntingdon and was driven to become Member of Parliament for the City of Cambridge.
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I was interested in the slightly provocative statement of my noble friend Lord Naseby that Cromwell created the London art market. We are all keen Royalists, but sometimes the truth must come out. Cromwell's effort was pretty disgraceful. He put up for sale the wonderful collection made by King Charles I. I am glad to say that some years later it was gradually restored, especially by that unusual king, King George IV, mainly when he was Prince Regent.
Perhaps we may consider the background to the London art market. We in London have probably the best collection of picture galleries in the world and that must attract the large number of visitors who come here. They spend money not only buying pictures and other works of art and antiques but on being in London and visiting galleries which may have to charge for admission. However, I am sure that such galleries are an attraction. In addition, we have wonderful museums. The British Museum is the most famous of its kind in the world. We also have the Natural History and Science Museums, the Imperial War Museum, the London Museum and many others. They all attract visitors from abroad and help the balance of payments.
If the London art market were without that background, surely it would not be so successful. Therefore, culturally, artistically, commercially and economically, we in Parliament should be anxious to help that market to succeed. Clear and convincing reference has been made to two main threats. Luckily, they are as yet only threats, although one has begun to have a bad effect. As regards our financial policy, the Government must be careful what they do about VAT. As regards European harmonisation, I wish to dwell on the issue because, although it appears to go wider than the debate, it is a serious matter which affects the London art market and many other factors.
I have always taken the view that the original six nations which signed the Treaty of Rome had so much cohesion and economic contact that harmonisation, financially and otherwise, could do them no harm. However, the European Union now consists of 15 nations with 11 different languages and many different cultures, if one dare use that word from this side of the House. I believe that harmonisation has become a menace and that we must be firm in our resistance to any kind of harmonisation which adversely affects our economy or our heritage. I hope that the Government will take on board what has been said about that.
I am pleased to be able to turn over four pages of my notes because the points have already been covered. In conclusion, I believe that Members of your Lordships' House deserve congratulation on the help given to our art and culture by initiating the legislation which increases its strength and protection and is a benefit to our art market. I refer in particular to the Treasure Act 1996, which applies to England, Wales and Northern Ireland. It did not apply to Scotland. The Bill was introduced by the noble Earl, Lord Perth, and we should be grateful to that Scottish nobleman for what he has done for England, Wales and Northern Ireland. He replaced the ridiculous ancient law of treasure trove, and doing so will be of great benefit. Furthermore, in 1994

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we abolished the ancient defence of purchase in market overt, which was a thieves' charter. Modesty prevents me from mentioning who introduced that Bill!
The Government have a heavy responsibility to follow the advice given by your Lordships in this debate, as on so many other occasions.
6.59 p.m.
Lord Freyberg: My Lords, I too would like to thank the noble Lord, Lord Hindlip, for drawing attention to what may be the last opportunity to save the British art market by persuading our European counterparts not to impose for ideological reasons two disastrous new charges that would benefit no one but the American and the non-EU art market.
That is not melodramatic. The British art market is a huge one, worth some £2.2 billion a year, but it is at a major crossroads: hundreds of years of connoisseurship and competitive trading have been seriously eroded in just three years since the seventh directive imposed an interim charge on works of art sold in the UK. Our share of the international market is on the brink of being damaged irreparably. The evidence is compelling and extremely disquieting.
As we approach 1998, the year of our presidency of the European Commission, I urge the Government to take this opportunity to engage our EU partners in a proper dialogue to convince them that it is better to maintain London as Europe's centre of excellence in the art world rather than to destroy its dominant position simply for the sake of "harmonisation".
Already, there is alarmingly clear evidence that the 2.5 per cent. VAT imposed in 1994—half way to the proposed 5 per cent.—has driven a large number of art vendors away from London to non-EU countries with no such tax to sell their works. Since 1994, as the noble Lords, Lord Hindlip and Lord Sandberg, have pointed out, the amount of works of art imported into Britain by non-EU countries is down a staggering 40 per cent. Of the two biggest markets, imports from the US declined by 17 per cent. and imports from Switzerland by a massive 64.6 per cent.—together a drop of more than £200 million.
The European Commission is impatient that we raise our import tax to 5 per cent. forthwith or it will take legal action. Yet it knows that Britain has the only international art market in Europe—worth some 60 to 70 per cent. of the entire European art market—and that refusing to recognise the loss of trade so far risks allowing it to drop still further. It suggests too that the Commissioners have forgotten that one of the reasons for our securing an interim tax arrangement was so that its effect on the market could be monitored: if it proved as disastrous as feared, then the whole matter could be rethought. Sadly, the interim tax has had a severely detrimental effect. I hope that the Minister can confirm this evening that the Government will do all they can to stop the forced implementation of this very destructive tax from continuing. Furthermore, in the past year, major, long-established art dealers have deserted London for New York.
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It is worth emphasising to the Government how much money is at stake. London, once foremost in the international art market, is now second to New York—even so, as the noble Lord, Lord Strabolgi, has said, its £2.2 billion turnover last year netted nearly £ billion in taxes. By comparison, the music industry is currently valued at £1.6 billion.
There are just a few cities in the world where the art market has developed sufficiently to accommodate the biggest sales of such major players as Sotheby's and Christie's. The two largest centres in recent years, London and New York, have up till now both been largely free of red tape. The new import tax of 1994 and the threat of more to come has changed all that. There has in the past couple of years been a significant shift to New York. The new taxes give New York an immediate edge over London.
As if that were not enough, the UK art market faces a second threat from Europe in the form of droit de suite. That seeks to award royalties to artists every time their works are resold. As America has no droit de suite and no intention of introducing it, it too would give sellers a further incentive to go to America rather than Britain and further reduce Britain's ability to compete internationally.
That proposal, put forward on 13th March 1996 and due to be implemented by 1st January 1999, entitles the author of a work of art (or his heirs) to a percentage of its price when it is resold by public auction or through an agent, regardless of whether it makes a profit. The EU wants Britain to impose that levy to eliminate differences in resale laws throughout the EU. At present droit de suite exists, at very different levels, in 11 out of 15 countries, although only eight of them enforce it. Only the UK, Ireland, Austria and the Netherlands have no form of resale rights.
The directive affects the contemporary art market, involving works by artists whose death occurred after 1927. It would, in theory, affect any work I sell over a certain price—and here I must declare an interest as a sculptor. The threshold at which the levy becomes applicable is 1,000 ecus, currently £669; this time last year 1,000 ecus were worth £757—almost £100 more, and an indication perhaps of complications to come. Thereafter it would be levied at a rate tapering from 4 per cent. to 2 per cent.
Although in principle living artists would benefit, in fact a vast proportion of droit de suite would go to the family of a handful of the best known (and chiefly dead) artists: in France, as the noble Lord, Lord Hindlip, and others have stated, 75 per cent. of the droit de suite levied goes to just six families—Picassos and Matisses and their ilk—who are already richly rewarded by a competitive art market.
Had droit de suite been in force last year, some £372.8 million worth of goods would have been subject to it and some £65 million of earnings would have been at risk. However, in reality the amount at risk is likely to be much higher. According to research carried out by two leading auction houses, approximately three-quarters of the items eligible for droit de suite

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were consigned by vendors outside the EU. With droit de suite, selling their work in Britain would be a less attractive prospect.
The items that attract the droit de suite levy are those that tend to attract international buyers and sellers to the UK market in general; namely, 20th century art. With the harmonisation of droit de suite levies throughout the EU, non-EU consigned business would be most at risk. If this trade were lost, it is likely that the UK market would become almost entirely a domestic one. There would also be a knock-on effect on the £2.8 billion value of expenditure by foreign visitors in the UK.
The rationale behind droit de suite is the EU's policy of favouring a high level of protection for intellectual property right holders in order to promote creativity. This directive aims to put artists on a par with authors and composers who earn royalties from their works whenever they are reprinted or played in public.
But the possession of a work of art is not a matter of performance as music is or literature may be. There is no parallel. Artists are established by their patrons. It is their willingness to put their hand in their pockets that establishes an artist's reputation. Their immediate reward is their personal and private enjoyment. They do not exhibit these works of art to their friends for a fee. They make no money on them. They may have to pay considerable sums on their conservation. They care for them and insure them. If they are of any interest, they will be asked to lend them to an exhibition for which they receive no benefit; though the exhibitors may benefit.
And when eventually for one reason or another they are sold, they may make a loss. Where is the justice in droit de suite? And if it makes a handsome profit it is most likely because the painter is world famous, like Hockney or Freud, and himself far richer than the patron who bought his early work. Hockney and Freud do not need a droit de suite. But droit de suite will be of no benefit whatsoever to the artist who throughout his lifetime sells for a modest thousand or two. Such an artist would be lucky to receive the £40 maximum on the resale of a painting for £1,000.
The levy is difficult and expensive to administer. The British art market has estimated that if droit de suite had been payable in the UK in 1996, it would have cost in the region of £2 million to collect some £9.9 million.
We want to encourage more trade not less. However, if the Government are not prepared to fight hard for the British art market and its unique position in Europe, much of the British art world, with all its peripheral benefits, will disappear for good. I beg the Government to do all they can to prevent that from happening.
7.9 p.m.
Lord Inglewood: My Lords, I must congratulate my noble friend on setting the scene for tonight's important debate by clearly identifying that the issues we are discussing are essentially European, albeit issues which have a very strong British interest. It is well known that VAT owes its origins to the Community, while intellectual property is an essential part of the single market. Of course, that includes the droit de suite.
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We have already heard this evening about the relationship between the European art market and the world market and how the former is but part of the greater one. Within the European art market the trade itself is peripatetic. After all, while today London is its centre, once upon a time it was Paris and before that it was, I believe, Antwerp. I want to see London remain one of the leading centres of the art trade, in the United Kingdom, in Europe and in the world. I believe that it is in the UK's interest for it to be so. But if, on the famous level playing field, let us say, Athens, Lisbon or Helsinki were to compete more effectively, I would say "Good luck" to them.
What seems to me to be beyond argument and cannot be in Europe's interest is for the EC so to legislate that it destroys London's position in the world art market but, at the same time, simply exports the business that was previously being done by London to somewhere outside the Community altogether. That is the threat we are discussing this evening. Do we in Britain, or in Europe, have so many jobs that we can just give them away? I do not believe that that is the case. Nor, I suggest, is it a very good way to mark what could be a new flexibility in the European labour market, heralded in Amsterdam, if we kill jobs through this kind of continental dirigisme. That is exactly the kind of concern that we on these Benches have articulated on a considerable number of occasions.
Another characteristic of the global art market is, as the noble Lord, Lord Strabolgi, pointed out, that many treasures created inside Europe are now outside it, no doubt aided and abetted by the predecessors of my noble friend Lord Hindlip. The imposition of VAT on bringing them back positively discourages their return to the land of their creation, unless of course the purchaser can find a way to reclaim VAT, which is not always that easy.
I believe that that is less of an issue for us in this country than it is for many of the other countries in the Community. When it was my privilege and honour to represent this country in the Council of Culture Ministers, I very much formed the impression that their sense of loss at what they had lost, which had gone abroad, is very great. For the Community gratuitously to make it more difficult for them to repatriate some of the products of this diaspora would, I believe, be contrary to everyone's interests.
Perhaps I may also raise a slightly different point about VAT; namely, VAT and museum charges. I appreciate that the noble Lord, Lord Haskel, who will respond from the Dispatch Box for the Government, may not be able to answer my question this evening. However, I ask him to do so in due course. In the past few days the Secretary of State for Culture, Media and Sport endorsed a new plan for the British Museum which, if I have correctly read newspaper reports, involves the relaxation of the rules regarding VAT. In many cases museums wish to charge because that provides a means whereby they can reclaim VAT, which would otherwise not be possible. If it is the case that some exceptional status has been accorded to the British Museum, can the Minister clarify whether or not that status will also be accorded to the other museums in the

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country? I am not aginst a relaxation if that occurs, but I believe that it is important for us to be even-handed about such matters.
I turn now to droit de suite. As I mentioned, harmonisation of the system of intellectual property legislation is an essential element of the single market. Like moral rights, the droit de suite is not a right which is known to English law. But there is nothing to stop that kind of arrangement being agreed in contracts by the parties to the sale of works of art. The fact that in this country it is not suggests that its attractions are illusory rather than real. Certainly the kind of situation described so vividly by the noble Lords, Lord Strabolgi, Lord Sandberg, and Lord Freyberg, clearly suggests that that is the case: quite simply, it is the heirs of a few great artists who scoop the pond.
The more I think about it, the more capricious this concept appears to be. As has been mentioned, it is calculated by reference to sale. Therefore, if a really fine example of an artist's work is bought by a museum, then, despite its being seen by many thousands and, over time, perhaps by millions of people, not a single extra penny piece accrues to the artist or his estate. However, let us compare that situation with a less good example. Such a work of art may be acquired by someone who then decides that he does not like it. It is then sold on and, in turn, the next purchaser does not like it, so it is sold again. Each time the transaction occurs the cash register rings. It is entirely illogical. It is my personal view that the droit de suite is a piece of nonsense. It seems to me that it combines some of the characteristics of an hereditary peerage with being the beneficiary of a Jersey trust.
I am also quite clear that this is precisely the kind of issue which member states should be allowed to determine for themselves. If in a particular country in Europe it is an important component of its cultural legal arrangements that this provision be incorporated in its own domestic law, surely it is right at member state level for that to be done. That is entirely in accordance with the principle of subsidiarity and entirely in line with the principle of mutual recognition, which is at least as important an element of the single market as the principles of harmonisation. There is no European Community harmonisation of the rates of royalty, or of auctioneers' commissions or of dealers' margins, so why should there be harmonisation of this aspect of the transaction? I sincerely hope that this will not be introduced into Community legislation on a Community-wide basis. However, in that unhappy circumstance, I urge the Government to consider making a zero rate available.
I have tried to look at such matters from a European Union perspective, to show that the concerns and aspirations of the London art market are not special pleading for the UK in some effort to try to be different from everyone else, but rather that they represent a coherent and logical position for the Community as a whole, bearing in mind its own adopted economic, cultural and institutional policies and priorities.
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I urge the Government to take up the issues canvassed today in the complete confidence that to do so is communautaire in both purpose and substance. They should not be deflected by those who envy and begrudge London's success and who wish to cut it down by legal means having previously been bettered in the market place.
7.17 p.m.
Lord Gillmore of Thamesfield: My Lords, I too. should like to congratulate the noble Lord, Lord Hindlip, on putting the matter before the House tonight and thank him. I warmly welcome the opportunity to return to a subject which we debated almost exactly a year ago and which is of great significance to our economy and perhaps as importantly to our cultural heritage.
I begin by declaring an interest in that I am chairman of LAPADA, the art and antiques dealers' association, which is the largest association of its kind in the UK and I believe the largest in the world. The association is a founder member of the British Art Market Federation which brings together under its wing all those who seek to promote and protect this valuable British asset. It was for the federation that the report mentioned by the noble Lord, Lord Hindlip. was recently produced.
The Motion refers specifically to the London market; but, of course, it goes well beyond London. The report that I mentioned refers to the United Kingdom as a whole. London may be the centre, but the market is nationwide. The UK attracts buyers, dealers, collectors and art lovers from all over the world because it provides a unique combination. First, as the noble Lord, Lord Renton, said, it possesses some of the greatest galleries and museums in the world. Secondly, it has an astonishing range of historic houses, lovingly maintained and open to visitors. Thirdly, in the United Kingdom there are over 750 auction houses scattered throughout the length and breadth of the kingdom. Finally, and by no means least, there are dealers across the length and breadth of the country.
That dealer community provides a unique underpinning to the market. They are indeed its bedrock. They bring immense expertise and professional skill to the trade. The members of the association which I have the honour to chair have clients all over the world with whom they deal daily and they are bound by a code of practice which gives their customers clear and dependable assurances about what they are buying.
The past 10 to 15 years have been a great success story. However, as other noble Lords have already pointed out, that is now under threat. Like the noble Lord, Lord Renton, I can turn several pages as many of the points about those threats have already been made. I shall, however, add one or two. As regards VAT I wish to re-emphasise a point which in last year's debate was not, I believe, wholly understood, and that is that we are not seeking advantage for the United Kingdom in comparison with its European partners. But we do not want to see Europe disadvantaged in relation to New York or Geneva or anywhere else. That is clearly what will happen if a 5 per cent. VAT charge becomes the European standard. Once again and, alas, not for the first

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time, it falls to the United Kingdom to persuade its partners and the Commission to look outward to the international context, not inward at the European Union as if it were somehow detached from the rest of the world or the only continent on the planet.
As regards droit de suite, I think it is a highly understandable, if a somewhat romantic notion, which lies behind the proposal. But the concrete experience elsewhere in Europe where droit de suite is in force shows how singularly ill conceived the proposal is. It is hugely costly to administer. Certainly 40 per cent., and perhaps as much as 60 per cent., of the levy will be lost in administrative costs before any money is distributed to anyone. We have heard of the case of France where not only is nearly three-quarters of the total levy distributed to six families, but none of them involves poor artists living in poverty in garrets à la Bohème; they are all extremely wealthy already.
I wish to mention a further threat which has not been mentioned. I do so with some trepidation. I refer to UNIDROIT, the Convention on Stolen or Illegally Exported Cultural Objects. Here the case is much more difficult to argue. No one would for a second wish to do anything to encourage a grim and deplorable trade, particularly in plundered antiquities and archaeological treasures. Those who argue against accession to the convention therefore find themselves in the unenviable position of appearing to stand firmly against motherhood and apple pie. The noble Lord, Lord Renfrew, has made frequent references to this in your Lordships' House speaking in favour of accession to that convention.
But the regrettable fact is that the UNIDROIT Convention is appallingly badly drafted and profoundly ill conceived. There is, alas, no time to go into the details. But the convention would place a heavy burden on museums and collectors as well as on the trade. The definition in the convention of what constitutes a work of art is so wide and vague as to be meaningless. The duty of due diligence is placed on the possessor. There is no protection against frivolous challenge. Were I to be in the happy position—which, alas, I am not--of owning a valuable work of art which was liable to challenge, I would make sure that I did not lend it for exhibition, for example, to any country which was a signatory to the convention.
By all means let us take every necessary step to stamp out the pillaging of sites and the obnoxious trade in stolen works of art. But let us not use the vehicle of this wrong-headed convention. I believe that Germany has announced that it will not ratify the convention. I hope that Her Majesty's Government will take a similarly robust view.
I hope that what has been said this evening does not sound too alarmist but the risks are not imaginary, they are real. Some of our auction houses are already repositioning themselves. One, I know, is considering moving its sales of porcelain to Geneva. Another is reinforcing its staff in New York in expectation that—against the background of the pressures that we have described—that is where the future market will increasingly reside.
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I suppose one might ask whether this is of any great consequence. I believe that all the evidence shows that it matters. The United Kingdom economy would lose revenue and invisible earnings. Some of the grander auction houses might perhaps be able to move their focus away from London and, increasingly, to New York. But the large majority, the dealer community—the bedrock of our market, perhaps more accurately its lifeblood—does not have this option. As the noble Lord, Lord Hindlip, said at the outset, they do not have the option of upping sticks. Their livelihoods are at stake. If, little by little, they were to disappear, their skills and their knowledge would be lost and our culture would be the poorer for it.
A year ago when we debated this issue the government of the day displayed an encouraging readiness to stand firm against these kind of threats. I trust that the Minister will be able to give your Lordships the same robust assurances tonight. I hope, too, that he will be able to confirm that the Government are working hard to create alliances with those of our European partners who understand these threats as clearly as we do in the United Kingdom. The French will be particularly important in this regard. If, as French governments have said repeatedly, they attach importance to their patrimoine, then surely they must see that a 5 per cent. VAT charge on imports is likely severely to discourage collectors who wish to bring back to France French works of art bought outside the European Union. Finally, I hope we shall be assured that the United Kingdom's opposition to what is proposed by the European Commission will not be traded away as a quid for some quite unrelated quo in a deal struck in a smoke filled Commission conference room in the small hours of the morning.
7.27 p.m.
Lord Astor of Hever: My Lords, I congratulate my noble friend Lord Hindlip on sponsoring this important debate. I much look forward to hearing the winding up speech of my noble friend Lord Luke when he speaks from the Dispatch Box.
I have spoken in this House in the past about the London art market and do so again tonight with a sense of conviction. What is at risk is our ability to hold on to the position this country has achieved within the past generation or so as the foremost art market in Europe. In so many realms of our national life we have found ourselves in a diminished role, for various reasons including, of course, our relatively reduced economic strength. But in a number of ways we have achieved a more prominent position, of which the world of art is certainly one.
A multiplier effect comes into operation here. The creation and exchange of works of art generates other markets. There is a buzz of activity. People are attracted as bees to honey. Not only does the art market provide employment for tens of thousands and bring overseas visitors here spending billions, but the Exchequer benefits directly through tax on a huge scale. All this is threatened by what I can describe only as a dog-in-the-manger attitude of other European countries who resent the success the UK has achieved in this

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market. They want to deprive us of the financial advantages we now enjoy and which lie at the heart of our success. If they succeed, the result will be not that other countries are able to secure the market that we have hitherto enjoyed, but that the goods are sold outside the European Union, either in the US or Switzerland. Indeed, this is already happening, such is the impact of the threats.
One of the threats is, of course, possible VAT harmonisation. Before the introduction of the single European market, no VAT was levied on works of art imported into the UK. Already, since the introduction in 1995 of the 2.5 per cent. VAT, imports of art from outside the EU have fallen by 40 per cent. So it is not difficult to imagine how serious would be the impact of a doubling of this rate.
However, the European Commission is going to carry out a review of the impact of VAT on the art market. It is essential that Her Majesty's Government take up the cudgels on behalf of the British art trade.
We have heard that the other area which presents a risk to the British art market is droit de suite. The objective of that levy was to help impoverished artists or their heirs. But as things have worked out, it is mainly the very successful who have benefited—for instance, Picasso and his heirs. In France, where the levy was first introduced in 1920, three-quarters of all the money distributed in this way was paid to the families of only six artists, as the noble Lord, Lord Sandberg, said in his excellent maiden speech. But penniless painters and their children are unrewarded.
At the present time 11 of the 15 member states of the European Union have legislation providing for this levy, which varies between countries. It is worth noting that in Italy droit de suite was introduced in 1941 but none has ever been collected.
The European Commission proposal seems to be another example where the attempt at uniformity, apparently for the sake of creating a level playing field for the art market, will have the effect of driving goods out of the EU for sale elsewhere. It has recently been estimated that on 1995 figures the droit de suite alone would have made New York a more profitable place to sell 90 per cent. of the Impressionist market by value and 85 per cent. of the contemporary art market.
In resisting the introduction of droit de suite, British based auction houses consider, justifiably, that this is an instance where the much trumpeted principle of subsidiarity should be applied. I strongly urge Her Majesty's Government to resist any attempt to introduce droit de suite into this country.
7.32 p.m.
Lord Pearson of Rannoch: My Lords, apart from the pleasure of listening to two such excellent maiden speeches, it has been a depressing experience to attend your Lordships' debate this evening. All the fears expressed in our debate almost exactly a year ago on 11th December 1996 have been repeated. Alas, it falls to me to continue the gloom by repeating some of what I said a year ago, to the general effect that there may be
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no way the London art market can escape from these destructive directives while the United Kingdom continues to be bound by the Treaty of Rome. I fear that the battle into which my noble friend Lord Hindlip so gallantly invites us to follow him may well be lost before we start.
Likewise, other noble Lords who have urged the Minister to protect our interests in Brussels may be asking the Government to do something which they are no longer capable of doing. After all, how often do we hear a British Government of one shade or another say that they will fight for this, that or the other in Brussels when in truth they know that they have no chance of succeeding?
I say that because under the Treaty of Rome the London art market, like all other British commercial and industrial enterprises, is in the end governed by European single market legislation, which is in turn ruled by the dreaded qualified majority vote. I am aware that the Conservative Government pretended that the single market was one of their greatest achievements in Europe; but that is a view which some of us have never shared.
To understand why the qualified majority vote (QMV) is so destructive, one has to understand how it works. I know that I have wearied your Lordships with an explanation on several occasions under the previous government, but this is the first time I have done so under the new Labour Government, who appear to believe that they can avoid the effects of QMV by a new charm offensive in Brussels. I submit that the future of the London art market is an excellent test as to whether that charm is working.
There are 87 qualified majority votes among the 15 member nations of the EC. France, Germany, Italy and ourselves have 10 votes each; Spain has eight; Belgium, Greece, Holland and Portugal have five each; Austria and Sweden have four each; Denmark, Finland and Ireland have three each; and Luxembourg has two. Of those 87 votes, 62 are required to carry a new initiative and 26 are required to block one.
As I understand it, and I may be wrong, if we want to avoid the effects of the seventh VAT directive, that would be a new initiative because we have already foolishly agreed to be bound by it. Thus 62 votes would be required to carry the new initiative and reverse the existing directive. On the other hand, if we wish to avoid the droit de suite legislation, in whatever form it finally emerges from Brussels, we would need to muster 26 votes to block its imposition upon us because we have not yet agreed to accept it.
So my first question to the noble Lord, Lord Haskel—he has the unfortunate task of answering for the Government this evening—is how he sees those qualified majority votes being cast on these directives when the British Government press their case, as I assume they will. Are the Government confident, given their brave new policy in Europe, of getting even the 16 votes that we need, plus 10 of our own, to block the droit de suite directive? I have heard a rumour that France may be moving our way on this issue, which would of course be excellent news. Can the Minister confirm this?

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It is an interesting coincidence that the noble Lord, Lord Haskel, answered our debate a year ago for the Labour Party, then in Opposition, and that he is doing so tonight for the Government. I hope that he will be more robust in defence of British interest tonight than he was then. He said at col. 1 173 of Hansard:
"I find it difficult to understand why our partners in Europe should agree to our having a competitive advantage so far as concerns VAT".
I trust that the speeches of my noble friend Lord Hindlip and others this evening have enlightened the noble Lord in that respect. In case they have not done so, perhaps I may ask the noble Lord the question that I often put to the previous Conservative Government. I put it a year ago to my noble and learned friend Lord Fraser of Carmyllie who was answering for the Conservative Government at the time. The question was, and still is: what is the point of being forced to play on the level playing field of Europe if its rules force us to lose out to our competitors outside the Community or otherwise damage British businesses? I shall be most grateful for a reply from the new Labour Government to this question because I never succeeded in obtaining one from the Conservatives.
The wider problem is that the London art market is not the only victim of single market legislation and of our adherence to the Treaty of Rome. There are dozens of other British interests which are threatened, or already damaged. by Euro-legislation about which we can do nothing because we have not been able to muster the votes to protect us. Those interests include, to name but a few, our fishermen, waste disposal, slaughtermen, the working week, herbal medicines, dairy farmers, cheese makers, food transporters, whisky distillers, pheasant shooting, buses, market gardeners, paper rounds and takeovers, not to mention the excellent lavatory designed by Thomas Crapper. I could name more, but the principle is always the same. For one misguided reason or another, the bureaucratic corporatist monster which has been created by the Treaty of Rome disgorges edicts which are destructive to our national interest but which we are powerless to resist. It is of course unfortunate for many of those other interests that they may not be so well represented in this House as is the London art market. But that merely makes this debate all the more important.
I conclude by putting my third and final question to the Minister, which I often put to the previous administration without the benefit of a satisfactory answer. In view of the predicament of the London art market which we have debated this evening and that of so many other British interests, has the time not come for the Government to commission an independent cost-benefit analysis of the United Kingdom's membership of the European Union?
Whatever the result of that analysis, I would pre-empt any reply that the Minister might make by saying that if we left the Treaty of Rome we would of course not lose access to its single market because we could easily negotiate a bilateral arrangement such as that enjoyed by Norway and Switzerland (the latter of which, I might add, is clearly going to be a beneficiary of the demise of the London art market if it occurs).
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I hope that the Minister will not reply. as the previous administration was prone to do, that such an analysis is not necessary because the benefits of our membership of the European Union are so obvious and self-evident. I submit that those benefits—
Lord Inglewood: My Lords, will the noble Lord give way? For the avoidance of doubt, I should be grateful if the noble Lord will tell me: does he want to see the collapse of the London art market in order to vindicate his prophecy of doom?
Lord Pearson of Rannoch: My Lords. I hope that my prophecy of doom will be disproved by the present Government, who will be successful in their negotiations with the European Community.
Perhaps I may return to my conclusion, which was to submit that the supposed benefits, by which my noble friend Lord Inglewood is clearly convinced, of our membership of the European Union must be far from obvious to those who earn their living in the British art market and to very many others besides.
7.42 p.m.
Lord Jacobs: My Lords, in responding on behalf of the Liberal Democrats, and as a very new Member of your Lordships' House, I thought it desirable to do a little research. I came across the debate that took place just a year ago, on 1 1 th December 1996. I read its approximately 9,000 words with interest. I presumed, because the nature of the subject for debate had been changed this time, perhaps the topics had changed slightly too—which shows that I have a great deal to learn.
There is a need for other subjects to be included as we are talking about the international art market as it affects Great Britain. I looked up the remarks of Liberal Democrats in the debate last year—and saw that they were not there! I therefore very much welcome the noble Lord, Lord Sandberg. It is to he hoped that if debates on this subject occur on other occasions, both he and I will be able to represent our party.
I must declare a past interest, in so far as I have a daughter who used to be quite well known as a contemporary art dealer in London. However, she is not a dealer any longer. She is studying to be a psychotherapist—which probably says a great deal about the nature of the art market. I recognise the major contribution that commercial galleries, auction houses and museums of art play in drawing visitors to London from all over the world.
The noble Lord, Lord Renton, referred to the excellent number of galleries that we have, particularly in London. The noble Lord did not mention one major gallery that does not presently exist in London. Here I declare a current interest, for I am a supporter and fund-raiser for the new Tate museum of modern art being constructed at Bankside, on the south side of the River Thames, opposite St. Paul's cathedral. Perhaps I may immodestly say on behalf of that museum that when it is completed it will be among the three or four greatest modern museums in the world. It is a

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millennium project costing £130 million, to which the Millennium Fund has contributed £50 million. There remains just £25 million to be raised. The project is proceeding very well.
There are a number of other major projects in London, including the Royal Opera House, the National Theatre and the British Museum, all of which are associated with lottery funds. There is, however, only one entirely new project being added to the London cultural scene; namely, the Tate museum. I believe it will be one of the big new tourist draws for London, and for the whole of Great Britain.
Everything is proceeding well with the project. There is just one problem. The lottery fund is now anticipated to generate nearly £10 billion, of which at least £4 billion will be for capital projects. Each one of those capital projects, which include the new Tate at Bankside, will incur substantial operating costs such as staffing, maintenance, depreciation and so on. Yet the groups funding such capital projects, including the Arts Council, the Heritage lottery fund and the Millennium Commission, say that they are not responsible for helping with the operating costs. So when all these projects come to fruition, we can be certain that at least £200 million a year will be required to cover the operating costs after deduction of the revenues they will receive from services that they provide.
In the case of the Tate at Bankside there will be an operating deficit. after taking into account restaurant and other revenues, of at least £5 million a year. I do not believe that it is the Government's strategy to force all museums to charge admission. I know that the subject is presently being discussed. I believe, therefore, that a serious mistake has been made in deciding that lottery funds cannot contribute towards endowment funds towards the maintenance and operating costs of these new projects. I believe that as much as £2 billion of the £10 billion that will be raised should be provided towards endowment funds.
Surprisingly, the rules do not prevent the provision of endowment funds. They are permitted, and in one case a small endowment fund exists. As an accountant and former industrialist, I find it inconceivable to engage in a major capital project without carefully examining how the operating costs are to be financed. I favour endowment funds; the only alternative would be if the Government would give £200 million in additional funding to the Arts Council for redistribution. At present, that is unlikely.
I now turn to the question of VAT harmonisation. I have learnt a lot about it, both from reading the debate last time and from hearing most of the same speakers making slightly different speeches in this debate. I feel that I have at least understood the subject and that the Government—even though not in government last time—will be equally familiar with it.
As the 13th speaker in a debate such as this on quite a narrow range of subjects, it is almost impossible to say anything entirely new. However, the key issue in relation to harmonisation where VAT is concerned is that the other countries in Europe have examined the
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situation and do not come to the conclusion that they have a great deal to lose. Therefore, to them, harmonisation is quite a nice idea. It is only when we examine the issue in this country that we recognise exactly what we have to lose. Reference has been made to Geneva and Switzerland; but in terms of art sales in the international market they do not rate very highly. The international art market is based on London and New York. I have spent quite a large amount of time in the United States. I recognise that the market is steadily moving towards New York and that this country is losing it. The other countries do not have a vested interest here; therefore it is not surprising that they do not move to try to change the structure.
Then there is droit de suite harmonisation. The initial idea is quite attractive. I shall not explain it again since it was twice very well explained during the debate. But one point has been missed. When well-known artists produce very good paintings, they often try to ensure that those paintings go to museums, often at a favourable price. They will probably never be resold. As I believe one noble Lord mentioned earlier, the lesser paintings are in many cases the ones that may be resold. The initial idea was a good one but its practical application is completely hopeless. I therefore strongly urge the Government to endeavour to secure change to both the VAT harmonisation plan with regard to art and the artists' royalty plan, which will also very much damage our interests.
7.50 p.m.
Lord Luke: My Lords, I should like to thank my noble friend Lord Hindlip for initiating this debate and add my congratulations to those already offered to the noble Lord, Lord Sandberg, and my noble friend Lord Naseby. Their maiden speeches were excellent and we look forward to hearing the noble Lords again. I was going to say something about King Charles I but it has already been said by my noble friend Lord Renton.
I know how difficult it can be to speak second to last in a debate. Nearly all my arguments have been made far better than I could make them; however, I shall persist. I must declare an interest. I have for the past 25 years dealt in 19th century watercolours. I have paid VAT on my margins, though I no longer do so. I am not, however, at present studying to be a psychotherapist. The levels at which I buy and sell my wares are rather different from those of the works of art which we have been discussing today. But even at my level the trickle-down effect will sooner or later operate as more and more specialist dealers decide to move their core businesses to New York and Geneva.
The most important immediate reason for this debate, as the noble Lord, Lord Gillmore, said, is the report of the British Art Market Federation for 1997, published last month. That document shows beyond argument that the predicted drop in imports of arts and antiques from non-EEC countries to the UK in the period since the introduction of the VAT levy of 2.5 per cent in 1994 is 40 per cent. That is extremely significant and disquieting. As many noble Lords have said, a levy of 5 per cent. will be even worse. As the noble Lord, Lord Sandberg, said, it could be even higher than 5 per cent.

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As we heard from my noble friend Lord Hindlip and from the noble Lord, Lord Strabolgi, we are talking about a global market, not a European market. Europe is involved, but the market is a global one. The European Commission seems to be only too happy to destroy the Community's participation in the world art market because other countries which do not currently share London's position have not appreciated the real implication of what is proposed. It is useless to talk about level playing fields when three-quarters of the players are not even playing the same game.
Those who have the resources to buy and sell great art operate internationally. They have no loyalty in conducting their business other than to buy and sell in circumstances most favourable to themselves. And why not? They are, however, increasingly unlikely to keep their collections in Britain, with all that that means in terms of works of art leaving the country; nor are they likely to keep them anywhere in Europe. The great auction houses and major dealers have, as it were, gone international and can absorb the changes of focus that that entails. It is the lesser houses and the great generality of dealers who will be at an ever-increasing risk of losing their businesses. I believe that, if we are not very careful, this decline will eventually destroy Britain's strength in the market.
Mr. Ian Taylor, Minister for Science and Technology in the previous government, said to the House of Commons European Standing Committee in January this year:
"The proposals for droit de suite are not sensible; if harmonisation were needed it would be better merely to withdraw artists' resale rights across the European Union—that would give each country an opportunity to decide what was best for it".
He went on to say:
"This measure will not lead to a significant, nor even a material improvement in the well-being of artists.
I believe that that sums up a situation that has not changed since then. The noble Lord, Lord Freyberg, said that there is at present no droit de suite operating in the United States. I believe that it was introduced into California a few years ago and then withdrawn as unworkable. I do not know what lesson we draw from that.
New taxes mean more bureaucracy, thus adding even more to the perception of the foreign buyer or seller—because that is what he goes by—that it would be less hassle, as well as better value for money, to go elsewhere.
A number of noble Lords said that, with the presidency of the Community, the Government's chance will come to change the situation. For instance, will the Government follow up the request for a proper cost-benefit analysis by the European Commission of the effects of droit de suite, not only of the possible benefits which might accrue to artists but also of the costs of collecting the levy? What plans have the Government for persuading the French to honour their pledge to open their art market to other members of the Community? Surely they are breaking Community law by not doing so? What sanction is available to persuade them? When will the review of the impact of the seventh directive. to which the Commission is committed, start
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to take evidence? Will the Government try to accelerate the start of that review so that they may be in a position to influence its conduct during their presidency? Is there in fact anything that the Government can do about droit de suite coming to this country, other than to discourage all attempts to impose it upon us? Subsidiarity has been mentioned; I believe that this is an excellent case for the application of subsidiarity.
There are many questions to be answered. This sorry tale is a remarkable example of how a market, founded by great effort and enterprise on a completely free and open trade principle, is being slowly but surely strangled by impositions of unnecessary and counter-productive tax and bureaucracy. As so many noble Lords have said, no one gains except the United States and Switzerland. The United Kingdom loses all the way along the line. The European Community looks extremely foolish as it cuts off the British nose only to spite its communal face. I look forward to hearing what the Minister has to say.
7.59 p.m.
Lord Haskel: My Lords, I am grateful to all noble Lords for their contributions to the debate. I should particularly like to congratulate the maiden speakers and also the noble Lord, Lord Jacobs, since I believe that this was the first time that he has spoken from his party's Front Bench.
Yes, it is a year tomorrow since your Lordships last addressed this issue. When I then spoke I was at the Dispatch Box on the opposite side of the Chamber. Words are often a hostage to fortune, but, in spite of the selective quotation made by the noble Lord, Lord Pearson, my views have not changed.
It is timely to return to this issue. The current situation, as I understand it, is that a revised proposal for a directive to harmonise artists' resale rights is currently the subject of inter-services consultations within the Commission and will be considered by the Chefs de Cabinet in around a fortnight.
I congratulate the noble Lord, Lord Hindlip, on his timing. It is a current issue. He told us that he has been in the art industry for 35 years. He knows the realities of the market place, as do many other noble Lords who have spoken. I can assure him that the Government will reflect carefully on what he and other noble Lords said today. We will take the matter seriously, as the noble Lord, Lord Naseby, urged. I hope that others elsewhere will too.
Art is not often thought of as an industry; but it is, and an important one. It makes a significant contribution to the United Kingdom economy and many noble Lords this evening gave us the figures. It is a highly successful industry and an example of what can be achieved given the right skills, imagination, management, investment and willingness to take risks. The Government are determined to see that that achievement is not undermined. Though we have only been in office for seven months, Ministers have already met representatives of the art trade on several occasions. We understand their concerns. We shall maintain a regular dialogue with them.

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Though there has been a change of government, the United Kingdom's policy has not changed. This Government, like the last one, is opposed to the introduction of artists' resale right. The reason is quite simple. Introduction of the right would damage our art market and would bring little or no benefit to the majority of British artists. In our concern for the art market, we must not forget the artists. As the noble Lord, Lord Freyberg, reminded us, they are the seedcorn. Traders need artists and artists need traders. They depend upon each other. The Government want to encourage artists, but applying a uniform royalty rate throughout Europe is not the right way to do it.
Despite the absence of artists' resale right, we have one of the largest—if not the largest—community of artists in the European Union. It is a thriving community. British artists benefit directly from the success of our art market, particularly from the influx of wealthy people and organisations, as other noble Lords explained. Those visitors come to our auction houses, galleries and dealers and stay in our hotels. They bring a lot of business to the United Kingdom and are always on the look-out for works of up-and-coming artists.
The Government will not name the artists of tomorrow. Whoever they are, they are benefiting from a lively and prosperous art market. The Government believe that the best way of helping British artists is not to introduce artists' resale right, but to ensure that our art market prospers and with it our artists. The way in which society looks after its artists is a social or cultural matter. The art market is an economic matter. We should not confuse the two. But what is good for the market is good for the artist also.
I say to the noble Lord, Lord Jacobs, and other noble Lords that it is important to record that we do a considerable amount to help artists even though we do not have the "droit de suite". We set up the lottery-funded endowment for science, technology and the arts. We should not forget the funds distributed by the Arts Council. The Government are committed to encouraging links between the world of business and the arts. The Government's National Heritage Pairing Scheme is a strong force in forging such links. We encourage a wide range of imaginative and valuable partnerships between the private sector and the arts. We do not ignore artists; we do what we can to help them in spite of not having the droit de suite.
I come back to the central issue which concerns your Lordships. The London art market is unlike any other in Europe. It is the Community's only truly international art market. Many of the works bought and sold here are ones traded internationally. If they were not sold here they would be sold in New York. Investors sell where they get the best returns. They will not come to London and Paris—or Frankfurt for that matter—if it costs them more to sell here than elsewhere.
London is a successful international art market not only because of the absence of artists' resale right, but because of its history, reputation and expertise. Yet, as other noble Lords said, our share of world auction sales is already beginning to slip and the United States seems to be the beneficiary. That is a matter of concern.
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I agree with other noble Lords that the proposal on artists' resale right will result in trade switching from London, not to other European capitals, but to New York, Switzerland or Hong Kong and other places where the right does not exist. The Department of Trade and Industry conducted a study and estimated that up to 5,000 jobs and earnings of up to £68 million per annum in dealers' and auctioneers' fees would be lost to our competitors.
The proposal is an unfortunate example of a single market measure for which a good case has not been made out. It completely fails to recognise the global nature of the art business. I agree with the noble Baroness, Lady Rawlings, and my noble friend Lord Strabolgi, that it is a European issue. Levelling the playing field in Europe is pointless if all it does is make the Community's art market less competitive internationally.
I say to the noble Lord, Lord Pearson, that we are committed to completion of the single market. The internal market has a valuable part to play in improving competitiveness. The Government will support sensible harmonisation to achieve that. The noble Baroness, Lady Rawlings, reminded us that there is a need to ensure that the proposals for completing the internal market bring genuine benefit, and we agree with that. In this case, harmonisation will make the art industry less competitive.
I am not surprised that the noble Lord, Lord Pearson, received no reply to his question from the previous government; it is a pointless question. However, he asked about qualified majority votes and France's position. There is not a blocking minority at the moment. We have 10 votes; the Netherlands have five and Ireland three. They too support our proposal and that brings our total to 18—eight short of a blocking minority. If France comes in—it has 10 votes—there would be a blocking minority. However, France has said that it favours harmonisation and is currently considering what the appropriate royalty should be. There is still a lot to play for. The DTI study has been translated into the languages of other member states. It may cause them to question what the consequences for them will be. The Government will not throw in the sponge.
Lord Pearson of Rannoch: My Lords, I am grateful to the Minister for giving me such a full answer. However, when he says that my question as to whether or not we should be in the European Union is pointless, will he admit that, if we were not in the European Union, we would not be taking part in this debate tonight?
Lord Haskel: My Lords, I do not want to argue with the noble Lord about the European Union. Again about a year ago we had a long debate on the subject and I refer him to that debate.
The United Kingdom is not seeking any special advantages. We are not afraid of the level playing field. We want to see the Community promoted as a centre of the art trade rather than losing business to third countries. My noble friend Lord Strabolgi asked about

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the review. The Government will be concerned to see that the review is realistic and as wide-ranging as necessary. They will seek to ensure that the particular interests of the UK art market as well as the European Community art market in general are properly represented. That will be the case whether the review starts during the United Kingdom's presidency or later.
The noble Lord, Lord Gillmore, asked whether the Government are working hard to establish alliances. Yes, we are, but at the moment a majority of member states favour harmonisation of the droit de suite. We are working very hard to persuade them to change their minds.
About a year ago, when we had our debate, fears were expressed about the impact of the VAT changes. We can still only speculate on this, although the Government are aware that anxiety in the art trade is growing as we get nearer to June 1999, which is when the rules will have to change. The noble Lords, Lord Hindlip and Lord Sandberg, showed their concern and gave the figures. They asked whether we can use the review of the seventh VAT directive to press for a zero rate and also whether we will use our presidency in that way. I believe the noble Lord, Lord Inglewood, asked me about that as well. While the question of a zero rate of VAT for imported works of art may well arise during the review, it may not command much support from other member states. Our major concern will be to attempt to persuade other member states and the European Commission of the Community-wide benefits of the UK's derogated rate of 2.5 per cent. rather than the minimum rate of 5 per cent. set in the directive. That will be the case whether the review starts now or later.
Lord Inglewood: My Lords, I was specifically addressing my remarks to the rate that might be applied on droit de suite. I appreciate that it is not part of the Commission's current proposals that the rate on droit de suite should be zero. However, does the Minister agree that, if it were decided that there should be droit de suite across the entire Community, it is at least a theoretical possibility that the rate at the bottom end could be zero? Therefore, if that is appropriate, does he not agree that it might provide an additional argument for the Government in resisting this pernicious proposal?
Lord Haskel: My Lords, I shall come to the question of a zero rate for droit de suite in a moment. The point I wish to make is that the artists' resale right and import VAT cannot be considered separately. It is the combined effect which is important. We need to know what effect both will have on competitiveness. New measures should not be introduced without knowing the impact.
The DTI has studied the impact of the resale right on the United Kingdom. This study has been made available to the Commission, but a study of equal depth needs to be made for the Community as a whole. The Government will continue to seek to persuade other member states and the Commission of the importance of this. Decisions must be taken only in full knowledge of the facts. Member states must understand the risks involved.
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The warnings contained in the study and in the DTI's study must not, and cannot, be ignored. We shall ask the Community to pause and reflect. It must consider what impact the resale right proposal will have. The Community must ask itself whether this is really what it wants. We shall point out that the United States has already rejected the idea of introducing the resale right. We shall point out that the Swiss have rejected it too, precisely because they want to build up their international art market. Perhaps it would be better, as the noble Lord, Lord Inglewood suggested, to abolish the right altogether. That would level the playing field in Europe with the international playing field. Europe cannot isolate itself from global competition. Nevertheless, the Government would not wish to impose abolition, or any other solution, on our European partners. We respect their culture and traditions. Some countries have had the right for a long time. They attach great importance to it. If they want to continue with the right because it suits them, it is not for us to say that they should not have it.
Equally, the Government see no reason for the United Kingdom to be obliged to introduce the right, simply because others have chosen to do so in the past and want to keep it. Our circumstances are different. As the draftsmen of the Berne Convention well knew, artists' resale right is an area of copyright which, for good reason, is best left for individual countries to decide for themselves in accordance with their circumstances. That is why I think this is a clear case where subsidiarity should apply.
As I said at the beginning, a new proposal is expected shortly. It will take account of proposals from the European Parliament to amend the Commission's original one. The Government will want to look at this very carefully. We shall want to see three things: whether it is accompanied by a fiche d'impact, or, for the benefit of the noble Lord, Lord Pearson, in English, a cost benefit analysis; whether it addresses the issue of international competitiveness; and what changes have been made to avoid damage to the United Kingdom's art market.
Your Lordships will be aware of the Government's positive and constructive attitude towards Europe. There is a better atmosphere and a greater spirit of trust. Our approach to negotiations on artists' resale right will be to explain to our European partners and to the Commission why the Government consider the resale proposal to be so damaging, and why what is proposed is not the right solution for Europe as a whole. I can assure noble Lords that we are in negotiations and we are doing all we can to persuade others of the strength of our argument.
Lord Strabolgi: My Lords, the noble Lord is coming towards the end of his allotted time. He has based almost the whole of his speech on the droit de suite. Will he now tell the House what the Government are intending to do about import VAT, which was the other half of this debate and equally important?
Lord Haskel: My Lords, the European Commission is specifically committed to reporting the conclusions of

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its re-examination of the relevant provisions of the seventh VAT directive on the international competitiveness of the Community's art market to the Council of Ministers by 31st December 1998. It has not yet indicated when the review will begin or how it may be conducted. The Government will be concerned to see that the review is as realistic and as wide-ranging as necessary and will seek to ensure that the particular interests of the UK art market as well as the European Community art market in general are properly represented. That will be the case whenever the review starts. We are waiting for the review to take place. That will be our position. We shall also want to discuss the British Art Market Federation's study with the Commission and also the DTI's own studies which have now been translated into other member states' languages. It is important for other member states and the Commission to understand our position. We shall aim to ensure that decisions are not taken which the Community will later come to regret.
If there are other questions which I have not answered, I shall write to noble Lords. I thank all those who have participated in the debate. Noble Lords can rest assured that the Government will be tireless in speaking up for Britain in this matter.
8.20 p.m.
Lord Hindlip: My Lords, I would like to add my congratulations to the noble Lord, Lord Sandberg, and to my noble friend Lord Naseby for their excellent maiden speeches. I would like to add also a special word of welcome to my noble friend. I was born in the neighbouring village of Hazelbeach. Perhaps I may tell him that there is a published catalogue of the disastrous Cromwell sale. I shall try to acquire a copy for him. I wish particularly to thank my noble friend Lady Rawlings for her kind remarks. It was also a joy to listen to the noble Lord, Lord Strabolgi.
But I hope that the obvious charm with which the noble Lord, Lord Haskel, has addressed this debate can be extended to his discussions in Europe. I say one thing to him: will he please prove the noble Lord, Lord Pearson, wrong? I beg leave to withdraw the Motion for Papers.
Motion for Papers, by leave, withdrawn.

Mink Keeping Order 1997
8.21 p.m.
The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Lord Donoughue)The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Lord Donoughue): rose to move, That the order laid before the House on 19th November be approved [14th Report from the Joint Committee).
The noble Lord said: My Lords, I beg to move.
Moved, That the order laid before the House on 19th November be approved [14th Report from the Joint Committed]—(Lord Donoughue.)
Baroness Nicol: My Lords, I wish to intervene briefly to put to my noble friend one or two small
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remarks on the order before it is approved. These are not particularly pleasant little animals. We cannot eat them. They have only one purpose which is to provide pelts. When they escape they have a devastating effect on local wildlife and in captivity they are kept in, what is for them, totally inappropriate conditions. They are semi-aquatic, but they are kept in confined and barren spaces with very little access to water or exercise. That could be described as cruelty and for what purpose? Are they so economically valuable that we should allow this trade to continue?
I know that my noble friend is merely seeking to extend licences which already exist, but I hope that he can assure the House that in future the Government will look closely at the need to continue what I consider to be a totally unnecessary and rather cruel trade.
Lord Hardy of Wath: My Lords, perhaps I may echo the comments of the noble Baroness, Lady Nicol. I shall not trespass on the welfare aspect except to say that I much prefer to see furs on the backs of the animals rather than on the human. I suppose that it is preferable to kill the mink humanely on fur farms; it is certainly preferable to the leg-hold trap which is still used in other parts of the world. Can my noble friend confirm that the British Government will maintain the position that they have adopted as regards that matter?
The main purpose of my brief intervention is to say that I entirely endorse the order. It is essential that there is a degree of regulation of the fur farms. As a conservationist, can I be sure that having been given a licence a mink farm is subject to adequate inspection? I say that because both sides of this House and the other place endorsed in 1981 the provisions of the Wildlife and Countryside Act which sought to ensure that alien species were not freed, released or allowed to escape in this country. Alien species really have no place in Britain. They can distort our ecological wealth. There is even a species of crayfish which is now playing havoc with our native crayfish in my own county. The House will be well aware of the damage that the coypu has done to the banks of the waterways on the Norfolk Broads. It escaped from fur farms in East Anglia rather a long time ago.
I would like to think that in addition to having tight conditions as regards the licences, the establishments, while they exist, will be subject to inspection which could well consider the welfare point my noble friend made. They might also take great care to ensure that escapes become impossible.
Lord Luke: My Lords, I note that this order is made under the Destructive Imported Animals Act 1932 which provides for the keeping of non-indigenous species of mammals to be either prohibited or controlled by licence on the basis of their destructive habits. The order is thus concerned solely with the security aspects of the keeping of mink and not with whether mink should be farmed or with the welfare aspect of the keeping of mink.
Indeed, if the order were not to be approved, the result would be, not a prohibition on mink keeping, but the absence of any controls on the keeping of mink including the crucial security requirements.

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I take note of the fact that fur farming in the UK is regulated and monitored by MAFF's veterinary advisers, with regular farm inspections by the independent State Veterinary Service.
I turn now to the text of the 1997 order and its accompanying amending regulations. My first point relates to paragraphs (1) and (2) of Article 1 which state that the order shall have effect for three years instead of the five years which has been the practice for previous orders. Can the Minister explain why the five-year period has been abandoned? Is there any significance in this for the future of the fur farming industry? Do the Government have plans to phase out the industry and, if so, would they make an announcement which could assist those engaged in the industry to adjust their business plans accordingly and consider what other action they may need to take?
I understand that when members of the British Fur Trade Association and the Fur Breeders association met the Minister, Mr. Elliot Morley, on 17th July he gave assurances that existing farms would be allowed to continue. Is that still the case? The Minister will not be surprised to learn that, as a result of Mr. Morley's comments in July, existing fur farms have already implemented investment plans.
My second point concerns The Mink (Keeping) (Amendment) Regulations 1997 which are linked with this order. They increase the cost of the licence fee charged to those who keep mink. In the case of those who keep mink for scientific research the increase is from nil to £185 in England and Wales and £60 in Scotland. In all other cases the cost of the licence fee has been increased from £115 to £630. Can the Minister explain why the licence fee cost has been increased in real terms so substantially? Was consideration given to the damaging effect that this large increase could have on smaller family firms? Was consideration given to phasing in the increase over a period, and if not, why not?
We continue to believe, as we did in government, that it is essential that where mink are kept it should be under licence and under secure conditions designed to prevent escapes. This order meets those objectives and we on these Benches therefore support the making of the order.
Lord Beaumont of Whitley: My Lords, everyone agrees that this order must be passed because mink must be contained. They do an immense amount of damage when they get loose and they only too often do so. Mink are to blame for a crash in the population of common terns along a 1,000-kilometre stretch of coastline between Mallaig and Campbeltown. Numbers have fallen there from 1,839 to 1,023 breeding pairs over the past 10 years. That is equivalent to a 4.5 per cent. reduction in the total British population of terns. In the same area between 1989 and 1996, breeding pairs of common gulls have dropped from 1,138 to 799, and pairs of great black-headed gulls from 630 to 303.
In the latest issue of Bird Study (volume 44), published by the British Trust for Ornithology, it is pointed out that the populations of these species have
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marginally increased at sites where mink are absent but steeply decreased where they are present. On 15 inshore islands populated by mink, numbers of seabirds have decreased by more than 90 per cent. or have disappeared altogether. Mink cause such devastation because, like hyenas, they sometimes kill far more than they eat. They can kill 100 chicks in one night. They are also strong swimmers and have no natural predators in Britain, other than humans.
Conservationists at Oxford University also blame mink for the virtual disappearance of water voles from most English rivers over the past 15 years. An unpublished study of the Thames, Soar and Amber Rivers by the university's Wildlife Conservation Research Unit warns that mink,
"can be associated with drastic local reductions in numbers of water voles within one year. and their effective extinction within two years".
At this time of year we should remind ourselves that that refers to Ratty.
There is an absolute need for this order to be passed. but it should not need to be passed because the Labour Party's pre-election document, which I noticed was not mentioned by those on the government Benches, stressed that the party was totally opposed to fur farming and that it would take action to end that cruel method as soon as practicable. If it had been ended as soon as possible. we would not need to be passing this order. As it is, we have to pass it and, as a result, we must look also at its welfare effects.
My information is that, in spite of the fact that mink farms are subject to inspection, many are of a very low standard and animal welfare is neglected. It is not difficult to see how that position arises, because mink are highly active, semi-aquatic animals which. in the wild, maintain territories a mile or more in length. Keeping such animals in small, barren cages, as is the norm on mink farms, poses serious welfare problems for them. As long ago as 1989, the Farm Animal Welfare Council stressed:
"the Council believes that the systems employed in the farming of mink do not satisfy some of the most basic criteria which it has identified for protecting the welfare of farm animals".
We support this order. We are glad that it is being imposed for only three years this time, as opposed to five. We hope that such an order will never again have to be moved because we hope that fur farming will have been abolished by that time.
8.32 p.m.
Lord Donoughue: My Lords, we are taking this discussion in a rather more original manner than I had anticipated but, given the competition of both television and another place, it may save us a little time.
The Mink Keeping Order before this House is made under the Destructive Imported Animals Act 1932. This Act is concerned with the control of mammals which are not indigenous to this country and which pose a threat to the environment because of their destructive habits. The order is concerned with ensuring that mink are kept securely to prevent their escape into the wild. It replaces the existing order which expires on 18th January 1998.

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As I am sure that noble Lords are aware, the Government's position on fur farming, as stated in our pre-election leaflet New Life for Animals, is to prohibit fur farming as soon as is practicable. Earlier this year, the Government reviewed the various options available to prohibit the keeping of mink and other species for fur, and a public consultation letter seeking comments on the way we proposed to proceed was issued on 5th August.
The overwhelming majority of responses to the consultation letter supported the Government's position that all fur farming should be prohibited. As I have indicated, the Destructive Imported Animals Act 1932 allows only for a prohibition on the keeping of non-indigenous mammals to be introduced for the purpose of protecting the environment. The Government have now concluded that there is insufficient evidence to suggest that existing arrangements for keeping mink significantly contribute to the problems caused by feral mink. Therefore, in the absence of this evidence, it is not possible to introduce an order prohibiting the keeping of mink for fur under the 1932 Act. However, I can assure the House that the Government remain fully committed to implementing our pledge to prohibit fur farming as soon as practicable and we are urgently considering how this can best be implemented.
It has been suggested that the UK's participation in negotiations aimed at updating and strengthening the Council of Europe's recommendation on the welfare of animals kept for their fur will in some way inhibit our ability to bring in a ban. I can assure the House that this is not the case. We are taking an active part in the discussions so as to ensure that those European countries which do continue to permit fur farming apply the highest possible welfare standards.
In the meantime, the Mink Keeping Order 1997 will need to be renewed. Here, I hope that I am dealing with the concerns raised by both my noble friend Lady Nicol and the noble Lord, Lord Beaumont of Whitley. If the order is not renewed, the keeping of mink for fur would be totally deregulated; the agriculture departments would not then have the power to enforce the stringent security conditions required to prevent farmed mink from escaping into the wild. Such a situation would not be acceptable to the Government. I agree with the noble Lord, Lord Beaumont of Whitley, about the dangers and horrors of mink and I thank him for his otherwise general support for the order.
The Government are making one change to the Mink Keeping Order 1997. Previous mink keeping orders have all been valid for five years. However, in view of the Government's intention to implement our pre-election pledge to prohibit fur farming as soon as practicable, we have proposed that the Mink Keeping Order 1997 should be limited to three years. I hope that that deals with the question raised by the noble Lord, Lord Luke, and I thank him also for his otherwise general support for what we are doing. The order will
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therefore expire on 1st January 2001, by when we hope that fur farming will have been prohibited absolutely in the United Kingdom.
As with the previous order, the Mink Keeping Order 1997 prohibits the keeping of mink absolutely on any offshore island other than the Isle of Wight and the Isle of Arran (and neighbouring Holy Island); and in the Caithness and Sutherland districts of the Highland region of Scotland. These are areas which have neither mink farms nor a feral population. The purpose of the continued absolute prohibition on the keeping of mink in these areas is to maintain this situation and prevent the establishment of feral mink populations. In all other areas of Great Britain the keeping of mink is prohibited except under a licence.
To qualify for a licence to keep mink, fur farm operators need to comply with the Mink Keeping Regulations 1975. These regulations prescribe the manner in which mink must be kept and the strict precautions that must be taken to prevent their escape. Currently there are 16 licensed mink farms in England. There is none in Scotland, Wales or Northern Ireland.
I should, perhaps, explain that the Destructive Imported Animals Act 1932 deals only with the need to prohibit or control the keeping of non-indigenous mammals by reason of their destructive nature. The welfare of mink which are being farmed for their fur is covered by separate legislation.
In closing, the Mink Keeping Order 1997 is essential to ensure that the Ministry has the power to enforce the stringent security conditions required to prevent farmed mink from escaping into the wild. To fail to renew it —I trust that the House will support the Government in this matter—will result in deregulation, with all the dangers that that involves. I can assure noble Lords that, until fur farming is prohibited, applications for licences will be considered fairly and will be issued where the required standards are met. Equally, where licensees do not comply with the required standards, firm action, including prosecution where justified, will be taken.
My noble friend Lord Hardy referred to inspections. Under the Mink Keeping Order we shall increase inspections from one to two, and the second will be unannounced. As regards leg-hold traps, the Government have supported moves in the European Union to ban their use for wild animals. They will continue their opposition in the current European Union negotiations with the United States. Referring to the comments of the noble Lord, Lord Luke, it is in relation to those extra inspections, and because the original pool of funds has been exhausted, that we are raising the licence fees. The costs of the inspections will be met from licence fees.
I hope that I have dealt with the points that have been raised and that the House agrees that these regulations should be passed.
On Question, Motion agreed to.
House adjourned at eighteen minutes before nine o'clock.