Lords Sitting of 14 July 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 Birmingham.
Lord Grantley—Took the Oath.

Equal Pay
Baroness Turner of Camdenasked Her Majesty's Government:
Whether it is the case that women are on average paid 20 per cent. less than men, whether as board directors or as sales assistants, and what action they are taking to rectify the situation.
The Minister of State, Department for Education and Employment (Baroness Blackstone): My Lords, the Government's new earnings survey for April 1996 shows women's average hourly earnings, excluding overtime, were 79.9 per cent. of men's. It also shows that the gap between women's and men's average earnings is narrower in some occupations and wider in others. Though the survey provides a useful comparison between men's and women's earnings, it does not prove there are unequal pay rates for comparable jobs. However, the Government are still concerned about the difference in average hourly pay between men and women. Our policies will enable more women to train for and enter higher status jobs and will encourage employers to pay full and fair rates.
Baroness Turner of Camden: My Lords, I thank the Minister for that response. I am sure she is aware that my Question is based on statements contained in the excellent annual report of the Equal Opportunities Commission. It acknowledges that much progress has been made, but there are still problems. The EOC urges improved access to justice for those claiming equal pay for work of equal value. That the procedures are often complicated and very long is exemplified by the well-known case of speech therapists, which began as long ago as 1985 and has still not yet reached a conclusion. Could there not be a review of these procedures, in consultation with the EOC, with a view to improving them? That might help the situation as far as concerns the gender gap.
Baroness Blackstone: My Lords, I am grateful to my noble friend. I should like to congratulate the Equal Opportunities Commission on its new code of practice on equal pay. It is the first of its kind to be developed by a member state in Europe. A good deal of consultation and care went into the drawing up of the code. If employers take note of it they can
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certainly improve their pay systems and practices for all their staff. On the more specific question about the 11-year long speech therapists' case, sometimes known as the Enderby case, for understandable reasons, I cannot comment on cases which are still going through the legal process. These cases are particularly complex ones. In this case it is the responsibility of the Department of Health. However, I very much take on board the more general issue my noble friend raises about trying to improve the procedures in such cases. I shall certainly look into them.
Baroness Williams of Crosby: My Lords, is the Minister aware that there has been very little improvement since 1976 when the noble Baroness, Lady Castle, was in charge of employment policy? I believe that the move has been within 5 per cent. since that time. Can she tell us whether the Government's training policy will focus on the occupational concentration of women in certain low paid areas as compared with men?
Baroness Blackstone: My Lords, the noble Baroness is right. The Equal Pay Act was introduced by my noble friend Lady Castle back in 1970. There was then a rapid improvement in narrowing the gap between men and women as far as concerns average earnings. However, since 1979 there has been a substantial slowing down in narrowing that gap. One way of doing it is by improving training opportunities for those in jobs with low pay and limited levels of qualification. The Government are engaging in a variety of different policies: both through modern apprenticeships, where we are trying to increase the proportion of women, particularly the proportion of women in those areas where there have not traditionally been many women; and through the programme of training provided by the TECs.
Baroness Gardner of Parkes: My Lords, does the noble Baroness agree that women can bring their own cases if they feel they are being unfairly discriminated against? I speak as someone who has sat on industrial tribunals since 1974. If the case is simple a woman can bring it under the Equal Pay Act and the industrial tribunal has power to deal with it. Long cases are the exception. I know that the noble Baroness, Lady Turner, is an expert in these matters. The Question refers to "board directors". Is there any suggestion that the boards of public companies are paying women less to be non-executive members? I have never encountered that.
Baroness Blackstone: My Lords, I am not aware of the board of a public company paying one of its non-executive directors less if she is a woman. On the noble Baroness's more general question, I am aware of the opportunity women have to take to industrial tribunals employers who they believe are discriminating against them. There are many such

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cases. I am glad to say that quite often any discrimination is subsequently rectified as a result of taking such a case to a tribunal.
Lord Dean of Beswick: My Lords, is the Minister aware that the issue of equal pay bites harder and more viciously on those at the bottom of the social scale? Such people not only suffer a disadvantage in terms of wages but in working conditions in general with regard to sick pay, maternity benefit and holiday pay.
Baroness Blackstone: My Lords, I am aware that discrimination of that sort is most common in jobs which are badly paid. One of the problems is that job segregation exists in this country leading to more women being concentrated in jobs that are probably undervalued in some ways in terms of the pay that is offered. That is something which we and all employers need to address.
Lord Quirk: My Lords, does the Minister agree that the Enderby case, to which she has referred, sends just the wrong sort of signals to one of the professions to which the noble Baroness, Lady Williams, referred—in other words, a hardworking profession whose personnel is almost entirely women?
Baroness Blackstone: My Lords, I do. It is most unsatisfactory that a case of this kind has dragged on for nearly 11 years. As I said earlier, that is something that we shall look into.
Earl Russell: My Lords, can the noble Baroness tell us how much more revenue the Chancellor of the Exchequer would enjoy were that 20 per cent. gap to be closed? If, as is possible, she is not provided with the answer to that question, can she please write to me and place a copy of the answer in the Library?
Baroness Blackstone: My Lords, I cannot say exactly how much additional revenue would be available to my right honourable friend the Chancellor of the Exchequer if that were to happen. I am a little sceptical as to whether an army of civil servants will be able to provide the noble Earl with that figure, but I shall certainly take his question back and ask whether the figure can be produced.
Baroness Trumpington: My Lords, do the Government envisage that the introduction of the minimum wage will change the present situation?
Baroness Blackstone: My Lords, of course it will change the present situation because there are many women who are paid scandalously low hourly rates. A minimum wage will ensure that that position is changed.
Baroness Byford: My Lords, as the noble Baroness is aware, Opportunity 2000 was formed in 1991 by the business community, and its purpose was to raise
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the profile of employment for women. Are the Government going to continue to encourage such schemes, and what plans do they have to develop that type of work further?
Baroness Blackstone: My Lords, the Government will certainly encourage such schemes.

Customs and Excise: Gambling Duty
2.46 p.m.
Lord Peyton of Yeovilasked Her Majesty's Government:
What percentage of total gambling in the United Kingdom is taken up by the National Lottery and what percentage of the total duty on gambling paid to HM Customs and Excise arises from that source.
Lord McIntosh of Haringey: My Lords, there is no reliable central record of expenditure on gambling. A number of government departments record information on betting and gaming, and some is not recorded at all. However, the best estimate that we can make suggests that the National Lottery accounts for up to 20 per cent. of the total stake on betting and gaming in the United Kingdom. From January 1995 to the end of May this year, Her Majesty's Customs and Excise has collected over £1.37 billion in duty from the lottery. That represents about 37 per cent. of all duty on gambling paid to Customs and Excise since January 1995.
Lord Peyton of Yeovil: My Lords, perhaps I may say how flattered I am that a Question of mine should again have attracted the attention of the noble Lord opposite. I am not quite sure how roving his commission is, but I am glad to be included in it. On this occasion all I wish—and I hope that the noble Lord will be prepared to do this—is for him to admit, on behalf of the Exchequer, that it is a very fortunate beneficiary of a very well-run operation.
Lord McIntosh of Haringey: My Lords, the appreciation is mutual. I am delighted to have the noble Lord continuing to ask Questions which I have the privilege of answering. Of course both the Exchequer and the beneficiaries of the various National Lottery distribution boards are all glad that the lottery is a success.
Baroness Rawlings: My Lords, can the Minister say what plans Her Majesty's Government have to extend Camelot's licence to other forms of gambling?
Lord McIntosh of Haringey: My Lords, we have no plans to extend Camelot's licence. Camelot can come to us at any stage and ask for extensions to its licence, and we shall consider any application that it makes.

Motor Car Emissions: Reduction
2.48 p.m.
Baroness Miller of Hendonasked Her Majesty's Government:
What increases in all forms of taxes and what restrictions on the use of private motor cars will be needed to implement in part the Prime Minister's initiatives announced at Denver to reduce the emission of greenhouse gases by a further 20 per cent. in the United Kingdom.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Baroness Hayman): My Lords, climate change is one of the most serious threats facing the world today and the Government are committed to taking firm action at home and to providing leadership abroad to combat the threat. We are examining a wide range of measures, including fiscal measures, which could help us achieve the goal set out by the Prime Minister to reduce carbon dioxide emissions to 20 per cent. below 1990 levels by the year 2010.
Road transport is the fastest growing source of greenhouse gas emissions in the United Kingdom and, along with other sectors of the economy, must make a fair contribution to meeting our target. The decision by the Chancellor to increase from 5 per cent. to at least 6 per cent. in real terms the commitment to annual fuel duty rises will, if continued to the end of the Parliament, save an additional 2.5 million tonnes of carbon in 2010, making a significant contribution to the 33 million tonnes which needs to be saved to meet our 20 per cent. target.
Baroness Miller of Hendon: My Lords, I thank the Minister for that comprehensive reply. Will she confirm that, however good the objectives are, there will be considerable inflationary increases in costs to industry and to domestic consumers of fuel and that there may possibly be damage to our own car manufacturing and export industries? Do the Government agree that all the Prime Minister's proposals must be fully implemented by all the other major world economies and not simply be imposed unilaterally to the competitive detriment of the United Kingdom?
Baroness Hayman: My Lords, I agree that it is essential that we tackle the problem internationally. In setting the UK's domestic target, the clear intention was to provide leadership in the international scene. At Kyoto we expect to see other nations contributing towards a target. I repeat that the problem must be tackled internationally. Our competitiveness will be helped if other countries take similar measures. However, I must advise the noble Baroness that we are absolutely determined that those measures will not jeopardise the economy. Indeed, there are benefits for the United Kingdom in achieving significant emission reductions. If we achieve our target, we shall have a better transport system, more competitive industry with
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new opportunities in the field of technological innovation, anti more energy-efficient homes for our citizens.
Lord Stoddart of Swindon: My Lords, does my noble friend agree that one of the best ways of reducing the amount of pollution, including CO2, in the atmosphere is to make those who drive their cars the most pay the most? Therefore, will the Government reconsider their attitude towards ending vehicle excise duty and transferring the taxation to VAT on petrol?
Baroness Hayman: My Lords, we have seen that increasing the duty on petrol is a very effective measure in terms of reducing CO2 emissions. It also provides people with an opportunity to reduce the number of car journeys that they make and provides incentives to industry to produce more fuel-efficient vehicles. On the issue of the other changes that could take place to encourage CO2 emission reductions, the Budget placed the environment at the core of the Government's objectives for the tax system with a statement of intent that environmental pollution should be discouraged through the tax system. It included the increase in the level of fuel duty escalator and recognised that we would have to consider the possibilities of a whole range of other measures.
Lord Ezra: My Lords, does the Minister agree that one of the biggest contributors to emissions from road vehicles is congestion at peak periods? Have the Government any plans to deal with that problem?
Baroness Hayman: My Lords, congestion does, indeed, contribute to pollution and it is important that we tackle it. The White Paper on an integrated transport policy seeks to consider in the most open and wide-ranging way all the possibilities with regard to how congestion can be tackled.
Lord Renton: My Lords, bearing in mind the great possibilities of having vehicles propelled by sources other than petrol and diesel oil, will the Government give every encouragement, including financial encouragement, to the development of those alternative sources of power?
Baroness Hayman: My Lords, there are great opportunities for developing other sources of clean transportation which could yield huge benefits for both public and private transport. In certain areas such encouragement is being given. I shall write to the noble Lord with the details. However, there are a whole range of measures—not just relating to transport—by which, by exploiting technological advance in, for example, combined heat and power and energy efficiency, we could make a huge contribution to cutting CO2 emissions.
Lord Paul: My Lords, will Her Majesty's Government consider dropping the tax threshold on company cars of 2,500 miles and 18,000 miles which encourages many company car owners to drive in the

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last quarter of the tax year, thus creating more congestion and more pollution at the worst time of the year, given the weather?
Baroness Hayman: My Lords, I understand very well the point that my noble friend is making. It would be wrong of me to anticipate the measures which the Chancellor might choose to impose, but I am sure that the taxation of company cars will be considered.
Baroness Williams of Crosby: My Lords, is the Minister aware that we welcome the Government's leadership on this issue? Will the noble Baroness give us two assurances, first, that submissions will be made, particularly to the Government of the United States, to follow up the initiative taken by Britain and Germany, as the United States has done almost nothing to reduce energy use in that great country? Secondly, will the Minister assure us that steps will be taken to try to introduce the use of information technology in the control of industrial processes, given that we could massively reduce the energy misuse of many industrial processes, particularly older ones?
Baroness Hayman: My Lords, on the second point, the noble Baroness clearly highlights the areas in which there are opportunities for cutting CO2 emissions, such as exploiting IT and technological advances, without taking some of the more painful measures. As far as putting pressure on the United States and other developed countries is concerned, we hope that at Kyoto the EU's negotiating position will be used to advantage with other developed nations to ensure that the burden in this area is spread fairly between the developed countries.
Lord Glenamara: My Lords, do the Government take into account in this matter the physiology of trees, which make the major contribution to reducing the amount of CO2 in the atmosphere? If they do, what additional plans do they have for planting broad-leaf forests as part of the effort towards achieving the target?
Baroness Hayman: My Lords, I shall have to write to my noble friend on the issue of broad-leaf forests. However, on the issue with which I am perhaps more familiar, the mitigating effects of tree-planting on road development, the Highways Agency has a major tree-planting programme alongside its road development programme in order to do exactly what my noble friend suggested.
The Earl of Lauderdale: My Lords, does the Minister accept that one of the chief pollutants in the world is the generation of electricity by the burning of coal and that two of the biggest offenders are China and India? Can the Minister say, first, what it is hoped to achieve at Kyoto with regard to encouraging China and India to reduce their burning of coal and the consequent pollution? Secondly, and for the same reason, what are the Government doing to encourage combined heat and power in this country?
Baroness Hayman: My Lords, on the issue of combined heat and power in this country, we recently
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had an interesting debate in this House on the very many ways in which we can support such initiatives. We are setting the target of aiming to generate at least 10,000 megawatts of power from combined heat and power schemes by 2010, doubling the previous government's target of 5,000 megawatts by 2000. On the issue of the developing countries, there is concern about CO2 emissions in such areas and particularly in the countries to which the noble Earl alluded. However, we have to balance that against the developing countries' rightful concerns about economic progress. I believe that we shall have a stronger negotiating and advisory position with regard to those countries if we in the developed world set a good example.
The Duke of Somerset: My Lords, does the Minister agree that those living in rural areas (away from public transport systems) should not be disadvantaged by fuel fiscal rates?
Baroness Hayman: My Lords, I understand the noble Duke's point about the impact on those living in rural areas and the need to find ways of helping them without penalising them because of their fuel consumption. Higher fuel costs encourage manufacturers to improve the fuel efficiency of their vehicles and can influence road users' decisions about car purchases and maintenance and their driving behaviour, particularly the speeds at which they drive as well as the journeys that they undertake. Some 30 per cent. of people do not own a car, and one must also be concerned about them.

Eurofighter Aircraft Programme
3 p.m.
The Earl of Kinnoullasked Her Majesty's Government:
What progress has been made on the European fighter aircraft programme.
The Minister of State, Ministry of Defence (Lord Gilbert): My Lords, the Eurofighter development programme is making excellent progress. All seven development aircraft are now flying, five with the EJ200 engines as planned. In total they have made over 400 flights. The ECR90 radar has recently flown in the Eurofighter, and all the key development maturity criteria have been met. Consequently, we are now ready to proceed to the crucial production and support phases of the programme. I hope that, as a result of the positive outcome from the German cabinet discussion last Friday, final German approval can be secured in the Bundestag in the autumn.
The Earl of Kinnoull: My Lords, I thank the Minister for that encouraging reply. Does he agree that the project is of vital importance and value to the future capability of the Royal Air Force to defend the realm? Moreover, does he also agree that it is a great achievement on the part of our European partners, who over many years have maintained the political will to

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show how effective a large European collaborative programme such as this can be and have produced a world-beating military aircraft far cheaper, as I understand it, than its American counterpart, the F22 project?
Lord Gilbert: My Lords, I confirm that this aircraft will be much cheaper than the F22. It is a tribute to the skill of those who have produced it and to those who have negotiated and sustained over many years such a complicated project. The aircraft has been flying since 1994. It will fill an essential role in the capabilities of the Royal Air Force.
Lord Craig of Radley: My Lords, does the Minister acknowledge that while the industrial benefits of Eurofighter will be enormous, the overriding justification for proceeding with the programme is to satisfy the air power needs of our Armed Forces in the next century, particularly in air defence and air superiority?
Lord Gilbert: My Lords, I would never attempt to justify a procurement decision for the Armed Forces on the grounds that it produced employment. The fact of the matter is that in this particular case it does. The Eurofighter has already produced 6,000 jobs and is expected to produce of the order of 14,000 at the time of pre-production. The noble and gallant Lord is right. The justification for this expenditure is that it is necessary to meet operational requirements for the defence of the realm.
Lord Jenkins of Putney: My Lords, speaking as one who worked for five years in Fighter Command during the late war—spent mostly on the ground—can my noble friend inform the House in what form of aerial combat it is envisaged the Eurofighter will be engaged?
Lord Gilbert: My Lords, I am delighted to hear of my noble friend's gallant war record. I point out to him that the majority of pilots, however able they are, spend most of their time on the ground. This fighter will have the traditional dogfight capability. I do not believe that I am allowed to disclose how many Gs it will pull, but it is also hoped that it will be armed with a beyond visual range air-to-air missile to enable it to engage in very long distance aerial combat.
Lord Ironside: My Lords, can the noble Lord inform the House of the likely in-service date of the Eurofighter? Further, can he inform the House when he expects the Tornado production lines to cease?
Lord Gilbert: My Lords, the Government hope for the in-service date of 2001. We are not completely out of the woods because the German authorities have yet to complete their parliamentary arrangements to see that it is approved. Approval of the aircraft will be put to the Bundestag either early in the autumn as a single item or may be wrapped up in a budget proposal later in the year. Until we have overcome that hurdle, we cannot be finally confident that the project will succeed. However,
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we are far more optimistic than we have been up until now. As to when the Tornado production line will be closed, I am afraid that the noble Lord takes me a little wider than the original Question. I shall find out the answer and let him have it.
Lord Monkswell: My Lords, bearing in mind the importance of this project in terms of national defence, is my noble friend aware that in its very early stages the project was about to be cancelled and the only factor that prevented it was the very vociferous campaign by the trade unions involved to ensure that it continued? Will my noble friend join with me in paying tribute to their foresight in their campaign to satisfy this essential defence equipment need?
Lord Gilbert: My Lords, I am always happy to pay tribute to my friends in the trades union movement, who show great foresight in many matters.
Earl Howe: My Lords, will the Minister confirm that the Government intend to order no fewer than 232 Eurofighter aircraft, as was the policy of the previous government? Can the Minister also say what the prospects are of export orders for this excellent aircraft and what countries have expressed an interest in it?
Lord Gilbert: My Lords, it is the Government's intention to order 232 of these aircraft, as was the proposal of the previous government. So far as concerns export orders, quite firm inquiries have been received from major Middle Eastern countries that have shown an interest in it. I am afraid that I cannot disclose their names at this stage.

Imperial College Bill
3.6 p.m.
Read a third time, and passed.

Coordinated Universal Time Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

Structural and Cohesion Funds: ECC Report
3.8 p.m.
Lord Barnettrose to move, That this House take note of the Report of the European Communities Committee on Reducing Disparities within the European Union: the Effectiveness of the Structural and Cohesion Funds (11th Report, Session 1996–97, HL Paper 64).
The noble Lord said: My Lords, I begin by thanking the Members of the committee for the tremendous job that they have done in the preparation of this report. I have been very fortunate in having such an excellent committee. I also thank the clerk to the committee,

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John Goddard, together with our special adviser, Professor fain Begg, who have helped the committee tremendously. I also mention the witnesses, who provided excellent evidence which is in one of the volumes of the report. I hope that this report will be recognised as a most useful document both here and abroad.
I also take this opportunity of welcoming the noble Lord, Lord Renton of Mount Harry, our maiden speaker this afternoon. To listen to him again will take me back to old days. I am sure that the House will also be glad to hear him. I also take the opportunity to welcome my noble friend Lord Simon, who is to reply to this debate. He has an unusual dual capacity in the sense that he gave evidence to the committee in relation to a previous report, not this one, and now he speaks as a Minister. I hope that he will give evidence to us of a character that equals the excellent evidence that he provided previously.
Finally by way of introduction, let me say that we received a letter from the President of the Board of Trade to which I shall refer on a number of occasions during my remarks.
The Motion on the Order Paper, which it is as well to read, refers to a report of the European Communities Committee on Reducing Disparities within the European Union: the Effectiveness of the Structural and Cohesion Funds. That may seem a dull and lengthy title, but the issue is anything but dull. We are debating a very important issue.
The committee tried to make the report a little livelier in the sense that we gave it an unusual cover for the House of Lords; that is, red with technicolour photographs. I notice that even the Chancellor of the Exchequer has changed this year's Red Book; only the back cover is red, the front being in a different colour, with photographs. I am glad to see that someone is taking note of what we have done with our report!
The structural funds were reformed in 1988 when their amount was doubled following the adoption of the Single European Act in 1987. The reforms followed four principles: concentration, programming, additionality and partnership. They are explained in our report and I shall touch on them briefly. The funds under discussion are very important because they cover some one-third of the European Union budget. I emphasise, and I hope that everyone understands, that we are not talking simply about regional disparities between countries but about the richest and poorest regions within all countries.
Apart from Holland, sadly, the disparities between and within member states have not improved a great deal. We saw something of what has and has not been done. We visited two countries, Greece and Ireland, with widely different success stories. We also visited Glasgow and Cornwall and saw the benefits that have occurred.
I welcome to the debate my noble friend Lord Elis-Thomas, who no doubt will speak about Wales. I apologise in advance for the fact that the committee did not visit Wales. I can assure my noble
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friend that that was due only to the shortage of time. We would have loved to have visited Wales, too. However, I am pleased to note that between 1994 and 1999 Wales will have received about £0.5 billion from the structural funds, which I am sure he will tell us is nothing like sufficient. Indeed, I see that he agrees.
In addition, the report calls for radical reform to reduce bureaucracy and delay and perhaps the nonsense of some of the small grants that are made. I am sure that the recipients of those small grants were pleased to receive them. But it is important that the grants are made not because, as was said by the noble Baroness, Lady Thatcher, "We want some of our money back"—that is precisely the wrong reason to make structural grants—but because they are effective and economically sensible. They should not be made because of political expediency—and I do not mean "political" in the party political sense.
I recognise that that is a generalisation of the kind that departments like; and I know that the Department of Trade and Industry loves generalisations. Therefore, I shall be specific in my remarks. In the time available I can refer to only a few of our many recommendations, but I shall seek clarification from the Minister on some of the general views expressed by my right honourable and old friend the President of the Board of Trade.
The central point in my right honourable friend's letter was that the "debate" on the future of the funds is at an "early stage"—and that is only the debate! No doubt that is factually correct, but it is somewhat depressing. I assume that it means that it will be a long time before anything happens. Perhaps my noble friend the Minister can reassure us that we shall not have to wait a long time before something sensible is done about the structural and cohesion funds.
My right honourable friend concentrated on our recommendations affecting the funds within the UK and therefore I shall do the same. However, any reading of our report will show that we covered many other areas, too. The first recommendation to which I shall refer is contained in paragraph 116 relating to devolution to regional level. That should be carried further to maximise the potential benefits of structural funds. That must be right. Indeed, it almost certainly is right because my right honourable friend stated in her letter that it was in line with government policy. That statement was unqualified, so naturally I assume that the recommendation is right. No doubt the Minister will confirm that.
In paragraphs 115 and 125 we recommend that programmes should not be imposed but should be the result of partnership between national and sub-national bodies, down to local communities. Indeed, we saw examples of that in Scotland, where the partnership between the Scottish Office and some of the local community bodies was excellent and very much appreciated locally.
Again, the letter from the President of the Board of Trade informs us that not only is that in line with government policy but it is welcomed. I am delighted to hear that and assume that the department agrees. I hope that that is not a rash assumption. However, there is a

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reference in her letter to "strategies". That is a good word because it can mean much and it can mean nothing. She says that the department's policies are drawn up by English, Scottish, Welsh and Northern Ireland offices.
Perhaps I may ask my noble friend the Minister a simple question. As regards Scotland, will he confirm that the Barnett formula is sacrosanct? Of course, everyone will know what the Barnett formula is. I devised it some 20 years ago and I know that the Minister will be aware of it. I understand that there has been some little dispute in government about it, but I have no doubt that he will be able to confirm that the formula is sacrosanct. He may wish to use another form of words, but I hope that his confirmation will be unqualified.
The next recommendation to which I wish to refer is contained in paragraphs 135 and 136. It is also referred to in paragraphs 51 and 52. We believe that the funds are spread far too thinly. Approximately 51 per cent. of the EU population (which the committee gathered from the noble Lord, Lord Marsh, is about 400 million)— I am mistaken; perhaps it is a little more—live in areas which are eligible for assistance. Commissioner Wulf-Mathies told us that it would be better geographically for the spread to cover no more than 35 per cent. of the population, which is big enough. However, my right honourable friend's letter tells of the difficulties. It seems that we can identify areas of particular need but other countries cannot. My right honourable friend must have overlooked the question that we posed. I assume that she overlooked it only because she did not tell us whether she agreed with the Commission that the figure should be reduced to something like 35 per cent. I look forward to my noble friend the Minister telling us that he and the department agree that the figure should be nearer 35 per cent. than 51 per cent.
In paragraph 117 we recommend an important role for local authority elected members. I am glad to see in my right honourable friend's letter that that policy is "being implemented". It is marvellous to read that comment about a recommendation. It does not always happen and I shall believe it when I see it.
In paragraph 119 and 120, we strongly support the concept of additionality. I am glad to see again from the letter that the Government support that policy, but they add, "as a general principle". I hope it is not just my old suspicious mind—
Lord Bruce of Donington: Hear, hear!
Lord Barnett: My Lords, I am sorry to hear my noble friend say "Hear, hear"! When I hear the words "in principle", I worry and my natural suspicions are aroused. When the Minister replies, perhaps he will remove any fears or suspicions which I might remotely have.
But, all in all, the report makes clear that there is urgent need for reform of the funds. In particular, there is a need for a radical reform of the administration not least in relation to delays of payment—something we
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met on our visit. The letter from the President of the Board of Trade refers not to reviews, which we have heard a great deal about, but to a new formulation: it will be continually reviewed. I hope that the Minister will be able to tell us that that means something. I hope that it means that the review will be in the direction that we as a committee have strongly recommended.
As regards the delays, the letter explains how the Commission makes payment. We are aware of that. Indeed, anybody reading our report will be aware of it. I see that my noble friend Lord Bruce smiles and that he is aware of it. The letter tells us that once a claim is properly made out, payment is made "as soon as possible". It goes on to say:
"as a general rule, within three months … [they] seek to minimise delay wherever possible".
I see the noble Baroness smiling. She may have drafted it while she was in government. I hope that the delay will be kept to the minimum because we met a number of small firms which were hit very hard by the delay. I hope that the Minister will be able to tell us that there has already been evidence of improvement in the speed at which payments are made, because delay hurts companies large and small but it hurts small companies in particular.
But there is one major issue which will arise in a few days' time; that is, about the way ahead for the Community. President Santer is to publish the Commission's Agenda 2000 on 16th July, which is in two days' time, and it will eventually be debated fully in Luxembourg in December and no doubt beyond that, when we have the Presidency in the first half of next year. Perhaps the Minister will tell us when we can expect to see the Government's response to that. I suppose that it is asking too much to expect the Minister to tell us what will be in that response, but he may be able to tell us when we may hope to see the response to what is likely to be one of the most important documents to come out of the Commission for a long time.
One does not have to take a pro- or anti-European Union line on matters of regional policy. I am sure that my noble friend Lord Bruce of Donington will understand that. My noble friend is not even smiling. The European Union policy rightly seeks to strengthen the economy and social cohesion—
Lord Bruce of Donington: My Lords, I am most anxious to have articulated clearly the question which the noble Lord wishes me to answer in due course. If he wishes me to answer something, then I can give it my most serious attention.
Lord Barnett: My Lords, I am sorry that I said anything at all because the last thing in the world that I want is to lengthen my noble friend's speech, which I hope may be briefer than usual.
As I was saying, one does not have to be either pro-or anti-European Union to want to see regional policies succeed. I see that my noble friend almost agrees with me—or the noble Lord, Lord Marsh, does in any event. But European Union policy, rightly in the view of the

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committee and certainly in my view, seeks to strengthen economic and social cohesion within the Community in view of the significant regional disparities of which I have already spoken. These policies are a key instrument to assist the less prosperous regions to adapt to the single market. The main aim is to create jobs and to ensure balance and sustainable development. I hope that our report will make a small contribution to that objective. I beg to move.
Moved, That this House take note of the Report of the European Communities Committee on Reducing Disparities within the European Union: the Effectiveness of the Structural and Cohesion Funds (11th Report, Session 1996–97, HL Paper 64).—(Lord Barnett.)
3.25 p.m.
Lord Renton of Mount Harry: My Lords, I am delighted to follow the mover of the Motion concerning European Union disparities, the noble Lord, Lord Barnett, whom I remember well and whom I admired in his previous incarnation, even though we sometimes disagreed.
As this is my maiden speech, your Lordships will forgive me for quoting very briefly an extract from a book written by David Cannadine, the well-known social historian, which a friend of mine sent to me recently. David Cannadine wrote that earlier this century,
"there existed a widespread feeling that Peers were raised above the scrimmage of public life [and] beyond the reach of the temptations that beset the ordinary man".
I look forward to learning more about the continuing truth of those comments in the years ahead.
I thought that the report written by the Committee chaired by the noble Lord, Lord Barnett, was extremely clear and easy to read. There was a pleasant simplicity of language in it. As an avid follower of matters European, I believe that this is the very first report that I have read outside those produced by the European Commission on the subject of the effectiveness of the structural and cohesion funds. We hear a great deal about the common agricultural policy and fishing quotas, but I have never read anything of this standard on that subject.
As the noble Lord, Lord Barnett, said, it is an extraordinarily important issue. Europe gets bigger all the time. That may be geographically correct but in terms of the European Union and its significance, it certainly is correct. The question of the enlargement of the European Union looms ahead. It was not settled at all at the Amsterdam Summit but we face the prospect that within five years, we may have a European Union with 20 or 21 members and five or 10 years later, a European Union with 25 or 26 members. All the newcomers are likely to have a gross domestic product per capita significantly below the average of the current 15. Therefore— and I think that this is the underlying message of the report— the question of the funds needed to diminish the disparity between the newcomers and the Cohesion Four and the other members looms very large indeed in people's worries about the future of the European Union.
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I remember visiting the Mani at the southern end of the Peloponnese some years ago about whom Paddy Leigh-Fermor wrote in a brilliant book. How could that part of Greece, which still appears totally medieval, be at the same economic level as Frankfurt, Bonn or Brussels?
One of the main concerns, therefore, about joining economic and monetary union is whether the funds required for coherent and stable development throughout the democratic countries of Europe, as the important treaties pledge, are simply too great and whether the flow of funds to achieve that objective from north to south could cause disturbance, leading in the end even to social insecurity.
I add in parenthesis that I am not nearly as worried about economic and monetary union as are other noble Lords. I regard it as an inevitable outcome of the completion of the single market. It is a necessary means for Europe to stay competitive with Japan, China, India and Brazil in the next century. Furthermore, there will be significant competitive advantages for Europe and for the United Kingdom as a result of moving to a single currency. I suspect that five years after moving to a single currency we might look back and wonder what all the fuss was about. But that, of course, is a matter for another debate. I fully understand the concern that after economic and monetary union, the long-term adherence to the Maastricht criteria could cause an unacceptable flow of EU funds, particularly to the central and east European countries.
Therefore, I find it very satisfactory that this report shows how well, by and large and up until now, the problem has been dealt with in relation to the Cohesion Four—that is, Portugal, Spain, Greece and Ireland. There are of course problems involved. It would be impossible for there to be no problems and the noble Lord, Lord Barnett, touched on some of them; for example, delays in payment, insufficient involvement at the lower levels of the Community, local councils, and insufficient involvement in decision making. However, in the main, the result has been extremely good.
I note from paragraph 58 of the report that:
"In the last ten years the four poorest countries of the EU, the Cohesion Four, have raised their GDP per capita from 66 per cent. to 74 per cent. of the EU15 average".
The commissioner responsible, Commissioner Wulf-Mathies, said that,
"the performance of the Union's four poorest countries was 'truly remarkable by any international or historic standards'".
I do not believe that any of us would actually disagree with that remark. The figures are indeed very remarkable. The commissioner then went to say that about 40 per cent. of the benefit of the purchasing power which flowed back from the Cohesion Four returned to the,
"other richer Member States in the form of purchase of know-how and capital equipment".
That is almost the creation of a virtuous circle: dare one say, quoting the phrase from Dodo in Alice in Wonderland (which is quoted elsewhere in the report), "All must have prizes". As we all know, life is not like that. From that, at this early stage, it seems that to date the cohesion and structural funds are working extremely well.

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However, there is one small point upon which I disagree with the noble Lord and his committee; namely, the statement in paragraph 95 that, in stressing the "devolution of real autonomy" down to a lower level in the United Kingdom, the government offices of the region should be used. From my previous experience as a Member of Parliament, I have to say that I found the government office for the south-east region to be absolutely useless. I do not know why it was formed. Indeed, when it was formed I wrote to the Minister involved, a good friend of mine, and asked him why. I saw that in its powers it was not only involved in planning applications but also that it was to be involved in tree preservation orders.
That seemed to be an extraordinary addition of yet another layer of bureaucracy and one which would be more likely to get in the way between the Department of the Environment, Transport and the Regions and local authorities than to achieve any real objective. I have to tell your Lordships that if this is to be the vehicle for creating greater local autonomy in such an important area, much will have to be done to improve the powers, the competence and the knowledge of the government offices for the region before they are used any more.
In conclusion, I should point out that in paragraph 100 of the report, Commissioner Wulf-Mathies, refers to the hope that in the next programme period the figure for national GDP going to the European Community budget would remain constant at 1.2 per cent. of GDP; but that, nonetheless, there would be a 30 per cent. increase in the funds available for structural and cohesion policies and, of that, there would be a sevenfold increase in European Union support for the central and east European countries. I would be very grateful if the Minister would confirm whether or not those figures are correct. If they are correct, they are remarkably encouraging. Moreover, if they work out, I believe that the Phare programme which is responsible will truly be acting as a lighthouse for raising standards in former Communist countries.
3.35 p.m.
Lord Elis-Thomas: My Lords, it very happily falls to me on behalf of the whole House warmly to congratulate the noble Lord on his maiden speech. It is a particularly pleasant duty to be able to welcome another member of the class of '74—indeed, a member of the class of February 1974—into this House. The noble Lord comes here as someone who has had substantial experience in another place as a Minister for a number of departments. For example, he served in the Foreign and Commonwealth Office, in the Whips' Office and, more particularly, as Minister for the Arts. That fact came out very clearly in the noble Lord's speech.
There may not be all that many Members of another place who find time to read or write books, but we have here an acquisition to this House of a noble Lord who is also a writer and that is to be welcomed. Indeed, the noble Lord's literary references in his speech today were very well received, as I am sure such references will be in the future. The noble Lord made one controversial point on devolution, but I shall not argue with him today. I believe he said that perhaps the government offices of the region
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are not strong enough as yet to deliver the liberation of the English regions. If that is the case, I wholeheartedly agree with the noble Lord.
I have just two themes to pursue today. I am grateful for the opportunity to do so provided by this most excellently produced and excellently designed report by my noble friend's committee. The fact is that we have here a report which enables us to debate the issues, so to speak, beforehand—that is, before we have the announcements from the Commission which, as my noble friend said, are due to be published on Wednesday. We cannot anticipate what is in Agenda 2000, but I assume that the Minister who is to respond to the debate is aware of what is likely to be said on Wednesday in all his capacities; that is, both his previous and his present capacity.
It is essential that we in this House play our part in this debate on regional policy. I should like to do so briefly by underlining two themes, one of which has already been dealt with quite extensively, and one which has not perhaps had enough emphasis placed upon it as yet. I have in mind the regionalisation of regional policy and the greening of the regional policy of structural funds. It may seem rather strange to emphasise the regionalisation of regional policy, but my noble friend did so very effectively—as, indeed, does the report—in referring to the need not to have just a "top down" approach or just a "bottom up" approach—I refer particularly to paragraph 86 of the report—but also that it was essential for the programmes to be,
"the result of partnership between national and sub-national bodies, down to local communities, at the planning stage as well as at the implementation stage".
The endorsement that we have from the President of the Board of Trade of that line is warmly to be welcomed—an endorsement which we are not quite used to having from government, but it is a pleasure to have it now.
That theme was present in the report and in the minutes of evidence which, as always with such committees, was a very valuable resource. I hope that I pronounce the following name properly, Signor Arias Cañete—indeed, I understand from my noble friend that I have; I always like to get these linguistic matters right, and I am always pleased to receive advice. He was the chair of the Regional Policy Committee of the European Parliament and emphasised the importance of concentrating on the geographical issue involved in regional policy and the fact that, as he said in evidence:
"It should be a general principle that the thematic and geographical concentration policy should be totally applied to all countries, and all regions, whether they are rich or poor".
I know that my noble friend Lord Desai will pursue the matter further, because that was his major line of questioning. However, that is of particular relevance to the United Kingdom and to the Welsh economy. I shall not dwell at length on the Welsh economy as I shall have plenty of opportunity to do so.
Structural changes have taken place very successfully in the restructuring of the former coal and steel communities and the existing very competitive steel industry located in Wales. It is important to recognise the contribution made by the restructuring of old industrial areas emerging from Objective 2 and the need for that to continue for all similarly placed regions within the

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Community, especially as we look to the extension of the Community eastwards through enlargement. It is essential that we have that urban old industrial dimension of policy, but it is equally important that the regions designated should be sufficiently specific so that where we use targets such as 75 per cent. of GDP in Objective I, that aid should be available even when there are sub-regions within more successful regions where the level of performance has not risen to the level of the region as a whole. That issue is important as we look to inward investment in south-east Wales and in north-east Wales and the position of the western seaboard which is benefiting from the INTERREG programmes and other Community initiatives.
It is important that we are able to have a sub-regional structure within regions that is able to deliver the benefits of the structural funds directly to the areas which need them. I am certain that the Minister will be able to comment on that because this is not just a matter for the European Union but also for member state governments. We shall want assurances that this Government, in their dealings with the European Union in the debate on the future of regional policy, will ensure that those areas within regions, such as the western seaboard of Wales—where I live and which I have represented in another place—continue to have recognition. If possible, they should be given further recognition because, as the Minister is aware, the lack of Objective 1 status under the present system in Wales has been a cause of great concern. That needs to be looked at most carefully as regards the new structure.
We have already heard about the emphasis on the decentralisation of partnerships and the concept that local communities are able to respond much more effectively to support through structural funds when they have an impact on planning. Robert Moreland, the chairman of the section for regional development and town and country planning in the Economic and Social Committee has written an excellent memorandum in which he emphasises,
"A sense of enthusiasm from Member States but in particular from the local community"
as being important to make a programme a success. We cannot over-emphasise that. We should consider recent successful initiatives. One such is the regional technology plan—although that was a Community initiative and therefore signalled from the centre, as it were—which has worked, certainly in the case of the Welsh economy, because it has been taken up by partnership institutions and by public sector bodies such as the Welsh Development Agency, local authorities, the academic sector and so on.
Therefore we cannot over-emphasise the importance of decentralisation in that context. That applies not just to regions or to sub-regions but also to local authorities themselves. I believe Sr Cañete pointed out that even where there are autonomous governments within member states, as in Spain, there is discussion in Spain as to whether local authorities should be associated with that matter. There is an ongoing fight between the different bodies of governing states. The regional policy committee of the Parliament has considered this issue and has
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attempted, in the context of regional policy, to define the principle of subsidiarity, or at least to ask for a definition. However, I notice that the committee was told in evidence that there had not yet been a decision on whether the whole of the Parliament could agree on a definition of subsidiarity. Clearly they see the importance of applying the principle of subsidiarity to the whole area of regional policy.
It is also essential to apply the principle of sustainable development and the greening of policy. The concerns expressed in evidence by CPRE, I of course endorse as a member of CPRW. I also endorse the detailed evidence put forward by the RSPB itself and on behalf of Birdlife International. I know that the RSPB is a regular contributor of evidence to our Select Committees, but the evidence is perhaps more valuable for that as the organisation is aware of the detailed activities of our committees. That evidence is always welcome. In its emphasis on the need for sustainable development criteria within the structural funds, CPRE has emphasised what has been a serious failure of the operation of policies in the past. It draws attention to the importance of the Cork conference on rural Europe and the need for integration and the role of green tourism in creating employment which is also sustainable in environmental terms.
I warmly welcome the report. I welcome the initial Government response and I look forward to the UK continuing to play a constructive role in the debate on the structural funds. I hope—although this may be a fond hope—that noble Lords on all sides of the House may also play such a constructive role.
3.45 p.m.
Lord Grenfell: My Lords, I add warm words of congratulation to the noble Lord, Lord Renton of Mount Harry, on his maiden speech. When we are treated to the eloquence and wisdom of an "old pro" coming to your Lordships' House from another place it is always a matter for great celebration. We look forward to many interventions from him.
Once again it is a great pleasure to participate in an inquiry under the chairmanship of my noble friend Lord Barnett. As usual, he guided us with his wisdom, wit and well-known skills through a long and complex study. I thank my noble friend for his eloquent and persuasive introduction to this debate.
The committee's recommendations fall into nine main subject areas. I wish to focus mainly on the three that look to the years ahead: the basis for reform; the implications of EMU and of the enlargement of the European Union; and the distribution of funds within the EU after 1999. Before doing so, I record my appreciation of the response of Her Majesty's Government to this report, as set out by my right honourable friend the Secretary of State for Trade and Industry in her letter of 30th June, to which my noble friend Lord Barnett and others have already referred. On the whole, I found it positive. I shall mention three points which struck me as particularly encouraging.
First, I welcome the assurance that in line with our recommendation in the report, and indeed in line with the Government's commitment to lifelong learning, the Government will seek early adoption of an Objective 4

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programme for this country. A programme of this kind to help adapt the workforce to industrial change is long overdue. I fully share the hope expressed in our report that this programme can be promptly formulated, agreed with the Commission, and implemented.
Secondly, I am encouraged that in accordance with their manifesto pledge Her Majesty's Government will pursue tough action on unfair state aids which harm enterprises in other EU member states. This accords entirely with the view expressed in our report. I am sure that the Government will use their enhanced influence in the Industry Council and the Commission to achieve that end. We await with great interest the report on this issue which the Industry Council has called on the Commission to produce.
Thirdly, I warmly welcome the Government's pledge to continue reviewing how best structural funds administration can be improved throughout the United Kingdom. I must, however, take issue with the view advanced in the Government's written response that delays in project approvals and payments are largely the consequence of current structural fund regulations, and that our contrary view in the report had resulted from our making comparisons with the Irish experience with the cohesion fund which was not relevant to our own experience with structural funds. With the deepest respect, the views formed by the committee were based on evidence from United Kingdom users of structural funds who found the roots of the problems a lot closer to home than Brussels. And this seems to have been the view also of the European Parliament's report on the use of structural funds in the UK published just three months ago. While that report was in the making, our committee took oral evidence from its rapporteur, Arlene McCarthy, MEP, and she was even then able to hint broadly at what her committee had learnt in the hearings it had held right across the United Kingdom.
In the words of the European Parliament's eventual report,
"Major problems exist in the UK government's management of the Structural Funds".
and it cites, inter alia, Government failures to act once projects have been approved, the delays often caused by inadequate staffing in government offices, and so on. I could go on but that is not the report that your Lordships are discussing this afternoon. Suffice it for me to suggest, with respect to my right honourable friend the Secretary of State, that her response to our report's findings on this matter of delays and our consequent recommendations in paragraph 96 tend to let the previous Government undeservedly off the hook. That is the only real quibble I have with what I otherwise regard as being a very encouraging government response to our report.
I now turn briefly to the reform of the funds, the implications of EMU and EU enlargement, and the distribution of funds within the EU after 1999. I shall touch on only a few aspects which have been of particular interest to me.
In one respect the debate comes two days too soon. It would have been interesting to have known what Commission President Santer had said rather than relying on press accounts today of what he is expected to say
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when he makes his Agenda 2000 statement this Wednesday—it was referred to by my noble friend Lord Barnett—when he presents the Commission's opinion on the preparedness for membership of the 10 applicant countries as well as the outline financial perspectives for the EU budget covering 1999 to 2004. It appears that the Commission is recommending that negotiations be opened with Poland, the Czech Republic, Hungary, Slovenia and Estonia, with Cyprus already on course.
Agenda 2000 will also set out the Commission's ideas on reforming the CAP and the structural funds. What the Commission tells us this Wednesday is, of course, only the beginning of a long process of discussion and negotiation involving both the Council and the European Parliament. We hope, therefore, that our report's recommendations on these matters will be helpful to the Government in the process.
Noble Lords will note that in paragraph 93 our report urges the swift preparation by the Commission of detailed proposals for reform of the funds if new structures and regulations are to be agreed and in place in time to avoid delay in drawing up the programmes to be implemented post-1999. I trust that the Government share our sense of urgency and that they will use Britain's presidency in the first half of 1998 to push matters along.
As to what those reforms should be, our report puts forward a number of proposals in paragraphs 94 to 97. I shall here touch on only one: the recommendation that the number of structural funds should be reduced with perhaps one fund for human resource development and one for all other structural purposes. I signed up to this consensus in the committee but with some doubts lingering in my mind largely fuelled by a quite telling point made by Commissioner Wulf-Mathies when we discussed this issue with her last January.
The point she seemed to be making was that reducing the number of funds was less important than making sure that the basic rules, conditions and procedures for the different funds were the same. A reduction in the number of funds would not of itself reduce the range and variety of problems to be addressed. I also gained the impression from other oral witnesses that the frustrations felt in recipient countries had less to do with the number of funds and more to do with the irritating diversity of procedures and regulations that distinguished one fund from another. Commissioner Wulf-Mathies' plea for harmonisation would address that problem while safeguarding the specificity of the role of each fund.
Nonetheless, the case for simply reducing the number of funds is attractive to many. I ask only that in considering whatever the Commission's proposals are in this regard, Her Majesty's Government bear in mind that a reduction in the number of funds without any complementary harmonisation of rules, conditions and procedures among the lesser number of funds that will emerge from the reform will provide little added value.
I come now to the implications for the funds of eventual European and monetary union and the enlargement of the membership of the European Union. With respect to EMU, I have two points to make. We are aware that with the advent of EMU, and against a background of strict and

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sustainable convergence, some member states might want to increase their domestic income transfer payments to adversely affected regions. But our report, quite rightly, argues against this being used as a justification for seeking additional EU funds for investment in structural development, even though EMU may make structural change more urgent. If that sounds half-hearted, it is at least consistent with what the committee wrote in its June 1996 report to your Lordships on an EMU of "ins" and "outs". I think that it is an important point of policy. When it comes to allocating scarce EU funds in the years after 1999, helping new members of an EU enlarged to the east and the south must take priority over relieving fiscal pressures on the older member states of the north and the west.
My second point on the impact of EMU relates to the committee's recommendation that cohesion fund assistance should be tapered off when a beneficiary country joins EMU. I find this logical because the cohesion fund's stated purpose is to assist convergence towards the criteria for entry into the single currency zone. However, I hope that Her Majesty's Government will vigorously encourage the European Investment Bank to help meet the continuing needs of the four existing cohesion countries, whether they are in EMU or waiting, in particular with their infrastructure, as the main focus of the cohesion fund gradually switches to central and eastern Europe.
That brings me to the impact of enlargement. It is sobering to recall that it took nine years to negotiate the entry of Portugal and Spain in 1986—two countries which were relatively more prosperous than today's applicants. No one expects these new negotiations to take as long as that since the Europe agreements have provided a head start. But they will still be long and arduous, and it is important that this is not used as an excuse for delaying the implementation of agreed reforms of the CAP and the structural funds, which urgently need reform irrespective of any enlargement.
My second point on enlargement is this. As the Economist pointed out last week, there is a danger that squabbles among the EU 15 over who gains and who loses from the reforms that must precede enlargement risk turning public opinion against the whole enlargement project. Those squabbles can be largely avoided if, as we point out in the report, the Commission provides convincing evidence to back the theory advanced by Commissioner Wulf-Mathies that the new members can be accommodated with structural funds, and that funds exceeding existing levels will still be available for programmes within the Community of 15, without any additional burden falling on Europe's taxpayers.
As Commissioner Wulf-Mathies stressed in her evidence to us, enlargement will mean a gradual inclusion and a gradual integration of new members into structural funding. The quality of their central and, importantly, regional and local economic administrations, and their capacity for matching funding (a serious problem in countries also coping with the costs of NATO enlargement), are generally not yet of a standard to ensure a high absorptive capacity. In our report we say that we
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would be surprised if it were to exceed 4 per cent. of GDP for even the best performing economies in central and eastern Europe.
With that in mind, I find that the hypothesis advanced by Commissioner Wulf-Mathies last August to the Bundestag's European Affairs Committee quite compelling. If today's press reports are accurate, what she said a year ago appears to have been broadly confirmed as regards the underlying assumptions in Agenda 2000. If the assumptions and calculations are correct, this should pre-empt a great deal of unnecessary scaremongering about the costs of enlargement and the future of the funds.
I come finally to the question of the distribution of the funds within the EU after 1999. The report before your Lordships makes some important recommendations in paragraphs 105 to 110. They address central issues such as the need for greater geographical concentration and a better spatial definition of eligible regions. We know that there has been deep division in the Commission over how to reconcile the competing claims of declining urban areas and struggling rural communities with Commissioners Wulf-Mathies and Fischler doggedly fighting their respective corners. One can only hope that a fair compromise has been, or soon will be, reached.
The most important of the recommendations on post-1999 distribution in the report is that there should be a vigorous pruning of the themes or objectives that are eligible for funding. I am tempted to call this the "Lord Dahrendorf seaside bandstand test". That reference may seem a little obscure to some noble Lords; however, I believe that the noble Lord, Lord Dahrendorf, knows to what I refer.
As our report urges, the overriding considerations when determining eligibility for projects should be: increasing competitiveness; increasing sustainable employment; and adjusting skills to meet changing labour market needs. In the past too much funding has failed to pass these tests. Now is the time to get it right.
The bottom line of the report is that the funds which have overall made a positive impact have survived rather well the tests of times past but will not in their present form survive the tests of times to come. I believe that Her Majesty's Government, on the basis of the response we have had so far to the report, will use their new-found influence in the European Union's councils, particularly during their presidency next year, to help ensure the kinds of reforms to these funds which historical experience and current realities now demand.
4 p.m.
Baroness O'Cathain: My Lords, I begin by paying tribute to the skill of the noble Lord, Lord Barnett, which was indeed quite remarkable. The 12 members of the committee were almost as individually disparate as the 15 members of the European Union, yet he managed to control, cajole and encourage us in a most effective way. The noble Lord, Lord Grenfell, put it much more elegantly, referring to his wisdom, wit and well-known skills. "Masterly" is the word. As an aside, he would do wonders in Brussels, bringing those self-same attributes to bear on the bureaucracy and making it more effective—the word "effective" is uppermost in our minds today.

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However, we should miss the noble Lord's deft chairmanship of this excellent committee. (I can now describe the committee as such being no longer a member of it.)
Today we are taking note of the 11th report of the European Communities Select Committee on reducing disparities within the EU: the effectiveness of the structural and cohesion funds. Certainly the funds have been effective. But two questions remain in my mind: first, how effective; and, secondly, could they be more effective?
It is difficult to assess how effective the funds have been. When taking evidence one always has to discount the fact that by the very nature of the inquiry witnesses in receipt of funds wish to put the best possible case forward. An inquiry conducted by the representatives of a country which is widely regarded as the least enthusiastic member of the European Union, and one which receives little or no funding by comparison with either Greece or Ireland, must have resulted in a determined effort to convert us!
Witnesses from the Commission and witnesses in the member states or regions of this country in receipt of funds were universally supportive of the funds and were pretty reluctant to envisage a situation in which the funds would be diluted to take account of enlargement; withdrawn because criteria for receipt of the funds had been overtaken, as in the case of Ireland; or changed in concept.
We received masses of supporting evidence to suggest that, without the funds, economic progress and job creation would not have been as "relatively" successful. However, I was left with a lingering doubt as to whether the use of the funds was as effective as it either could be or was claimed to be.
That doubt is founded upon the universal inability to specify exactly how many jobs have been created. That should be a relatively easy calculation to make, but it seems to be outwith the competence of the Commission at present. A subsidiary doubt refers to the "quality" of the jobs created. It was exceedingly difficult to assess whether the jobs created were long-term, skill-enhancing jobs or just temporary, part-time jobs. In one notable instance funds were used to transform a hobby into a business for people who were quite happy to continue with their hobbies but saw an opportunity to make "pin money" out of them because they were in a "funds" area. In all conscience, that is surely not the intention of European taxpayers and does not meet the objective of,
"reducing disparities within the European Union".
Reducing disparities is the aim of the funds, and every single one of us would wish to do just that. In the absence of any other bright ideas, I guess that they are certainly better than nothing. However, since they are funded out of taxpayers' money, accountability is a prerequisite. I fear, as in many other cases regarding EU measures, accountability is not necessarily uppermost in the minds of the recipients of the funds—and probably not in the minds of the Commission doling out the funds.
Here I have a difficulty, and it relates to my second question: could they be more effective? If we insist on putting in place yet more administrative arrangements to ensure greater accountability—for example, post-grant
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audits and the like—more and more of the EU moneys will be spent on bureaucracy and administration. One has only to let one's imagination run a little wild to arrive at the total cost of what has been called the "Lord Dahrendorf Padstow bandstand", which I am sure was well in excess of the £15,000 funding received. I am sure the noble Lord will tell the House what this bandstand is all about.
Everywhere we went we heard of "administrative nightmares" at worst, "hiccups" at best, in dealing with the Commission and with national governments from the petitioners for funds. I turn again to my second question: could the fund be more effective? In Ireland they seem to have the problem substantially licked. Networking by senior civil servants (who to a man—and I say the word advisedly—unfortunately were enthusiastic EU supporters, and most seemed to have "done time" in Brussels) was remarkable in its ability to get funds sanctioned within hours in some cases, while the UK experience was that it usually took many months.
My personal recommendation is for our civil servants to become much more adept at networking in Brussels and with Brussels. I should be most interested to hear whether the Minister has any radical ideas on how to achieve that. Several years ago I raised many hackles by suggesting that spending some time at the Commission should be a pre-condition for promotion to the level of Deputy Secretary in the UK Civil Service. I shall not elaborate on that but at some time, someone, somewhere might consider it.
There is a big requirement to cut red tape. But once more it must be asked: is it possible so to do and still safeguard taxpayers' moneys? We spent much time, officially and unofficially, chewing over this one. I fear that our combined inputs to the discussion did not yield so great a result. Diagnosis is so much easier than effecting a cure.
In our visits to Strathclyde and Cornwall I realised that sometimes the word "effectiveness" does not necessarily mean the effective use of funds to achieve an objective. Effectiveness is not always quantifiable in financial terms. I came to believe that the very existence of the funds has actually, in some cases, energised local groups to do some strategic thinking and local economic planning with the objective of seeing whether they might be able to build up a business case and win funds for it. There have been cases which were not successful in attracting the funds for which they applied yet the people were so energised that they decided to go ahead anyway. Effectiveness of the structural and cohesion funds is not judged by the catalyst effect that they have—perhaps it should be.
Debate on the subject of EU moneys being used to reduce disparities will continue; it will run and run. Future enlargement of the European Union will bring the subject to the fore year after year. One of the real achievements of the committee in undertaking this investigation was to produce a report which states clearly and in simple language the issues, the pitfalls which should be guarded against, while giving the best résumé to date of a complicated concept and an emotional subject.

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I am sure that some disparities have been reduced. I am sure that the use of the funds, together with the "share of voice" of strong European Union supporters, have been in part responsible. I also believe that this report is in the category of "required reading" for anyone involved with, or interested in, the future of the European Union.
4.9 p.m.
Lord Bruce of Donington: My Lords, it was a great pleasure to have the opportunity of listening to the maiden speech of the noble Lord, Lord Renton, whose reputation in ministerial office in another place is well known to me. I look forward to his future participation in debates, particularly where they involve finance and even more so where the noble Lord's views may conflict with those of the former Financial Secretary sitting on my right.
It is also a great pleasure for me to see for the first time the noble Lord, Lord Shaw of Northstead, on the Front Bench opposite. He and I had many pleasant encounters in the European Parliament when we were both involved in a number of joint enterprises. I look forward to his participation in the debate.
I now turn to the report. I am glad that my noble friend Lord Barnett took advantage of the occasion to refer to the printing of the document. As one who was responsible for the most rigorous enforcement of the strictest financial disciplines, I am at a loss to understand why we suddenly have a House of Lords Select Committee report with a glossy cover, in colour and printed on expensive glossy paper. I must express some surprise that the report has not been produced at the most economic price. The quality of a Select Committee report lies, as I am sure noble Lords agree, not so much in its adornments, colours and dressing-up but in its contents.
Having read the report, I must confess to some disappointment. We are dealing with an endeavour to redress differences that have either always existed in one form or another or developed between various member states of the European Union. As I understood it, the original regional development funds were initiated for that purpose. The current report deals with cohesion funds, which do not concern us domestically but concern only four countries: Spain, Portugal, Greece and one other whose name escapes me for the moment—Ireland, of course.
As chairman of the European Parliament's Regional Committee, I had some experience of the European Community's endeavours to deal with these imbalances. Those endeavours were not entirely successful, at any rate on the basis on which they were originally undertaken. Year after year in the European Parliament we have been forced to acknowledge that, taken globally, they have not been successful at all.
Baroness Williams of Crosby: My Lords, does the noble Lord accept that the country whose name he had difficulty recollecting leapt from 60 per cent. of the per capita GNP of the European Community in 1975,
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when it entered it, to 94 per cent. last year, by any standards as remarkable an achievement as those of the outstanding little Asian tigers?
Lord Bruce of Donington: My Lords, I can only refer to the report itself in order to illustrate the point. By and large, the results have not been impressive. I refer to paragraph 59 of the report at pages 18 and 19, where it is stated:
"Across the EU as a whole disparities between the best-off regions and the worst-off regions were little changed: the 25 best-off increased their level of average GDP per capita from 140 per cent. of the EU15 average to 142 per cent. while the 25 worst-off regions moved from 53 per cent. to 55 per cent"..
I do not believe that that can be regarded as particularly impressive. I am not denouncing the European Community for that but merely reciting a fact which is already well known: that endeavours to reduce disparities within the fortunes of member states by the application of regional funds and similar measures have not been particularly successful. Year after year this happens and is underlined in budget speeches.
We need to realise why that is so. Whatever administrative and government arrangements are made about the levying of funds from member states in order to perform what is in effect a redistributive function, the macroeconomic policies pursued by member states of the European Union are the most important factor. One cannot run against the tide. The deflationary policies carried out in Europe as a whole over the last few years and more particularly now—and we shall not ultimately escape the effect—are likely to make endeavours to redistribute income or resources by the injection of quite trivial sums unsuccessful.
Instead of action by governments within member states to redress disparities within localities, even that small and basic function has now been spread to European institutions. That is what we have to face. At the moment, for example, structural funds involve in the United Kingdom the Department of Trade and Industry, the Treasury, the Foreign and Commonwealth Office, the Department for Education and Employment, the Department of the Environment, Transport and the Regions, the Department of National Heritage, the Scottish Office, the Northern Ireland Office and in some respects the Ministry of Agriculture, Fisheries and Food. There are not tens but hundreds of civil servants involved.
Lord Elis-Thomas: My Lords, the noble Lord has forgotten another country, this time one inside the United Kingdom. I refer to Wales.
Lord Bruce of Donington: My Lords, that I should forget Wales? That is impossible. My noble friend adds Wales and I willingly accept it.
In the EC itself similar departments are involved in the process. There is Directorate-General XVI, regional policy; Directorate-General V, social affairs; Directorate-General VI, agricultural affairs; Directorate-General XIV, fisheries; Directorate-General II, economic and financial affairs; Directorate-General XIX, budgets; and so on. In addition, large numbers

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of civil servants are involved in the European Commission itself. We are not talking of tens but of hundreds, and yet the report complains—though not over-vociferously—of matters becoming lost in bureaucracy. You can say that again! I have had experience of it. Once civil servants, whether international or national, are involved on such a scale, the system is bound to become over-bureaucratised.
Moreover, looked at from the report's standpoint, it seems to be automatically assumed that the funds are there. It is assumed that the funds are subject not to the caprice of individual ministers in different countries but subject to decisions made in monitoring committees, various planning committees and throughout the directorates and directorates-general. Rational decisions cannot be made on that basis. Also it is assumed that the funds are there. It is said that funds are being made available to projects in the United Kingdom. But it is not always realised, particularly in the United Kingdom—although the Commission always insists, as a matter of principle, that due acknowledgment is made by boards shoved on site to the effect that this project is undertaken through the courtesy and assistance of the European Community—that it is being made available out of funds provided by the British taxpayer. Little attention gets paid to that.
Yet that is indeed exactly the case. The contribution from Britain in these matters is not exactly to be sneezed at. The report itself says that the net contribution made by the United Kingdom to the structural and cohesion funds—to all the funds, whichever country benefits—involves the net payment by British taxpayers of £500 million. So it is not as though all these projects are provided by the generosity of the European Community. In fact, we pay for them. There is a net cost to us of £500 million. The Treasury is in a position to correct the figures, if it so wishes.
I do not necessarily object to it. It may be for reasons of high policy, our relations with other countries, our defence position, or for a whole series of other reasons that the British taxpayer should contribute to all those things that are alleged to be provided by the European Commission. But the public ought to know. I do not think they do, and I think that they should do so.
One thing is certain. If we are to become involved or even further involved in an enterprise of that kind, we should be quite frank and open about it. We should not attempt concealment or say, in effect—as does the report by not mentioning it in the conclusions—that there is no cost to us. There is.
Surely, also, it is best—the report brings it out on occasion after occasion—that all those decisions made by committees that shuttle across the Channel or across Europe in order to appraise certain items are decided at national level; not to have individual appraisals made of them, possibly aided by expensive consultants in order to talk about them once again in Brussels and argue whether or not they should be modified and if so who should pay and how much should be paid. Indeed, the report itself makes a note of that, even though it does not feature prominently at all in its conclusions.
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Therefore, let us have some honesty about these matters. Let us admit that there is a cost. Without being carried away by too much jargon one way or the other, one can view the whole question of disparities between regions and disparities between localities and one's own country. These matters are far better reviewed not on the basis of ancient dogmas that come to be perpetuated in the wretched Commission rituals with which we are afflicted, but by the ordinary common sense of Parliament itself, including, I hope, your Lordships' House.
4.25 p.m.
Lord St. John of Bletso: My Lords, as a member of the sub-committee, I also thank the noble Lord, Lord Barnett, for his leadership and skill—a word used by several noble Lords—in co-ordinating this inquiry. I should also like to extend my thanks to our Clerk, John Goddard, and to our special adviser, Professor lain Begg, for all their support in the extremely interesting inquiry. I join too in congratulating the noble Lord, Lord Renton of Mount Harry, on his maiden speech. Certainly his interest in European matters will greatly enhance debates in your Lordships' House. I look forward to hearing much more from him in the years to come—if, that is, I am still here in years to come after any reform of your Lordships' House.
One of my concerns about the work of Sub-Committee A has been the apparent lack of distribution and exposure of its reports. I am by far the most junior member of the sub-committee. Perhaps the smart cover of the report may increase its penetration and exposure. I was saddened by the fact that the noble Lord, Lord Bruce of Donington, felt that the quality of the cover does not match the quality of the contents. Certainly the report represents value for money.
I wholeheartedly support the commitment of the structural funds and the cohesion fund to reducing regional disparities. But it was crucial in the inquiry to establish whether the funds were correctly targeted and whether they have been effective. It is surely the delivery of results that is one of the key objectives of the funds. I agree with Commissioner Wulf-Mathies's view that one of the greatest challenges in Europe will be to reduce the levels of unemployment, particularly for those under the age of 25.
The report has comprehensively covered the key issues behind the strategy of the funds and the possible reform of the funds. Therefore, I shall keep my comments brief, but would like simply to highlight what I believe are a number of the points that are of special concern.
Central to the rationale and objective behind the structural funds is that the investments should be made to strengthen the economic base of the recipient regions, but not as income transfers. Their objective is to achieve greater equality in economic and social opportunities. Paragraph 35 of the report encapsulated the point that the inquiry was:
"not whether Community policies by themselves are achieving economic and social cohesion but whether they are operated so that they add value to and complement national cohesion policies so as to achieve results which would not otherwise he obtained".

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What became clear certainly from visits to Athens, Dublin, Strathclyde and Cornwall was that a good relationship between member states and the European Commission is vital to maximise the use of the structural funds. That was particularly apparent, as mentioned by the noble Baroness Lady O'Cathain, from the strong relationship between the Irish officials and the European Commission. There is no doubt that the structural funds and the cohesion fund have made a major contribution to the recent success of the Irish economy. I am pleased that the noble Baroness, Lady Williams of Crosby, highlighted that point. Those of the committee who visited Dublin were enormously impressed by the high standard of strategic co-ordination and effective delivery in Ireland. I emphasise "effective delivery" as this appeared lacking from the submissions of several of our key witnesses talking about the efficacy of structural funds in England.
A common complaint by many of the witnesses was that the structural funds, and, more specifically, the location for structural funds was over-bureaucratic, and that there were unnecessary resultant delays which affected approval decisions and the payment of funds.
While there have been many regional success stories— here I refer to the recent report by the European Regional Policy and Cohesion Committee on success stories—with profiles of 36 projects in Europe, there is no doubt that there is enormous scope for improvement. The words "scope for improvement" remind me of the comment always made by my headmaster. As I have already said, the emphasis for the structural funds must be on efficiency, adding value, and complementing national cohesion policies.
While I agree with the four principles of concentration, programming, additionality and partnership which underlie the structural funds, there appears to be a variation in the interpretation of those principles. For example, in the submissions from the British chambers of commerce, it was pointed out that one of the difficulties with the principle of additionality is that it is extremely difficult to access match funding for both the public and private sectors.
Unlike cases in Scotland, where there appears to be a good relationship between the Scottish Office and local organisations, there appeared to be far less of a partnership, as I have said, in England between Whitehall and the local authorities. That led to many calls for the administration of the structural funds to be simplified. It was felt that—I say this despite the reservations of the noble Lord, Lord Renton—with government offices for regions that should produce a better relationship between central government and local partners. My understanding of the legislative programme for the coming years is that government for the regions should be more effective.
I strongly support the recommendation in paragraph 46 that government should further improve the analysis of economic and social needs based on local area statistics. Paragraph 48 states,
"we are convinced that devolution to regional level of decisions about structural policies and their funding will need to be carried further if the potential benefits of the Structural Funds are to be maximised".
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Further, paragraph 86 states:
"Programmes must be the result of partnership between national and sub-national bodies, down to local communities, at the planning stage as well as the implementation stage".
The point has already been made by my friend Lord Elis-Thomas. I was delighted to hear that the Minister for Trade and Industry gave her commitment to achieving those objectives in her letter responding to our report.
As for the reforms mentioned in the report, I concur that future funding should be targeted more closely on the most needy countries, regions and smaller pockets of deprivation, and central government and the European Commission should work as partners, not adversaries, to steer, but not to dominate, the planning of regional strategies and programmes. Those programmes should be seen to be regional needs assessed on the basis of reliable economic and social statistics, and the administration must be simplified. A great deal more should be done to encourage and entice more private sector involvement with the funds.
The pace and conditions of enlargement, as the noble Lord, Lord Grenfell, said, will have major financial consequences for the future of European policies, including those for cohesion.
Finally, there is no doubt that to assess the efficiency of the funds, it is vital to have effective financial controls, and, here I refer to monitoring and evaluation of existing and past projects. There appears to be scope for more reform of the monitoring committees. With almost a third of the EC budget devoted to the structural funds and the cohesion fund, it has become all the more essential that the funds are targeted correctly, managed properly, and that lessons are learnt from past experience. I warmly recommend the report.
4.35 p.m.
Lord Desai: My Lords, as the last speaker in the debate, let me start by saying, "You may have read the report, but did you see the film? Little did you know that the chairman is not just the many things that speakers have said, he has missed a career in the movies". Anyone seeing him coming down that lovely staircase in the Greek Embassy, would have thought, "Ah, there is style". I congratulate the noble Lord, Lord Renton, on a notable maiden speech. I remember how nervous I was when I made my maiden speech. I had great feelings of trepidation. He had the most relaxed manner of any maiden speaker I have seen recently. I am sure that that comes from his long experience in another place. I am sure we look forward to hearing many more contributions from him.
I shall confine myself to the future of the funds and not so much on what has already happened. I shall say one thing in response to my noble friend Lord Bruce of Donington. It is correct to say that on the one hand we have had the cohesion countries—Ireland, Spain and Portugal but not Greece—considerably improve their relative status in terms of average income over the past 15 to 20 years. That is a welcome result.
It is also true as the report points out in Paragraph 59, which my noble friend quoted, that indices of inequality have not moved all that much. The problem is—it is

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a well-known problem in economics and politics—that inequalities, especially across regions within a country, are hard to correct in the short term. Some noble Lords may be aware of the brilliant work of Professor Putnam, who pointed out when analysing the Italian case that Italian inequalities across north and south can be traced back to forces and factors which go back 600 or 700 years with the building up of the culture of hard work, enterprise, and so on.
Those things are important. Even within the UK, I would bet that if we looked at industries as between the north east and the south east, inequalities persist for a long time. We are looking for funds such as these to arrest the growth of inequalities so far as possible. We must be sure that they do not worsen as a result of, say, a single market or joining a larger union, but that they stay the same or improve.
I am worried about enlargement. I am untypical in your Lordships' House. When the noble Lord, Lord Wallace of Saltaire, initiated a debate on enlargement, I was the only speaker to say that I did not like any of it. I am worried that we shall add six countries in the first instance—in a year we shall go from 15 to 21—which will add a third to the population and about 5 per cent. to total GDP. Therefore, the entry of the six and perhaps later on of another four will require a more fundamental rethinking of the EU structures than any of us has so far realised. We may even have to ask ourselves whether any of the old 15 receive any of the funds that are designed for redistribution.
That would be unfortunate. One of the lessons of the cohesion fund and of t he report is that one must not go too much into aggregates within a country. There are widespread regional differences. A country may be quite rich on average but within that country there may be serious pockets of poverty. One must not neglect that, especially if one sees that internal policies are not adequately dealing with the problem. There should be some mechanism for the EU process to look at the deep pockets of poverty which persist even in rich countries.
In this respect the use in the cohesion fund of average per capita income is far too crude. We shall have to revise the threshold level from 75 per cent. to a figure much below 75 per cent. to make people eligible for cohesion funds. However, by itself, income does not convey enough information. If we rely only on income at a national level to give aid to countries, and then rely on those countries to distribute them to where they are needed, we may miss the target. What is important is not that Greece, Spain or Portugal are that much below average or that Poland and Hungary will be much lower; what is important is to pinpoint the areas of those countries which are well off and able to manage by themselves and those areas which need help. In that respect one of the matters the Commission and perhaps even the DTI should look at is the construction of additional variables or indices which might help better to pinpoint regional inequalities.
Some noble Lords may be aware that I have made a contribution to the Human Development Index which looks at poverty across countries. The Human Development Index has been constructed for provinces,
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and even for districts, of some countries in eastern Europe. The Hungarian human development report looked at how different districts compare in terms of their human development. That might help better to pinpoint where aid should go rather than relying on broad categories such as average income or how to help industry adapt to change. Those may be noble objectives but they are fuzzy. They are not good enough guides for operationalising the construction of a policy which is designed to tackle regional inequalities.
We should look at how we can find better measures for identifying where inequalities are. What is the nature of an inequality? Is it a poor region that has been poor for a long time or is it a region that has been impoverished recently because of industrial change? Those two things may require very different policies. The instruments that are currently being used are far too crude.
We should all think about how we can improve the detection of inequalities, how we can define the nature of those inequalities and how we should tackle them. Different problems may need different instruments. In this respect I agree that it is not so much that the number of funds is large but that they have a disparate set of criteria for giving money for different procedures. If it is made clear that our objective is reducing inequality, that inequality may have a different nature in different areas and may therefore require different instruments. Having thought like that, it would be better for the Commission to think about how it can simplify the criteria it uses and while simplifying them, make them much more precise than they are right now.
As the trends show, no doubt the total amount of money will shrink. However, as the noble Baroness, Lady O'Cathain, said, it is remarkable that we do not know whether the money has done the job it was supposed to do. We have broad indications, as the noble Baroness, Lady Williams, pointed out, that Ireland is a success story, but we do not know how much of that success is due to the cohesion fund. I hate to add another expenditure on to the Commission, but I think by now it should have made a much better study of the results of the various funds it has given and that we should have had a much better account of whether the funds were effective; and, if they were effective, what measures for judging effectiveness were employed.
4.45 p.m.
Lord Pearson of Rannoch: My Lords, I have enjoyed the whole of the debate, especially the maiden speech of my noble friend Lord Renton of Mount Harry. I particularly enjoyed that part of his speech when I thought he sailed a little near to the wind of our convention that maiden speeches should not be too controversial when he said that he regarded EMU as the inevitable outcome of a single market. In order to assist my noble friend, I would agree that this was not controversial, but I would have to put it to him that it was perhaps just wrong.
I wonder whether I might ask the House, in order to reach two questions which I should like to put to the Minister, to accompany me into the engine room of

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the European Communities. I want to ask him two questions about how he envisages that the Treaty of Rome will actually work in the areas that we are discussing. In order to do this I shall quote briefly from two paragraphs, paragraphs 4 and 5, on page 8 of your Lordships' excellent report.
The first quotation reads as follows:
"the CAP takes about one half of the Budget's resources while the structural policies are taking a gradually increasing share which is planned to rise to about one third of those resources by 1999".
Other noble Lords have quoted that and indeed have referred to the following passage from paragraph 5 on the same page:
"The regime for the future financing of the EU, with or without enlargement, also calls for decision before 1999 when the current financial perspective arrangements expire. Negotiations and expectations on the overall size of the Budget, the enlargement of the EU and the impact of EMU, particularly on peripheral or poorer regions, will form the political context in which decisions on the future of EU aid for regional development—its structural policies—will be taken".
Quite so, my Lords. But your Lordships will have heard me before say that some decisions in the European Communities are taken by unanimity and some by the qualified majority voting system.
Under that system, I hesitate to remind your Lordships again, there are 87 votes among 15 nation states; 62 are required to pass a motion and 26 to block one. I imagine it is true—the noble Lord the Minister will correct me if I am wrong—that the votes necessary to block reform of the CAP, which is so vital for enlargement, as your Lordships have agreed on many occasions, including this afternoon, are in the hands of recipient countries. Likewise, I think it may be true that a similar blocking minority may be in the hands of recipients who could block any change to the funds we are debating; or, I have to put it to the Minister, are any of these decisions to be taken by unanimity? In which case they become even more difficult to achieve.
So I merely want to ask the Minister whether the new Government have given any thought to these possible negotiating difficulties; and, if so, to what conclusion they have come.
4.49 p.m.
Lord Dahrendorf: My Lords, those of your Lordships who have had the pleasure of listening to the entire debate will realise by now that it was rather fun to serve on the committee which has produced this report. It was fun because we had a chairman whose firmness was always coupled with good humour. It was fun because it was an interesting committee. Indeed, I shall for ever find it difficult not to refer to other Members of the committee as "my noble friends".
For me, it now emerges that the committee had a special significance in that it has given me what I have long sought, and that is a small element of immortality, if only in the form of a bandstand financed by the European Union to the tune of £18,000 and located in the harbour of Padstow. That is what the noble Lord, Lord Grenfell, and the noble Baroness, Lady O'Cathain, referred to. For me, it was one of the examples of how
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perhaps not to spend European Community money, although I am sure that there are those who enjoy the effects of the bandstand, as I do now. I am now in a much weaker position in that respect than I was.
If we strip the whole European exercise of the rhetoric of union, we are left with three major policy areas. The first is what I would call the management of trade. I deliberately call it that both within the single market and outside. Second is the protection of declining industries, notably of agriculture in the countries which still had a major agricultural sector at the time of the foundation of the European Community. Third is the support for disadvantaged regions and groups, the area of the structural and cohesion funds. There are other activities. There are the remainders of EURATOM, which is the research area. There is of course a degree of privilege for former colonial countries associated in one way or another with present members of the European Union. But it is the three major areas which one is looking at if one identifies the reality of the European communities.
The first of these, the management of trade, does not cost any public money. It costs a lot of people a lot of money, but it does not cost any public funds to speak of. The second and the third between them consume about 80 per cent. of the total budget of the European communities. That is a fact that we should bear in mind as we discuss this issue in order to give it its proper, important place in the European scheme of things. As we have heard, and as noble Lords have seen from the report, about one-third of the total budget of the European Union now goes into the various funds which we have lumped together as the structural and cohesion funds designed to reduce disparities.
That is important. What is more, my conclusion, not least from the inquiries of the committee on which I had the privilege to serve, is that of the major activities of the European communities, the structural and cohesion funds are easily the most effective and important. I say that despite the comments made by the noble Lord, Lord Bruce of Donington, and others. In that regard averages, and even measures of disparity as such, are not necessarily the most informative.
It is a pity that the noble Lord, Lord Bruce of Donington, was carried away by the beauty of the cover of the report, because apart from being beautiful it is quite informative. It is an important fact that all the great success regions of Europe are not included in the areas to which the funds are applied and which we are discussing here. I refer to the south-east of England, the Low Countries, apart from Wallonia, Denmark and southern Sweden, the Île de France, south-east France, north-west and south Germany and northern Italy. They are not included. It is characteristic of the funds that we are discussing that they apply to countries on the periphery of the European Union and to peripheral regions within the major countries of the European Union.
That is rather an important fact because it probably tells us that on the periphery there is often a sense of insufficient recognition of needs even by national capitals. That is one of the discoveries that we made in

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our travels. Therefore, recognition is an element of the success story of these European funds. I want to use a word which I am surprised has not been used before in the debate and which is in part a response to my noble friend Lord Desai. The word is "catalytic". In peripheral areas in particular even limited sums of support can have a catalytic effect in that they trigger developments which might otherwise not have happened. In other words, it is not simply redistribution; it is not simply pouring large sums of money into particular regions; but encouraging forces which in principle are already there but which need that bit of encouragement which can sometimes be given by outside funding. Incidentally, that is quite often the best conceivable effect of international action to support developments in regions which are particularly in need of such support.
In this regard Ireland is an extreme example. No one in his senses would argue that it was simply the funding that came from Europe which, as funding, turned things around. But one can argue that by having special attention paid to Ireland, those forces in Ireland which in any case were prepared to move forward to quite a different story of development from the history of the country were encouraged. That was done partly by their being recognised as important. That is only one aspect and there must have been other elements of motivation.
All this leads me to conclude—as one who was quite sceptical, as my initial comments showed noble Lords, about the effect of many of the policies of the European Union—that it is highly desirable that the structural and cohesion funds should be continued after 1999, and even if we (and I hope we will) promote the enlargement process emphatically. That has simple conditions which are in the report. I am glad that the President of the Board of Trade seems to accept them. I hope the Minister will confirm that they are very much in line with government thinking. Where the funds have been particularly successful, it has to be possible to discontinue them. I encourage the Government to take a very strong position. Since Ireland has virtually reached the average level of per capita income, the moment has come when Ireland can no longer be a recipient of funds which were designed to encourage; they were not designed to transfer resources indefinitely.
There must be a concentration of purposes, as has already been discussed. I very much hope that the sort of statements which Commissioner Wulf-Mathies made in her evidence to the committee will become policy. There must be greater integration of the different aspects of the funds and policies, including—here I strongly support what the noble Lord, Lord Elis-Thomas, said—the environmental aspect in so far as it is relevant in both rural and urban areas; an integration of policies; and something which we do not have the time to discuss in great detail this afternoon but which relates to what was said by the noble Lord, Lord Desai. I refer to the fact that there must be quite a shrewd sense of whether, at the receiving end, there is sufficient preparedness to make the catalytic effect real. That is a complicated combination. It has something to do with regional or local organisation, including incidentally an item which the committee found important and on which I am eager to hear the Minister comment. I refer to the
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representation of elected members of local communities and regions on the bodies which advise and which to some extent take the decisions.
Without any doubt, there must also be absorptive capacity for the funds. That is why enlargement is not quite so much of a worry as some people seem to think. It is evident that Poland—the country which, above all, I think should become a member—cannot absorb even 4 per cent. of its GNP by way of European structural money. It will have to be less than that. Absorptive capacity is itself a condition of catalytic success. There are a number of other factors which we might wish to consider before making available more concentrated European funding.
Having said all that, the structural and cohesion funds naturally remain of limited importance. I should like to underline strongly what the noble Lord, Lord Grenfell, said: the funds have nothing to do with the sort of transfers that would be necessary among the members of a monetary union if such a monetary union emerged in Europe. They have nothing to do with that and it is important that we do not confuse the two. One of the great problems of monetary union is that those who are in it will be left with a transfer of resources and with the free movement of labour as their only adjustment mechanisms. These funds are not the answer to that question. They are independent of it. They belong to the European communities as we have them today. They can be improved in many respects, but of the key policies of the European Union they are, in my view, the most successful.
5.3 p.m.
Lord Shaw of Northstead: My Lords, my first and very pleasant duty must be to congratulate my noble friend Lord Renton of Mount Harry on his maiden speech. We are, he says, beyond the temptations of normal man—and he arrives here in the hope that he will share that situation. I am bound to say that as my former Chief Whip—I hope that I was a loyal follower—I had always thought that he, as Chief Whip, was already beyond the normal temptations. I certainly treated him with the respect due to someone in that position.
My second duty must be to congratulate the noble Lord, Lord Barnett, on his chairmanship of the committee. Long ago when I was a Member of the European Parliament we met from time to time—he in an exalted position as a member of the Government and myself as a humble Rapporteur in the European Parliament. Later he was chairman of the Public Accounts Committee and I was a humble follower and member of that committee for several years. The circle has now come full circle and I am glad to be again a member of a committee chaired by the noble Lord. I welcome that fact because the noble Lord led us with skill and, as the noble Lord, Lord Dahrendorf, said, with some fun as well. I have always believed that work is carried out all the better for a little humour in the right place. I believe that all members of the committee entered our work with some considerable enthusiasm, but not always understanding fully what it was that we had undertaken.

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The structural funds are intended, through investment, to strengthen the economic base of the recipient regions and the cohesion fund, set up especially to deal with the cases of the special four countries, was intended to try to bring them to a position where they could eventually be admitted to EMU. Although the need for regularity and the avoidance of fraud must be maintained, our main concerns were not so much in that direction, but were based on trying to see whether the projects were really carrying out the tasks which they had been set and whether they were being run as efficiently as possible. Here we have to remember the words of the commissioner and to accept, as we state in paragraph 27 of the report, that roughly one-third of the EC budget is devoted to structural funds and the cohesion fund. That point has already been made. Indeed, I believe that we made that point in our conclusion on the annual report of the Court of Auditors. I mention this because it is important to note that we also are making inquiries.
I must admit that no one is more surprised than I am at the fact that I am standing at this Dispatch Box this afternoon. I greatly welcome the kindness that has been shown to me by the noble Lord, Lord Bruce of Donington, with whom I have shared many committees in the past. I speak both as a member of the committee and as a spokesman from this Front Bench and, putting on my other hat and speaking momentarily from this Front Bench, perhaps I may say that I believe that the committee did a splendid job in presenting the report in this form. The form adopted is easier and more sympathetic for those who are interested in reading the report. I hope that our example will be followed by other committees in due course.
The Court of Auditors has been going along the same lines as our committee. That is encouraging. When I was a Member of the European Parliament I took great notice of what was said in the House of Lords and by its committees. Such reports were helpful and were widely considered in the European Parliament. I find it a happy coincidence, having left the European Parliament and having given evidence to House of Lords committees nearly 20 years ago—I believe that the noble Lord, Lord Bruce, also gave evidence at that time although I cannot remember the occasion—now to find myself serving on a House of Lords committee. It is much the happiest position to be in.
At paragraph 538 of its 1995 annual report, the Court of Auditors stated:
"If the various criteria to be taken into consideration for determining the eligible areas are applied, this results in more than 50 per cent. of the Community population being affected by one or other objective. As a consequence, Community aid measures are to a certain extent sprinkled over a large number of eligible areas. Indeed, it is proving difficult to reconcile the many factors involved & particularly bearing in mind the quality of the statistics available".
That shows very clearly that there is still much to be done. That was in large part the reasoning behind the efforts of the committee in producing the report. The committee found as a fact that there was a need for change. Commissioner Wulf-Mathies in her evidence to the committee repeated that which had been said by the Court of Auditors, namely, that 51 per cent. of
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Community regions were themselves eligible for regional fund assistance. She claimed that that figure should be reduced.
It is absolutely essential that the help should be given efficiently to assist those areas that are clearly defined. It is also true—I believe that the report brings it out very clearly, particularly the evidence of Sir Alan Cockshaw—that the areas must be very carefully defined if the use of the moneys poured into those areas is to be of maximum benefit. The money is not just needed to help individual cases; it is needed through those particular cases to help the region as a whole so that it can kickstart further enterprises in its wake.
One should look again at the words of the Court of Auditors who have something to say on this matter. On page 9 of its last report it said:
"Moreover, a number of questions regarding the eligibility of projects for Structural Fund support are being discussed by representatives of the Commission and of Member State administrations within the SEM 2000 framework, together with an examination of other possible ways of inciting national authorities to ensure both the effectiveness of Community structural aid and proper accounting for it at national level".
That brings out a point that the committee has made in many other reports and I have spoken about in earlier debates in this Chamber. The court goes on to say:
"Finally the Court would again like to emphasise that prevention of fraud and waste is much more cost-effective than detection followed by, often problematical, punishment and recovery".
That must be borne in mind in organising structural and cohesion aid, although from what we saw the same problem does not exist with regard to other funding within the Community. The money may have been irregularly or inefficiently used but the same degree of fraud is not evident, according to the evidence taken by the committee.
As far as concerns structural funds, there is a great problem in defining regions. There is a need to create good organisations consisting of local interests, local authorities (one hopes) and local businesses and a close identification (one hopes) with government. As to that, I should like to put a question to the Minister who is to respond. On 3rd December 1996 a Statement was made in the other place by Mr. David Curry:
"We intend to revise radically the present administrative arrangements and to delegate to local partnerships considerable responsibility for project selection within an agreed action plan & We will be notifying the new arrangements to the European Commission and will be discussing the detailed implementation with the monitoring committees and others".—[Official Report. Commons, 3/12/96: col. WA 578.]
Both I and I am sure your Lordships will be interested to know what progress has been made in regard to the making of those new arrangements. Together with that there must be emphasis in those future arrangements on continued additionality. I believe that that is very important. I was very glad to see that Commissioner Wulf-Mathies came to the same conclusion on page 126 of the evidence:
"In general I would say that Structural Fund policies have been positive and successful & policies are made with Member States & what the Union can do is to add to those strategies but it cannot replace Member States' policies and it does not want to do so".

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I believe that she is absolutely right.
The success of future policies—and the great value of reports such as this—depends on finding what is best for the future certainly by analysis of what has gone on in the past. But we must be interested in the future. The past is there to show the direction in which we should be moving forward. It is quite clear that national governments must play a great part in the use of these strategies; namely, through the structural and cohesion funds. Whatever tasks are given to the regions when set up, they must as far as possible feel that the projects are theirs, not those of the particular nation. The whole region must be identified with the developments that are taking place. That emerged clearly from the evidence.
I turn to the cohesion funds. Mention has been made of the success of those funds in Ireland. There is no denying that the funds have been of help to Ireland, but it is quite clear that those funds would not have been as effective, or not effective at all, had the organisation and administration of the Government of Ireland not been first-class. That lesson must be learnt by other countries which receive cohesion funds. Its success owes much to its sound economy. But there is a danger, to which the noble Lord, Lord Dahrendorf, has already referred, that every effort will be made to keep the funds coming in. I hope that in the planned expenditure of the money until 1999, which is the end of the present schedule of funds, it will be remembered that those who have succeeded in carrying out the objectives of the cohesion fund must prepare for an easing off or early termination of the funds so that they can stand once more on their own feet. Funding should not be expected to continue indefinitely, although benefits already achieved must not be endangered by sudden cessation or reduction of funding. There is a great need for good management at both local and national levels.
I believe that cohesion funds are valuable if they are handled correctly. I also believe that in the cases we have seen the second tranche of the cohesion funds up until 1999 has been handled much better than in the first instance. Ireland has already been cited. I should like to cite the Athens-Corinth motorway which the committee was able to look at in its journey through Greece. Incidentally, a number of people have mentioned that there has been a television programme on this topic. Our visit to Greece was not a feast of gastronomy; it was a feast of hard work. We had to eat. The fact that pictures were taken of Members eating had nothing to do with the work that we carried out. On that motorway we saw instances of new businesses that would not have been set up but for the ease of transport that it created. We saw a packing station which was built with Community aid and developed to such a state that regular contracts had been made with Marks & Spencer. The establishment of such a contract demanded a strong measure of confidence on the part of Marks & Spencer. In order to succeed, the packing station had not only to pack the goods successfully but it had to obtain them at the right time and at the right quality. It had to employ the pickers on the farms, for example, put them under contract, ensure that they worked regularly and that the goods came in the right condition and at the right time.
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Therefore, there was a spreading effect of the aid that had been given. Such use of structural aid is of real benefit.
As was said by the noble Lord, Lord Dahrendorf, the structural fund provides the best example of the help that can be given. However, I believe that there is a danger of over-bureaucratisation—a ghastly word—and of over-organising the help. We are talking about organisations in the regions, organisations in government, departments in the Commission and the necessity to have professional advisers to advise on various matters, to advise people on how to make their claim and so forth.
All that costs money. We have said that we need to make the organisation simpler. At the same time, I have seen the difficulties which bureaucracies have in making themselves shrink. I hope that, whatever the simplification, there will be a record of how it has led to less cost within the bureaucratic administration of the funds. I hope that the funds can be controlled, that they will prove useful, and that they will fulfil the object for which they were set up; namely, to try to help the assisted regions to stand on their own feet and to be successful without the need for additional funds from government. I hope that governments will monitor the use of the funds. I congratulate the committee on another successful report.
5.23 p.m.
Lord Simon of Highbury: My Lords, as a young Member—if that is the appropriate word—my first task is to welcome to the House the noble Lord, Lord Renton of Mount Harry. I had the pleasure of appreciating that extremely robust defence of the great adventure that is Europe, with particular regard to the points on monetary union. This is not the time to debate them, but I am glad to see and hear a new friend on the other side of the House. I hope that we shall have the opportunity of listening to him regularly.
It is also a pleasure to greet the noble Lord, Lord Shaw, to the Front Bench and to have the opportunity of exchanging views on what we are both agreed is a most excellent report. Furthermore, I thank my noble friend Lord Barnett. I am grateful to him and to the Sub-Committee which he chaired for producing the report. I like the cover, I like the inside and I certainly like the fact pack at the back, which is useful for incoming Ministers.
Perhaps in business fashion, I may respond to two or three of the points which I shall not cover in dealing with the body of the report. The first is the Barnett formula. That was a tricky one, due to my relative youth; but I understand that the noble Lord introduced it because it deals with general Scottish public expenditure allocation. We heard much of Wales from my noble friend and we heard something of Ireland from nearly everyone. The reason for introducing the Barnett formula must have been to cover Scotland. The only information that I have to add is that it does not apply to structural funds. It was interesting to hear about the formula, but it was not currently on the table for this debate.

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I turn to additionality. As the noble Lord, Lord Dahrendorf, observed when he was taking evidence from the President of the Board of Trade, this is an extremely tricky intellectual area. I was delighted to read the committee's first line of paragraph 23, because it is a wonderful sentence. It reads:
"additionality is a concept easily grasped but elusive when verification of its application is required".
I liked that sentence. I am all for additionality. The Government support it and, as the report states:
"in the required sense, it cannot be assessed by considering whether an individual project would have gone ahead without structural fund support".
It is conceptually complex. I believe that we shall reach a position where it will apply to the structural funds but not to the cohesion fund. The principle is understood, but I liked the idea that it would be elusive when verification of its application would be required. That is a timely warning.
In general, the timing of the debate is fortuitous. The day after tomorrow, the Commission will produce its opinions on the central and eastern European countries which have applied to join the European Union. Importantly, it will also produce initial proposals for the future financing of the EU for the period 2000 to 2006, as mentioned by the noble Lords, Lord Pearson and Lord Grenfell.
Part of the proposal will include the structural and cohesion funds, which currently take up one-third of the EU budget. I have no doubt that the Commission has taken account of the points made in the committee's report as I noted that two commissioners came to London to give evidence to the inquiry.
The Government are committed to promoting economic and social cohesion throughout the United Kingdom. Indeed, that was one of the objectives of the Chancellor's Budget. We are also committed to seeing it across Europe both within the existing European Union and extended to those countries which will eventually join. Clearly, we are supporters of the enlargement process.
However, such cohesion depends on a multitude of actions principally at national, regional and, if possible, local levels. But we must support the European effort and the European level of co-ordinating what is a very complex organisational exercise. Much of the report was about that process and, as I was invited to do so by many noble Lords, I intend to speak a little about it.
The structural and cohesion funds are the principle European-wide financial instruments for strengthening cohesion. The question to the Government is not one of whether the funds will continue but how best they achieve their objectives. A major part of the answer is by contributing to improved competitiveness.
As the noble Lord, Lord Grenfell, commented, those funds should be used to increase competitiveness in the regions. That is a wide subject and I know that it does not depend solely on spending money. It is about the capacity to add value. I believe that that is a question at the heart of this excellent report: are those funds, and the way in which they are distributed, adding value;
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and are the systems up to scratch? I believe that that question stood very much behind the contributions of the noble Baroness, Lady O'Cathain, and the noble Lord, Lord Shaw. In reality, are the action plans delivering the "bacon" from that system?
As the report makes clear, the funds cover a wide range of subjects and a number of different structures. In the United Kingdom they are aimed principally at the original elements. Over the six years from 1994 to 1999, the UK's structural fund allocation is about £9 billion, covering such subjects as the productive environment, improving human resources—the training side—land improvement and regeneration and environmental improvement. Therefore, in recent years there has been a very wide range of targets. Now that we are beginning to fund business support and innovation in a very large number of small companies, control becomes much more important from a distributive point of view.
With regional programmes comes regional administration and decision making. That is a significant part of the Government's approach to competitiveness within the different parts of the United Kingdom. The proposed Scottish executive and Welsh assembly will take over the decision making which is currently the responsibility of the Scottish and Welsh Offices. No doubt those bodies and in particular the latter—I say this for the noble Lord, Lord Elis-Thomas—will ensure that fair shares are maintained in Wales. The proposed regional development agencies will create economic forces within the English regions. The structural funds are based already on regional partnerships and we shall look to reinforce those. The regionalisation of Objective 3 is an example of the steps under way.
The then government announced on 4th March that structural funds monitoring committees—the bodies which look after the expenditure, for those who do not know the jargon—should decide whether to include locally elected councillors among their members. That happened after the sub-committee stopped taking evidence but before the publication of the report which called for councillors themselves to decide. That is now happening across England and Wales, although I should make clear that in the larger programmes, it is not individual councils which are represented but the local authorities collectively.
Therefore, the Government's approach is to ensure that local partnerships are represented properly and that the monitoring committees work effectively. As the noble Lord, Lord Grenfell, said, it is extremely important that the precise composition of the committees should not be decided in the centre; each region and programme can best decide for itself. For example, the Objective 2 programme in the north east of England has just shrunk its monitoring committee, which is an unusual organisational event. That is precisely because it wishes to see even greater efficiency.
The Government also see the advantages of a wider social partnership, bringing employers' and trade union representatives into the local partnerships. We shall expect the social partners to make a real contribution to the programmes, as existing partners do. In Scotland,

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parallel consultation arrangements already exist both for locally elected members and for social partners. As the report emphasised, those seem to work effectively and will continue.
Much of the Select Committee's report concentrates on improving the efficiency with which the structural funds are administered within the United Kingdom. Part of this results from complications introduced by the regulations themselves and the way in which they are applied. There is general agreement across Europe that substantial simplification is needed, though it is unlikely to take place before the current programmes end in 1999. We will be looking for significant proposals from the Commission and we will press further for streamlining during later negotiations within the Council of Ministers. After all, that is part of the drive for the completion of the internal market.
One example of how some of the delays occur was shown in the process of adopting Objective 2 programmes for the three years 1997 to 1999 in the UK. None was agreed on the start date of 1st January of this year and the last one has only just been agreed six months too late. That is not a good track record for the Commission. It must shape its act more effectively and we shall be asking it to do so, certainly before the year 2000. But it is fair to say also—and I echo the comments made by the committee—we must all look to improve. That includes our own structures inside the UK. The noble Lord, Lord Grenfell, made that point clear. I believe that by restructuring the monitoring committees and in driving for a better action plan structure, as the noble Lord, Lord Shaw, said, we can come to terms with that. It is a question of delegation and focus. In England, the new arrangements for local action plans under the structural funds will enable simplified administration and greater responsibility at local sub-regional levels.
The Single Vote for the English elements of the European Regional Development Fund, which started in April of this year, is speeding up payment. It is replacing a decision-making process which, as we were reminded by the noble Lord, Lord Bruce, used to involve six separate government departments. Therefore, the recommendations have been well taken.
The Commission frequently produces reports on aspects of the structural and cohesion funds. They are produced usually for information rather than containing legislative proposals. I shall mention two reports produced last year: first, the 7th Report on the structural funds, which was published last year and which looked at the last major changes in relation to the regulations governing funds which occurred in 1993. Therefore, updating is needed in that regard. It is quite clear that in that period there have been improvements in appraisal, monitoring and the evaluation of projects. I believe also that there has been greater transparency as part of the impact of the 7th annual report.
It is an extremely unwieldy document, like many produced, and it is not nearly as good as the sub-committee's report. However, it provides a great deal of useful information and it highlights some interesting matters from the UK's point of view: first,
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that the implementation of the single programming documents for our Objective 1 regions, which, for the cognoscenti, are Northern Ireland, the Highlands and Islands and Merseyside, has progressed as planned. Therefore, we are on target for the Objective 1 regions. In general, we are not losing out on any Objective 2 programmes.
As regards how we are meeting our targets, which really is the test of the efficiency of the decision-making system, over the whole programming period, the UK led in the percentage of total funding committed in the first two years. We have achieved 41 per cent. of our funding against an EU average of 31 per cent. For payments the figure is 25 per cent. against the average of 19 per cent. Of course we can do better, but in relative terms, we are still ahead of the field.
The cohesion report was the first report on the progress made towards achieving economic and social cohesion in the EU. It is a useful summary of past actions and their impact.
Along with noble Lords to whom I have listened carefully today, the Government welcome the conclusion that disparities in the income between member states are narrowed significantly. I do not wish to become involved in the debate whether the comparisons should be regional or national. There was some debate about that. The national improvement is very clear: as has been noted, for the past decade, income per head in the four poorest countries of the Community has increased from 66 per cent. to 74 per cent. of the Community average. If we start playing about with sub-regions I am sure that we shall be able to prove that that very important point can be obscured.
However, the report recognises that member state policies are the primary instruments for cohesion and that low inflation, sound public finance and sustained growth are the key elements. Therefore, we should not believe that cohesion funds can replace sound economic management; they cannot do so. But both of them should be doing good for all of us if we are true Europeans. The cohesion report shows that the UK is one of the few countries where regional differences in unemployment have decreased. Although there has been a small widening of per capita GDP differences in the UK regions, that is relatively insignificant.
So much for where we have come from to date. I have tried to give the House a brief réméf organisational change, covering the monitoring committees, the action plans, the widening out of the process of decision between the social partners—all matters which I believe were signalled in the report and which, as my noble friend Lord Barnett said, the President of the Board of Trade has welcomed and put into our policy.
My last section is on looking to the future and the proposals which are due to come from the Commission the day after tomorrow. Of course, I would not want to make a speculative response to a press report in the Financial Times, would I? Therefore, I shall just describe the Government's aims as seeking a regime which is simpler, more efficient, affordable and durable

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and, indeed, fair to all present and future member states. Each of those tests is important. Their future balance will require some reform of the policies, that is for sure.
The amount of space in the Select Committee's report devoted to the administration of the funds is just one indication of the need for simplification. We must get over the bureaucracy and get more focus for the money that we are going to spend. Referring to our test, parts of the process do add value—notably the partnership, the programming and the drawing on local priorities. However, in terms of its efficiency as a process, I have to say that that still contrasts with the cohesion fund. I should just like to point out that the cohesion funds typically commits 99.99 per cent. of its appropriations each year, which cannot be said for the structural funds. I hope that that is specific enough for noble Lords—two places of decimals.
We must look at good, focused expenditure. I believe that the next key question for the period ahead is affordability. That will mean keeping the overall cost of the structural and cohesion funds below the 0.46 per cent. of the European Union's GDP, both before and after enlargement, to include countries from central and eastern Europe. As I said, that is an enlargement which we support. As Commissioner Wulf-Mathies pointed out, and as the noble Lord, Lord Renton, said, that will still give us a large injection of funds into eastern Europe, even if we maintain that cap.
As my noble friend Lord Bruce of Donington pointed out, the UK is a significant net contributor to the funds. We have no interest in seeing our contribution increased because, with tightening budgets across Europe, no member state has an interest in seeing overall costs rise. As the new member states will be much poorer than average, it means that all existing member states should expect cuts in their receipts if costs are to be contained. That will not be easy for some to accept, especially those who are currently net recipients or who have particularly acute regional differences, but they will need to do so. As my noble friend Lord Desai pointed out, we must focus on the neediest areas.
However, it is not just in the next few years that the funds have to be affordable. Indeed, we shall have difficult negotiations in agreeing this reform for the period up to 2006; but we shall need to pursue that aim if the outcome is to be a durable one and if the system is not to be disrupted when more new member states enter the Union. So there will be difficult negotiations ahead.
We believe that fairness is the key to durability, both for new member states and for existing member states. There are also other issues such as the capacity for very poor countries to absorb large flows of support, as the noble Lord, Lord Dahrendorf, pointed out. The Select Committee suggested that inflows should be limited to 4 per cent. of the country's GDP. It is highly likely that some such rule will apply. We need to recognise the unsatisfactory nature of relying on such a cap to deliver an affordable regime beyond 1999. Some countries will, as a result, automatically receive less money per capita than other richer countries, which is ironic, but it also
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means that as the poorest countries grow relative to the European average they will receive more, thereby putting very much greater pressure on total cost.
Even among existing member states, fairness will be an important test. We know that the UK is not the poorest EU member state, but neither is it the richest. We receive lower receipts per capita than a number of member states that are richer than we are. We recognise that the UK is likely to receive less in the next period, especially after any transitional periods; but we believe that the overall burden and benefits should be fairly distributed across all member states.
Perhaps I may respond briefly to the point made by the noble Lord, Lord Grenfell, on the structure and restructuring of the funds. I do not believe that it will be possible to reduce the number of funds; indeed, that chance was missed in Amsterdam. Nevertheless, we could perhaps reduce the number of objectives from seven to three. I should like to stress that the Government will provide an explanatory memorandum on the Agenda 2000 proposals that we expect to receive on Wednesday in the usual manner. However, I should point out that detailed proposals may not be published until next year when our presidency is in place.
The noble Lord, Lord Pearson, asked me whether we had given any thought to the restructuring of the structural funds, and indeed of the CAP, which is not on today's agenda. I can tell him that we have certainly given thought to it. I should remind the noble Lord that under Article 130D, the framework decision article, that will require unanimity. I also remind him that, on many of these great decisions which have required unanimity, we still expect a consensus to be found because that is how partnership works. I hope that we shall see that achieved in 1998. I further remind the noble Lord that the next budgetary period is for 2000 and 2006, so we have a little time. I give way to the noble Lord.
Lord Pearson of Rannoch: My Lords, the Minister was kind enough to refer to the questions that I asked and admit that the solution would be very difficult. He also answered his noble friend Lord Bruce of Donington by saying that we are indeed net contributors to the whole exercise. Can he say whether the United Kingdom might not have been able to spend all the sums of money that have been spent in this country without the extraordinarily expensive and wasteful filter of the EU and its various bureaucracies and committees? Indeed, could we not simply have spent that money and made a donation, which no doubt would have added another £1 billion or so to our costs, to the European Communities to enable them to do it themselves?
Lord Simon of Highbury: My Lords, I thank the noble Lord for that observation. We have heard that this system works extremely well in Ireland. When challenged earlier about why the Irish system works, the answer showed that it was because the Irish networked so well, talked to their opposite numbers in Brussels and tried to form a partnership. I cannot help commenting that if that had not worked in the past under previous regimes, it is possible that they did not understand what

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networking was about. Had they tackled Brussels in the appropriate way, perhaps we would have spent the funds more effectively.
My summary has done justice neither to the excellent detailed report nor, if I may say so, to the breadth of vision that the noble Lord, Lord Dahrendorf, so strikingly encapsulated in his contribution as to the importance of such funds. The importance is to build a strong and committed Europe and one where we would find a partnership to the advantage of our electorate.
5.50 p.m.
Lord Barnett: My Lords, I shall be brief but, as everyone else has done, I must congratulate the noble Lord, Lord Renton of Mount Harry, on a quite excellent maiden speech. I have a feeling that I shall agree with him more than I shall with others on matters such as economic and monetary union, but we are not debating that today. I also thank members of my committee for their kind and over-generous remarks about my chairmanship; they are much appreciated.
I thank my noble friend Lord Simon for his reply to the debate. On another occasion I shall take up some of the points that he made and did not make. He did not even reply to my direct question about the Barnett formula. I should have loved to have an answer to that. Indeed, he did not answer any of the specific questions I put. However, I was not too surprised at that as he is obviously learning fast! He even managed to use a fair number of DTI clichés. I shall read those again later. I appreciated the contributions of all those who spoke in the debate. I look forward to discussing various matters relating to the European Union on many other occasions.
On Question, Motion agreed to.

Court Fees
5.51 p.m.
Lord Acknerrose to ask Her Majesty's Government what action they have taken or propose to take to protect the constitutional right of access of a litigant of modest means from the impact of new and increased court fees.
The noble and learned Lord said: My Lords, since I have no right of reply at the end of this debate, I thank noble Lords who will take part, and in particular my noble and learned friend the Lord Chancellor, even more so as I believe this is the first debate to which he will reply. He and I have always seen eye to eye in our encounters in this Chamber. I am sure that that tradition will continue to flourish.
The stimulus for this debate arises out of certain court costs orders made at the end of 1996 by the then Lord Chancellor under powers conferred on him by Section 130 of the Supreme Court Act 1981. These orders not only more than doubled fees but added new fees where previously there had been none and removed certain exemption provisions. I have given notice to my noble and learned friend the Lord Chancellor that this debate gives rise not merely to questions of practical concern as to the extent to which access to justice is
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being denied or restricted by the quantum of the increases. It raises a major policy issue, with wide-ranging implications, which has never been the subject of public debate. Historically, it has been government policy for salaries and pensions of judges and the cost of court accommodation in civil litigation to be paid by the state out of public funds, while other administrative costs should be met by litigants. However, in 1982 the Government decided that accommodation costs, such as the notional rent for the Royal Courts of Justice, should be included in the costs borne by litigants, and in 1992 judicial salaries should be included. In short, the civil justice system should become self-financing.
What is quite remarkable is that this radical departure from previous practice, not heralded by any White or Green Paper, has not been the subject of public debate in Parliament or elsewhere. Indeed the previous Government have acted in a way which seems to border upon the arrogant. Let me explain. Last year the Government introduced a Housing Bill. Tucked away in Section 83 was a seemingly harmless provision enabling an application to be made to a leasehold valuation tribunal, instead of the county court, when there was a dispute as to the value or provision of services provided by a landlord.
During the Committee and Report stages it emerged that the applicant to such a tribunal was to pay the entire costs of that tribunal. Indeed the noble Lord, Lord Lucas, cheerfully observed that this would include even the milk for the office cat, assuming such existed. What was distinctly worrying was the concession by the noble Lord, Lord Lucas, that the tribunal's costs could amount to as much as £2,000 per day. This was roundly condemned from all sides of the House and the Government were defeated on Third Reading on an amendment moved by the noble Viscount, Lord Bledisloe, with a majority of 136 to 119. There was more than an hour's debate on that issue.
In the debate, to the surprise of those present, the Government revealed that they intended that full costs were to be applied to all courts. To this the noble Viscount, Lord Bledisloe—who is on the speakers' list but who may be impeded from attending—observed,
"So be it. If that is what they"—
that is the Government? —
"want, let them introduce a Bill to that effect. Let us see and debate the various consequences and safeguards; and let us hear the considered views of judges, lawyers, litigants, etc. Let us tackle the problem face on, in its entirety".—[official Report, 17/7/96: col. 861.]
Those sentiments were, I believe, shared by all those who spoke in favour of his amendment.
But not a bit of it—there was not even prior discussion with the senior judiciary. When the heads of division queried the necessity for these drastic fee increases they were told that the increases were essential to enable the Lord Chancellor to balance his departmental budget. It was on this occasion that the heads of division, whose concurrence to these new fees was required, were told that it had for some years been the established government policy that the civil justice system should be self-financing. The annual subvention

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from public funds for the Lord Chancellor's Department is apparently nowadays calculated on the footing that nothing need be allowed for the civil justice system as its costs will be met by litigants. Thus without these recent increases in fees and the imposition of new fees the Lord Chancellor could not have—having regard to the annual sum allowed his department by the Treasury—met the expenses of the system for which he is responsible. Not surprisingly the heads of division felt obliged to give their concurrence to the orders, which I understand are expected to raise in excess of £50 million and a further £50 million by orders to be made this year.
In regard to the above facts I am indebted to the vice chancellor, Sir Richard Scott, who is also head of civil justice, for a transcript of a highly critical speech given by him on 13th March 1997 to the Kent Law Society in the Keith Tucker lecture. I agree with the views expressed by the Vice Chancellor in that lecture; namely,
"that the civil justice system is an integral and indispensable part of the structure of administration of justice that must be put in place by every State in which public and private affairs are to be conducted in accordance with the rule of law; and that a policy which treats the civil justice system merely as a service to be offered at cost in the market place, and to be paid for by those who choose to use it, profoundly and dangerously mistakes the nature of the system and its constitutional function".
In my remaining few minutes, I turn to issues of practical concern, hoping that others may develop the matter fully. The previous orders were made in 1980 and contained provisions relieving litigants on income support from the obligation to pay fees, and, in addition, giving the Lord Chancellor a discretion to reduce or omit a fee where,
"it appears to the Lord Chancellor that payment by a party & would involve undue financial hardship because of exceptional circumstances of the particular case".
Article 3 of the 1996 orders removed those provisions. I fear that I can spare no time on the humiliating decision suffered by the previous Government as a result of the application made by Mr. Witham to the divisional court within weeks of the orders coming into force. It declared that Article 3, to which I made reference, was unlawful. The value of the case for present purposes lies in the recognition by the court of the constitutional importance of access to the civil courts.
The House will recall from the recent debates on the provisions of the Crime (Sentences) Bill, in particular those provisions dealing with mandatory life sentences and minimum sentences, that those words "exceptional circumstances" are inevitably interpreted in a very restrictive manner. Although they do not amount to once in a blue moon, they get very close to that situation. There are clearly many litigants unable to obtain legal aid who cannot afford to pay court fees and whose circumstances are therefore not only unexceptional but extremely common. In regard to those persons, if access to justice is not to be entirely illusory, then the limitation on the exercise of the discretion must be changed. I would have thought it far more appropriate for the discretion to be exercised by the district judge and the words "exceptional circumstances" deleted.
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Perhaps I may take the comfort of ending with three short quotations from brother Law Lords. First, in the case of ex parte Lwch in 1994, in Queen's Bench 198, Lord Justice Steyn said:
"It is a principle of our law that every citizen has a right of unimpeded access to a court".
In Raymond v. Honey, 1983, 1 Appeal Cases 13, my noble and learned friend Lord Wilberforce described it as a basic right. He said:
"Even in our unwritten constitution it must rank as a constitutional right".
Finally, in his interim report on civil justice reforms, the noble and learned Lord, Lord Woolf, said at page 205:
"Court fees can have an adverse effect on access to justice if the litigant regards them as putting the cost of litigation out of proportion to the remedy sought. As part of the review of courts' fees I would therefore wish to see the position of the litigant of modest means being protected from the undue impact of increased court fees".
I await with, I hope, justifiable confidence the reply of my noble and learned friend the Lord Chancellor.
6.4 p.m.
Lord Mishcon: My Lords, the House will be indebted, as it often is, to the noble and learned Lord, Lord Ackner, for raising an important public matter. I am indebted to him for the comprehensive way in which he has dealt with the question, thus leaving me comparatively little to say.
I have always loved that chapter in possibly the most eloquent of the Old Testament prophets, Isaiah, which commences with the Almighty, through the prophet, having a discussion with us mortals. The chapter begins with the expression, "Come, let us reason together". I use the phrase not because I wish in any way to deify my noble and learned friend the Lord Chancellor (even though he may have as part of his traditional duty to be the conscience of Her Majesty the Queen) but because it is the right note to sound when one recognises the fact that, before the noble and learned Lord commenced to grace the Woolsack, all the matters of which the noble and learned Lord, Lord Ackner, complained had been completed. Therefore, knowing well the breadth of the Lord Chancellor's mind, I ask that certain considerations be uppermost in the noble and learned Lord's mind when reviewing the matter.
The noble and learned Lord, Lord Ackner, had limited time in which comprehensively to deal with the subject. He started by saying that there were some practical considerations but that he would talk about principles of grave concern. Perhaps I may therefore deal with some of those practical matters.
Fees were altered—the noble and learned Lord, Lord Ackner, said that it was without any public debate or discussion, and without full consultation, as I understand it, with the Bar Council, the Law Society or the judiciary—on the following scale. On purpose I take examples which I believe will appeal to your Lordships as being of grave social concern. In 1995 and 1996, one had to pay a fee of between £20 and £50 for wardship applications. Those are often applications to protect the physical well-being of youngsters, or to ensure that they

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remain within our jurisdiction, and are cared for in a proper way. From January 1997 the fee to commence the application was £100.
I turn to a debtor's petition in bankruptcy. Your Lordships will appreciate that when a debtor files his own petition, one takes it for granted, if he is an honest man, that he has literally nothing in his pocket; otherwise he would make an offer to his creditors, however small that may be. The fee used to be £20. In order that the debtor can file his own petition, from January 1997 the fee was increased to £50.
Lastly, as an example, would your Lordships take it for granted—noble Lords will have become familiar with this type of case having read the newspapers, if not from having followed it as lawyers would—that someone has been grievously injured for the rest of his or her life by the negligence of a doctor? Will noble Lords take it for granted—let me bear the pain of saying this—that a client of a lawyer has suffered immeasurable damage as a result of that lawyer's negligence? Will your Lordships take it for granted that, when the matter is as serious as I have tried to explain, the damages claimed may well be £100,000 or more? Before a writ could be issued, in October 1995 the fee payable was £100; in 1995–96 it became £120. Before the writ can be issued, since January 1997 a fee has now to be paid of £500.
The people whom I know the noble and learned Lord the Lord Chancellor will have in mind as much as anybody are those who fall just outside the net for legal aid. They are always the people who have the gravest difficulty in using our courts as they are intended to be used. They are the ones in the middle. The very poor are looked after; the very rich can afford it. The people in the middle are those who suffer most. It is in regard to them that I believe your Lordships will be especially sympathetic.
Perhaps I may make a plea to the noble and learned Lord following upon the remarks of the noble and learned Lord, Lord Ackner, in relation to those on income support. They are now exempt. But there are means-tested classes within our community whom I want to mention in particular. They are those in receipt of jobseeker's allowance, disability working allowance, and family credit in those cases which are not family cases by way of the type of jurisdiction that the person concerned is trying to have exercised. If they are family cases, there is an exemption. I want to plead with the noble and learned Lord—although in his case I do not need to be of an unnecessarily pleading mind, because he will have these considerations very much in his concern. I ask that urgent consideration be given to exempting those who, I repeat, are means-tested from the increases that have taken place. Indeed, I want them, as I believe will your Lordships, to be completely exempted. Very apposite quotations were made by the noble and learned Lord. Since he referred to the case of in re Witham, I wish to quote Mr. Justice Laws, who delivered the main judgment in that case. He said:
"The right to a fair trial which of necessity imports the right of access to the court is as near to an absolute right to any which I can envisage".
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Perhaps I may repeat, very humbly, the words of that very learned judge and hope that the House will endorse that judgment and that the noble and learned Lord will act within its spirit.
6.14 p.m.
Lord Hacking: My Lords, we are all grateful to the noble and learned Lord, Lord Ackner, for introducing this timely debate. It is timely not only because of the vast recent increase—in January this year—in court fees; but also because of the speech that the noble and learned Lord made at the annual conference of the Bar of England and Wales on 28th September last year, a speech to which he referred in his remarks during the Second Reading debate on the Civil Procedure Bill on 5th November last year. Perhaps I may remind the noble and learned Lord of what he said:
"an incoming [Labour] government would immediately undertake a wide-ranging review both of the reform of the civil justice system and of civil legal aid. That review would include the noble and learned Lord's reports"—
that is, the reports of the noble and learned Lord, Lord Woolf.
"That remains the position of the Opposition. A rigorous cost-benefit analysis there must be".—[Official Report, 5/11/96; col. 611.]
Before I go any further, I should declare an interest. I am President of the Civil Court Users' Association, formerly the County Court Users' Association, which is chiefly concerned with consumer judgments and debts. I therefore much look forward to hearing where the noble and learned Lord is on this immediate, wide-ranging review of the civil justice system.
I believe that the noble and learned Lord, Lord Woolf, and his colleagues have put their finger on the right button. In its interim report, the Woolf Committee stated:
"The problem of cost is the most serious problem besetting our litigation system".
In Chapter 7, on page 78 of the final report, the noble and learned Lord, Lord Woolf, and his colleagues said:
"Fear of costs deters some litigants from litigating when they would otherwise be entitled to do so and compels other litigants to settle their claims when they have no wish to do so. It enables the more powerful litigant to take an unfair advantage of the weaker litigant. The scale of cost per case has an adverse effect on the scope of the legal aid system. It also adversely affects the reputation of our civil justice system abroad".
The cost of litigation has therefore been a subject of increasing concern since I began practising some 34 years ago, and in recent years it has been of escalating concern.
The noble Lord, Lord Mishcon, referred to some of the increases. I should also like to point with some particularity to them. Prior to October 1995, the fee for a divorce petition was £40; from January 1997 it is £150. Then there is a new fee for amending that divorce petition of a further £50. Prior to October 1995, the fee for a county court summons was £80; it can now go up to £500. As the noble Lord, Lord Mishcon, said, a High Court writ prior to October 1995 was £100; it is now up to £500. The fee for the debtor's petition, a point also mentioned by the noble and learned Lord, Lord Mishcon, has risen from £20 to £50.

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This increase in fees also has a cumulative effect. Let us take as an example a summons in the county court for a claim of between £50,000 and £100,000. Prior to October 1995 there would have been a fee on that summons of £80; then, perhaps if the litigant wanted to have some interlocutary hearings before the district judge, the cost would have been £10 per hearing; if there were three of them the cost would have been £30; and with the hearing before the judge the total would have been £210. From January 1997 the cost of the summons has risen from £80 to £300; the fee for the three interlocutary hearings has risen from £30 to £90; the hearing before the judge has gone up to £150; and the setting down for a trial, which is a new fee, is £100. The total is £640.
What is therefore the impact? It might be said that a litigant is in the big business of litigation if he is claiming something between £50,000 and £100,000, which carries a court fee of £300. It might also be said that a litigant is in the big business of litigation if he has a claim in excess of £100,000. That is not necessarily the case. As the noble Lord, Lord Mishcon, pointed out, someone with personal injuries—a quadriplegic or someone with brain damage—may have injuries valued at well over £100,000.
Take another example of a lorry which crashes into a village shop whose owners are either not insured or under-insured. The damages to the fabric of the building, to the business and perhaps for personal injuries can amount to well over £100,000.
Let us also look a little more precisely at the cost of divorce proceedings. The cost is £150 and another £50 for amending the petition, on top of all the other costs that rain on a person going through divorce proceedings, including the cost of running two households. These court fees are hardly an inducement to litigants to end unhappy marriages.
Not only were these increased fees announced in January this year, but there were rumours last year of daily hearing fees, of £800 in the county court and £2,000 in the High Court. If those fees were introduced and passed into pensions and salaries for judges, the noble and learned Lord, Lord Ackner, would never need to raise again in your Lordships' House his well known concerns over judicial salaries and pensions. An enormous increase in court fees would result.
I hope, therefore, that the noble and learned Lord the Lord Chancellor will be able to tell your Lordships' House that there are no such plans for daily hearing fees.
As the noble and learned Lord, Lord Ackner, said, the great importance of this debate—whether the litigant should pay the full cost of the administration of justice in our courts—is that it has never been considered and debated in Parliament. If the litigant does not undertake the full cost, then the taxpayer to some extent subsidises access to justice. But he and we should do so, particularly if to do otherwise would be a deterrent or a denial of access to justice.
6.23 p.m.
Earl Russell: My Lords, in thanking the noble and learned Lord, Lord Ackner, for introducing this Question, I am not merely making a conventional remark. It seemed that this debate was originally going to fall to me. I persuaded the noble and learned Lord to introduce it on the ground that he would do it better. I should like to thank him not only for doing so but also for proving me right.
I should also like to congratulate the noble and learned Lord on the Woolsack. I think that this is the first time that we have exchanged words in a debate since his arrival there. We have so far tended to have the good fortune to agree and I hope that that will continue.
I appreciate that I am criticising measures which the noble and learned Lord was not responsible for introducing. I hope he will not reply with the words used about Parliament by King James VI of Scotland and I of England in an unguarded moment of bad temper: "I found it here when I arrived so I am obliged to put up with what I cannot get rid of".
I hope that the noble and learned Lord will take a rather wider view of the subject. If his right honourable friend the Chancellor of the Exchequer should say to him that he cannot afford the cost of changing this measure, I hope that the noble and learned Lord will ask him to consider the cost of not changing it. This Government have so far been much better than their predecessor in considering the cost of not spending money as well as the cost of spending it. I hope that the noble and learned Lord will not allow the first exception to that improvement to arise in his own department.
A long time ago, when I was an undergraduate, I took part in a large protest march. We passed through a medium-sized county town where the town council decided to forbid the marchers to use the town's public lavatories on the ground that, if they did so, they would cause a mess. Fortunately, the council was at the last moment persuaded that it would cause a great deal more mess if they were not allowed to use them. Similarly, I believe that, if the Government do not change the policy on these fees, it will cost a great deal more than if they do.
The noble Lord, Lord Mishcon, quoted to us the words of Mr. Justice Laws, in which the learned judge spoke for his predecessors and our ancestors. When our medieval predecessors fought so strongly for the principle of access to the courts, they did so because they knew very well what people would do if they did not.
When John Lilburne's father was the last man but one to claim trial by battle in English law, he did so because his opponent had burned down his house with his evidence inside it. I recall the right reverend Prelate the Bishop of Liverpool making precisely the same point in a memorable plea for the law centre in Liverpool, Toxteth. We must encourage access to the courts because we know what people will do if they do not have it. It is a live tradition and it deserves a hearing.
I have had experience of the introduction of full cost fees in another context, in the photographic service in the Public Record Office. It caused such astonishment

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among the customers of that office that those managing it were finally reduced to displaying a Hansard page reporting a Starred Question in your Lordships' House, in reply to which the then Lord Chancellor explained that the costs covered the whole costs of the office. That was done because the office was becoming extremely unpopular as a result of collecting those costs. It is not in the public interests that our courts should become unpopular in that way.
It is clear as far back as records go that the maintenance of the courts is one of the Crown's basic responsibilities. Judges' salaries have been paid out of the Exchequer even at moments of greatest poverty in the Crown's experience. Nothing like the present proposal has been carried out, even in the reign of King Richard I, who, according to his critics, would sell his grandmother if he could be sure to get a good enough price.
This is a tax increase. The noble and learned Lord should perhaps portray it as the twenty-third increase introduced by the previous government.
It applies to all sorts of things. It is said that worse will happen if there is not this increase. There is a Treasury guideline to the effect that any Minister of the Crown proposing a saving on his departmental budget must consider the resource implications for other departments. I do not know whether the noble and learned Lord can discover how far that was done in the introduction of this measure, but I am a little curious as to how the calculations might have been carried out.
Civil disputes easily turn to fighting if there is no resolution in the courts. People notoriously do not obtain a divorce if it is too expensive, which leads to a confusion of matrimonial relationships, differing from partnerships. Noble Lords will understand what I mean if I say that this could almost be described as Sadducean legislation.
As regards debt, the remarks of the noble Lord, Lord Mishcon, about bankruptcy are well taken. His remarks about compensation bear on actual cases. There are people who are entitled to large sums of compensation who, for the lack of a few pounds to begin proceedings, will never get it.
It applies also to eviction. In one case it was avoided because the citizens advice bureau in North Yorkshire paid the court fee out of a charitable fund of its own. But that cannot be a regular policy. Does anyone really suppose that the cost to the Government of eviction is ever as low as £10 per case? The arithmetic is a little curious, especially when we take into account the £14 million increase in the legal aid budget. That is what the noble Baroness, Lady Thatcher, used to describe as "churning". It is an exhausting and expensive activity.
We should also consider the effects on the benefits system. I am extremely surprised that income-based jobseeker's allowance has not been included under the terms of Mr. Justice Laws's judgment. The court which decided that did so on the ground, mistaken in point of fact, that it was more than income support. It makes my point that no appeal was possible because the fees could not be afforded. That creates injustice to other people as well as the particular litigant.
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It is also a great concern to the Chancellor of the Exchequer and the Department of Social Security to eliminate poverty traps from the benefit system. There are far too many cases in which people who get into work are worse off than when they were on benefit because of the loss of a whole series of means-tested privileges. These fees add just one more to those privileges. I do not see why they do not apply to family credit or to disability working allowance.
If the Government do not intend to scrap those fees—as I believe, with proper costing, they probably would—I hope they will refer to Mr. Martin Taylor's review of poverty traps in the benefit system, which I welcome. The reason why it should go to such a review is that what is important is that the steps in costs as a person comes off benefit should not all happen at the same place. Otherwise there is a mountain. So they should be considered by somebody who is considering the other poverty traps. Instead of having steep steps, they should be spaced out, like a ramp for wheelchair users. Then people can come up a little further. I think that is something which only Mr. Martin Taylor can do.
We are told that it is difficult to deal with anything of this kind. But the Government do have certain basic duties. Doing justice is one of them; defending the realm is another. The noble and learned Lord was in the House at Question Time when the noble Lord, Lord Gilbert, answered the noble and gallant Lord, Lord Craig. Speaking on the Eurofighter, he said that the defence of the realm was one of "the" basic duties of government. Doing justice is the only duty which comes on a level with that.
In 1637 in the Ship Money case, Lord Fynch, Chief Justice of the Common Pleas, said that if an Act of Parliament were to enact that the King should not defend his kingdom it would be void. That never came to judgment. It was not tried. I do not know, if there were an Act to say that the Queen should not do justice, whether it would equally be void. I should rather not find out.
6.34 p.m.
Lord Meston: My Lords, the starting point and the governing principle for this debate must be the maintenance of effective access to justice. That is a basic right which is provided and guarded with equal force, both by the common law and by the European Convention for the Protection of Human Rights.
In the Witham case, the divisional court held that the 1996 amendment order impeded that right. Even without that trenchant decision of the divisional court, fee increases of that kind of level would have caused uproar, if they had been applied to, say, car tax or prescription charges. Today's debate has given an opportunity for the new Government to indicate whether matters are to remain in the unsatisfactory state left by the Witham case or whether there has been—or, at least, whether there will be—a more thoughtful review of the structure of court fees and the underlying policies and targets for any such structure. That is a review which should take place against a background of developing civil justice reform. In that context I am very glad that the noble and

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learned Lord, Lord Ackner, quoted what the noble and learned Lord, Lord Woolf, said in his interim report about court fees.
The noble Lord, Lord Mishcon, characteristically selected an appropriate quotation from the Old Testament about reasoning together. Like many noble Lords participating in this debate I have been trying to grapple with what is the underlying rationale for any structure of court fees, particularly as it is a subject about which I suspect that most of us have not had to think very profoundly until, all of a sudden, there was this enormous uplift and an adverse decision, from the then Government's point of view, of the divisional court.
I am by no means sure that it is possible to reconcile effective access to justice with a full cost recovery, which was the policy of the last government. I suspect that, among other noble Lords, I am not the only one who has received the useful briefing material provided by the Legal Action Group which tells us something of what happens in other countries. It says:
"The proposal to raise the full cost of the courts through fees has been rejected in both the United States of America and Australia. The Judicial Conference of the United States discussed whether court fees should be raised to meet the running costs of the courts and rejected the idea. In Australia, a Government-appointed committee recommended: 'that fees should neither encourage nor be perceived as encouraging decisions by court administrators designed to maximise revenue. Accordingly, we are firmly of the view that there should be no budgetary link between revenue raised by the collection of fees …. and the appropriate use of monies'".
I suggest that it is necessary to ask whether full cost recovery is the policy of this Government and, if so, how that will operate in practice. For example, how will it operate as between the charges for issuing formal pieces of paper—which is what we have been discussing today—and charges for subsequent use of the court facilities once the necessary pieces of paper have been issued? That was a point raised by the noble Lord, Lord Hacking.
If full cost recovery is still the policy, what practical account is to be taken in the future of the impact on potential litigants of negligible or modest means? If full cost recovery is not the objective of the present Government, what is their policy and its rationale as between different categories of case and different categories of litigant; and what future uprating can be expected?
The present situation is unsatisfactory for a number of reasons: first, it does not give automatic exemption to those in receipt of benefits, apart from income support—a point made by my noble friend Lord Russell, and the noble Lord, Lord Mishcon; secondly, the undue financial hardship test creates uncertainty and takes time; and, thirdly, it bears hardest on those who are poorest, even if just above income support and legal aid limits.
In the Witham case, Mr. Justice Laws said:
"It is clear on the evidence before us that there is a wide ranging variety of situations in which persons on very low incomes are in practice denied access to the courts to prosecute claims, or, in some circumstances, to take steps to resist the effects of claims brought against them".
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It may be said that the right of access to justice is not an absolute right. Nor is it; yet for most people, litigation is a last resort and, for many people, it is not a choice. Statistics show a decline in the number of civil cases being started. There is, quite properly, a growing emphasis on mediation and alternative dispute resolution. Apart from that, responsible lawyers always try hard to keep their clients away from the court, pushing them sometimes reluctantly to compromise and impressing upon them with firm advice the costs and hazards of litigation. Yet there will always be cases which need quick and easy access to the courts, sometimes urgently, and there will always be other cases in which a negotiated settlement can only be achieved in practice with litigation concurrently progressing to trial and concentrating minds.
Because some proper rationale for court fees is required, it perhaps does not help to focus the argument on particular categories of case, nor to try to compare or rationalise the different categories of case—for example, the fee for a bankruptcy petition, or that for a road accident claim, although, very properly, attention has been drawn to the enormous increases in those particular types of case. However, the public, and the court service itself, have an interest in compromising disputes. So why does there have to be a fee for amending a divorce petition? That usually reflects the fact of a compromise to enable a civilised end to a marriage on an agreed basis. Why does there have to be a fee for a consent application for ancillary relief following divorce? Likewise, that would normally reflect a cost-effective compromise rather than hostile litigation.
Finally, access to the courts for the protection of children should be the least impeded part of our system. Obviously children need to be protected—a point well made by the noble Lord, Lord Mishcon—but it is also the form of litigation least likely to be covered by any form of insurance on either side, and in which it is least likely that the costs will be recouped from the other parties to the litigation. Surely a nominal fee, if any, is all that is appropriate.
Another category upon which I focus briefly is adoption. There is, as we have heard, an increased fee for an adoption application. Surely adopters, or prospective adopters, have more than enough hurdles already to overcome before they reach court, and once they get to court after the court process has been initiated. It is wrong to have a substantial fee for an adoption application, whether that bears upon the pocket of the individual adopters or upon that of the limited funds of the adoption agencies which support them.
Those cases are of course about access to justice, but they are about something much more. They are examples of situations in which the court is providing a public service, which any decent society would afford to its citizens for no more than a nominal charge.
6.43 p.m.
Lord Kingsland: My Lords, I regret that my noble and learned friend Lord Mackay of Clashfern is unable to speak in the debate. I am sure that he will take an

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early opportunity to bring his immense intellectual and moral authority to bear on this topic. I thank the noble and learned Lord, Lord Ackner, for bringing this subject to the attention of the House. Perhaps I may suggest a few principles upon which the noble and learned Lord the Lord Chancellor might base the decisions that he will soon have to make on it.
First, the noble and learned Lord should endorse in its entirety the judgment by Mr. Justice Laws in Witham. Secondly, he should endorse the principle so eloquently explained by the noble Earl, Lord Russell, that the administration of justice is a matter for the taxpayer. That is not merely an important constitutional principle; it makes good economic sense. The vast majority of people do not use the courts. On the other hand, it is in their interests that the courts are there, just in case they want to use them. It seems to flow logically from that that they should pay for the fact that the opportunity is available if they wish to use it.
A further principle that I should like to emphasise is that any decision that the noble and learned Lord the Lord Chancellor makes about the structure of fees should wait until Sir Peter Middleton reports on the whole question of financial assistance to litigants; and, in turn, his views, which we eagerly await, about the implementation of the Woolf Report. One cannot make an objective assessment about the structure of fees in courts without also taking a view about the provision of legal aid, and, indeed, the whole running of court services. They have all to be seen together. I should not expect the noble and learned Lord the Lord Chancellor to come to any conclusion about the subject matter of the debate until well into the autumn.
I have something to say now—not very much your Lordships will be delighted to hear—about the structure of costs themselves. Given the fact that they will pay only for the cost of litigating, and not for the administration of the courts or the judges' salaries, considerable thought could still be given, with benefit to the—if I may put it this way—shape of the structure; for example, if one looks at most county court actions, the plaintiff wins a high proportion of them. Yet it is the plaintiff who seems to bear the initial costs. There are certain circumstances in which defendants behave rather badly. In those circumstances, why should they not have to put their money up first before their pleadings? That leads me to think that a greater degree of discretion should lie in the hands of the masters and the judges in taking decisions about the costs of interlocutory proceedings.
My other thought about the structure of costs is that at present they seem rather front-loaded—as the financial experts in the City say. The further into an action one gets, the higher the costs. At the moment the burden of costs seems to fall earlier rather than later in the procedure. Those are reflections which the noble and learned Lord the Lord Chancellor, I hope—I say this with due deference—will take into account when he applies his mind to the whole picture.
He has a difficult task in front of him. Treasury Ministers must be putting great pressure on all departments of government, including the noble and
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learned Lord's, to keep down costs. He will have a big internecine battle to fight with his own colleagues in the Cabinet. If he sticks to the principles that have been so well outlined by so many noble Lords today, and stands up for them when it really matters, we will make real progress on what is, after all, an absolutely central constitutional issue.
6.48 p.m.
The Lord Chancellor (Lord Irvine of Lairg): My Lords, I welcome the kind words at the outset of the debate of the noble and learned Lord, Lord Ackner. His one-man opposition to the previous administration on issues concerning the administration of justice was one which the official Opposition, before the general election, from time to time joined. I hope that we may continue as allies generally, but I cannot undertake always to agree with him. I fear that this may be one of those occasions, but I hope that much that I am about to say he will find encouraging. I hope, too, that the views I express in the debate will satisfy the noble Earl, Lord Russell, that I have taken a wider view than my predecessor, though he, too, may not agree with everything that I am about to say.
The question in terms confines itself to the case which makes the strongest appeal: to protect the constitutional right of the litigant of modest means from the impact of new and increased fees. I expressed in your Lordships' House on 27th January this year my concern about the position of a family on income support unable to pay the £10 fee that was formerly required to reschedule a rent or debt obligation. I urged my predecessor to reverse his decision to remove exemptions and remissions. That decision of my predecessor came into effect on 15th January 1997, but in fairness to him—the point has already been made by the noble and learned Lord—I should add, with the concurrence of the higher judiciary who signed along with him the necessary fee order. Without their consent these changes could not have been made in the High Court. As a new Lord Chancellor, I hope that I will not be convicted of schadenfreude if I say that the fact that my predecessor could, with the concurrence of the Heads of Division, sign a statutory instrument which the courts in due course held to be ultra vires gives me a little confidence for the future, although I, of course, cannot guarantee to do any better.
My view, expressed in your Lordships' House, was supported by the Divisional Court in the Witham case, so I would say to the noble Lord, Lord Kingsland, with respect, that I really have no need to endorse it. My position was well known before that court ever gave judgment. Its judgment was not appealed by my predecessor. It reinstated exemptions and remissions in the Supreme Court. Subsequently, my noble and learned predecessor also reinstated them in the county courts and in family proceedings.
It is right that those caused undue hardship by a requirement to pay fees should be protected; and they now are. I could not personally accept any other proposition, as I made plain from the Opposition Front Bench in January. At the same time, of course, the legal aid fund helps those who are eligible by meeting their

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court fees and—an incomparably greater burden—by meeting the cost of their legal representation. And there is a general discretion, under paragraph 5(3) of the 1980 order, to reduce or rescind any fee where it appears that payment of it,
"would involve undue financial hardship because of the exceptional circumstances of the particular case".
I could treat that as an entirely satisfactory answer to the noble and learned Lord's Question, and I could now sit down; but I do not propose to do so. Lurking beneath the Question on the Order Paper, although not in terms asked, is another question: whether fees should be charged at all to those using the civil courts. In a democracy governed under the rule of law there must be a court system. I accept, of course, that citizens have what may be called a constitutional right to a court system. They enjoy that right. However, I do not accept that they have a constitutional right to a free court system. Those who claim that claim too much. What the state provides free, or at a charge, is a matter of policy for government. They have to determine priorities in the allocation of scarce public resources. Those who argue for free access to the courts in all cases say that no issue of policy arises—no discretionary decision how to allocate scarce public resources—because they attach the label "constitutional" to the right for which they contend. The real question is whether they are correct to do so.
I would not, for example, accept that a citizen has a constitutional right to free medical services in all cases, although a powerful argument can be made that the state should give a high priority to the provision of free medical services; and it does.
Earl Russell: My Lords, I am most grateful to the noble and learned Lord. Would he accept a slight reformulation of the case he is putting? He said that decisions on charges are a matter of policy. Would he accept that they are a matter of policy so long as they do not prevent access; and that in order not to prevent access, the system needs to be slightly more generous than at present?
The Lord Chancellor: My Lords, I would accept only that a system of charging for access must be fair. I shall elaborate on what I mean by "fair" in the course of this speech. What I am saying very, very clearly is that those who attach the label "constitutional" to their arguments are doing so quite deliberately so as to put themselves into a position of arguing that government have no discretion left in the allocation of scarce public resources because to charge anything for the use of the courts would be unconstitutional. It is that position that I cannot give intellectual acceptance to. For example, I would not accept that before the National Health Service was set up on 1948 there was a "constitutional" right of citizens to free medical services which was being denied.
I read in my Times on Friday that Mr. Justice Ferris recently described as "profoundly shocking" figures which showed that all but £60,000 of the £1.68 million personal estate of the late Robert Maxwell would be
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swallowed up in professional fees. The judge said that if the amounts claimed by the insolvency firm appointed by the court to sell the remaining assets left after Mr. Maxwell's death were paid in full—and they were claiming at a billing rate of £270 per hour for senior staff and up to £195 per hour for other accountants—then the receivership would have produced,
"substantial rewards for the receivers and their lawyers and nothing at all for the creditors".
The modest fees charged by the court service did not of course merit a mention. They were a drop in the ocean.
Now any civil litigant who does not represent himself, but is represented by a lawyer, will in practice pay fees to his lawyers vastly in excess of the modest court fees. It is the fact that there are number of QCs in this country who do earn £1 million a year and many who would regard £500,000 in one year as representing a very bad year for them. I have to acknowledge that until recently I had myself what I think I could fairly describe as an entirely satisfactory and rewarding practice at the Bar, so that, to some, my calling attention to incomes of this order might bear comparison to the conversation of St. Paul. On the other hand, I am in an especially good position to know the facts and I do not believe that facts should be suppressed. It is also fair to say that there are very many more who earn fair and reasonable incomes, largely from criminal legal aid, the level of whose incomes are not to be criticised.
We are not talking expressly about criminal litigation today, but we are talking plainly. It is a staggering fact that of the total criminal legal aid budget of £566 million per annum, the top 1 per cent. of criminal cases consume 24 per cent. of the total expenditure. In a Written Answer on 24th June I confirmed that £13.36 million had been paid as of 17th June 1997 from the legal aid fund to lawyers who acted in the recent Maxwell cases. I shall not know what the final costs are until early next year. It is the fact that top lawyers in this country easily earn at least four times what top surgeons earn. The main deterrent on going to law is not court fees but the price at which lawyers value their own services and, so far, have succeeded in charging. To argue that court fees act as a deterrent to litigants is rather like arguing that people are deterred from buying a new motor car by an increase in vehicle excise duty.
It is the overall financial cost and risk of ligation that affects decisions whether or not to litigate, not any particular component in the overall cost. I therefore question whether it can be right to suggest that one of the smallest components in that bill—court fees—is really the determining factor. Fat cat lawyers railing at the inequity of court fees do not attract the sympathy of the public. People who live in glass houses should not throw stones.
Let us for a minute consider the implications of any claim that users should not pay court fees. The total cost of civil business in the courts is £335 million per annum. Not all of this is required to be recovered in fees. The expression "full cost recovery" is a misnomer. The exemptions and remissions to which I have referred are funded by the taxpayer to the tune of about £15 million per annum. On top of this, the taxpayer, via the Legal Aid Fund, pays roughly £63 million of court fees. In all,

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a total of about £78 million of the costs of the civil courts is met by the taxpayer on behalf of the poorer users of the courts. The amount paid by court users out of their own pockets is, therefore, around £257 million.
And let us be clear who these court users are. We estimate that around £100 million of fees are paid by large concerns, either issuing claims on their own behalf or paying to support those taking advantage of legal expenses insurance. Far less than half the cost of civil business therefore falls on individual litigants.
If I wished to provide courts free to all those who wish to use them, whether corporations or individuals, your Lordships will appreciate that the £257 million currently taken in fees would have to be found from somewhere else. Should I deduct £257 million from a legal aid budget which last year totalled some £1.5 billion? That would not be met with acclamation, least of all from the noble and learned Lord. I do not think anyone would argue that I should withdraw criminal legal aid to any extent, although I am sure that everyone will agree that I should control its cost. Nor do I think that any of your Lordships would wish me to cease providing assistance to those of modest means bringing family proceedings, or cases under the Children Act, or those seeking protection from domestic violence. Over £1 billion of legal aid expenditure would therefore be regarded as representing categories of legal aid, which I think almost every one of your Lordships would regard as inviolable. Perhaps I could make the saving by an immediate wholesale abolition of the advice and assistance scheme? That would excite howls of protest and rightly. Anyway, we have a manifesto commitment to develop, not to abolish, community legal services. A high priority therefore attaches to the £151 million which they currently cost.
The remaining £250 million or so goes to provide full civil legal aid, funding help for those bringing or defending housing and personal injury claims, or bringing proceedings for judicial review. Noble Lords will have observed that this £250 million would be just about enough to enable me to abolish all court fees. But would it really be a sensible development of policy to tear away legal representation from an impoverished tenant under threat of repossession; or to cast aside a person who needs help to prove a claim for injuries at work or elsewhere? Can it really be right to cast such people aside as the price for exempting people who have the means from paying a small fee to use the court? I do not think so.
The plain fact is that to cut my budget by £257 million Would affect access to justice even more comprehensively than the current court fees are claimed to do. Is the truth not that those who argue for free access to courts for all are really arguing that the Government should charge taxpayers an additional £257 million and then increase my budget by that amount so that I can dispense with court fees?
Lord Mishcon: My Lords, will the noble and learned Lord accept that no one participating in this debate
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asked for no court fees, but did indeed ask that any rise in those court fees should be of a moderate nature and not induce hardship?
The Lord Chancellor: My Lords, although the unspoken premise is never articulated, the unspoken premise of much that is said on this subject is that courts are part of the constitutional fabric of the state and therefore should be provided free for all. It is that which lies at the root of argument on this subject, but the logic of that is very often not accepted and picked up and run with by those who tacitly are arguing that because they realise that they would not prevail in that argument. I am very clear as to what the noble Lord, Lord Mishcon, wishes to hear from me. I can see that the existing structure of fees is not as rational as it should be. The front-loading of fees, which involves those who pay a fee to commence a claim cross-subsidising that small group whose case proceeds all the way to a hearing, may be an anomaly. As noble Lords know, I have asked Sir Peter Middleton to review the proposed reforms of the civil justice system and legal aid together. That is what I said in my address to the Bar conference that we would do if we were elected. That is exactly what I have done in appointing Sir Peter to report to me. His review is well under way and it is expected that he will report to me by the end of September.
What Sir Peter Middleton is doing is looking at the problem both of the proposed Woolf reforms and legal aid together. But it is legal costs (lawyers' fees) which make up the overwhelming proportion of the total cost to litigants. Should I decide—and I am directly responding to the debate—following Sir Peter's report, to implement the Woolf proposals or to make similarly sweeping changes to the procedures of the civil courts, it is clear that fees will need to undergo a similarly radical restructuring. Changes to the procedures of the courts would remove or redefine the current charging points, by which I mean the stages in court proceedings where fees become due. Alongside any reform of procedures there will, therefore, of necessity be a restructuring of court fees. I intend to consult in the autumn on the principles which this restructuring of fees should follow. That is the clearest response to the point made by the noble Lord, Lord Kingsland, on that matter. I am very concerned to get this issue resolved and resolved right.
I began by talking about protecting the poorest among us from the impact of court fees, and I explained that I regard the protections already in place—in the form of provision for exemption from, or remission of, fees, and in the form of legal aid—as adequate to ensure that they are not precluded from access to justice by being required to pay fees they cannot afford. The nature of the fees that are charged, and the way in which they are levied, however, needs to be reviewed. That is what I intend. But my present judgment is that there is nothing wrong with a general principle that those who can afford to do so should pay a fair fee for the use of the courts to resolve their disputes. The courts are cheaper by far than the charges associated with commercial arbitration.

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I have listened to this debate with great profit. I have listened to what the noble Lord, Lord Hacking, has said about daily hearing fees. I have no present plans to introduce them. The present principle is to recover the full cost of providing the civil courts, less an amount equivalent to the sum of exemptions and remissions. But I do not exclude any possibility from the review. There is a serious argument that court fees are excessively front-loaded.
Finally, in direct response to the noble Lord, Lord Mishcon, I acknowledge that the current provisions limiting the granting of automatic exemptions in the county court and the Supreme Court to those in receipt of income support is worthy of consideration. Other forms of benefit are in practice taken into account by court staff, to whom the day-to-day exercise of the power to reduce or remit fees is delegated. But as part of the review of the structure of fees I intend to examine the basis on which remissions are granted and I shall consider whether it will be appropriate for other categories of benefit to give rise to an automatic exemption from the liability to pay court fees.
In a debate which has not lasted as long as was thought likely, I apologise for having taken a little longer than I should, but I took the view that the importance of the subject matter merited it.
Lord Ackner: My Lords, before my noble and learned friend sits down, I wonder whether he can help me on one point. He referred to the Lord Chancellor's discretion, which is delegated, to remit or to reduce fees as being satisfactory. Would he not accept that adding the qualification that undue financial hardship must be shown and that that hardship must be due to exceptional circumstances renders that discretion very narrow indeed, since "exceptional circumstances" is a very restrictive qualification and rarely has any operation except to make the use of that discretion impossible to justify?
The Lord Chancellor: My Lords, I do not at present accept that the discretion is too narrowly framed. I shall, however, consider representations in the review that it is.

The Caribbean
7.11 p.m.
Baroness Youngrose to ask Her Majesty's Government what proposals they have for addressing the needs of the Caribbean.
The noble Baroness said: My Lords, I start by saying how delighted I was to hear that the noble Baroness, Lady Symons of Vernham Dean, who is to reply to the debate, has already made two visits to the Caribbean. All of us taking part in the debate are delighted to feel that the Caribbean has a friend in her. The Caribbean needs friends.
Two weeks ago I had the opportunity to visit Washington to attend a conference that brought together an influential group from government and the private
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sector from the US, Europe and the Caribbean to consider how best we might work together to assist the region to make the transition to a more open economic environment. I also had the opportunity to discuss privately a wide range of issues affecting the Caribbean region with members of the US Congress, the administration and others.
What was most striking at the conference was the continuing close nature of the relationship between Europe and the Caribbean and the similar approach to the region's concerns. Above all, Europeans saw the region's problems as development issues to be resolved through consensus. Unhappily, the same could not be said of the United States, a country with which I have a strong affinity and affection. While US officials fully recognised the nature of the problems facing the region, the Caribbean's problems were not seen in the context of partnership, but more in the context of trade advantage, security and stability. Few US participants recognised that the region's underlying problems could be resolved through the development over time of sound economic structures within which the private sector and democracy might flourish.
Trade negotiations within the western hemisphere and with Europe now make urgent the need to determine whether small states in the Caribbean are to have a special place in the global trade environment or are simply to be written off as losers. I should therefore welcome particularly any statement from the Minister on the nature of Britain's relationship after the year 2000 with the Caribbean. I say that because the Caribbean needs a significant period of adjustment.
By the year 2005 we shall all have a better picture of the environment within which the Caribbean will have to live. By then a post-Lomé arrangement will be in place and the shape of the free trade area of the Americas will be known. There will probably have been significant changes in the structure of Europe. The balance of power between EU member states may have changed and almost certainly the Union will have been enlarged to embrace the now free nations of eastern Europe. A new trans-Atlantic relationship will most probably be emerging as a result of the relationship with Mercosur, Mexico and other important players in the hemisphere.
The challenge for the Caribbean will be to develop a coherent strategy with a clear objective and timetable in mind. That will not be easy as the region will have to deal with the complex negotiating processes of both the free trade area of the Americas and the post-Lomé arrangement, as well as responding to significant changes in the trans-Atlantic relationship and the global economic environment. Above all, Caribbean negotiators will have to obtain from Washington and Brussels viable arrangements that ensure a secure economic transition in a manner which also ensures the retention of a high degree of sovereignty. That is something that we all want to see.
Let me voice my concerns. The first is that the US Administration and, to a much lesser extent, some of Europe's member states have not recognised that their present approach may not facilitate this but rather create

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problems. This may result in high levels of economic and political instability, especially in the Organisation of Eastern Caribbean States. The more so if policies are developed and implemented on the basis of short-term trade advantage, or by domestic concerns about economic refugees or narcotics.
If instability occurs in the Caribbean region as a result of poorly thought-through measures aimed only at encouraging trade liberalisation, this may well lead to a direct threat to both the US and our own interests. My fear is that if we and the US do not play a more active role in supporting, on a bilateral and multilateral basis, a more creative but gradual approach to economic transition, we will all lose the economic benefits we derive from the region and may, at worst, come to preside over an area of instability.
What do I mean by this? First, the free trade area of the Americas and any post-Lomé emphasis on eventual full reciprocity may make some of the smallest island states in the eastern Caribbean economically unviable. This is a serious charge. But this policy may result in us having to recognise that these states require permanent, special, and differential treatment. Present US trade policies, especially in respect of bananas, towards the eastern Caribbean States are not, if I may say so, in the region's best interest.
An outstanding example is the United States' current attack in the WTO (together with four Latin American states) on the special protection provided to imports from the Caribbean and other ACP countries under the EU's banana regime. Caribbean governments tried, in vain, to persuade the USA not to take this issue to the WTO. Now a WTO panel has ruled that special measures of protection provided by the regime are illegal, notwithstanding a GATT waiver which had been intended to cover them. If the current appeal against this ruling fails, this will pose a dire threat to the economies of the seven Caribbean states which have traditionally exported bananas to the UK.
My second area of concern is that a precipitate end to existing arrangements for these commodities may cause the region's economies to fail before they can change to newer industries, such as tourism, information technology, manufacturing and the service sector. Bananas, rice, rum, and sugar—through price—are already under threat.
The third area of concern is the isolation of Cuba. This, in my view, is counterproductive, and I base this statement on the three visits I have made to Cuba, the most recent in last October. If the approach of the US Congress causes an implosion in Cuba, the Caribbean and the southern US will come to reap the whirlwind of refugees, crime, narcotics trafficking, and even terrorism. These are the hallmarks of an unstable or violent transition from a centralised economy. History does not suggest that democracy would rise like Phoenix from the ashes.
Fourthly, new industries require stability. Tourism, the single largest industry within the Caribbean region, the financial sector, and information technology-based industries can flourish and attract investment only against a background of economic certainty. Achieving this requires external support.
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Fifthly, narcotics trafficking and associated criminal activities will fill any vacuum left by collapsed industries.
I therefore believe that for reasons of economic and political self-interest, we need to develop now new approaches towards the future development needs of the Caribbean in conjunction with the private sector, NGOs and others.
There are a number of difficult questions that need urgent resolution. We need to consider how the mechanics of transition within a post-Lomé arrangement and the FTAA can be harmonised. It is in the interests of the Caribbean that the US and Europe ensure a co-ordinated and well phased economic transition. There is a need to find ways to foster the growth of newer industries in the Caribbean while broadening the economic base through the creation of schemes that encourage small and medium size enterprise and micro-enterprises. In this context there is a need to develop new financing mechanisms that assist in underwriting economic transition. There is a need to recognise that the British and Dutch dependent territories and the French Department d'outre Mer make our three European nations, plus the United States, special partners in the region. These remote parts of Europe and the territories of the United States offer options that to date have not been explored or understood.
I shall not repeat what I said in an earlier debate on dependent territories, save to note that absence of further advancement in our thinking about those nations for which we are responsible will lead to a growing resentment not just in the nations concerned but in the broader Caribbean region. Beyond this we need to engage in a much broader dialogue with the younger generation of Ministers in Cuba. We have a good relationship with that nation but it needs to be taken further. Despite our early start it is clear that in trade and other respects France, Italy, the Netherlands, Sweden and others are now outranking us. FCO officials and Ministers need to visit to engage in dialogue on the matters that concern us; invitations need to be issued to senior figures such as Carlos Lage and Roberto Robaina; ECGD needs to give creative thought to the ideas put to it by Sr. Soberon, the President of the Central Bank, for dealing with debt and establishing new forms of credits; we need to listen to the concerns of our businessmen who want to trade with Cuba; and we need to consider seriously the question of humanitarian assistance with medicines halted by the US embargo. We also need to prepare for when Cuba re-asserts its economic power and, together with the Dominican Republic, comes to compete aggressively for the market share presently held by the anglophone Caribbean countries in tourism, services and agriculture. There are also many other areas in which there might be closer co-operation and co-ordination which time does not permit me to raise.
If the Caribbean is truly to benefit from the special relationship it enjoys with us, Europe and the US there has to be a holistic approach that recognises that the best prospect for stability lies in working in a consistent manner over a five to 10-year period with government and the private sector in the region to ensure a measured

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economic transition. We therefore need a long-term perspective. In the course of 20 or so years in public life, I have noted two occasions when small islands have caused disproportionate but very serious difficulties. The first was the Falklands war. The second was Grenada. I fear we are now witnessing a third in the island of Montserrat with whose people I have every sympathy. Small islands are vulnerable, and the small islands of the Caribbean need and deserve our support on a guaranteed long-term and carefully considered basis.
7.23 p.m.
Lord Rea: My Lords, I should like to thank the noble Baroness Lady Young for asking this Unstarred Question about a region for which over the years she has shown great concern and of which she has great knowledge. I thank her for the very sound sense that she has embodied in her speech. I should also like to congratulate my noble friend on having acquired her credentials so early for answering this Question by her visits to the Caribbean. Her visit to Montserrat was particularly appreciated. I shall not refer any further to Montserrat. I am sure that the noble Baroness, Lady Hamwee, will ask all the questions and cover the position of that island very fully. She is more up to date than I am.
As I warned my noble friend's office, I shall be concentrating mainly on Cuba. As the noble Baroness said, she spoke in an earlier debate on Cuba in January this year. That debate was answered by the noble and learned Lord, Lord Fraser of Carmyllie. This is but one of many parliamentary occasions on which the noble Baroness has emphasised the potential benefits of improved Anglo-Cuban relations. Today's Unstarred Question gives the new Government the opportunity to report on new developments since January and to announce their overall position on diplomatic and trade relationships with Cuba.
I have a particular interest in Cuba as a doctor concerned with the health of developing countries. I also went to Cuba on a private family visit in March and April this year. Cuba has an outstanding record in health care. From the start of the revolution the health of the population has been a top priority. This was not made any easier at the beginning by the departure in 1959 of half of the country's 6,000 doctors to the US. Since then new medical schools have been opened. There are now some 30,000 doctors and an equal number of nurses distributed on an equitable basis throughout the country, not merely in Havana where all of them used to practise. In most other developing countries health personnel and facilities are still concentrated mainly in the large centres because of private practice opportunities.
To cut a long story short, this concentration on health has resulted in Cuba enjoying a state of health as reflected in its health statistics which is comparable with that of the developed world. In 1995 it had an infant mortality rate of only 7.9—considerably better than that of Washington DC—and for the past five years life expectancy has been 74.3 years. These statistics are genuine, unlike certain statistics that one used to obtain
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form the USSR (if any were available). They are vouched for by the World Health Organisation which has a close interest in the Cuban healthcare system. But this excellent record is now in jeopardy. A very full report entitled The Impact of the US Embargo on the Health & Nutrition of Cuba was published by the American Association for World Health in March this year. In January this year a shorter article on the same subject appeared in the American Journal of Public Health. These reports are the result of detailed on-the-spot clinical and statistical studies during a large part of 1996 by more than 12 experts in their field. I have with me the extremely detailed report which runs to 300 pages. It contains masses of references and provides details of all the many people who were interviewed and the institutions visited during the research. It is difficult to find better words than those of the report itself to describe its findings:
"After a year-long investigation, the American Association for World Health has determined that the US embargo of Cuba has dramatically harmed the health and nutrition of large numbers of ordinary Cuban citizens. As documented by the attached report. it is our expert medical opinion that the US embargo has caused a significant rise in suffering—and even deaths—in Cuba. For several decades the US embargo has imposed significant financial burdens on the Cuban health care system. But since 1992 the number of unmet medical needs—patients going without essential drugs or doctors performing medical procedures without adequate equipment—has sharply accelerated. This trend is directly linked to the fact that in 1992 the US trade embargo…was further tightened by the 1992 Cuban Democracy Act.
"A humanitarian catastrophe has been averted only because the Cuban government has maintained a high level of budgetary support for a health care system designed to deliver primary and preventive health care to all of its citizens. Cuba still has an infant mortality rate [only] half that of the city of Washington DC…Even so, the US embargo…has wreaked havoc with the island's model primary health care system. The crisis has been compounded by the country's generally weak economic resources and by the loss of trade with the Soviet bloc".
My own very limited observations during our visit certainly back up those conclusions. For example, during a visit to the diabetes institute in Havana I was told that it is almost impossible to obtain blood glucose testing strips which form the basis for the effective control of the treatment of diabetes. As a result of poor control, more patients will die from the complications of diabetes or will need hospital admission. During a visit to the main paediatric hospital in Havana, I was told that the most effective chemotherapeutic drugs for the treatment of leukaemia were in critically short supply and that infusion pumps and medications that ameliorate side-effects were virtually unobtainable. The hospital was modern but was in a run-down state because of the lack of maintenance. However, the standard of care seemed excellent. Among the many ordinary, very friendly Cubans whom we met was a young woman who two or three years ago had lost all her front teeth as a result of a bus accident. She had been unable to have them replaced because the materials which her dentist needed were not available. Other Cubans said that their doctors were very good, but there was little point going to see them for most complaints because no drugs were available unless they could be paid for in dollars.

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It is difficult to avoid the conclusion that the US Government, in order to achieve their unilateral political aims, are prepared to make the population of Cuba suffer. In fact, it seems that they are deliberately doing so. It is the unilateral nature of this action which is so questionable, as much as the suffering of the Cuban people and the economic interests of those who would trade with them.
The embargo might be justified if it were the result of a UN Security Council resolution, as in the case of Iraq. But even there, humanitarian supplies have always been allowed through—and are now finally getting through—under certain conditions. We would all like to see more political openness in Cuba, but it has not broken any international convention that would justify the US sanctions. The comparison of US trade with other nations with a much worse human rights record than Cuba has often been made; for example, Indonesia, China and Turkey, which we are discussing on Friday.
The Organisation of American States, the regional organisation, is opposed to the embargo, although many of its governments are much more likely to face a communist takeover than is the United States. In January, when answering the noble Baroness, Lady Young—who is known well in Havana as La Varonesa—the noble and learned Lord, Lord Fraser, said:
"The United Kingdom and its EU partners have taken positive action to respond to the unacceptable assertions of jurisdiction by the United States contained in this legislation'",
that is the Helms-Burton legislation,
"and the EU has also adopted a regulation designed to counter the effects of US legislation on Cuba".—[Official Report, 22/1/97; col. 791.]
May I ask my noble friend to outline what has happened in the interim six months? So far as I am aware, there has been no high level World Trade Organisation meeting on the issue and discussions are still going on between the European Union and the United States. How long are we going to wait before the World Trade Organisation adjudicates on the matter? Time is very important for the Cubans and for our export trade. For the Americans, the more delay the better because their clear aim seems to be to bring Cuba to its knees economically. We are seeing that through the suffering of its people. Perhaps I may say in parenthesis that recently there were bombs in two hotels in the central tourist part of Havana. I wonder who has been trying to discourage the tourist trade.
Finally, what is the present position on the rescheduling of Cuba's debt to the Paris Club? My information from Cuban sources is that they are prepared to enter discussions on the issue on an open agenda with no preconditions, but that the Paris Club is insisting that certain positions are "non-negotiable". As the British Government were previously not prepared to allow further credit through the ECGD unless the matter was settled, surely it is highly desirable to make progress. Cannot our new Administration take a more open view on these negotiations and on the linking of the ECGD loans to their outcome? It is worth remembering that many British jobs could depend on these decisions, quite apart from the benefit to the people of Cuba. As the noble Baroness, Lady Young,
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has put it, the Cubans are in a Catch-22 situation; they need loans to modernise their industry, which they need to do, in order to make the exports to pay back the loans.
7.35 p.m.
Baroness Trumpington: My Lords. I greatly welcome the enterprise of my noble friend Lady Young in initiating this Unstarred Question. I was extremely interested in what she had to say.
My love affair with the Caribbean started some years ago. As a MAFF Minister, I was responsible for the really tricky question of bananas and I was fortunate indeed to be privileged to visit several Caribbean countries on behalf of MAFF. Tonight's debate has prompted me to make one point which is not only of the utmost importance to the Caribbean people but also to the United Kingdom. I refer to the disease known as sickle cell disorder.
The disease is an inherited blood condition. It is incurable. It is also extremely painful. It affects people of equatorial African origin and their descendants in north and south America, the Caribbean and Europe. It also affects people around the Mediterranean and central India. Sickle cell disease affects 10,000 patients in the United Kingdom and is an increasingly important cause of ill health.
When some seven years ago I went to Jamaica, I visited the Jamaican Sickle Cell Unit and was tremendously impressed by the dedication and high quality research and care of its patients. I wish to pay tribute to its distinguished and tireless director, Professor Sergeant. There are more than 5,000 people suffering from the disease in Jamaica. That country represents the ideal place for long-term follow-up because of the ease of tracing and the co-operation of parents and families. The lessons learnt have changed the concept of sickle cell disease. The expertise of the unit has permitted it to provide consultative services to the Caribbean, the USA, the UK, Brazil, Greece, Saudi Arabia and India.
I hope that I have given a flavour of the importance of the unit not only to the Caribbean but also to this country. Now comes my plea. At the present time funding for the unit comes from the British Medical Research Council, but this support will be phased out between 1999 and 2002. The Jamaican Ministry of Health has pledged 6 million Jamaican dollars a year to continue the clinical services. The University of the West Indies has pledged 6 million Jamaican dollars towards the research programmes. However, there will be a shortfall of 10 million to 12 million Jamaican dollars, without which the unit will not be able to continue its clinical and research programmes.
My plea is to this Government. The Jamaican unit, perhaps the greatest centre of expertise in the clinical management of sickle cell disease, has a vital role to play in the education and training of UK-based staff responsible for its management in the United Kingdom. If the unit were to close for lack of support, the unique training facility would be lost, to the detriment of training and also research which directly benefits sickle cell patients in the UK and worldwide. It is my hope

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that the Department of Health can be persuaded to fund training fellowships for national health staff who could contribute to the running costs of the unit. I sincerely hope that my plea will not fall on deaf ears.
7.40 p.m.
Lord Palmer: My Lords, I too wish to thank the noble Baroness, Lady Young, for asking this important question, and I do so much echo many of her words. I am going to limit my few remarks to the plight of St. Lucia, one of the most beautiful of the Caribbean islands. I must declare an interest as I am a residual beneficiary of a large estate on the island producing bananas. There are three points I wish to make; first, not surprisingly, bananas; secondly, ODA; and finally, pensions.
Bananas are St. Lucia's lifeline—65 per cent. of its total foreign exchange earnings come from bananas and 13 per cent. of the total population are involved in banana production, which is 30 per cent. of the working population.
When I first visited the island I was aware how vital it was for St. Lucia to reduce its dependence on bananas. Tourism and financial services are gently expanding but the St. Lucian Government accept that the banana will always remain the core product.
I know from experience how appreciative the St. Lucian Government have been for the support given by HMG in the past and most especially the interest shown by the noble Baroness, Lady Chalker.
I now urge HMG to: continue robustly to defend the current preferential market access arrangements; to encourage support for the obligations for the banana protocol of the Lomé Convention; and to continue to support those policies and mechanisms which will enable banana exports from St. Lucia to enter the EU Market on the basis of fair and remunerative prices.
St. Lucia, like other Commonwealth Caribbean countries no longer qualifies for development grants from HMG on the basis of what is regarded as its "high per capita income". As a result, St. Lucia has been "graduated" out of accessing grants and concessional aid. Bilateral aid from HMG (and other donors) is virtually nonexistent, except for technical assistance.
However, while St. Lucia understands the objectives of Her Majesty's Government's development assistance policies, there is nonetheless a good case for the Government to review their policies and strategies with respect to development assistance to St. Lucia and other member states of the Organisation of Eastern Caribbean States (OECS). In this context, I urge the Government to consider that modern and adequate physical infrastructure is necessary to support St. Lucia's efforts aimed at diversifying its economy and sustaining developmental activities. St. Lucia and other OECS countries are particularly vulnerable to external forces including hurricanes. Huge sums of money are spent on repairs and/or rebuilding in their aftermath.
I urge the Government to review their development assistance programme, particularly their bilateral programme with St Lucia, with a view to making grants
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and other concessional aid available to sustain its economic and social development; to assist in encouraging other donor countries and agencies to review their "graduation" of OECS countries, and St. Lucia in particular, with the objective of causing a reversal of this particular policy. As virtually every motorised vehicle on St. Lucia is Japanese, it has often struck me that Japan ought to be doing more to support the island.
I now turn to pensions. The pensions of UK national pensioners who reside in this country benefit from cost of living adjustments. The 1,055 retired pensioners who have opted to reside in St. Lucia do not receive these upratings. The rate remains payable on the date of the entitlement. or the date the person left the UK, if they were already a pensioner then. Such a policy appears to be unjust and discriminates against pensioners who might want to relocate for medical or other reasons. This "frozen pension" policy has acted as a deterrent to pensioners who wish to return to their native country on account that they would be deprived of the "upratings".
I urge the Government to review the issue of "frozen pensions" with a view to ensuring that UK pensioners in St. Lucia receive pensions on the same basis as those residing in the UK; in other words, that their pensions are index-linked. With such a small number of pensioners involved, the charge to the Treasury would be minute. I look forward with interest to the noble Baroness's reply.
7.45 p.m.
Viscount Montgomery of Alamein: My Lords, my noble friend Lady Young has spoken at various times on the Caribbean. She has done valiant service over a number of years in drawing those problems to our attention and in making very worthwhile missions there which have always been a great success.
I expected that this debate would concentrate largely on the anglophone Caribbean, which, after all, is the ex-British area for which we should expect Her Majesty's Government to have specific policies. However, like the noble Lord, Lord Rea, I propose to concentrate entirely on Cuba, the largest island in the Caribbean and potentially the most important.
Cuba certainly has needs but they are quite different from those of the anglophone Caribbean. Since the end of the Cold War and the collapse of the Soviet Union, Cuba has found itself living with a quite different sense of reality. The difficulties have been created to a large extent by US intransigence. I suppose that philosophically the US position has somewhat played into the hands of the Cuban leaders, who have been able to establish a fortress mentality behind the patriotic cause. I do not believe that the present system in Cuba could possibly have survived for so long in any normal relationship with its nearest neighbour, US policy having been so short-sighted because it has isolated the island and delayed progress there very considerably. Indeed, the noble Lord, Lord Rea, rather implied that in his remarks.
I have been to Cuba on a number of occasions and I have had the privilege of a very long conversation over dinner with Fidel Castro, who is a most charismatic

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leader and extraordinary character. Indeed, having a long conversation with him is a fascinating experience and very worthwhile.
Of course, he is somewhat obsessed by the United States and uses that to maintain the zeal of the revolutionary cause and its ideals. But revolutions need to evolve and move on. That has been brought to our attention quite recently in Mexico where a long-standing revolutionary cause was brought to a close by the democratic process and the introduction of a much more pluralist democracy.
All systems where the supreme leader stays at the top for too long have tended to come unstuck in the end. Castro has been there for 38 years.
I believe that it is quite possible that the socialist model may have been right in 1959, considering the corrupt and appalling regime which existed before. But I do not believe that that is the case today. If the Cubans are convinced of the righteousness of their cause, I believe that they should be able to withstand the rigours of a pluralist democracy and, above all, a free Press.
That may seem an intrusion into Cuban affairs, but I have enormous affection for both Cuba and its people and I very much look forward to continuing the dialogue with that dynamic, striking and very hardworking people.
However, despite all those problems, as the noble Lord, Lord Rea, and my noble friend Lady Young pointed out, Cuba is changing and the economy is opening up, albeit somewhat slowly. Indeed, I believe that it would move faster if only the Cubans would realise that we all have to live in an increasingly globalised and interdependent world. But, of course, there is the further problem of Helms-Burton—a scandalous piece of extra-territorial legislation and a further example of flawed US policy, to which I referred earlier. I am tempted to continue developing the Helms-Burton problem, but as I have a Starred Question on this subject tabled in two days' time, I shall resist and turn to more specific UK interests.
Cuba is a very beautiful country, well endowed with both human and material resources. Cubans want to move away from their inward-looking past and their dependence on the Comecon countries, which no longer exists. Therefore, there are plenty of opportunities for Europe, and Europe is beginning to take a considerable interest. Spain and France seem to have taken the lead, while we are lagging behind. Trade missions have visited Cuba and, indeed, a Caritag mission returned only last week. However, their hands have been somewhat tied in following up those opportunities by the lack of cover from ECGD. I hope that something can be done in that respect.
Ministers have visited Cuba. I hope that the noble Baroness, Lady Symons, who seems already to have visited the Caribbean twice, will include Cuba on her next round to that part of the world and also encourage many of her colleagues to do likewise. They can be assured of receiving a very warm welcome indeed. Moreover, by the same token—and my noble friend Lady Young mentioned this—Cuban Ministers should
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be invited here. In the January debate, it was suggested by my noble friend Lady Young, and supported by me, that Dr. Carlos Lage should be invited. But, unfortunately, nothing has yet happened. But why only Dr. Lage? What about Roberto Robaina, the Foreign Minister, and Ricardo Alarcon, the President of the Parliament? They are all able and very talented Ministers with whose dialogue we would benefit if they were asked here.
Therefore, what Cuba needs from the UK, apart from our good will, which I believe exists, is trade and investment. We need to follow up the many opportunities which present themselves and I hope that we can do so as soon as possible.
7.53 p.m.
Baroness Hamwee: My Lords, perhaps I may be the first speaker to express my thanks to the noble "Baronessa" for introducing tonight's debate. I should also like to thank the Minister for her visits to the Caribbean. I heard her say how rewarding those experiences had been. That was a private remark, and one I hope that the noble Baroness will not mind being repeated publicly; indeed, I believe that it says a great deal for her commitment and that of the Government to addressing the issues which arise in the Caribbean.
As ever, I have learnt more this evening than I can possibly contribute to the debate. I had not thought that I would be asked to address the notion of the evolution of revolution. I think I shall leave that issue for later. The discussion of the attitude of the United States in seeing the Caribbean as a market and not a partner was a notion which moved directly from the speech made by the noble Baroness, Lady Young, to that of the noble Lord, Lord Rea. I have to say that I was also struck by the association of the notion of bananas, rum, rice and sugar, which I believe were the commodities mentioned as being under threat, needing to be replaced by new commerce, including tourism. However, when that was followed immediately by reference to narcotics and terrorism, it struck me that the latter must be great threats to tourism.
Since the debate on the dependent territories on 11th June, the volcano in Montserrat has erupted and Hong Kong has been handed over to the Chinese. That has led to some interesting press comment on the treatment of what was this country's empire, although I do not much like to think of it in those terms. I am grateful to the noble Baroness for referring to Montserrat, which she described as being very vulnerable; indeed, it is. Perhaps I may confine my remarks to that island.
I am well aware of the sensitivities of the relationships between the British Government and the local government. I hope that the Minister can make some comment this evening about how relationships are developing. In particular, perhaps she can say whether the time may now be coming to declare a state of emergency in Montserrat which, as I understand it, would give the governor more powers. I should especially like the Minister's assurance that any holding back from declaring a state of emergency is a matter of

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local sensitivities and not, if I may put it bluntly, one of cash in that it might lead to more obligations on this country.
With regard to cash, the Government have not shied away from the need to assist the people of Montserrat. I am aware that there has been a further investment—I hope that one might look at it in those terms—of £6.5 million. Can the Minister tell the House how that sum is to be spent? I have heard that it is perhaps to be used for housing some 1,000 people—that being an estimate of those who may be assisted by it. I would be glad to hear the Minister's comments on that in the context of the 1,500 or 2,000 people who had to move following the recent eruptions.
As I understand it, £450,000 out of the previous grant is to be spent on hospital development. That is clearly badly needed in this unhappy island. In that respect, can the Minister comment on the time that will be taken to provide medical facilities? I understand that there is to be a local consultation as to what is to be provided, which may take something like 15 weeks. Often in your Lordships' House I have begged for consultation. I feel somewhat embarrassed to make the point that this may not be an occasion for consultation but one for getting on with the job and spending money. If there is to be such a long period, how many people will be left on the island by the time that the hospital is built? I believe that a health study is in progress at present. However, as I understand it, it will be two or three months before a report is available.
A major issue for the people of Montserrat is how long the island can remain viable. I believe that a comment was made by the governor in a television interview; namely, that when the population dips lower than 4,000, the island may no longer be viable. As your Lordships may well understand, with the threat of further eruptions the population is decreasing very fast, though not I hope on a permanent basis. However, at present, it is decreasing at a great rate. Other dependent territories have tiny populations, certainly that applies to the Pitcairns and the Falkland Islands. If the Minister can assist the House as to the judgment of 4,000 being a viable population, I would be most grateful. I am particularly concerned to be assured that decisions about evacuation will be based not on the future financial viability of the island but on safety grounds.
I raised my next point in the debate on the dependent territories last month. I know that the Minister has shown an interest and an understanding of this problem; namely, the need for someone in this country under the wing of the Foreign and Commonwealth Office to act as a liaison person with the community here. The representatives of the Montserrat community here have been most grateful for the Minister's sympathy. They would be even more grateful to know when such a person may be appointed.
8 p.m.
Lord Moynihan: My Lords, I left Tate & Lyle in 1983 to take my seat in another place. While over 10 years have passed since I would have to declare a
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commercial interest, the passing of time has not lessened my deeply held commitment to this part of the world that we are debating this evening, nor to the important trading agreements which figured prominently at the time we joined the European Community, for it is trade not aid which the House has rightly focused on during the debate.
In 1974 the United Kingdom joined the European Union without an agreement on Commonwealth sugar which figures so prominently in the third of the Caribbean which comprises the Commonwealth countries. However, there was a commitment from the European Community that it would have—I quote from Protocol 22 of the UK Treaty of Accession—
"as its firm purpose the safeguarding of the interests of the ACP countries whose economies depend to a considerable extent on the export of primary products. and particularly of sugar".
As Patricia Jamieson, a leading expert on the subject, recently noted, the commitments made by the European Union to the ACP sugar exporters provided firm guarantees of access to the market.
We have heard reference to the post-Lomé era. Our historical commitments to our trading partners in this area, not least in the Commonwealth countries of the Caribbean, are important. In the context of today's debate we seek assurances from the Government that they will uphold their commitments to secure the interests of the Caribbean countries which remain heavily dependent on their trading links with Britain and the Community, and thereby recognise that trading access and opportunity should wherever possible supersede aid in order to maximise effective development potential.
The noble Baroness, Lady Hamwee, has lucidly and movingly referred to Montserrat, the tiny island with roughly 6,000 residents which has figured prominently in this debate. As she mentioned, it is a dependent territory which is on the brink of collapse as a result of the volcano which has been simmering and, regrettably, occasionally exploding during the past two years. As I understand it, that threat has led to the island being divided into zones which vary according to their relevant danger. Zone A in the south, nearest to the volcano, is so dangerous that the area may be entered only by scientists when a helicopter is standing by to pick them up in an emergency. Unfortunately, the south is also the most productive region and includes the capital and the airport. It has in the past been agriculturally fertile. This has meant that many of its residents have chosen to go back and work in the area despite the warnings that it should be completely evacuated.
Meanwhile the majority of the population has been rehoused on the north side of the island, but understandably often in unsatisfactory conditions. There are widespread environmental problems as a result of many families being relocated together. The shelters are primitive and are unlikely to survive the hurricane season which is currently under way and will last until late September. What worries many people in this House—and I am sure it worries the Minister—is that the health facilities for the remaining islanders are poor. The hospital which was built with UK aid—that was

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commendable—was located in the capital which is now almost completely out of bounds. I understand that at least one school has been converted into an emergency hospital but lacks suitable amenities. The lavatories are located outside the main building, for example.
This has also had a significant knock-on effect on education. The relocation of families, the annexation of at least one school for health reasons, and the mass exodus of teaching staff, who along with some of the wealthier citizens have been able to leave the island, have created a vacuum of decent education for many. Moreover, on an island where the crime rate has traditionally been low, the strains which inevitably arise from this form of disaster have, I understand, led to an increase in crimes of burglary and violence.
The UK Government and the Minister have commendably taken some steps to alleviate the suffering. The Government have built a new jetty in a designated safe area, but there is some doubt about whether a full scale evacuation could, if necessary, take place at short notice. I would appreciate the Minister's comments on the question of evacuation. This matter has been raised today. The Government also permitted all Montserratians to enter the United Kingdom should they choose. Inevitably only the wealthier citizens have initially at least been in a position to accept that offer. They face an uncertain future, as currently I understand there is no guarantee they will be permitted to stay here indefinitely. At the present time there are some 1,000 people in total here.
I know that a task force of officials has been working with the Government of Montserrat to assist with some of the difficulties. I hope that all my comments will be taken in the spirit of commending the work of that task force and of the Minister and her colleagues. I, for one, greatly admire her energy and the way in which she has committed herself to address these problems caused by what is unquestionably one of the greatest disasters faced by people in the Caribbean for many years. I commend the action of ensuring that helicopters have been mobilised to work on the island. I understand that four of them have been mobilised. A special ferry service is now in operation to and from Antigua which has alleviated the problems caused by the closed airport. As the noble Baroness, Lady Hamwee, mentioned, a further £6.8 million has been made available. This is in addition to the £16.5 million found by the previous government to assist the island following the first major volcanic eruption.
I understand that the present Government argue that the first priority is to see that the Montserratians are safe, and that secure housing will follow. There is inevitably a continuing debate over the viability of the island—which we have heard this evening—and the potential need for it to be completely evacuated. Obviously, if this were to be the case, the building of secure housing would have been premature and a sad waste of time. The Government of Montserrat are nevertheless keen to ensure that the island remains inhabited and viable. Of course the economy of the island has nevertheless been seriously disrupted. Although poor, with a per capita GDP of some 3,500 US dollars, the island was previously viable, producing
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rice for the European Union and creating a haven for tourists. Both those pillars of the economy have been completely destroyed. The Minister's comments on all these points would, I know, be welcomed both by the people of Montserrat and those in this House who have taken an active interest in the terrible tragedy which has taken place.
I welcome the comments of my noble friend about the importance of trading relations and the uncertainty resulting from the considerable change in all those trading relations, not least from the impact of the free trade areas of the Americas and the adverse trade rulings on bananas which my noble friend rightly highlighted. That unquestionably threatens the long-term stability of the area. What is needed is a close and detailed look at the implications of this shifting sand and changing mosaic in the trade arrangements which impacts so deeply on the people who live there.
I wish to mention another subject which has dominated this evening's debate; namely, Cuba. I agree with noble Lords who have said that the Helms-Burton legislation in the United States was not only unwelcome but deeply contentious. Any legislation that aims to penalise companies from anywhere in the world that do business in Cuba by creating "black lists" and boycotts within America—I understand some 318 companies are reportedly doing business with the Castro regime—deserves the sort of response that the Canadian Foreign Minister took with considerable strength in his brave step of organising a state visit to Havana in January of this year to demonstrate his country's clear view on the American ruling.
Generally, international governments have taken the view that this kind of policy is not the right way to encourage a process of transition to a pluralist democracy, and particularly unnecessary at a time when Cuba is beginning to send some new and welcome signals to trading partners following the dissolution of the Soviet Union. That should be encouraged. I think that the confrontational approach that was demonstrated in the Helms-Burton legislation is unwelcome. I look forward with interest to hearing the views of the Minister on that subject.
Finally, I praise and thank my noble friend Lady Young for initiating this debate. After so many years of admiring her outstanding work, it is a privilege to be able to participate in a debate with her. I also congratulate the Minister on her commitment to the region's interests, despite suffering as a result from the necessary cocktail of immunisation jabs—I am pleased to report that she has fully recovered—required for her first visit. If I may say so, it was the only setback in an otherwise exemplary approach to understanding the problems of this vitally important region. I assure the noble Baroness that all noble Lords will support her if she continues to show the commitment and dedication to the people, not least those of Montserrat, and continues to work in the way that she has clearly demonstrated so effectively and vigorously in the early months as Minister responsible for this region.
8.11 p.m.
The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, I have listened to the debate with great interest, as I am sure all noble Lords have done. Like other noble Lords, I thank and warmly congratulate the noble Baroness, Lady Young, on introducing the debate tonight. We have touched on a wide range of topics. I shall do my best to answer the questions raised. If I am unable to get through them all, I shall write to noble Lords whose questions I am unable to answer in detail.
The economic and social progress of the small Caribbean Commonwealth countries is threatened by several global trends. Those include the erosion of preferential trade arrangements for their exports, growing competition for the tourism sector; drug trafficking throughout the region; and climate change which is likely to increase vulnerability to natural disasters. Poverty is still widespread in some countries and there are pockets of severe deprivation in others.
Britain's development partnership with the region aims to build local capacity so that Caribbean people are better able to face those challenges and achieve a sustainable reduction in poverty. At the same time we are negotiating actively within the European Union to moderate the impact of changing trade preferences, for example, as many noble Lords have mentioned this evening, in relation to bananas.
Britain maintains a significant flow of finance to the region through a number of channels. First, we provided £38 million of bilateral aid last year. Secondly, there are very substantial resources available through the European Union. The UK has contributed over £100 million to the region through this channel over the past five years. Under the eighth European Development Fund there will be an increase in EU assistance. Thirdly, we support the region through the activities of multilateral agencies such as the World Bank and the Caribbean Development Bank. Britain contributed £11 million to the most recent replenishment of the CDB's special development fund.
In addition, the Commonwealth Development Corporation provides direct assistance for private enterprise in the Caribbean. Last year, the CDC invested £50 million.
The Caribbean's future prosperity depends on the skills of its people and safeguarding its natural resources. Through our development assistance programme we are supporting education in many parts of the Caribbean, particularly for poorer children.
Law and order is crucial to underpin development, particularly in response to the drugs threat. Drug abuse and drug-related crime is a growing problem, particularly for the poor. We are continuing our assistance to strengthen law enforcement agencies in the Caribbean, with particular emphasis on anti-narcotics work.
We are also helping to strengthen Caribbean economies so that they can withstand the growing competitive pressures of the new trading environment.
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The European Commission, with strong support from Britain, is helping the Windward Islands to restructure their banana industries and diversify their economies.
In these various ways we hope to develop Caribbean capacity to tackle the challenges ahead without the extensive reliance on external support which has been a feature of the past. Helping them to help themselves includes our support for regional organisations such as CARICOM. This will enable us to move towards a stronger and more equal partnership with Caribbean countries based on shared interests and mutual respect.
The conclusion reached by an EU Experts Group which visited the Caribbean early last year was that the drug problem had become the single greatest threat to the stability, democracy, and economic and social development of all countries (including our Dependent Territories) in the region. The growth of drug abuse in the Caribbean was also of major concern to almost everyone I saw when I visited the region.
Countering drug-trafficking and abuse of drugs is therefore a major priority for the British Government. Our West Indies Guardship is perhaps the most visible example of the Government's commitment in this area. We provide considerable bilateral assistance to the region for counter-drugs work—some £3.5 million in 1996. Britain is also active in supporting counter-drugs work by the European Union—in particular the Caribbean Drugs Initiative—and multilateral agencies such as the UNDCP. We recognise the need for a co-ordinated approach to the drug problem and close co-operation with major powers in the region. We work closely with the United States over counter-drug work. But the work on drugs and drug trafficking must be relentless. We shall continue not only to sustain these initiatives but to seek further ways of combating the international menace of this appalling trade.
The Caribbean region is vulnerable to money laundering because of its proximity to the major drug-producing countries in Latin America and the large number of offshore centres. We welcome growing recognition by countries in the region that failure to tackle money laundering cannot only damage their international reputation and drive away investors, but can also destabilise their economies.
Urgent action is needed to counter that threat. We are encouraged at the efforts now being made to criminalise money laundering, improve supervision of the financial sector and modify the strict banking confidentiality laws which apply in some countries. Britain is glad to have been able to support these efforts with advice and bilateral technical assistance both to our Caribbean Dependent Territories and to some independent states in the region.
Many noble Lords concentrated their remarks on points relating to Cuba. I should like to outline the ways in which the UK has steadily increased its range of activities and initiatives on Cuba over the past three or four years. We have revived the practice of so-called functional visits with an extensive exchange of business delegations: Ministers and officials responsible for trade, investment, health, justice and other fields. A first ever visit by the Royal College of Defence Studies took

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place at the end of last year. There has also been a flow of sponsored visitors to the UK including the Minister of Justice, and, this summer, the Minister for Agriculture. In addition to seminars and training schemes, a successful trade mission to Cuba concluded earlier this month with over 20 companies represented. Wider assistance includes annual British Partnership Scheme support for economic reform and good governance and, earlier this year, the British Council restored a programme for Cuba.
The Government's policy towards Cuba, along with our EU partners, is to encourage a process of transition to pluralist democracy and respect for human rights and fundamental freedoms as well as a sustainable recovery and improvement in the living standards of the Cuban people. Proposals to evaluate and implement the December 1996 Common Position on Cuba were adopted by the European Union in June. The Common Position notes that transition is most likely to be peaceful if the present regime were itself to initiate or permit such a process. We believe that constructive engagement is the most effective way of encouraging the reform process in Cuba.
We strongly object to the use of unilateral trading sanctions which target the trading interests of our close partners as exemplified by Helms-Burton. It makes it harder for us to achieve our shared objectives with our European partners in ensuring democracy, human rights and fundamental freedoms in Cuba as well as economic reforms.
My noble friend Lord Rea raised a question about medical supplies. Both the Cuba Democracy Act and the Helms-Burton Act, in Section 202, contain specific provisions on medical supplies. Under the UK's bilateral aid programme to Cuba, the British partnership scheme has been used in the past to provide some limited medical aid.
I was also asked about the UK's policy in relation to Cuba's debts. We agree that Cuba's indebtedness is indeed a problem that will affect its economic prospects. That underlines the importance of Cuba reaching agreement with its Paris Club creditors on the rescheduling of its debts and establishing a track record of repayments. The ball is in Cuba's court to establish a constructive dialogue with the Paris Club. Cuba has already had two debt rescheduling agreements with the Paris Club even without an IMF programme, which is the normal prerequisite. It is only natural that creditors will expect to see some undertakings in terms of economic reform when considering further rescheduling so that they can be satisfied that Cuba will be in a position to meet future repayments. That is particularly so given that the Cubans have allowed arrears to build up under the previous agreements.
I was also asked about ECGD cover. Cover is not currently available for Cuba. That is due to Cuba's poor economic situation and the outstanding debts that I just mentioned. However, short-term cover for consumer items is available from, I understand, the private company NCM.
A number of noble Lords raised the question, and the noble Baroness, Lady Young, did so in particular, of the Government's policies post-February 2000, when
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the current convention, Lomé IV, expires. Negotiations on a successor, Lomé V, must begin no later than September 1998. That means that the EU must agree a mandate for the renegotiations in the first half of next year, largely during the UK presidency of the EU.
I am fully conscious of the responsibility that that places on the United Kingdom. It is a responsibility that we take very seriously. Agreement of an EU mandate will be one of the external policy priorities of our presidency. We are determined to play an active and constructive role in preserving the long-standing ties that have grown between the Lomé signatories. I cannot yet give the noble Baroness, Lady Young, a detailed account of the UK's approach to the individual aspects of the Lomé regime. We are considering carefully how best to shape the convention for the next 10 years.
The noble Lord, Lord Palmer, raised questions relating to St Lucia, and again focused on the banana issue. Officials of the British Development Division in Barbados are in regular contact with the banana producing governments throughout the Caribbean. Indeed, they met the Prime Minister of St Lucia on 20th June to discuss this matter. We continue to promote the EU programme of restructuring and diversification for the economies that are adversely affected.
The noble Baroness, Lady Trumpington, raised questions in relation to sickle-cell disease and in particular in relation to the University of the West Indies in Jamaica, which provides valuable input into research into the disease.
Baroness Trumpington: My Lords, it is the unit; it is not the university.
Baroness Symons of Vernham Dean: My Lords, I understood that the unit was in fact at the University of the West Indies. I beg the House's pardon if I was misinformed.
We are aware of the difficulties over funding, which at the moment comes not only from the British Medical Council but also from the Department for International Development. The funds currently pay for all staff, provide all consumables and cover the cost of the clinical care of patients. We shall consider further funding as and when the question arises in a few years' time.
I now turn to the question of Montserrat. Montserrat is in a peculiarly difficult position. After hurricane Hugo, in 1989, and a volcanic eruption in 1995, the second eruption on 25th June brought with it tragic loss of life. I am sure I speak for all those in the House when I offer my sympathy to those who were bereaved or made homeless. Montserrat's needs are not only the short-term needs of which the noble Baroness, Lady Hamwee, spoke; there are, too, the long-term needs of the island to ensure that it can sustain a future for its people, particularly its young people.
The noble Baroness referred to the interview during which the Governor made some remarks about sustainable levels of population. I have spoken to the Governor on this point. He believes that his remarks

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were, unfortunately and perhaps under the strain of the moment, taken somewhat out of context. The viability of the island is not dependent on a specific population figure. Some of our dependent territories have a much small population figure than that of Montserrat. Decisions about evacuation will be based on the needs of the safety of the people of the island, not on financial viability.
The noble Baroness asked me several detailed questions. Sadly, I am running up against the clock. However, I believe that the relationships we have with the government of Montserrat have strengthened over the course of the past few weeks—perhaps in adversity, but I believe that my own visits there and the steadfastness of our Governor in Montserrat have encouraged the people there to believe what is true: namely, that the British Government are supporting them in the profound difficulties that they face.
I have tried to cover most of the important issues debated this evening. I have sought to assure the House that Britain takes its obligations to the Caribbean seriously. It is true that the region faces great challenges. We will continue to review our policy to meet the
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new needs that will arise. The Government of the United Kingdom look forward to flourishing relationships with all our friends in the Caribbean in years to come.
Lord Rea: My Lords, before the noble Baroness sits down, will she consider arranging a meeting between representatives of the Cuban Government—possibly Señor Lage as mentioned by the noble Viscount, Lord Montgomery—to look again at the tricky problem of the Paris Club debt and the export credit guarantees that are so badly needed to increase our trade with Cuba?
Baroness Symons of Vernham Dean: My Lords, I do understand the difficulties on this front. I hope I did my best to answer some of the points made, perhaps not to the noble Lord's satisfaction but nonetheless to answer some of the points. I have discussed these matters with the Cuban ambassador in recent weeks. I will certainly consider the point that the noble Lord makes about further efforts that we might make to discuss these matters in a constructive way.
House adjourned at twenty-eight minutes past eight o'clock.