Lords Sitting of 18 June 1997

Preamble
The House met at half-past two of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of Southwell.

Lord Howell of Guildford
The Right Honourable David Arthur Russell Howell, having been created Baron Howell of Guildford, of Penton Mewsey in the County of Hampshire, for life—Was, in his robes, introduced between the Baroness Chalker of Wallasey and the Lord Tugendhat.

Lord Baker of Dorking
The Right Honourable Kenneth Wilfred Baker, having been created Baron Baker of Dorking, of Iford in the County of East Sussex, for life—Was, in his robes, introduced between the Lord Hanson and the Baroness Thatcher.
Several Lords—Took the Oath or Affirmed.

NATO Enlargement
2.57 p.m.
Lord Wallace of Saltaire Lord Wallace of Saltaire asked Her Majesty's Government:
What are their plans to put to the British Parliament and public the advantages of the enlargement of NATO.
Lord Whitty: My Lords, Ministers will be reporting on the outcome of the NATO summit in Madrid on 8th and 9th July when the allies will invite one or more countries of central Europe to start accession negotiations. We shall continue to set out the case both in Parliament and in public for NATO enlargement, and the benefits of it, as part of our strategy for European peace and security.
Lord Wallace of Saltaire: My Lords, does the noble Lord accept that most people in this country are totally unaware that any proposals for NATO enlargement are currently on the agenda and that the very small number of people who are so aware are mostly either sceptical or opposed? Given that NATO is the foundation of British defence policy, does the noble Lord accept that the Government need to do a great deal more to explain the rationale for the proposals?
Lord Whitty: My Lords, I am not sure that I would put it quite as the noble Lord has done, but as compared with developments within, and the enlargement of, the European Union, the enlargement of NATO has been less a subject of public debate. Nevertheless, I think that the public are aware that NATO has helped to give us
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and our partners peace and security since 1949. The countries of eastern and central Europe share our aspirations for both security and democracy. The public will recognise that those countries have demonstrated their willingness to share NATO's collective responsibilities. It must be our responsibility to allow those countries emerging from totalitarianism the opportunity of joining NATO. Of course, the enlargement of NATO is only part of our approach to peace and security within Europe. Our relations with Russia and the Ukraine are also part of it.
The Earl of Lauderdale: My Lords, can the noble Lord tell the House what military advantage Hungary and the Czech Republic can bring to the alliance?
Lord Whitty: My Lords, the advantage of bringing such countries into the alliance—noble Lords will be aware that no decision has yet been taken about which countries—is to broaden security and the sharing in that security. The specific commitments of any particular country will need to be assessed by the allies as a whole, but it must be right that the countries which are committed to democracy and security in Europe can share in the responsibilities and the duties of membership of the NATO alliance.
Lord Jenkins of Putney: My Lords, does my honourable friend agree—
Noble Lords: Noble!
Lord Jenkins of Putney: I beg your Lordships' pardon. Does my noble friend agree that so far as this country is concerned the advantages of the enlargement of NATO are difficult to discern whereas the disadvantages and dangers are very real?
Lord Whitty: My Lords, I understand why my noble friend is unaccustomed to addressing me in the form used in your Lordships' House. I sometimes find it difficult myself. On my noble friend's point about the benefits of NATO, I believe that the involvement of the eastern and central European countries in some sort of relationship with NATO must benefit us all and the peace of Europe as a whole. I trust that the dangers will be taken care of in terms of developing a much more positive relationship with Russia and with the other countries of the former Soviet Union.
Earl Howe: My Lords, is the noble Lord aware—I am sure that he is—that whatever decisions are taken at the Madrid summit there will be some difficult issues to resolve on the funding of NATO enlargement? Can the noble Lord give the House any up-to-date news on the NATO command structure and the progress being made towards reorganising it? Does he agree that that structural reorganisation needs to yield some worthwhile savings in order to mitigate the costs of enlargement?
Lord Whitty: My Lords, the noble Earl will be aware that we and our allies are looking for savings through the review of NATO's structure. However, the decisions

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on enlargement are not directly related to the cost assessment in that form. There have been various estimates of the cost. It has to be borne in mind that the costs of enlargement will depend on the number of countries to which NATO membership is extended and on the timescale. Furthermore, the costs will be spread over a dozen or more years and between 16 or 20 countries. I am not in a position to give up-to-date estimates of the cost until the decisions at Madrid are clearer.
Lord Grenfell: My Lords, can my noble friend give some assurance that when the time comes to negotiate the burden-sharing of the cost, which will be considerable, the new members' ability to pay will be most carefully and sympathetically assessed? Furthermore, if the United States Government, in order to be able to gain passage of the necessary legislation through the Senate, seek to reduce to the minimum the cost to the United States, is my noble friend aware that not only the burden falling on existing members will be very considerable but that, proportionately, it will be much larger on the new members who have to finance very important economic and social programmes which, in the long run, are a better guarantee of security in the region than is the enlargement of NATO?
Lord Whitty: My Lords, to some extent I agree with the final point my noble friend makes. Clearly, the expansion of NATO is secondary to the development of economic prosperity and democracy in eastern and central Europe. As far as concerns the sharing of the burden by the United States, the decision will be a collective one reached by all of the allies in NATO. That will become clearer following Madrid. The costs will be shared equitably. Part of the assessment of the criteria against which applicants are judged will be their ability to meet part of the cost, but the bulk of it may well fall on the existing members of NATO for the reasons outlined by my noble friend.
Lord Elton: My Lords, to revert to the form of address adopted by the noble Lord, Lord Jenkins of Putney, does the noble Lord recognise that while he is always honourable he is not necessarily right? Does the noble Lord accept that there is a need for the public to be convinced of the rectitude of this policy which spreads into civil as well as military areas? Does he agree that this is a form of education which is required and which should be pursued?
Lord Whitty: My Lords, neither I nor any of my noble friends has ever claimed infallibility, and therefore I accept the first point. However, I believe that the whole question of peace and security in Europe, of which this is but one part, requires further explanation to the British public. I trust that when the decisions and the strategy are clearer—as is now the case in relation to the European Union—the Government will engage in a public education programme to help explain these matters more widely.
Earl Attlee: My Lords, given the understandable reluctance of the United States to accept Romania, how does the noble Lord balance the need to reintegrate France into NATO?
Lord Whitty: My Lords, I am not sure that the two matters are connected. The application of Romania will be decided against the same criteria as any other application. Decisions on French reintegration have already been taken. The two issues are not a trade-off.
Lord Rea: My Lords, is my noble friend completely assured that the addition of these eastern European countries to NATO will not encourage the emergence in Russia of nationalistic forces that we do not particularly wish to see?
Lord Whitty: My Lords, that is precisely why I said that the enlargement of NATO should be seen in a wider context in which the improvement of relations with Russia, the founding act and the accord between NATO and Russia must be regarded as an integral part. It would be extremely dangerous were the expansion of NATO to create negative reactionary moves within Russia and other states of the former Soviet Union.

Cancer: Treatment and Research
3.5 p.m.
Lord Dean of Beswick Lord Dean of Beswick asked Her Majesty's Government:
What proposals they have for dealing with the increasing incidence of cancer.
The Minister of State, Department of Health (Baroness Jay of Paddington): My Lords, the Government have already signalled their commitment to make cancer a priority. We will direct immediate savings from cuts in the costs of the NHS internal market into patient care. As a first step, £10 million has been made available for breast cancer services to speed access to diagnosis, reduce waiting time for treatment and support networks of specialist teams.
Lord Dean of Beswick: My Lords, I am grateful to my noble friend for her positive reply. The conclusion that I draw from it is that the Government will continue the policy of the previous Government and treat increasing numbers of cancer cases. That will give comfort and confidence to those who suffer from this particular disease. Will my noble friend join with me in congratulating and expressing our appreciation to centres of excellence, such as the Christie Hospital in Manchester and the Royal Marsden in London, on some of the treatments they have pioneered that are now put to beneficial use? Further, does my noble friend agree that these two hospitals and other cancer centres predict that they will be able to treat a greater number of people, which means that we can draw much comfort and benefit from what the Government are doing today?
Baroness Jay of Paddington: My Lords, I am very happy to join my noble friend in congratulating the two hospitals that he mentions on their excellent record for treatment and research in this particular area. The whole basis on which the extension of cancer services will be arranged is to establish both cancer units and cancer specialist centres which it is hoped will bring all centres up to the level of the hospitals to which my noble friend has referred.
Baroness Gardner of Parkes: My Lords, does the Minister agree that there are many centres in the country and that those two cannot be singled out as the only ones that do such valuable work? Does the noble Baroness also agree that research is perhaps one of the most important matters, because all of us look for prevention rather than just a treatment for cancer?
Baroness Jay of Paddington: My Lords, I agree with the noble Baroness that just two hospitals cannot be singled out. There is good work going on all over the country. The aim of the Government is to bring the practice of those right up to the practice of the best. I am sure that this afternoon one could produce an enormous list if one wanted to pick out particular hospitals or units. I agree with the comment of the noble Baroness about research. As the noble Baroness, as chairman of a hospital trust, will be aware, the causes of cancer are enormously complex. The range of research that is required to undertake a specific approach to a cure or any improvement in therapy is very expensive. We intend to support all of the work that is going on in that field.
Earl Baldwin of Bewdley: My Lords, does the noble Baroness agree that, in view of the notable lack of progress in treating the major cancers over many decades, it is high time that the research agenda was widened to include complementary approaches, such as dietary, herbal, psychological and spiritual methods, which so many patients report they find effective?
Baroness Jay of Paddington: My Lords, the noble Earl and I share a positive interest in the importance of complementary medicine. I agree with him that many patients report feeling better as a result of combining complementary therapies with orthodox methods. I also agree with him that there is a possibility of carrying out more extensive research that will produce greater evidence-based results of the impact of complementary medicine. He will be aware of the establishment of the Research Council for Complementary Medicine. We very much hope that that will succeed.
Lord Winston: My Lords, does my noble friend agree that one of the problems with the rising incidence of cancer is the fact that the NHS is the victim of its own success? The rising incidence is due partly to the increasing age of the population, and, as the researches of Professor Donald show, partly to improved diagnosis. Does my noble friend further agree that reforms in the health service have posed a problem in that with decentralisation there has been the risk of less expert
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attention for cancer victims? Given the statement in the gracious Speech about decentralisation, would she be kind enough to tell us whether she intends to ensure that there will be specialised centres which maintain expertise in these treatments?
Baroness Jay of Paddington: My Lords, we will, as I said, try to expand the approach of having a network of cancer units to which people can be referred initially and cancer specialist centres of the type to which the noble Baroness and my noble friend referred in earlier remarks. I agree with my noble friend that something which breaks down the national approach to expertise in therapy and research is not to be encouraged. That is why we believe that the approach of establishing networks of care, which will also underpin research, is the best way forward.
Baroness Cumberlege: My Lords, bearing in the mind the remarks the Minister made in response to the noble Lords, Lord Dean and Lord Winston, can I interpret them as the new Government endorsing the previous Government's visionary policy encapsulated in the framework for cancer services? If that is the case, will she undertake to give the House a report within six months as to the progress of that policy? Lastly, the Minister mentioned £10 million going into cancer services, in which I am sure we all rejoice, but will she say how many jobs that will cost in terms of managers and administrators in the health service who, after all, are often the oil that keeps the machine going?
Baroness Jay of Paddington: My Lords, the noble Baroness asked several questions. On the first point about the beginnings of the policy, it is indeed the case that the Chief Medical Officer, Sir Kenneth Calman, who served under the previous Government, and continues to serve under this one, was the author of the policy of establishing networks of care which we are anxious to develop. One of the problems with regard to breast cancer is that, although Sir Kenneth and his colleagues had developed a theoretical framework, there had been no funding to establish it in practice. We have given this early indication of resources to bring it to fruition. As to the noble Baroness's third point about the number of job losses that may result, I am afraid that I do not have that information. If it is possible to obtain it, I shall of course let the noble Baroness know.
Baroness Rawlings: My Lords, as there is more and more proof, as the noble Earl, Lord Baldwin, said, that diet plays a contributory role in the increased incidence of cancer, will the Government's new agency, mentioned in the gracious Speech, look after that?
Baroness Jay of Paddington: My Lords, I am sorry I am not sure to which new agency the noble Baroness is referring. If she is referring to the whole exercise of the public health programme—
Baroness Rawlings: My Lords, the food standards agency.
Baroness Jay of Paddington: My Lords, I thought the noble Baroness was referring to the public health programme. The food standards agency will of course need to look at the whole area of nutritional safety and its role in the underpinning of health education, which we all hope will be expanded by that agency and by the Minister responsible for public health.
Lord Mason of Barnsley: My Lords, is my noble friend aware that the House recognises that due to research, screening and tests that have taken place there have been encouraging results with breast cancer? Is she further aware of the thousands of elderly men suffering from prostate cancer? What research into prostate cancer are the Government planning? Could they introduce a screening and test system for prostate cancer?
Baroness Jay of Paddington: My Lords, I am grateful to my noble friend. Prostate cancer and other cancers such as colon, rectal and ovarian, are the subject at the moment of continuing work, both in the theory of the research that is needed to produce prevention techniques and on the most efficacious treatment for them. We hope to be able to report soon to Parliament and to anyone, such as my noble friend, who has a particular interest in this matter, on the development of a system to deal with them similar to that for breast cancer.

Scottish Parliament: Proposed Tax Powers
3.14 p.m.
Lord Mackay of Ardbrecknish Lord Mackay of Ardbrecknish asked Her Majesty's Government:
What discussions have taken place between the Treasury and the Scottish Office on the impact of the tax-varying powers for the proposed Scottish parliament on government income from income tax.
Lord Haskel: My Lords, I appreciate the noble Lord's interests and concerns on this issue. He raised them in yesterday's debate. From that debate noble Lords will be aware that the Government intend to publish before the Summer Recess a White Paper setting out their devolution proposals for Scotland. I can however reassure him that Treasury and Scottish Office Ministers and officials are fully involved in the Government's collective consideration of their devolution proposals. That includes discussions on the tax-varying power for the Scottish parliament. Noble Lords will understand that I am unable to pre-empt those discussions.
Lord Mackay of Ardbrecknish: My Lords, is the noble Lord aware that I apologise for bringing him to the Dispatch Box again in place of the Treasury Minister, Lord Simon of Highbury, especially as he brings the Answer that he has just given to the House? If the noble Lord will look at yesterday's debate, he will see that I did not raise the matter then; I raised it in the debate on the gracious Speech. Is he aware that his
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Answer is no advance on the unsatisfactory answer I received later from the noble Baroness, Lady Jay of Paddington? The question is simple. I shall try to put it again. If the Scottish parliament reduces tax by 3p in the pound, the take by the Inland Revenue from Scottish taxpayers will be £450 million less. To make up that deficit will the Exchequer impose additional tax on English taxpayers or will it reduce the Scottish block grant under the Barnett formula by £450 million? It is a simple question. I have waited for 18 years to put it in that way. Will the Government come clean?
Lord Haskel: My Lords, the noble Lord did ask my noble friend Lady Jay that question. Her letter stated:
"The Government is committed to seeking the endorsement of the Scottish people for the proposal to give the Scottish parliament financial powers to vary revenue. These powers will be defined and limited. The exact mechanisms for this process still have to be finalised, but as you know a clear proposal will be put before Parliament in a White Paper.… In the White Paper we will provide details of the proposed tax varying powers and their implications for spending levels in Scotland".
Lord Marsh: My Lords, may I ask the noble Lord a related question? To what extent will the costs of devolution and the Scottish parliament be borne by Scottish taxpayers?
Lord Haskel: My Lords, devolution will bring real benefits for the people of Scotland and Wales and the costs will be met from within the spending totals approved by Parliament for Scotland and Wales. They will come out of the block grants or revenue raised.
Lord Marsh: My Lords, before the noble Lord sits down, there is a misunderstanding for which I apologise. I am not asking about the block grant. I am merely asking to what extent there will be a charge on Scotland as opposed to England?
Lord Haskel: My Lords, I repeat my reply. The costs will be met from within the spending totals approved by Parliament for Scotland and Wales. Scotland and Wales have their block grants. The costs of the exercise will be met from those funds.
Lord Stoddart of Swindon: My Lords, is my noble friend saying that if the block grant, which is agreed by this UK Parliament, is a given amount and that if the Scots decide to reduce taxation in Scotland by, say, threepence, then that will have no bearing on English taxpayers who will not have to pay additional tax to finance additional spending or reduced taxation in Scotland? That is the question: the English want to know the answer.
Lord Haskel: My Lords, if the Scottish parliament were to vary the tax rate downwards, Westminster would lose a possible £450 million of revenue but could deduct that from Scotland's block grant.
Lord Mackie of Benshie: My Lords, does the noble Lord agree that the noble Lord, Lord Mackay, should know that a decrease in taxation often leads to such a rise in prosperity that revenue goes up?
Lord Haskel: My Lords, I thank the noble Lord for his comments. I agree entirely.
Lord Dixon-Smith: My Lords, is the Minister aware that the only reasonable interpretation of his response to the noble Lord, Lord Marsh, is that the costs of the Scottish parliament or assembly—whatever it is finally called—will be a charge on the taxpayers of the United Kingdom rather than those of Scotland for whose benefit, one assumes, it is to be brought into being? Does he consider that to be a reasonable approach?
Lord Haskel: My Lords, taxation in Scotland is part of an integral UK tax system. We are dealing here with devolution, not with independence.
Lord Swinfen: My Lords, can the Minister—
Baroness Jay of Paddington: My Lords, I believe that we must move on. I am sure that all noble Lords are keen to hear the fate of British fishermen.

British Fishermen and the EU
3.20 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
Whether they will seek to exempt British fishermen from inclusion in European Union working conditions schemes, in the light of that industry's exemption from the working time directive.
Lord Carter: My Lords, Her Majesty's Government are committed to policies which will ensure the health and safety of people at work and prevent the exploitation of vulnerable members of the workforce. The European Commission has been considering how to extend the scope of the working time directive for some time. If proposals are made to include British fishermen in European Union working condition schemes such as this they will be considered on their merits.
Lord Campbell of Croy: My Lords, I am grateful to the Minister for his reassuring Answer. I am glad that his experience of agriculture and fisheries is being used, despite the demanding duties of his job as Government Chief Whip.
Will the Government ensure that the Commission is aware that most British fishermen are no longer employees of large trawler-owning firms but are share fishermen or self-employed individuals, and that fish do not conform predictably to routines so that at times fisherman have to work long and irregular hours?
Lord Carter: My Lords, I am extremely grateful to the noble Lord for his welcome. I am the departmental Whip for MAFF as well as being Chief Whip.
Noble Lords: Hear, hear!
Lord Carter: The industry has not been able to get rid of me that easily! As the noble Lord knows, a share fisherman is someone who is a master or crew member of a British fishing boat manned by more than one
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person and is paid some or all of his wages by a share of the boat's profits. It is estimated that there are some 12,500 share fishermen, which is about half the number of people employed or self-employed in the sea fishing fleet. Obviously that has a marked effect on the application of any extensions that there might be—I emphasise "might be"—in the working time directive, because it does not apply to the self-employed.
Lord Molloy: My Lords, is my noble friend aware that this is a very important issue to British fishermen? If he has not seen their representatives, will he give the House an assurance that he will do so? If he has seen them, will he continue to see them because this is an extremely important issue to British fishermen?
Lord Carter: My Lords, the answers are yes, yes and I agree.
Lord Mackay of Ardbrecknish: My Lords, if eventually the Government have to accept some European Union working conditions for our fishing industry, will they make certain that the same conditions are applied to the Spanish fishing fleet?
Lord Carter: My Lords, we have not yet even seen the White Paper. It would be no kind of negotiating stance to indicate now what our position might be. However, I am sure that from long experience of the subject the noble Lord is aware that there are derogations under the working time directive—I can read them out if he would like—and that is just the kind of issue that we shall be taking into account.
Lord Pearson of Rannoch: My Lords, can the Minister tell the House whether these decisions are likely to be taken by a qualified majority vote or unanimity in Brussels and what hope he has of achieving success under either system?
Lord Carter: My Lords, in order to forestall a thought which might be in the noble Lord's mind, perhaps I might say that extension of the working time directive has nothing to do with the common fisheries policy or the social chapter. Therefore, it will be taken under the rules which apply to the working time directive.
Lord Campbell of Croy: My Lords, as regards safety, is the Minister aware that periods of watches and rest periods can be safely arranged within crews, whose situation is not similar to that of long-distance lorry drivers or factory workers?
Lord Carter: My Lords, the noble Lord is right. In the eight sectors which have been excluded from the working time directive there are areas such as air, rail and road where safety factors for the pilots and drivers apply. That would certainly be the case if we were considering the directive for fishermen.

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As regards fishing, if there were to be—I emphasise "were to be"—an extension of the working time directive, we would have to consider the fact that fishermen must work when the fish are running and must get the fish back to port in the best condition. All such factors would be taken into account when we started negotiating. But we have not yet even seen the White Paper.
Lord Fraser of Carmyllie: My Lords, the noble Lord said, and it is a reasonable enough stance, that the Government would not wish to show their hand in negotiations on this matter. However, will they show their hand immediately as regards one aspect of the working conditions directive? I refer to others who work at sea; namely, in the offshore oil industry. Is it not already clear to the Government that if the directive were to be applied to their working activities, far from improving safety there would immediately be a real risk to their lives, not least as a result of the increased number of necessary helicopter flights? In those circumstances, cannot the Government immediately signal the fact that we are not prepared to tolerate an extension in respect of that industry?
Lord Carter: My Lords, that question is wide of the Question on sea fishing, but the noble and learned Lord is right. Those are exactly the kind of facts which must be borne in mind in such considerations. Although we have not seen the White Paper, there have been extensive negotiations with the Commission in its preparation. Although we have not seen the final document, that is exactly the kind of point that has been hammered home.
Lord Molloy: My Lords, will the noble Lord tell us when he last spoke with representatives of our fishermen?
Lord Carter: My Lords, the last time was during the election, when I campaigned in Filey and had a very good time.

Business
3.27 p.m.
Lord Carter: My Lords, it never stops! At a convenient time after 3.30 p.m. my noble friend the Leader of the House will, with the leave of the House, repeat a Statement that is to be made in another place on the European Council in Amsterdam. That will be followed by my noble friend Lord Donoughue, who will, again with the leave of the House, repeat a Statement on the common fisheries policy.
I wish to take this opportunity to remind the House that the Companion indicates that discussion on a Statement should not exceed 20 minutes from the end of the Minister's initial reply to the Opposition spokesmen and that contributions in the discussion should be confined to brief comments and questions for clarification.

Business of the House: Debate this Day
Lord Carter: My Lords, on behalf of my noble friend the Leader of the House, I beg to move the Motion standing in his name on the Order Paper.
Moved, That the debate on the Motion in the name of the Lord Borrie set down for today shall be limited to three-and-a-half hours.—(Lord Carter.)
On Question, Motion agreed to.

Industry: Competitiveness
3.28 p.m.
Lord Borrie Lord Borrie rose to call attention to the case for improving the competitiveness of British industry; and to move for Papers.
The noble Lord said: My Lords, four weeks ago today this House was engaged in the fifth and final day of its debate on the gracious Speech. That day's debate was largely concerned with the economy and industry. I was most struck by the fact that during that debate speakers from all sides of the House referred to the speed and determination with which the new Government had set about their tasks in the days following the general election. In other words, the Government had indeed hit the ground running. One of the speakers in the debate, the noble Lord, Lord Tugendhat, paid tribute to the "whirlwind start" of the Chancellor of the Exchequer. The noble Lord, Lord Cobbold, congratulated the Government on what he called the "robust actions" which they had taken in the first few days of office.
The two noble Lords, both active in the City of London, were particularly interested in macro-economic policy and referred to the announcements about the responsibility of the Bank of England for setting interest rates and the new, tougher regulatory structure proposed for financial services. I believe that these developments are highly relevant to the competitiveness of British industry. After all, the CBI and others from the world of business have emphasised repeatedly the value of economic stability and a high level of predictability about the future in order to give industry that basis of faith in the future on which it can build its strategic plans for investment and growth.
Business men do not want a stop-go economy, and ensuring a high reputation for integrity, which an effective and efficient regulatory regime can bring, is extremely relevant to the success of UK financial services as provided so pre-eminently across the world by the City of London. I need hardly remind your Lordships that that reputation has received a few knocks in recent years. I mention Barings and BCCI. It is most important for UK competitiveness that the integrity of the City of London's financial services is maintained and enhanced.
I do not suppose in this debate that anyone is likely to dispute the objectives of competitiveness. Competitiveness is vital to the prosperity of every individual in this country. I pay tribute to the previous government, whose White Papers on the subject stressed this country's ongoing dependence on the sale of goods

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and services in all the markets of the world. But—and it is a big "but"—too often the rhetoric of those White Papers was not matched by action and there were serious inconsistencies of approach.
The efforts of many in recent years, including Ministers in the previous government, civil servants here and abroad, and ambassadors and business men here and abroad have done a great deal to further the export of British goods and services but they were hardly assisted when certain high-ranking Ministers made extremely xenophobic speeches at party conferences which were widely reported in other countries.
As I have had a long and particular interest in competition policy, perhaps I am somewhat biased in saying that, during the period of the previous government, that was the most glaring aspect where their words were not matched by action. The previous government said—and were widely supported for it—that competition provides the spur and incentive for firms to be efficient in giving customers value for money and for being competitive abroad. A White Paper was published in 1989 which promised a radical strengthening of competition policy along the lines of Articles 85 and 86 of the Treaty of Rome: to prohibit anti-competitive cartels and to prohibit the abuse of monopoly power. For seven successive years, seven successive parliamentary Sessions after that White Paper, the promises of implementation were made by the then government and were broken. It is a sorry tale.
The excuse made by the previous government in successive parliamentary Sessions was a lack of parliamentary time. According to the all-party Trade and Industry Select Committee in another place, that was "wearing a bit thin" by 1995—from whose report I take those words.
In this country we have had some measure of competition law to combat price-fixing cartels and the abuse of monopoly power for nearly 50 years, starting with an Act of the Attlee Government in 1948. But surely we have all known for some years—and the previous government said they knew for some years—that the present law was weak. It provided inadequate deterrents against misbehaviour. A lack of investigative powers and inevitable long-delayed consequences for malpractice were also serious deficiencies. It was especially weak when compared with the laws of our major competitors, especially the United States, and certainly weak compared with the laws of the European Union. Of course, our major companies which trade in the European Union are extremely familiar with and subject to European law when they engage in the inter-state trade. I know that my right honourable friend the President of the Board of Trade will be promoting a Bill on the subject in the autumn, and the Government could hardly be quicker than that. That is an excellent comparison with the record of the previous government.
Competitiveness must be an objective that is given the highest priority throughout government, and not just in the DTI and the Treasury—departments to which I have referred. It is not just a matter of ministerial pep-talks to business men, completing the common market or trade missions to South America, or
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congratulating a British company when it receives an international design award. Of course, all those are extremely important. but we need to go beyond the confines of trade policy. The weakness of our transport infrastructure and skills base are among the basic underlying weaknesses that constantly pull Britain back from the maximum competitiveness that it could and should achieve.
It should be recognised too that our country cannot attain real and sustainable economic success if it allows deprivation and large-scale unemployment to take a substantial hold, as indeed they have. I am interested that The Times seems to be what I might call a late convert to the view that many of us on this side of the House have held for a long time: namely, that a fractured society is not just socially divisive and harsh; it is—and I quote from a leader in The Times on 10th June—
"economically inefficient and expensive for those in work … it also holds back Britain's potential for growth".
That is part of the subject of this afternoon's debate. Hence I believe the enormous importance of the welfare-to-work programme being pursued now and in the forthcoming Budget by my right honourable friend the Chancellor of the Exchequer. Social justice and economic success are not alternative objectives. I believe that they are necessarily complementary.
I say that it is no good talking about partnership between management and workers—another phrase which in the past governments have often stressed—if trade union leaders are treated as pariahs, excluded from involvement in discussion with business. Trade unions today do not represent as many members as they once did, but they represent and speak for 7 million people. Seven million workers cannot sensibly be left outside when consideration is given to UK prosperity, competitiveness and growth.
If competitiveness is to be really successful, it must be inclusive of all those who can contribute and it must take account of the long term. Education seems not to have been regarded by the previous government as part of the real economy, I suppose because it is largely in the public sector. It seems to me to be crazy to down-grade in resources, status and esteem such vital institutions and people as those engaged in education at every level.
I have been acting recently as an independent pay commissioner for the pay and conditions of all grades, from manual workers to professors, within our universities and colleges. I was appointed by the employers and by the seven trade unions which are involved. Well-known, reputable management consultants were engaged to make comparative studies of comparable posts in the private sector and in other parts of the public sector. At almost all levels pay and conditions in universities were worse, and have been worse for some time. It is difficult to avoid the conclusion that there has been severe erosion of standards of pay. That must surely have a serious spin-off effect in eroding over time standards in teaching and in research, including scientific, engineering and professional skills of all kinds which are so important for the UK in the high-tech, high-skilled world in which

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we must compete. I look forward to hearing the speech of my noble friend Lady Lockwood, who has great experience in university matters, later in the debate.
In his Mansion House speech last week, my right honourable friend the Chancellor of the Exchequer said that he expected business men to take a longer-term view of investment. Research to be published shortly by the University of Leeds reveals that at present UK business has been too short-sighted in its strategic thinking, mapping out corporate direction for only two to four years ahead. Of course, companies often blame lack of economic stability; they blame the alleged short-term perspective of the City of London. The Government can certainly help business and give that confidence in the future that will encourage it to plan much further ahead. Nowhere is this more important than in planning for the skills that will be needed. Skills cannot be acquired and learned overnight.
I recall the noble Lord, Lord Ezra, who is to speak shortly in today's debate, saying only recently in this House that, as they come out of recession, many firms have found skill shortages and have had to go elsewhere and abroad to buy those skills. We surely want to avoid that in the future in this country. In moving the Motion standing in my name on the Order Paper, I look forward to hearing the many and varied contributions from noble Lords who have tabled their names to speak. My Lords, I beg to move for Papers.

European Council, Amsterdam
3.42 p.m.
The Lord Privy Seal (Lord Richard): My Lords, with the leave of the House, and with apologies to my noble friend Lord Borrie for interrupting his debate, I shall now repeat a Statement made in another place by my right honourable friend the Prime Minister about the meeting of the European Council in Amsterdam on 16th and 17th June, which he attended with my right honourable friends the Foreign Secretary and the Chancellor of the Exchequer and my honourable friend the Minister of State for the Foreign and Commonwealth Office. The Council conclusions have been placed in the Library of the House. I shall also place a full copy of the text of the Amsterdam Treaty in the Library as soon as it is available. The Statement is as follows:
"Our aims in these negotiations were to protect our essential interests over immigration, foreign policy, defence and a central role for Britain in Europe; to promote changes of real interest to the British people; and to move Europe on to a new positive agenda. We also promised to bring a fresh and constructive approach to Europe and to these negotiations.
"I am happy to tell the House that our objectives were fully achieved. And they were achieved while at the same time improving our standing in Europe and relationships with our partners.
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"First, we have obtained legal security for our frontier controls, through a legally binding protocol to the treaty. This is an achievement of lasting value, attained for the first time. The key point in the protocol says, and I quote:
'The United Kingdom shall be entitled … to exercise at its frontiers with other member states such controls on persons seeking to enter the United Kingdom as it may consider necessary for the purpose'.
"I know that this will be welcomed by the whole House. We have ensured that we, and only we, decide border policy, and that policies on immigration, asylum and visas are made in Britain, not Brussels. Others may choose to have different arrangements, to suit their traditions and geographical position. I see no reason to prevent them doing so, although these arrangements will continue to be governed by unanimity. The United Kingdom can participate in areas of interest to us if we so choose—at our option. No opt-out. An opt-in as we choose.
"In the justice and home affairs area, we have also agreed better arrangements for co-operation on police, crime and drugs. I attach great importance to more effective international action in these areas of direct concern to people. But co-operation will remain inter-governmental and subject to unanimity. Thanks to amendments that we secured, the European Court will also have no authority to decide cases brought in UK courts on these issues.
"We have also ensured continued protection for our essential interests in all the areas where we sought it. We have maintained the veto—as we said we would—in foreign policy, defence, treaty change, community finances, and tax. We have prevented the extension of qualified majority voting in areas where it might cause damage. Others wanted to extend QMV in the social chapter, which would have affected our companies even if we were not party to the chapter. Because we were in it, we were able to stop this. We have agreed to qualified majority voting where it is in our national interest; for example, on research and development and on action to combat fraud and waste. We have also ruled out other potentially damaging proposals. For example, others wanted to give the European Union explicit legal personality across all the pillars. At our insistence, this was removed. Moreover, the treaty spells out that international agreements can only be concluded on the basis of unanimity following a clear Council decision. In addition, we secured a veto over flexibility arrangements which could otherwise have allowed the development of a hard core excluding us against our will.
"Secondly, for the first time in a decade Britain is setting a positive agenda for Europe. In April in Manchester, I set out our platform for reform: completion of the single market, a new emphasis on flexible labour markets and education and skills, reform of wasteful policies in agriculture and elsewhere, enlargement and a more effective common foreign and security policy. Each of those elements was fully reflected at Amsterdam, in the IGC or the Council conclusions. In particular, we successfully

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promoted support for a new action plan for the single market which echoes key British concerns. This should in time lead to further opening of Europe's markets to British companies. Completing the single market will be one of the top priorities for the British presidency.
"Thirdly, jobs. We have put these at the top of Europe's agenda, where they belong. The new treaty chapter on employment recognises the importance of job creation and sets member states and the Community the task of promoting flexible labour markets, and education and skills. That is where Europe must make a difference.
"Fourthly, the treaty makes Europe more relevant to people: it ensures greater openness; it increases powers to combat fraud and waste; it strengthens environmental protection; it creates power to act against discrimination on grounds of sex, race, religion or disability—another area where Britain has taken the lead; it gives subsidiarity—ensuring that decisions are taken at the European level only where there is real added value in doing so—real teeth through a binding protocol; and it imposes an obligation to take into account the welfare of animals.
"Fifthly, the treaty prepares the institutions of the Union for enlargement. There was not as much progress on this as there might have been. But we have ensured that, at the time of enlargement, the Council's voting system will be changed to give Britain and other large countries more votes. Europe must now get on with making a reality of the historic opportunity of enlargement. We need to extend our stability and prosperity to the new democracies of central and eastern Europe. The European Council is committed to decisions on the opening of enlargement negotiations at its meeting in December. We shall play a leading role in those negotiations, particularly during our presidency.
"Sixthly, while retaining our veto, we have taken steps to improve the effectiveness of foreign policy co-operation with better planning and co-ordination. That is an important British interest. But getting Europe's voice heard more clearly in the world will not be achieved through merging the European Union and Western European Union or developing an unrealistic common defence policy. We therefore resisted unacceptable proposals from others. Instead, we argued for—and won—the explicit recognition, written into the treaty for the first time, that NATO is the foundation of our and other allies' common defence.
"The House will also be interested that the treaty contains provisions to strengthen Parliament's ability to scrutinise European legislation properly, by laying down a minimum six week period for documents to be available.
"Though not part of the IGC, we also made real progress in Amsterdam on the problem of quota hoppers—fishermen from other member states who fish against British quotas. We secured an agreement with the Commission on our two central concerns. First, that we are entitled to put into law a clear
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economic link between boats using our quotas and Britain. Economic benefits from boats flying the British flag should go to British ports, for example through a proviso that 50 per cent. of a boat's catch should be landed locally. We will be introducing new licence conditions to reflect this with all possible speed.
"Secondly, the Commission agreed to bring forward new tougher measures of enforcement to ensure that fishermen landing their catch abroad cannot escape controls. These measures are agreed by qualified majority voting and cannot therefore he blocked by another member state. These agreements, taken together, will mean a major disincentive to quota hoppers, present and future. And Commission agreement to the new measures means that their vulnerability to legal challenge, a perennial problem hitherto, should be greatly reduced.
"The letters between myself and the President of the Commission setting out these agreements are in the Library. The Commission letter also confirms that important principles underlying the common fisheries policy, notably relative stability and the provisions on 12 mile limits, should remain when they are reviewed in 2002. These commitments allow us to start working with fishermen from around the country to plan a sustainable future for the industry. My right honourable friend the Minister of Agriculture, Fisheries and Food will be making a more detailed Statement immediately after this.
"On economic and monetary union, the documents discussed by the House on 9th June were approved. I made clear that the entry conditions should be strictly applied and that sustainable convergence is essential if EMU is to go ahead successfully.
"The European Council also agreed a resolution on employment with British ideas at the centre of it. We have shown that, alongside low inflation and sound public finances, Europe needs a new approach to employment and growth, based on British ideas for competitiveness, including more flexible labour markets and employability. This means creating a more skilled and adaptable workforce, better equipped to cope with economic change. It means a new emphasis on getting people off welfare and into work. It does not mean the old agenda of tax and spend—no new money from the Community budget was agreed in Amsterdam. This is the right approach, in or out of EMU.
"The successful conclusion of the IGC enables Europe to put institutional wrangles behind it and move on to the issues which affect people's daily lives: jobs, the environment, crime. Progress in these areas will be our priority. We are determined not to let Europe get bogged down again in minutiae. If we are to build a people's Europe, we must stay focused on the people's concerns.
"We said we would secure our frontiers; and we did. We said we would preserve NATO, not the European Union, as the cornerstone to the defence of Europe; and we did. We said we would get a new deal for our fishing communities; and we did. We said

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we would put jobs at the top of the agenda for Europe; and we did. We said we would start to make Europe more relevant to the concerns of the peoples of Europe; and we did.
"We made Britain's voice heard at Amsterdam, because for the first time for many years Britain spoke as a united Government with a clear direction for Europe. We have proved to the people of Britain that we can get a better deal by being constructive, and we have proved to Europe that Britain can be a leading player setting a new agenda that faces the real challenges of the new century".
My Lords, that concludes the Statement.
3.54 p.m.
Viscount Cranborne: My Lords, the House will be extremely grateful to the noble Lord the Lord Privy Seal for repeating the Statement with his usual panache and style. Nevertheless I feel that the Statement raises more questions than it answers. However, I welcome parts of it and I draw the attention of the House to what may seem to be some of the more detailed parts: the reference to the free movement of goods and the question of legal personality in the conclusions.
I am sure the noble Lord the Lord Privy Seal will be aware that the documentation is extensive and does not yet appear to be fully available. On those grounds alone, let alone the importance of the subject which today's Statement addresses, will the noble Lord undertake that there will be an opportunity to debate these matters in your Lordships' House as soon as the papers are available and we have an opportunity to study the detail? I hope that the usual channels will be able to agree a suitable length of time for such a debate and that the noble Lord the Lord Privy Seal will be able to give the House an undertaking that we shall have an opportunity to debate these matters before the House rises for the Summer Recess.
Will the noble Lord the Lord Privy Seal also undertake to bring any necessary legislation to this House so that the British Parliament has an opportunity to vote on it and to enact it? I seem to remember in the days when the noble Lord was speaking on occasions such as this from this Dispatch Box that he always advised me to read the Presidency conclusions rather than the Government's version of them. I always try to follow the noble Lord's advice whenever possible in spite of the inevitably rather restricted amount of time available to the Opposition for preparation for these occasions.
I was pleased to see that both in the Statement and in the Presidency conclusions the question of unemployment quite rightly takes priority. However, I have to say that particularly on page 8 the conclusions read rather like a restatement of the old corporatist line that has produced such splendidly effective results for unemployment in Germany and France. I suspect that is rather different from the claim in the Statement as regards flexible markets. When he replies will the noble Lord the Lord Privy Seal confirm that flexible markets will be possible, in particular in the context of what
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seems to me to be the less than clear claims about the effects of the social chapter and its integration into the treaty?
I have asked the noble Lord the Lord Privy Seal the following question before and I hope he will forgive me for asking it again. Whatever is introduced into the QMV provisions of the social chapter, will the noble Lord the Lord Privy Seal please confirm that the only way—short of extraordinary negotiating skill, which may be even beyond the capacities of the present Prime Minister under certain circumstances—in which the Government can pick and choose which elements of the social chapter they wish to apply is to maintain our opt out and to put those provisions in parallel through the British Parliament? If that is not so, I should be extremely interested to hear it. If it is so, I wonder how the noble Lord reconciles that with the claim in the Statement that he has just read.
I move on to the question of enlargement. Is the noble Lord aware that the Labour Party manifesto stated that the enlargement of the Community would be a high priority? The Statement stated that there was not as much progress as there might have been. All I can say to that is, indeed. Where, for instance, is the agreement on the institutional reform that points towards future enlargement? What new practical measures will be taken to bring in new members as a result of this treaty? Is it not a fact that this treaty does nothing to build a wider Europe, only—as is all too predictable to some of us—a deeper, more bureaucratic Europe which therefore will be less competitive, unlike, I fear, what the noble Lord, Lord Borrie, said before we began these exchanges, and therefore one that is less likely to create jobs which, quite rightly, the Government regard as the highest priority for all Europeans at the moment?
Can the noble Lord clarify precisely what has been said on a question of flexibility? Is he aware that if flexibility can be agreed by QMV it could constitute a major step towards a deeper integration in Europe—something of which I understand the Prime Minister is no longer in favour? Therefore in what areas has the Prime Minister agreed to allow new flexibility? Might this not be a veto bypass to allow greater centralisation even if Britain wanted to stop it?
Did the Prime Minister raise the issue of the beef ban during the talks? Is it not the truth that no progress whatever has been made towards lifting the ban, whether in other forums which have been more properly used for that debate or in this forum in view of the lack of progress in other forums? In that context, what is the Government's attitude towards importing European beef which appears now not to be subject to the same stringent controls as British beef?
What exactly has the Prime Minister agreed on defence? Can the noble Lord confirm that the draft treaty talks of,
"the objective of the gradual integration of the WEU into the European Union"?
Is he aware that on defence a Dutch presidency spokesman has said that this is,
"the first time Britain has conceded the principle of integrating defence in the European Union"?

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I hope that when the noble Lord answers these questions he will be able to deny that claim from his Dutch colleague.
There is deep suspicion in all parts of the country, despite the glorious honeymoon being enjoyed by the party opposite, that the United Kingdom has entered these negotiations, in particular on the social chapter, perfectly prepared to give ground in exchange for dubious returns. It seems to me that in agreeing to the provisions of the social chapter, to a new employment chapter, and on surrendering our veto in a number of areas, the innocence of the Government in the shark-infested waters of European negotiation is becoming all too obvious.
Will the noble Lord also tell the House what benefits were secured for this country's national interest as a result of what has happened? Will he confirm that as a result of the agreements made today there will indeed he more qualified majority voting? Will there he more powers for the European Parliament and more influence for the European Union and its institutions over foreign and employment policy? It looks as though that is so. That is fine so long as the objectives that are being peddled are consistent with the competitiveness and employment objectives that we all wish to see achieved.
Will the noble Lord confirm that the remit of the European Court of Justice and the Commission has not been extended to cover asylum and immigration? Is it true that the Council of Ministers will consider at a later date extending QMV to this area? As regards the European Court of Justice, will the noble Lord tell us what, if anything, has been done to limit the damaging effect of the retrospective application of ECJ judgments?
On common foreign and security policy, the noble Lord read from the Statement that we have maintained our veto. Can he confirm that the decisions of the Council on common foreign and security policy would indeed be by majority vote? I refer to the decisions on the implementation of the policy with,
"a possibility for a member state to take a position of constructive abstention or only in the case of important reasons for national policy to block a vote".
Can the noble Lord tell the House who will decide those important reasons of national policy? What guarantees do we have that a national judgment will be recognised and respected? Indeed, how does that square with the claim that the Government have maintained the veto which is, after all, a bald assertion which appears not to be qualified half enough in the Statement?
All in all, at the risk of perhaps sounding a little churlish—I welcome some of what is in the Statement—there is increasingly apparent a gap between the Government's rhetoric about flexible markets and what they are prepared to sign up to but, more importantly, to resist in Europe. It seems to me that the Government are caught between a desire to be loved in Europe at almost any cost and their gradually dawning realisation that what I can only describe as Tory policies deliver jobs. I hope that a debate can help us to clarify where
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the Government really stand and that the Lord Privy Seal will enable us to have that opportunity at an early date.
Lord Jenkins of Hilihead: My Lords, I, too, thank the Lord Privy Seal for having repeated the Statement. I believe that a fair summary of the Prime Minister's report on Amsterdam would be that it shows he has already vastly improved Britain's working relationship with our European partners but has not yet, hardly surprisingly, solved all the difficulties of Europe. But it is something that Britain has moved from being the problem of Europe to perhaps offering at least a part of the solution, at the same time showing how relatively easy it is with a little good will to achieve quite a lot of what are thought to be Britain's special interests, some of which I am more enthusiastic about than others.
The contrast with the previous Government's ineffective mixture of braggadocio, humiliating retreat and maximum ill will could hardly be greater. In the circumstances the noble Viscount, Lord Cranborne, although opening in a more muted way than he has sometimes done recently, was perhaps a little ungracious. I particularly treasure his statement that there is deep suspicion throughout the country of the Government's attitude to the social chapter. I am reminded of "My Fair Lady" and references to parts of Hertford, Hereford—rather doubtful—and Hampshire. It could just possibly be true of those three counties. Broadly, throughout most of the country, I believe that the Government are enjoying an almost over-heady honeymoon. I do not find much touch with reality in what the noble Viscount said. Representing a party which handled the European issue in such a way as to wreck Britain's influence in Europe and at the same time nearly destroy itself was a remarkable feat which might have been expected to produce a little humility.
However, there was one service which the previous Government rendered to Europe. By uniting everyone else against ourselves, it made them somewhat artificially patch over their own differences. This time, the uniting bogey man having been removed, or at least some of his features having been modified, the more cross currents begin to emerge. That is not in itself unhealthy and gives us a position of greater influence. However, I think that it should be subject to two important provisos. First, to attempt to sunder in recrimination the Franco-German partnership would be an act of gross irresponsibility which could have grave consequences not only for Europe and ourselves but also for the world. Secondly, whether we are in or out, for the single currency to fail at this stage would be like the juddering halt of a vast airliner whose engines had been reversed at the very last moment. The mood would be sullen throughout Europe. I do not think that the next great challenge and important British interest—that of the enlargement to the east—could then be faced and overcome.
It was in regard to preparation for enlargement that Amsterdam accomplished least. If the Community is to be enlarged to 20-plus, it is essential that the number of commissioners be reduced from the present basis. Already in my day, with a Community of nine, there

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were one or two too many commissioners. It is essential, too, that the decision-making process in the Council of Ministers is strengthened. These were the unsolved issues of Amsterdam.
Amsterdam as a whole, however, I count as a good beginning for the Prime Minister; although it leaves him with many tests to face in the future. It was neither a disaster nor a triumph for the European Union—although such modified success and partial disappointments should be seen in perspective as having always been part of the rhythm of Europe.
Lord Richard: My Lords, I am grateful for the remarks of the Lord Privy Seal, at least for the beginning of his remarks—
Noble Lords: You are the Lord Privy Seal!
Lord Richard: My Lords, there it is. One is concentrating so much on other matters. I shall try again, and I shall not make that mistake again. I am grateful for the remarks of the noble Viscount the Leader of the Opposition—at least for the beginning of his remarks. I am also grateful for the comments of the noble Lord, Lord Jenkins of Hillhead.
The noble Viscount gave us a short lecture. In his kind, avuncular way he said that perhaps we were innocents in shark-invested waters. Speaking as one of the former sharks, I do not think the Government are innocent. In any case, for the Leader in this House of the party opposite to attempt to give anybody lectures on how to handle Europe and European policy is a little rich. Given that his party reduced British influence in Community institutions to the depths in which it was found by us on 1st May, I really should have thought that a decent period of silence on the part of Members opposite would be more appropriate.
The noble Viscount asked me a number of detailed questions. Some I can answer and some I cannot. I will write to him about those that I am unable to answer now. He said that the summit was a little weak on enlargement. The position on enlargement is this. The Commission will present its papers next month covering not only enlargement but also the related issues of the common agricultural policy, structural fund reform and the future financing of the European Union. It looks as though negotiations will start relatively soon thereafter. Frankly, that is not being slow on enlargement. In addition, the principle that was agreed is that there should be a reduction in the number of commissioners on the one hand but that there should be a re-weighting of the votes in the Council of Ministers on the other. That principle was agreed. To return from an international summit with those measures on enlargement in one's pocket was a distinct success and did not deserve the muted words of the noble Viscount opposite.
The noble Viscount asked me about the social chapter. He and I, and the party opposite, examined the social chapter on many occasions. My views on it are pretty well known. We have not agreed to any extension of qualified majority voting in the social field.
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Unanimity still applies in areas vital to competitiveness, in particular social security, co-determination in the boardroom and dismissal rights.
Qualified majority voting does apply in some other areas under the social chapter. However, it does not mean that we shall not be able to influence legislation. Of course we shall; we shall be there in order to influence it. A constructive approach overall means that one's partners are rather more likely and willing to listen to one's specific concerns.
Let us be clear. There is no half-way house between opting in and staying out. If we want to be able to influence the social and employment agenda and promote competitiveness across the European Union, we must be there at the table arguing our case. For example, if the working time directive demonstrates anything, it demonstrates that the previous Government's opt-out in no way protected them from being out-voted on measures with which they disagreed.
United Kingdom prosperity as a whole depends on the competitiveness of the European Union as a whole. Staying on the sidelines is no answer. The only way to ensure that Europe develops in the way in which we want it to develop is to persuade others of our case. The recognition by the Amsterdam Council of the importance of flexible labour markets and employability demonstrates that that is possible.
The noble Viscount asked me about the wording in the conclusions on jobs, which he found a little "padded". I do not think that he could have read the annexes to the presidency conclusions. One of them, the resolution of the European council on growth and employment, states:
"In addition, we will need to strengthen the links between a successful and sustainable Economic Monetary Union, a well-functioning Internal Market and employment. To that end, it should be a priority aim to develop a skilled, trained and adaptable workforce and to make labour markets responsive to economic change. Structural reforms need to be comprehensive in scope, as opposed to limited or occasional measures, so as to address in a coherent manner the complex issue of incentives in creating and taking up a job".
That does not seem to me to smack very much of corporatism. On the contrary, it seems to illustrate quite clearly what we were aiming for and succeeded in achieving.
The noble Viscount asked about defence, and about remarks made by a Dutch presidential spokesman. I should not dream of commenting on a report in a British newspaper. I am certainly not prepared to comment on a report of what might eventually appear in a Dutch newspaper. I have not seen what the Dutch spokesman is supposed to have said. I shall make a point of looking at it.
To turn to common defence and foreign policy, the noble Viscount asked whether we have preserved the veto. Yes, we have preserved the veto. We are in favour of closer co-ordination and co-operation in these areas, but we are not in favour of giving up the British veto on action in these two areas. That we have preserved.
I hope that the House will have an opportunity at some stage to examine this matter in greater detail. I cannot this afternoon give any commitment at all as

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to whether, or when, a debate will take place. I can only give the same reply as the noble Viscount used to give to me. It is a matter for the usual channels, and I will consult with them.
4.18 p.m.
Lord Boyd-Carpenter: My Lords, before the noble Lord sits down, will he give an undertaking that the House will have an opportunity to debate in full this enormously important Statement, and that the debate will be given a full day without diminution in view of the general interest and importance of the matter?
Lord Richard: My Lords, I am afraid I cannot give the noble Lord any answer other than the one I just gave to the noble Viscount the Leader of the Opposition. I heard what he said, and I hear what the noble Lord says. I will consult with the usual channels, having listened very carefully to comments made this afternoon.
Lord Kirkhill: My Lords, perhaps I may press my noble friend the Lord Privy Seal on one point regarding the Western European Union. I quite understand that the Prime Minister has returned from the conference with the question of NATO confined within a legal framework which previously did not exist. I am confused, however, as to whether the Western European Union will continue to be the European defence arm. If the Western European Union is to begin to merge with the European Union, and the European Union is to be its own defence body, then I should like to know what is the Government's position regarding membership of the Brussels Modified Treaty. One thing is certain: the signatories to that treaty could not be brought together today and agree to sign. It seems to me that it would be a step back, were we to move from the modified Brussels treaty.
Lord Richard: My Lords, I obviously did not make myself clear. There were moves at the conference for a closer relationship between the European Union and the Western European Union. Those moves we resisted and they therefore did not take place. We see the role of the WEU in the future as it has been in the past. We do not see a defence role for the European Union.
Lord Harmar-Nicholls: My Lords, as regards Europe and the fishing industry, the Statement seems to claim that decisions have been made which would improve the situation in relation to the dangers of quota-hopping. Can the noble Lord tell me what new arrangements were agreed that are different from the regulations which already existed before the meeting took place?
Lord Richard: My Lords, we now have the right to make further regulations. However, before the noble Lord comes back at me, immediately I sit down my noble friend Lord Donoughue will repeat in this place the Statement on quota-hopping and fish which is being made in another place by my right honourable friend the Secretary of State for Agriculture, Fisheries and Food.
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I have no doubt that my noble friend will be able to reassure the noble Lord, Lord Harmar-Nicholls, on all his difficulties.
Lord Shore of Stepney: My Lords, there will be considerable satisfaction at what my noble friend said, particularly about retaining national control over our frontiers, immigration and asylum policy. There will also be satisfaction that the European Union's ambitions to take over defence have at least been temporarily checked.
Apart from that, is the Minister aware that there is still a major contradiction between what we are saying about giving priority to the creation of employment and the continued pressing ahead with the restrictive and deflationary policies of economic and monetary union? Nowhere is that contradiction more evident than in the unfortunate position of the French Prime Minister. He was elected in the hope that he would reverse the policies previously pursued of squeezing the French economy and maintaining the high levels of unemployment. Yet once he was elected, he found himself pursuing exactly the same policy of going ahead and giving the same priority to the single currency as his predecessor. Is there not by now a recognition of the fundamental contradiction between pressing ahead with deflation and a single currency and at the same time saying, "We are going to give top priority to the creation of jobs"?
Lord Richard: My Lords, I am grateful for what my noble friend said at the beginning of his question. I can only tell him that the contradiction he perceives between the moves towards a common European currency and the creation of employment does not seem to exist in the minds of most of our partners inside the European Union. Nor does it exist in mine.
The Earl of Onslow: My Lords, I am not sure whether the noble Lord the Lord Privy Seal is a tiger shark or a basking shark; I leave him to make that judgment. It is reasonable that we should all congratulate the Prime Minister on his views on employment in Europe. He makes himself sound like a cross between Lord Tebbit and John Bright, and that can only be cause for congratulation.
We all believe that expansion of the eastern European countries into Europe is vital for Europe's prosperity. A committee of your Lordships' House found that that would be totally impossible without there being a complete reform of the common agricultural policy. There is no sign, except wishful thinking, that that will happen. Yes, we want to change the common agricultural policy. It is easy to stop new clauses being inserted into a new treaty, but it is totally impossible to extract clauses from an old treaty. We all agree with what the Government want to do: to make Europe's jobs freer and to reform the common agricultural policy. What expectation do they have that the common agricultural policy can be changed, bearing in mind all the vested interests in keeping that ridiculous and, if I may say so, evil policy in existence?
Lord Richard: My Lords, again I did not make myself clear earlier on. The position is that the Commission is producing detailed reports on the expansion of the Community by including some of the applicant countries in July. One of the issues which the Commission is charged with examining is the effect of enlargement on the common agricultural policy. So it is a live issue and will no doubt get livelier as the time for enlargement approaches.
Lord Ezra: My Lords, in connection with employment, will the noble Lord the Lord Privy Seal confirm that it will be an important part of the Government's policy to ensure that the single market is completed? It was effectively introduced by the noble Lord, Lord Cockfield. I was in Copenhagen yesterday to witness the start of the construction of a unique enterprise to build a tunnel and a bridge between that part of Denmark and Sweden. I am glad to say that British firms are playing a large part in it. There should be many more such opportunities in the single market. Would it be part of the Government's policy to encourage that?
Lord Richard: My Lords, not only is it part of the Government's policy to encourage that, but it was one of the specific issues raised at Amsterdam. It found its way into the eventual conclusions: that the completion of the single market is one of our priorities and a priority of the European Union as a whole.
Lord Bruce of Donington: My Lords, I wish to pursue the point raised by my noble friend Lord Shore of Stepney. Is the Minister aware that in the draft treaty provisions relating to unemployment, the whole section which was to be put after Title VI in the original treaty is made specifically subservient to Article 103 of the original treaty? The article laid down the strict macro-economic conditions which are being complied with at the moment.
If the noble Lord regards the provisions on unemployment as now being satisfactory, were those sections in the draft treaty repealed or rather taken out of the treaty in the course of negotiations? If not, it still means that any policies to cure or ameliorate unemployment are still conditioned to the rigid conditions laid down by Maastricht on macro-economic policy, as set out in Article 102. Those conditions apply today and are largely responsible for the grossly excessive unemployment throughout Europe, now amounting to 18 million, and unemployment here which is nearer 3.5 million than the phoney figure that has been put forward so far.
Lord Richard: My Lords, with his usual vigour my noble friend makes a powerful debating point. However, with respect, it is no more than that. A large number of the countries of the European Union seem to be bent upon moving to European monetary union by 1999. In those circumstances, of course the relevant provisions of the treaty were not repealed at the Amsterdam Summit, and I am sure that my noble friend would have been staggered if they had been.
Baroness Carnegy of Lour: My Lords, I think I heard the noble Lord say that the Government had agreed to qualified majority voting extending to areas where it is in our national interest and that they had agreed to that extension in the case of research and development. Can the noble Lord tell us why it is in our national interest that qualified majority voting should apply to research and development, which is an important part of our economy, so that we can be outvoted as a country by a group of countries where it is perhaps less important?
Lord Richard: My Lords, it is because we perceive that more countries in Europe are in tune with our views on the increase of research and development than are opposed to it. Therefore, the extension of qualified majority voting in that area would be directly to Britain's benefit.
Lord Monson: My Lords, can the noble Lord the Lord Privy Seal say whether any action was taken behind the scenes to put Spain in the dock, so to speak, over its disgraceful bullying—which is not too strong a word—of the people of Gibraltar, who are, of course, fellow members of the Community?
Lord Richard: My Lords, the noble Lord asked me a question which I cannot answer.
Viscount Waverley: My Lords, I believe that the noble Lord the Lord Privy Seal used the words:
"have Europe as competitive as a whole".
I have two questions to put to him. First, how high a priority is it that we endeavour to be more competitive than our partners? Secondly, will he take into account regional costs of living when establishing minimum wage rates in order to maintain local competitiveness?
Lord Richard: My Lords, with great respect, I do not think I understood either of the noble Viscount's questions. So far as concerns the first one—am I in favour of the extension of competitiveness in Europe as a whole?—the answer is clearly yes. Am I in favour of Britain becoming more competitive than the rest of Europe? The answer to that would also be yes. Am I in favour, when minimum wage rates (I believe he said) are being negotiated, of regional variations being taken into account? There is not a word in either the Maastricht Treaty or indeed this treaty about minimum wage rates. If that is a question which is concerned with the possible introduction of a minimum wage for the workers of the United Kingdom, then it is a question better addressed to my right honourable friend the Chancellor of the Exchequer.
Lord Shaw of Northstead: My Lords, in considering enlargement of the Community, everybody accepts the need to revise the CAP. But was consideration given to the need to tighten up on fraud, particularly at the point of entry into the Community? The Budget Control Committee of the European Parliament has undertaken

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a massive and very worthwhile report which shows enormous losses that will only be accentuated if we enlarge without previously tightening up.
Lord Richard: My Lords, the answer to the noble Lord's question is yes. Indeed, specific proposals by the British Government were made at Amsterdam in relation to fraud. They found a fair wind. Indeed, we agreed to the extension of qualified majority voting specifically on action to combat fraud, as otherwise it might be very difficult to get Community action as a whole taken if one country—perhaps more than one—is in a position to veto the action.

Common Fisheries Policy
4.32 p.m.
The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Lord Donoughue): My Lords, with the leave of the House, I shall now repeat a Statement on the common fisheries policy which is being made in another place by my right honourable friend the Minister of Agriculture, Fisheries and Food. The Statement is as follows:
"Fishing has an important place and a long tradition as an industry in this country. This Government intend to work with the industry to ensure its continued and sustainable future. This means devising a strategy to meet the challenges of low fish stocks and overcapacity.
"We have inherited a series of profound problems as a result of the previous administration's handling of fisheries policy, which has lacked any sign of direction or support. One of their excuses for failure has been the problem of vessels owned largely by foreign interests which are UK flagged and use UK quotas. They give little or no economic benefit from their activities to our own fishing communities because they are largely operated and crewed from other member states and land a high proportion of their catches outside the UK.
"This is a long-standing problem which the previous administration allowed to develop and failed to solve. It could have addressed it in 1982 when the common fisheries policy was being negotiated. Having failed to act then, it should have addressed it when enlargement to bring in Spain and Portugal was agreed in 1985.
"But they allowed matters to deteriorate and eventually last year proposed a draft treaty protocol which, it became clear, stood no realistic chance of success because they failed to secure support for it. Nor is it clear that it would have dealt effectively with the existing situation. Not a single member state was willing to support the concept of a protocol.
"In the weeks since 2nd May we have taken this up with the Commission and other member states, including my talks with Commissioner Bonino on 20th May and concluding in Amsterdam this week. The Government's efforts have now secured a constructive outcome. In an exchange of letters
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between the Prime Minister and the President of the Commission, the Commission has set out measures which we can take requiring UK flagged vessels to demonstrate that their activities contribute substantial economic benefits for populations dependent on fishing and related industries in the United Kingdom. The UK now has a basis for imposing requirements on fishing vessels that they comply with provisions to land a specified proportion—we envisage some 50 per cent.—of their catch into UK ports, or have a majority of their crew resident in the UK, or commence a majority of their fishing trips from UK ports, or comply with a combination of measures. At present, many of these foreign owned vessels contribute little or nothing to the economy of our fishing communities. The new rules would change this and ensure benefits flow to our fishing communities and processors by requiring the vessels to demonstrate that substantial economic benefits are secured.
"We intend to introduce new licence rules to implement these measures as swiftly as possible. We shall be consulting the whole fishing industry about the new rules before asking the Commission to give a formal opinion on them. In this way, we can ensure that our rules are effective, sensitive to the interests of all affected by them, and also consistent with the various legal requirements.
"Without effective enforcement all our efforts to ensure the conservation of fish stocks are undermined. That is why the importance of enforcement has been the second major issue that we have pursued with the Commission. We have insisted that more must be done to ensure effective and consistent application of the rules. It is essential that wherever fishermen land their catches they must be subject to equivalent measures. The Commission are committed now to examining improvements in enforcement, including strengthened obligations on member states. They will also be looking at the role of Commission inspectors. They will report later this year to the Council with proposals as necessary. Meanwhile, we are ourselves taking steps to tighten various aspects of enforcement. I am announcing these in a separate written Statement to the House. They concern action to assist the Marine Safety Agency in ensuring that vessels and their crews are properly certified to comply with safety requirements and in addition steps to prevent evasion of quota rules and undermining of conservation objectives by discarding of fish already stowed on board.
"We have also obtained from the Commission assurances about the involvement of local fishing interests in the decision-making process and about the review and prospects for the common fisheries policy after 2002. The Commission has confirmed that key elements of the common fisheries policy are widely valued and that it considers it is unlikely that the fundamental principle of relative stability would be called into question, or that there would be a desire to modify present restrictions on access to waters inside

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member states' 12 mile limits. We will be building on these assurances during the future discussions about the common fisheries policies.
"In total, I consider that this is a valuable outcome. We have secured some very positive results concerning the application of economic links, as well as making constructive progress on a range of wider issues, all of which are central to the Government's approach to the common fisheries policy. Because we have agreed a way forward with the Commission, we are in a much better position to avoid legal challenge to the measures we adopt. And measures proposed by the Commission to the Fisheries Council would be agreed by qualified majority voting.
"There is much more to be done to put our fishing industry on a sound footing for the future. I now propose to take this forward urgently. With my colleagues responsible for fisheries in Scotland, Wales and Northern Ireland, I am inviting the leaders of the United Kingdom fishing industry for talks on the industry's future. The highest priority is to decide the way in which we implement rules to require the economic link.
"But there is a much wider agenda. We have to address the problems of enforcement, low stocks and overcapacity as well as looking at other possibilities for change in quota and licence management and the scope for more regional involvement. The Government want to develop a realistic strategy to create a viable future for our fishing industry over the years ahead. These talks will start the process. We shall ensure that the industry is directly and fully involved".
My Lords, that concludes the Statement.
4.41 p.m.
Lord Lucas: My Lords, I am most grateful to the noble Lord for repeating the Statement. It is always an enormous pleasure to listen to the noble Lord in the House. This was no exception.
Perhaps I may start with a question which fascinates me and, I know, many of my colleagues. Does the noble Lord believe that he will be taking this process forward post-Scottish devolution; will it be taken forward by Scotland independently, it being very largely a Scottish interest; will it be taken forward jointly; or will this process remain a United Kingdom, and therefore a Westminster Parliament, responsibility?
Straying back to the Statement for a moment, I cannot but say that, in my brief experience of listening from this side of the House to Statements, I have not heard a more fatuous and empty Statement taking longer to say nothing. This is a complete sell-out of the British fishing industry. What is the noble Lord doing in trying to maintain that what has been achieved is in any way binding on anyone? Certainly, it will not be binding on the Spanish, who have already expressed their opinion of it, and quite accurately too: nor will it be binding on the European Court of Justice—unless what we are seeing. which is what I expect, is a Statement which signifies precisely nothing.
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The noble Lord knows—and his party admitted it before the election—that to achieve anything significant on quota-hopping required treaty change. He will have been advised of that by his officials and doubtless they will have said the same thing to him today. Now we are asked to believe that a letter from the Commission is enough to see off the European Court of Justice. To quote the Statement:
"Because we have agreed a way forward with the Commission, we are in a much better position to avoid legal challenge to the measures we adopt".
What an astonishing leap forward in jurisprudence! The Commission is now sovereign over the European Court of Justice, and where it expresses an opinion, the ECJ will bow to it. I hope that this is not true. I am sure the noble Lord realises that there is very little substance in that statement.
What are the proposed measures: 50 per cent. landing in UK ports, majority UK crews and fishing to start from the United Kingdom. The noble Lord must realise that all those go straight to the basic questions addressed by the ECJ—restraint on trade and employment. We already have much of what is promised here extant in British arrangements and British law. We have gone as far as we were able to. We have taken it to the limit. How can the noble Lord contend that it is possible to take it further without running into severe problems with the ECJ? What the Government propose, if one takes it at face value, would be wonderful if it worked. But it will not.
The fishermen have gained nothing and there is nothing in the other parts of the Statement that represents progress. The Statement says that the Commission is committed now to examining improvements in enforcement. Where does the word "now" come from? If one reads the letter from M. Santer it is clear, first, that it is something the Commission has been looking at for a long time and, secondly, he explicitly in his letter makes no such promises. He just says, "We might think about it sometime. We might do something. We may". There are no promises. Nor are there promises about the involvement of local fishing interests. M. Santer says, "This is something we are thinking about". There are no promises to take it seriously or to reach any such conclusions.
The Statement says:
"The Commission has confirmed that key elements of the common fisheries policy are widely valued".
What the Commission has confirmed is that, as has previously been stated many times, it feels this. That is what it says in the letter. There is no justification for parading this as something new. All we are looking at is the old position of the Commission as we long knew it. All we are looking at is the old position of the European Court of Justice as we have long known it. There is nothing here for fishermen. There is nothing to make any advance in dealing with quota-hopping, which will remain and will increase.
The Government say that they will address these matters as swiftly as possible. I hope we see this quickly. I hope that by "as swiftly as possible" the

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Government mean this year and not perhaps the back end of next year, so that we will have an opportunity to see at an early stage just how little has been achieved.
The Statement also looks forward to 2002 and to the changes that will take place then. Will the noble Lord confirm that the basic, fundamental position in 2002 is that all derogations from the underlying legislation will end? As doubtless the noble Lord knows, we will then go back to Council Regulation 101/76, under which there is no common fisheries policy, no derogations which will allow six and 12-mile limits, quotas and licences will be settled by Europe and the Spaniards will have the right to fish up to the British shores. There is nothing in that basic regulation to protect us. It is all a matter of negotiation and the starting position is one which reflects the importance of local fishing communities.
Fishing communities as such are what we have been trading away with the quota hoppers. Quota hoppers as they exist now, be they Spanish or Dutch, will be part of the Spanish and Dutch interests in 2002. If we go ahead with the MAGP and reduce our fleet by a further 30 per cent.—presumably mostly our boats, because who will compel quota-hoppers to decommission theirs?—we will be left in 2002 with our basic position being that we have rights to half the fish that we fish at the moment, half the fish that we regard as ours under our quotas.
That is the position the Government have landed us in by not taking the matter of quota-hopping seriously and by not obtaining the treaty changes to which we had committed ourselves had we remained in power. That is the position from which the Government will have to fight back. I shall be fascinated to know whether the noble Lord has any proposals as to how they will do it.
Lord Mackie of Benshie: My Lords, if I had wholly disapproved of the Statement and was totally against the Government, the statement of the noble Lord, Lord Lucas, would have reversed my view completely in favour of the Government and the Statement. I have never heard such extraordinary arrogance from a Government—a former Government, thank heavens—who have led the fishing community into the position in which it finds itself.
I thank the noble Lord the Minister for repeating the Statement. I think it offers some hope. I, too, read the letters between the Prime Minister and the head of the Commission. I thought that there was a great improvement in relations, which one needs before one can make progress. We all know the problems of quota hopping and we know why they arose. It was because full advantage was not taken of our decommissioning policy. We did not take advantage of the European regulations to buy out the quotas and the ships at a decent price so the equipment was sold. Some progress has already been made in this Statement.
However, it will be difficult. Three issues are set out; namely, the landing of 50 per cent. of the catch in the flag state, employing the majority of the crew in the flag state and commencing the majority of trips from flag state ports. That will help. It will be difficult, but it will
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be useful. It is true that British fishermen land their fish abroad and they may be less keen on more fish being landed here while the processors might welcome it. Nevertheless, there are possibilities. The co-operation of the Commission in this area does offer hope.
I was heartened by the fact that the Statement looks forward to the year 2002 when something more radical might well be done. The problems are great. Enforcement has been a problem from the start. The degree of enforcement in this country is much greater than it is in Spain relative to the size of the fleet, yet even in this country "black fish" are being landed at the ports and merchants admit buying that fish. So even in this country we need better enforcement, and certainly it is needed in Spain and elsewhere. If the Government can persuade the Commission to concentrate on enforcement that of itself will be a great help.
The Government must tackle the problem of discards. The Norwegians have shown the way forward on that and there is no reason why we should not do so in Britain and in the European fisheries policy. I also hope that the Government will concentrate very much on co-operation with fishermen on any measures for the future, particularly as concerns research because there is always a conflict between fishermen and scientists. If they get together more and information from all over Europe is properly pooled and researched, then fishermen will be much more inclined to accept the fact that the stock of fish is limited even though they may be getting good catches at the time. That is also an important point.
I would like to hear the Government's views on this matter. The Government should be looking forward to operating properly a decommissioning policy, which will include buying out the quota because at the end of the day, such are the skills and methods available, that there is no question but there will have to be fewer fishermen and ships fishing for the same amount of fish. That will involve buying out people who are fishing now. That is a policy which has been advocated in agriculture and there is no reason why it should not apply to fishing. There will be fewer fish and there are far better methods of catching and finding fish. Therefore, we need a policy to satisfy those who want to leave the industry. I hope that the Government will pursue their efforts to co-operate with the Commission in solving the problem.
Lord Donoughue: My Lords, I thank noble Lords on the Front Benches opposite for their comments. As regards what the noble Lord said about our policies being fatuous and empty, I believe that it is fair and modest to say that we have achieved more in six weeks than the previous government achieved in 17 years. What has been announced constitutes good progress. It is far from the end of the line of achievements that we wish to attain, but it is a solid step forward. The establishment of the economic link between fishing and the fishing community is very important. It is what noble Lords opposite in the previous Administration were seeking in their ill-fated protocol. What we are

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proposing in terms of enforcement is, as the noble Lord said, considerable progress. What we are proposing relates both to the national front and the European front.
My right honourable friend has announced today three further measures to tighten enforcement, including especially the question of discards. The Commission is now committed to looking at achieving better, harmonised enforcement on the Continent, particularly imposing stronger obligations on the member states and strengthening the use of the inspectorate. Therefore, perhaps tomorrow morning, when the noble Lord reads what he said, he may think that he could have expressed his view better than describing what we have done as empty and fatuous.
As regards the legal aspects, we all know that there are legal problems. They are not as great as the political problems that the previous Administration had when their proposed protocol did not have the support of a single member state and had not a cat in hell's chance of going through. We have the statement of the President of the Commission concerning his interpretation of the legal position and what is possible under the law. That is significant and practical progress. It gives us a reasonable chance of avoiding legal confrontation.
Quota hoppers exist in other countries, but for us the acuteness of the problem derives from the failures of the previous government and their one-time belief in the working of the free market. I particularly thank the noble Lord, Lord Mackie, for his kind remarks, for his comments on the arrogance of the party opposite and for recognising the progress that we have made. I shall look again at what he said about decommissioning, which we know is a very important question. I shall also look at what he said about the way forward. We shall indeed be working towards the year 2002 and hoping to make further progress then. Certainly, we shall be working with the fishermen. My right honourable friend has announced immediate meetings with the fishing industry and we propose to go forward with those. I was not personally aware of the problem with scientists, but one always learns, especially from the noble Lord. I agree with him that the key is enforcement, and that is at the centre of what we have announced today both in what we propose to do and in what we believe is now the commitment of the Commission.
Lord Strathclyde: My Lords, before the noble Lord sits down will he answer the question that my noble friend asked about the position in Scotland and Wales? The noble Lord and his colleagues have been negotiating in Europe on behalf of the whole of the United Kingdom and for the fishermen of Scotland, England and Wales. If, after devolution, these responsibilities are devolved to the parliament or assembly in Scotland and Wales, who will speak for them and to whom will that person be accountable: a Scottish parliament or the Westminster Parliament?
Lord Donoughue: My Lords, this area of policy will be a national one for some time to come. When we deal
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with devolution our proposals on this front will be set out in the White Paper and noble Lords opposite will have many opportunities to discuss them.
Lord Harmar-Nicholls: My Lords, it is a little confusing to have two separate Statements on what is virtually the same subject. That caused me inadvertently to put my question to the Lord Privy Seal a minute or two ago. If I had heard the Statement on agriculture separately my view as to what was happening would have been slightly different. All that I can do now that I have heard it is to wish the Government well in being able to achieve what the Statement said that they hoped to achieve, but it is only a hope.
The noble Lord has just said that what the Government have done in six weeks has been quite amazing. However, as regards the fishermen, precisely nothing has been done in those six weeks. The arrangements under which the Government can renegotiate are exactly now as they were before. It is when the Government have amended those arrangements and can bring to fruition all of the hopes and aspirations that were mentioned in the last Statement that one can start to be pleased about it.
The first Statement made it clear to the House that some improvement had been made which could be recognised and identified. However, there was no evidence in that Statement that the inclusion of that sentence could be justified. The second Statement put things on a slightly different plane. The Government have said that they recognise the dangers and the criticisms that I have made and that they hope to do something about it. They have laid much stress on an exchange of letters which commits nobody to anything. Until those letters have been used in a constructive way that produces results we are entitled to continue to be worried about the rough deal under which our fishing industry has to live at the moment.
Lord Donoughue: My Lords, I thank the noble Lord. What he said was constructive and I have a lot of sympathy with it. The noble Lord said that he had been confused. Perhaps I may advise him that I have become very familiar with that state of mind in the past six weeks. I know exactly what it is like.
As regards a separate Statement, I am sure that the noble Lord understands that this agreement is not central to the IGC. It took the form of an exchange of letters with the President and, as such, it seemed appropriate to deal with it separately. It is also a complex matter and would not have been appropriate for inclusion in a Statement which was very much centred on other matters.
The noble Lord is absolutely right. There is still much more to be done. The noble Lord is right to be concerned and we share that concern. We shall try to meet those concerns and to achieve more.
The Earl of Onslow: My Lords, is my noble friend aware—I am sorry, I should have said "the noble Lord opposite", but I hope that I still regard the noble Lord as a friend—that he is now making the same sort of noises which my noble friend Lord Lucas made when he occupied that position? It is interesting, however, that my noble friend Lord Lucas is, in effect, a sinner reformed. He hath repenteth. Surely in this

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agreement there has been no addressing of the problems of the basic faults of the common fisheries policy, including the appalling discard rate, which the Norwegians and the Canadians can cut by 95 per cent; and there has been no change in the regulations on cod ends or landings of discards.
What has happened is that there has been an exchange of letters. That is exactly the same as me writing to the noble Lord stating, "Dear Lord Donoughue, we do not mind you speeding down the Guildford bypass and we shall ignore it", but a court will say that that is totally unlawful. It is certain that the Spaniards and the Dutch, who have at least 50 per cent. of the quota-hopping vessels, will go to the European Court and say, "Okay, Mr. Blair has written to M. Santer and they have come to an agreement", but that would be outside the treaty, and if something is outside the treaty, whatever Mr. Blair and M. Santer write to each other will not make a ha'p'orth of difference. That is what has gone wrong in this agreement. We have not addressed the basic faults of the common fisheries policy. The Namibians, the Canadians and the Norwegians all run much better fisheries policies. All that we have done is to write letters, hoping to avoid a problem.
I absolutely accept that what the Government want to do represents a major advance, but what they will actually achieve is not worth the paper that the letters have been written on. It is a great advantage that my noble friend Lord Lucas is a sinner who hath repenteth, but the Government have not advanced one jot or tittle from where we were last April.
Lord Donoughue: My Lords, I have particular sympathy for sinners, whether or not they have repented. However, I believe that the noble Earl is wrong to dismiss the letters out of hand. An exchange of letters between the British Prime Minister and the President of the Commission is not like an exchange of letters between the noble Earl and myself. I cannot think of the parallel, but on the Kingston bypass the chief constable of Surrey might be more appropriate. The President of the Commission is not an ordinary citizen. He and the Commission are the guardians of the treaties and the law of the European Union. A commitment from the President and the Commission has much greater significance.
We have a lot of sympathy with what the noble Earl says about the faults of the common fisheries policy. However, it was the previous Administration who negotiated that common fisheries policy. They have missed every opportunity to improve it since. We have to live with what we inherited. However, we shall bear in mind what the noble Earl said and shall do our best to attempt to correct some of the policy's obvious and undisputed failings.
Lord Willoughby de Broke: My Lords, when the noble Lord repeated the Statement he mentioned as one considerable gain the fact that there was now economic linkage and that the quota hoppers would be required to land in the order of 50 per cent. of
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their catch in British ports. That is not new. I have here a fishing licence which is dated 1993, the conditions of which specifically state that,
"In each 6 month period … at least 50 per cent. by weight of the total landings of all stocks",
should be landed at British ports. That licence is out of date by four years, so even the miracle workers of this Government can hardly claim to have achieved something that was not in place before. I wonder, therefore, whether some of the other things for which the Government are now claiming credit are as hollow. Perhaps the noble Lord can reassure us on that point.
Lord Donoughue: My Lords, I hope that I can reassure the noble Lord. That was, indeed, a condition in the previous licence, but we have built on and extended that. The noble Lord has given one condition, but an alternative requirement was that a foreign quota-hopping boat could call at a British port four times in six months and that would be all right. We have now stitched together a series of conditions going far beyond that. Together, they constitute a link between fishing, the fishing communities and their economic health. The condition is now 50 per cent. of landings with no evasion through dropping in at a port a few times every six months, or 50 per cent. of crew being resident in the UK, or 50 per cent. of the fishing trips originating in British ports. Those conditions are much more significant and go much wider than the condition quoted by the noble Lord. That was, indeed, the case previously but we have built heavily on it.
Lord Mackay of Ardbrecknish: My Lords, I find that answer particularly interesting, but the fact remains that the licence conditions to date included 50 per cent. by weight, with the second criterion being that,
"evidence is provided of the vessel's presence in ports [in this country] on at least 4 occasions of at least 8 hours duration".
With the best will in the world—and I really mean that because I am hugely interested in the wellbeing of the fishing industry and this has been a very difficult problem which is, I suspect, much more difficult than the noble Lord yet appreciates—I do not see that the conditions that are laid out in the letter to the President of the Commission are significantly different from those already contained in British fishing licences. I must ask the noble Lord to check the conditions in those licences at present and to check on the straightforward fact that the problem has arisen not because of the Commission's involvement, but because the European Court has clearly stated that the treaty overrides the common fisheries policy. That is the central problem and until we get the Commission and the other member states to agree to a change of policy, I am afraid that there will be another Spanish quota hopper in here tomorrow.
Lord Donoughue: My Lords, indeed Spanish quota hoppers can come in given the existing situation. The noble Lord has read from the licence conditions to which I have referred. It is true that they referred to a 50 per cent. catch or eight hours or four visits within six months. But I believe that that is a much slimmer condition than that which we are applying. He is quite right that in the end we must see what happens in the

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European Court. It is our view that the assurances given by the President of the Commission as to his interpretation of the legal position represent progress on what we had before, because there was no prospect at all of the approach through the protocol being passed.
Lord Cobbold: My Lords, I understand the motive behind the new condition that 50 per cent. of crews should be from the flag country. However, does the Minister see any possible conflict between that and the priority at the IGC to achieve a more flexible labour market in Europe?
Lord Donoughue: My Lords, no. What we have proposed is fairly flexible. One of the reasons is not to conflict with those requirements of flexibility and impose inflexible constraints on our fishermen who may wish, flexibly, to fish abroad.
Lord Harris of Greenwich: My Lords, is not the reality that the Government faced an extremely difficult problem when they came into office and had to deal with this issue? Most of us recognise that the idea that this problem can be solved in six weeks is nonsensical. Many of us congratulate the Government on what has so far been achieved, recognising that a great deal more must be done?
Lord Donoughue: My Lords, I thank the noble Lord for what in my view is a totally accurate and helpful description of the situation. We have not attempted to oversell it. The Statement says quite specifically that what we have done is a valuable step forward, but there is very much more to do.
Baroness Denton of Wakefield: My Lords, can the Minister tell the House whether his discussions with the Commissioner, with which he is so well pleased, or the exchange of letters included The Hague preference which gives Northern Ireland fishermen great concern as it allows the Irish to have quotas that they do not even fish? If they did include The Hague preference, what was the outcome; if not, when does the Minister intend to raise the issue?
Lord Donoughue: My Lords, I confess that in my mind the name "Hague" is otherwise associated. As I recall, it does not refer to that matter. My impression is that it makes no change in the Northern Irish situation. However, as before, we shall continue the stream of letters to the noble Baroness.

Industry: Competitiveness
5.13 p.m.
Debate resumed.
Lord Burnham: My Lords, when the Lord Privy Seal began to repeat the first Statement—about a couple of years ago it seems to me—he apologised to the noble Lord, Lord Borrie, for interrupting his debate. With
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respect to the noble Lord, I consider that a little odd. The noble Lord, Lord Borrie, had finished speaking. I have been sitting here for some time and have become increasingly confused by the Statements and their effect on what I might wish to say. All I can do now is to keep my fingers crossed that I do not commit some solecism and that the optimism that was clearly shown by the Lord Privy Seal's right honourable friend will be justified by the facts and what happens to business as a result of what he hopes will be achieved in the coming years.
I should like to thank the noble Lord, Lord Borrie, for having introduced this debate, which is very timely. It comes at a time when the former Conservative Government have handed over the British economy to Labour in a most excellent condition. Of course, it is not so excellent that no further improvement is called for. The means of improvement have been highlighted today in the speech of the noble Lord, although he spent a good deal of time going back into the past. The noble Lord, Lord Borrie, is particularly eligible to speak on this subject. He has the highest credentials as a past Director General of Fair Trading and a lifelong student of consumer affairs and consumer law.
However well the economy is doing we must strive to do better. No doubt during the course of the debate many noble Lords, some of them with experience of what was achieved during the course of the previous Government, will be able to give the new Ministry some worthwhile advice. During the election, and before, repeated but unjustifiable claims were made by Labour politicians that the Conservatives had somehow damaged, if not destroyed, Britain's industrial base. The past 18 years have been a period in which the British economy has moved an immense distance from the position where the previous Labour Government had to apply for help from the International Monetary Fund. The competitiveness of the British economy was transformed beyond recognition under the Conservative Governments of Margaret Thatcher and John Major.
On entering office this Government have inherited the most favourable economic climate for more than a generation. Labour is again in power but at a time when everything is working economically in its favour, unlike the world it left behind it in 1979. Inflation is low and under control. It has been below 4 per cent. for over four years—the longest period of low inflation for half a century. The former Government's target of getting inflation down to 2.5 per cent. or less was achieved. Unemployment at 5.8 per cent., although obviously still much too high, is at its lowest level for seven years and is well below the European Union average. Britain is top of the inward investment league, winning about one third of all inward investment into the European Union. There can be few clearer illustrations of a country's competitiveness than the amount of inward investment that it attracts. The billions of pounds invested in Britain by thousands of foreign companies give an indisputable concrete demonstration of the position that Britain holds in the world today.
I give some facts on which to base this argument. The Economist Intelligence Unit reported in May that Britain had the second most favourable business environment in

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the world ahead of Singapore, the United States, Japan, Germany, Switzerland and New Zealand and behind only Hong Kong, although it expressed some fear that Hong Kong might not for long be in the lead. However, it did not suggest that this country would go to the top. In March of this year the International Institute of Management Development reported that the United Kingdom had jumped from 19th to 12th in the world competitiveness league, moving ahead of Germany and becoming the highest European G7 member. The UK has had the strongest growth of any EU economy since 1992. It exports more per head than Japan. It is Europe's largest exporter of televisions and computers, and one third of the small businesses started in Europe start in Britain.
This has not come by chance. It has needed hard work and a clear and coherent policy. Incidentally, I wonder what the figures would have been, and may be in the future, if Scotland and Wales were untimely ripped from their mother's womb.
The Conservative Party has made it clear that it will offer nothing but constructive opposition to the Government's programme. Where their policies have a positive impact we will give them our support. Indeed, many of them look very familiar. I am reminded of the advice given to Neil Kinnock before the 1992 election to ignore traditional Labour policies and traditional Labour voters, who would never vote for another party. The adviser said that he should go for the middle class waverers and middle class policies. In that way he could win. Kinnock ignored that advice; Blair did not. What happened?
Nevertheless, there are certain areas of Labour policy which pose a threat to our nation's competitiveness. These have been much talked about but they seem a potential incubus on enterprise. The agenda is already familiar: a national minimum wage, the European social and employment chapters and, something that makes me particularly shudder—new powers for trade unions.
In a debate in this House last week, the noble Lord, Lord Clinton-Davis, pointed out that these policies were what the electorate had massively voted for on 1st May. That is true, but I wonder whether many of the electorate, in their clear wish for a change, really understood what they were laying themselves open to.
Of those policies I shall speak of the trade unions first since I suffered the most bitter personal experiences in the 1970s and very early 1980s. Those were the times when 29 million working days a year were lost through strikes. I do not think that the unions were then particularly pro-Labour or anti-Tory. On the Daily Telegraph we suffered the most convoluted and tongue-in-cheek attempts to get round the regulations on wage restraint introduced by the noble Baroness, Lady Castle. The unions were shameless. The print unions and their members were all that mattered. The country and everyone else could go hang.
At that time my wife had a horse called Union Card, by Good Bond out of Season Ticket. I thought it was rather well named. Having benefited from its success, the National Graphical Association's Imperial Chapel in the composing room gave me a union card of my own. It was a good joke, but what was not a joke was the
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large, conspicuous monogram on the reverse which in normal hands showed that the owner had not opted out of the political levy. At that time whenever the card had to be shown at a meeting the member's financial support for the Labour Party—the party which later opposed all proposals for trade union reform—could be seen, and the absence of the logo showed the courage of those few who did opt out.
The Conservative Government in 1993 undertook reforms which made the payment of a political levy by the workforce more equitable. Today's debate is particularly timely as it is reported in The Times this morning that Mr. Ian McCartney, the Minister for Trade and Industry, has said that the Government are to introduce legislation to make it easy for the trades unions to exact payments from the workforces. That again makes me shudder.
Times have undoubtedly changed. We have many worker/shareholders who have a broader understanding of investment and business problems, but the policies of the late 1990s are suspiciously like the facts of the 1970s. For instance, we have proposals in the manifesto for compulsory union recognition with new rights for strikers. I have no comment on the rights or wrongs in the current dispute on what was Southern Railways, but, already, here we go again.
There is wide agreement that a minimum wage will destroy jobs. The chairman of the Low Pay Commission, Professor George Bain, has admitted this in an article in The Times this month, when he surprisingly added that some jobs would be better lost anyway. Which jobs? Part time women workers supplementing their husband's incomes? First jobs for the young? Jobs held by those re-entering employment after a period on the dole? These are the categories of the workforce on the lower rates of pay, but they usefully allow flexible working patterns or a first job where new skills can be acquired.
Apart from job losses we will be forced back to one of the most dreaded of the trade union cries, "differentials". No union official and few workmen will accept a rise of a pound or more for the lowest paid without the more skilled workers' differentials above that rate being maintained with an increase of a pound plus being demanded. It is not necessary to underline what this will do for inflation. The DTI calculated last year that a minimum wage of £4.15 an hour, with a 50 per cent. restoration of differentials, which I believe to be optimistic, would destroy a million jobs. I hope that it is wrong.
Labour's commitment to sign up to the social chapter is another blow to Britain's hard won competitiveness. The two pieces of legislation which have been passed already on works councils and parental leave are not benign. The DTI has calculated that the parental leave directive would cost industry £200 million a year.
A great deal of legislation can be passed under the social chapter by QMV. As I say, I have not studied the recent Statement so I am not clear as to the degree to which that is possible. The Prime Minister cannot pick and choose. He has no veto. What he can do is not sign up for the social chapter in the first place. Let us do

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what a Cabinet Minister is alleged to have done when taking the Oath in another place: keep our fingers crossed.
The Labour Government's determination to ape the ailing European social model by handing over employment to Brussels, a policy which is destroying jobs throughout the Continent, seems bizarre. If we sign up to the employment chapter, Brussels is where job policies will be made—made on the basis of qualified majority voting. Here, no individual EU member can veto a proposal. New measures to be brought forward under the employment chapter would have to be approved by QMV and, almost worst of all, we would adopt a "co-ordinated strategy for employment" which requires member states,
"to regard promoting employment as a matter of common concern."
What is this? Compulsory job sharing with the rest of Europe? It looks like it.
Padraig Flynn, EU Social Affairs Commissioner, has announced that the Commission is to press ahead with legislation to require small and medium-sized companies to introduce bureaucratic works councils (bureaucratic? Ha!) with a right to impose sanctions on those who do not consult adequately. Flynn is also suggesting a reversal of the burden of proof in sex discrimination cases. Employers will be guilty until proved innocent. But all that, as the noble Lord, Lord Clinton-Davis, told your Lordships, is what the electorate voted for. In the words of Lord Walpole:
"they now ring the bells, but they will soon wring their hands".
There are worrying signs that the Commission is failing to honour the legally enshrined principle of subsidiarity—the principle whose prominence is yet another testimony to the previous Government's negotiating success in Europe. Do not let us lose it.
All of this is immensely depressing: depressing, because the British economy is undoubtedly now leaner and fitter than at any time in recent memory. Businesses in Britain now enjoy an excellent climate of low inflation, low taxation, minimum social costs and a flexible labour market. These were not gained easily and we must continue to look at ways in which we can improve, for improve we still must.
One lesson that has been learnt is that there is no "quick fix". If in this debate we can underline the problems which appear likely to arise as a result of the Government's plans and urge the Prime Minister and his colleagues to look very carefully at proposals which seem suspiciously like the old Labour which we have all been told is now dead, we have a chance.
The Government must concentrate on ways of reducing, not increasing, burdens on business. Until they do so, they cannot expect their competitiveness agenda to be taken seriously.
5.27 p.m.
Lord Ezra: My Lords, as the noble Lord, Lord Burnham, pointed out, the noble Lord, Lord Borrie, is to be congratulated on introducing this subject for debate today, particularly at this early stage in the life
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of the new Government. This is, after all, a crucial issue upon which the objective of sustainable growth, to which all parties are committed, depends. The noble Lord, Lord Borrie, was right in saying that the previous Government had indeed devoted a great deal of attention to the subject, and many White Papers and interesting documents were produced. What we must discuss today are the policies which will be pursued by the present Government.
I believe that this is an occasion, at this seminal period in our post-war history, with a new government with a substantial majority, when we should be considering the role of government in relation to industry. I have in my career served in an industrial capacity throughout the whole of the post-war period. To start with it was in a nationalised industry, and, subsequently, in the private sector. I have been much involved in and concerned with government policy towards industry. The Attlee Government of 1945 introduced what was patently an interventionist policy. They introduced nationalisation of the basic industries, and interventionism spread into other sectors. That was felt at the time to be a desirable policy. My one worry about that policy, having served in a nationalised industry, was that that process of intervention in fact contradicted what was the understanding in setting up the nationalised industries on the Morrisonian principle, that they should be operated at arm's length. In fact that was never so—not under Labour governments or Conservative governments. To my mind, the concept of nationalisation was not defective in itself but in the way in which governments constantly intervened.
That period of intervention in industry was pursued in varying degrees, according to the nature of the Government, right up to the end of the 1970s. As we well know, after that there was a total change of direction when, through the privatisation and deregulation programmes, there was a progressive move on the part of government to disengage and to leave things to market forces. Indeed, many believe that the proper role of government is to keep in the background, to concern themselves only with basic macro-economic matters and to leave things to take charge of themselves. The young Mr. Hague at the age of 16 made his debut in the Conservative Party by making an impassioned speech asking for the Government to withdraw from our lives.
However, I do not believe that at present either the policies of direct and constant intervention or of disengagement are appropriate. I would like to believe that at this late stage in the 20th century we are entering a new phase in which government should act as a stimulator. I would like to indicate where in relation to the subject of our debate the Government should stimulate.
First, we must deal with the question of the basic framework within which industry must operate. There are a number of main areas in which any government must set the scene. Without question, in terms of macro-economic policy, the first is inflation. The Government have moved with commendable speed to introduce a system of controlling inflation which will remove it from political intervention. By giving greater

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operational independence to the Bank of England, the Government have done word for word what was contained in the CBI document issued in July 1996 entitled Prospering in the Global Economy. It strongly recommended that it should be the role of government to set an inflation target and for the bank to be accountable for its delivery. It indicated that in countries in which there was such an independent operational role for the central banks inflation had been kept under better control.
The test of whether that system works will come when inflationary pressures generally begin to manifest themselves. We are living in a period in which not only in the UK but in all the other countries of the EU inflation has been kept at a very low level. Therefore, we must ask how the system which has now been introduced will act when circumstances and pressures change. At any rate, what has been put in place appears to be eminently sensible, certainly to the CBI and many others.
The containment of public expenditure, which ran out of control in recent years, but more recently came under control, is another essential issue. Undoubtedly, it is part of the role of government. There certainly should be a commitment to keep public expenditure below 40 per cent. of GDP. There is every indication that it could fall below that, but it must be maintained at below that level. The borrowing requirement should be kept within, and below if possible, the Maastricht limit of 3 per cent.
Within those limits of public expenditure there must be prioritisation. I am pleased that the Government have moved to introduce a comprehensive expenditure review, which we discussed last week and which I hope will identify not only the areas in which savings can be made but also the areas which require increased expenditure and where efforts must be found to fund the increased requirements.
Thirdly, there is the issue of currency stability. Sterling is riding high and at one time that was believed to be a good thing. In practice, it is very difficult for many enterprises. Today we have seen the financial results of British Steel, one of our most successful enterprises. In spite of all it has done to improve its efficiency, because it exports so much of its product it has lost out as a result of the high level of sterling.
I was a Member of the Select Committee on Overseas Trade, presided over by the noble Lord, Lord Aldington, in 1985. One of the steps we took in looking at ways in which trade and therefore industry could be promoted was to ask business respondents we interviewed for their views on currency. The first comment they made was that they would like to have a stable currency. We went a bit further and asked, "What do you think the relationship between sterling and the other main currencies should be?". They told us—and it was the common view—that in the case of the dollar it should be 1.5 dollars to the pound and in the case of the deutchsmark it should be 2.5. I believe that those views are as relevant today as they were 12 years ago. Unfortunately, we have the dollar at 1.64 and the deutchmark at 2.85.
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It is difficult to control levels of currency in a free-moving area where there are floating currencies. The problem that we must face—and I hope that the Government will be considering it—is that if the single currency were to be introduced at the scheduled time and if the UK were not to be in the first wave, we must think seriously about our relationship with that currency. There could be the risk that sterling could be regarded as a refuge for currencies escaping from the single currency if it were potentially weak, and our currency could go sky-high. The reverse could also be the case. We must be thinking of ways in which we can protect the currency against that kind of major fluctuation.
There is also the issue of competition policy. I shall not deal much with that because the noble Lord, Lord Borrie, one of our leading experts on the subject, spoke wisely on it.
Finally, I hope that we shall soon see some draft legislation. I wish to speak briefly about investment, which undoubtedly must be stimulated. The trouble with the British economy is that in times of boom that boom has tended to be based on increased consumption expenditure and our investment has tended to lag. That is already happening on this occasion, boosted by the windfalls from the building societies.
I hope that we will be able to describe the forthcoming Budget as one for investment and for rebalancing the ways in which we use our resources. We must create the right investment in industry, in essential parts of the public sector and, above all, in skills training. The noble Lord, Lord Borrie, was kind enough to refer to my remarks about the skills shortages which are already emerging. I know that my noble friend Lord Thurso will be developing that issue. If the forthcoming Budget deals with these issues of macro-economic policy, we can look forward to the maintenance of the positive economic conditions under which we presently operate and to which the previous government contributed.
5.40 p.m.
Lord Desai: My Lords, first, I thank my noble friend Lord Borrie not only for introducing this rather timely debate but also for recognising that academics are badly paid. I can entirely support his judgment on that. I congratulate also the noble Lord, Lord Burnham. It is the first time that I have seen him on the Front Bench and I congratulate him on a very fine performance. He promoted my honourable friend Mr. Tony Banks to a Cabinet position, which will no doubt please us all.
Perhaps I may say a few words about the minimum wage. I was not going to speak about that, and some of the things which the noble Lord said were no doubt well taken. If one takes a static view of the economy, a minimum wage set too high would cause a loss of jobs. I teach that to first-year undergraduates and I have no problem with that. But in a dynamic economy other effects should be considered. For example, the most dynamic economy in the world today is that of the United States and the United States has a minimum wage and has had a tremendous growth in employment.

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There is a lot of work being undertaken in this area at present, but academic evidence is divided because it is extremely difficult to take into account all the other factors. The United States has a minimum wage which is roughly 40 per cent. of average earnings and yet it still has growing employment. I do not deny that a high minimum wage may cause unemployment but other factors should also be considered when looking at the problem of a minimum wage. I shall say nothing more about that.
Moreover, I shall not go down the path followed by the noble Lord, Lord Ezra, as regards the macro-economic framework for competitiveness. I wish to take up the point of how we define, interpret and understand competitiveness. There are a number of points to be made. A major characteristic of economic policy in Britain—at least post-war policy—is that different governments tried to find the holy grail of competitiveness or economic efficiency. Once upon a time we believed that nationalised industries, large-scale industries, were efficient. Then when the Conservative Government came to power in 1951 they introduced what they understood to be laissez faire. There is a difference between competition and laissez-faire. When the Wilson Government came to power, they believed that we were not performing to our best ability because British firms were too small and that scale was very important. Therefore, there were mergers and large corporations were built up. That Government believed that largeness by itself would make us competitive with the United States and we went down the path of the IRC. The Heath Government went back to competition and Selsdon man. After that, we had deregulation, and so on.
Partly, different strategies work at different times. But also in a sense my worry is that we are always looking for one particular definition, structure, theory of competitiveness which often is based on economic thinking that is slightly out of date. Moreover, it is often static. A lot of work is currently being done in that area and my noble friend Lord Currie is better qualified to speak about that than I am. But economists have had a problem with defining competitiveness. I shall not bore noble Lords with the various exegeses of the literature, but, by and large, we think of monopoly and competition in terms of the numbers of competitors and the level of concentration; and that is extremely static.
What works—and I do not know why it works—is to have an economy in which a sufficient number of innovating firms make sufficient profits to keep a dynamic economy going. Let us look again at the United States. About 15 years ago people were saying that the US would lose its economic power with its low productivity and all sorts of other problems. Professor Paul Kennedy wrote a book about it. Look at the United States now. It is the most dynamic economy in the world. I am not saying that this is the only answer, but there are firms in the United States which are innovative and which have the ability to borrow venture capital and break through established markets. Size does not matter. Microsoft, which was a very small company, practically broke IBM, which was an extremely large company. If
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we had looked only at size and concentration, we should have thought that IBM was a big, bad beast and poor Microsoft would be crushed by it. But innovation was very important.
We should create a climate for innovation. I return to what my noble friend Lord Borrie said. We have not appreciated fully the important role of basic research in universities which eventually feeds into industrial innovation. I know that tomorrow we shall discuss a report on that topic. Unfortunately, I cannot take part in the debate due to another engagement. But we should think positively about restoring the research base of engineering, science and technology. That may give us the opportunity to get back into an innovative framework.
What really matters is what makes an economy dynamically efficient. One factor must be innovation. Secondly, we should think about competitiveness of the economy and not just industry. Far too often we become hung up on the manufacturing industry. I have nothing against the manufacturing industry but there is a tendency to have a misplaced concreteness in our minds so that if there is not anything solid coming out at the end of the process, we are deeply suspicious. We feel uncomfortable if we see people making profits and nothing concrete is being produced. But that is not the way an economy works.
For example, in the British economy, one of the paradoxes is that the service sector is and has been much more profitable. The rate of return in the service industry is substantially higher than it is in manufacturing. We should ask ourselves why that is. Is it because the service sector is easier to enter and it is easier to borrow money because the commitments may be only short term. In a number of sectors—fashion, design, pop music—Britain has an extremely innovatory economy. If we think of the innovations that we have in pop music, design or fashion, we can see that Britain is a world leader. We should try to understand why those sectors are so successful and learn from them.
As we advance, the economy will not be frozen into the old structure of making solid things and nothing else. Not only shall we not be able to make solid things because there is fierce competition from, for example, east Asia, where highly skilled people can make those products much better than we can make them. It is also partly because products and processes are changing so that what people buy nowadays is not a solid product but an abstract one. People pay a great deal more for design, advertising or promotion than for the solid, material things.
Let us think of when you buy a pair of Nike trainers. You are not merely buying the material which goes into making the shoe but buying the design. Indeed, you are buying fashion, design and endorsement. It turns out that in the production cost of a pair of those shoes labour costs represent only 10 per cent. That is not surprising because anyone can make a pair of shoes once its computer design has been sent over the network from here to China, Thailand or wherever the shoes are being made. Making the shoes is no longer the trick; designing them in a way so that sophisticated consumers buy them is the source of profitability.

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If we are to make our economy more competitive, we must understand that encouraging schools of design and fashion is as important as old-fashioned engineering or technology. Indeed, very often that is the leading edge of competitiveness in the world economy today. We must ensure that we do not get into a single solution mentality again. We must also avoid a single sector obsession—manufacturing and nothing else. It must be made quite clear that, whatever we do, the most difficult thing is to change what we have started. As the world economy evolves, any solution that we have today will become out of date within a very short time. Therefore, flexibility in our policy-making and in our thinking is as important as flexibility in labour markets.
5.51 p.m.
Lord Astor of Hever: My Lords, I, too, congratulate the noble Lord, Lord Borrie, on his introduction of this important debate. I should also like to congratulate my noble friend Lord Burnham on his elevation to the Opposition Front Bench.
Efforts to improve Britain's industrial efficiency will fail unless safety and health are placed near the top of today's business agenda. Doubtless there are those who disagree arguing that, desirable though they may be for social reasons, health and safety measures serve only to increase costs and to stifle innovation. After all, they say, does not safety just "get in the way", and is not "risk taking" at the very heart of competition and business decision-making? Those are views which many of us will have heard from time to time. They are ones that I personally encountered in business long before I became president of the Royal Society for the Prevention of Accidents, an interest that I now declare.
While it is often said that Britain, in comparison with many other developed countries, has a very good health and safety at work record, there can be no room for complacency. Thankfully, due to consistent preventive work, there are now relatively few accidental deaths in workplaces. However, about one in 12 workers every year will suffer some kind of injury while at work. Death early in retirement, due to work related health damage, is still a massive problem in this country. Exposure to asbestos alone is estimated to cause up to 6,000 deaths a year, and that figure is set to rise beyond the millennium.
The human cost, including the impact on families, is massive. For that reason alone, as a civilised nation, we should take effective action to protect people who contribute towards building our national wealth. But there is also a powerful economic reason why we should take action, and that is because accidents—and ill health caused through work—damage individual businesses and our entire national economy.
The Health and Safety Executive has calculated that workplace accidents and ill health are costing Britain up to £16 billion annually—nearly 3 per cent. of our GDP. That is equivalent to one average year's economic growth being thrown away, in the main, as a result of failure to put safety first. But government expenditure in 1996–97 on the Health and Safety Commission and
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Executive is surprisingly modest at some £178 million, representing less than 2 per cent. of the cost of accidents and workplace ill health to UK plc.
Only last week, Frank Davies, Chairman of the Health and Safety Commission, warned companies, saying:
"Dealing with the causes of accidental losses is not an unnecessary overhead—failure to do so will eat into the profitability of a company".
The publication that he was relaunching, The Cost of Accidents, highlights major events such as the "Piper Alpha" explosion which cost 167 lives and £2 billion; and the 1987 BP oil fire, in which only one life was lost, but which cost BP £100 million. The same publication shows that for every pound of accident costs which companies recover through insurance, between £8 and £36 are lost, never to be recovered.
In smaller businesses, injury to a key employee, or a major accident causing business interruption, can quite literally spell the end of that firm. By contrast, action to build the existing management systems benefits efficiency, stimulates innovation, and boosts staff involvement and morale.
Despite the great strengths of Britain's occupational health and safety regime, further action is still urgently needed to improve the management of work-related risks. I will focus on just three specific issues to illustrate this point. First, stress at work is estimated by the Industrial Society to be costing Britain £13 billion every year, and is possibly the biggest single cause of absenteeism. The solutions are not difficult. Good practice guidance has been produced by the HSE, and others, to show businesses how to identify symptoms and root causes, and how to tackle stress problems at source. Very often, that can be done simply by adopting straightforward and low-cost changes to management practice. But such action will not happen on a wide scale without sustained high level publicity and practical support to business.
Secondly, there is the need for organisations to adopt a modern risk management approach to reduce what RoSPA has termed "occupational road risk"—that is, the risk of accidents faced by those who have to drive as part of their job. Available evidence suggests that deaths of drivers, passengers and other road users in accidents, involving vehicles being driven for business reasons, probably account for up to a quarter of the 3,500 fatalities occurring on Britain's roads every year. That is at least double the number of fatalities occurring in all other kinds of work-related accidents.
Risk levels are really quite high. For higher mileage business car drivers, the risk of being killed, in effect while they are working, is as high as in coal mining. An estimated 77,000 people every year sustain injury due to an accident while driving for business reasons. Action is needed to persuade employers to adopt a modern risk management approach, and to tackle the issue as a mainstream health and safety at work question.
Evidence from RoSPA shows that firms, such as British Oxygen and Texaco, which invest in defensive driver training for their staff, can achieve rapid and substantial improvements in their fleet safety performance—meaning that training. pays for itself very

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quickly. The potential to improve road safety generally—for both employees and the wider public—is immense, and yet this will not happen unless we see much closer co-operation on the issue between the Department of Transport and the Health and Safety Executive.
A third area concerns help to small firms, many of which face real difficulties in understanding the requirements of modern health and safety law. Despite the excellent work done by Frank Davies and his colleagues, much more is still required; for example, to get personal business advisers working for Business Links to give better advice on health and safety for small businesses.
There is also a need to integrate health and safety into schemes such as Investors in People. We must also ensure that health and safety receive high priority in the Government's continuing work on the national curriculum, and in their plans for the university of industry and business schools.
The creation of a thorough-going health and safety culture in this country is an indispensable prerequisite for industrial growth and regeneration. Those businesses which are successful, irrespective of size or sector, are ones which have grasped this principle, and have learnt how to turn it to their advantage.
Put simply, good safety is good business. Yet safety does not happen by accident. Whether in a family business, a blue chip plc, or the nation as a whole, it has to be led from the top. It cannot be a bolt on extra; it can only be achieved by making it an integral part of business planning and management processes.
Improved safety and improved competitiveness go hand in hand. I hope that the Government will integrate health and safety into their business support and development processes, and that Ministers will promote the highest level of co-operation between all government departments involved.
6.2 p.m.
Lord Currie of Marylebone: My Lords, I shall not follow the previous speaker, the noble Lord, Lord Astor of Hever, in discussing health and safety issues as I found his analysis both informative and illuminating.
I return to the broader question of competitiveness. I start by underscoring the need for this debate. I congratulate my noble friend Lord Borrie on introducing this debate. There was a tendency before the election for those who are now on the Benches opposite to say that the British economy was in wonderful shape. It is in good shape, but I am afraid that it is not in good enough shape. If one takes a comparison on OECD figures of GDP per capita on a purchasing power basis, we are ahead of almost no country with which we should like to compare ourselves. I could give noble Lords the list but it is a long one. Most of the major countries we should like to compare ourselves with have a higher per capita income. Even the Republic of Ireland overtook us last year. That must give us pause for thought as to why it is that the British economy is not performing as well as we would like.
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There has been a great deal of discussion—and no doubt there will be more in this debate—about the flexibility of labour and product markets. There is a great deal of ambiguity as regards the interpretation of that term. One interpretation is that flexibility is simply about the removal of unwarranted and intrusive government interference and regulation—the agenda that the noble Lord, Lord Ezra, referred to as being the agenda that was pursued in the 1980s. I believe there is growing appreciation that that is not enough; that the freeing up of markets is partially effective and important. However, it is equally vital to ensure that employees, managers and companies have the skills and capacity to take full advantage of the resulting freedom; otherwise, greater freedom may well result in significant losers, and that takes away some of the benefits.
We need flexibility in product and labour markets which encourages innovation and performance. I wish to illustrate that by referring to a number of aspects. I start with the managerial perspective. The noble Lord, Lord Burnham, referred to the industrial relations scene of the 1970s. I think we can all agree that we do not want to return to the confrontational attitudes on both sides—I emphasise the words "on both sides"—of British industry that occurred in that period. I must say in passing that I think that the noble Lord grossly exaggerated the risks of the modest proposals on trade unions that are contained within the Labour Party manifesto. Managers could not and did not manage in that period and there was confrontation. Now they can manage but there is a further problem; namely, the quality of British management does not match international performance. I declare an interest here as my salary is paid by the London Business School and therefore I have an interest in arguing the need for management education.
I speak to many business people on many occasions and many of them are of the best. The UK has many first-rate companies that are well-managed and match the performance of any in the world. However, the fact of the matter is that we also have a longer tail of rather poorly performing companies—more than most of our competitors. That is why our overall productivity performance, taken across the economy as a whole, is lagging behind—measured in level terms—what is happening elsewhere. If we could raise the performance in that tail to even the average of international performance, let alone the best, the British economy would really thrive. That is an objective. It is not just the objective of management to ensure short-term efficiency—I shall return to that—but also to manage innovation and the development of new products that meet the needs of customers and open up new markets. There is one other depressing fact about this tail; namely, the further one goes down it, the more complacent companies become and the more the badly performing managers do not know how badly they are performing relative to international performance.
In improving managerial quality one has to recognise that the scene is moving on. Twenty years ago there was quite a lot of discussion about how many companies could not perform a simple net present value calculation; they would muddle real and nominal values together in

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a rather confused way and get the wrong answer. It is probably the case now that pretty well every company can do such calculations well. That is routinely taught in the first year finance course of any business programme. Unfortunately not many managers are acquainted with what is taught in the next stage of finance courses, Finance 2. Few of us understand options and similar matters. We think it has something to do with financial companies. I suspect that a lack of understanding of options has been the downfall of as many industrial companies as financial companies. I shall illustrate what I mean by that.
In the early stages of new product development, including design, if one simply applies standard investment appraisal techniques—in the way that most companies do—one gets the wrong answer. R&D and new product development are all about keeping in the game and keeping one's options open. It is worth investing in those processes even when, on a straight routine calculation, that may appear to be unprofitable.
My colleague, Professor Gary Hamel, in his book Competing Pr the Future, argues that many companies have focused too much on cost-cutting and in the process have weakened their capacity for innovation and new product development. My other colleagues, Andrew Sentance and James Clarke, recently carried out a study for the Design Council which made the point that investment in design—this was the point that my noble friend Lord Desai made—can be fundamental to the performance of companies and of economies. The evidence is that investments in R&D and design promote growth at company level and in industry and the economy. An over-emphasis on downsizing—cutting costs at the expense of those functions—can lead to inflexibility with companies failing to adapt to changing circumstances and new market opportunities. Downsizing may well have its down side; and companies are increasingly realising that.
In the employment area, it is undoubtedly desirable to remove excessive regulation of the labour market. We have gone a long way in that direction. That agenda needs to be pursued further in the European context. It may be necessary, but it is not sufficient for good economic performance. Flexible labour markets can all too often mean a flexible move into unemployment not into other sources of employment. The problems of youth unemployment and long term unemployment are with us. They need to be tackled and that is why it is important that the Government's welfare to work programme is undertaken and pursued.
Over many years Professor Sig Prais at the National Institute has pointed to the problems as regards skills and the weaknesses of investment in training and skills in the British economy which hold us back in that area.
Professor Stephen Nickell has undertaken an interesting piece of research into the factors underlying unemployment of male manual unskilled workers across a range of countries. It is true that excessive regulation can cause unemployment in those groups to be high. But there is another factor. The evidence is that those countries which do not invest well in their basic skills and education also have a bad performance in that area.
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Deregulation may be helpful, but without the positive aspects of investment in skills and training it is not enough.
Let me take another example. The previous Government made much play of the fact that we were the enterprise centre of Europe. We certainly were open to inward investment and have attracted much inward investment. But again that is not enough. How does one explain the fact that France, held up as an example of rigidities and inflexibilities, attracted more foreign direct investment over the five years from 1991 to 1995 than did the UK? The amount of inward investment rose considerably compared with the previous five years whereas our inward investment was down. That involves other factors including our position in the world economy, infrastructure, and investment in education and skills.
That is a prognosis of some of the difficulties. What about remedies? The Government are committed to an agenda which will point us in the right direction: a commitment to macro-economic stability, as the noble Lord, Lord Ezra, pointed out; avoidance of the instabilities that lead to the necessity for savage downsizing and the problems that arise from it; reform of competition, referred to by my noble friend Lord Borrie; reform of City regulation; the welfare-to-work programme; and, above all, a commitment to training, skills and education across the spectrum. We must close the gap with our competitors. I hope very much to see that start to happen over the next five years.
6.13 p.m.
Baroness Lockwood: My Lords, during the debate on the gracious Speech, I said that education and training were vital to the UK's competitiveness. I wish to return to that theme today and to the question of partnership between industry and education.
There is no doubt that partnerships are the flavour of the day. I was interested in a special and quite substantial section of last week's Times Educational Supplement on the subject of school links. There is much support in industry for those links and a considerable amount of money has been invested in them by both individual companies and partners generally. A number of points in that section of the TES were of particular interest. The first was that companies clearly see their own interests very much involved in those links. For instance, an article on Cadbury stated that,
"One of our major priorities is investing in education, with a need to keep in touch with future markets for recruitment and consumers."
The article listed a number of benefits which it saw for the company in those links.
Marks & Spencer has been quoted on a number of occasions as saying that,
"prosperous high streets need prosperous back streets".
That throws an interesting light on the subject of the minimum wage, about which the noble Lord, Lord Burnham, seemed to have a number of problems. Marks & Spencer employees are not likely to live in the worst

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of the back streets, but as a company Marks & Spencer needs the people who live in those back streets to have a job and to be able to earn sufficient in order to make their purchases in Marks & Spencer high street stores. As a consequence, as a company it is prepared to invest in schemes which help to jack up the standards of low paid workers and find jobs for the unemployed.
There is also the question of who should benefit from the schemes. Again, I was interested in an article by Sir lain Valiance. He said,
"It is no longer enough to focus exclusively on basic literacy. Interpretative, analytical and communication skills are likely to be at a premium. Most important will be flexibility, wanting to adapt and learn as the environment evolves around us".
We hear sometimes of a different kind of flexibility from the Benches opposite. The article underlined for me the importance of business links stretching across the board from the low achievers to the academic high flyers. I agree that industrial links should not be regarded as exclusively for the under-achievers because if they are they will be devalued. We need links between the high flyers who can provide some of the leadership that will be required in the future.
There is a proliferation of schemes. Not all deliver to the same level. A report within the DfEE refers to a lack of co-operation and coherence across the country, and the fact that the best practices are not disseminated. It refers to many other weaknesses. Therefore I welcome the fact that the new Secretary of State is now looking in a holistic way at the whole range of products with a view to making them more cohesive and more evenly spread. Perhaps I may add that in reframing some of the schemes we should not over-bureaucratise the system. It is important that individual firms should have scope for their own initiatives.
Those are some of the things that are happening at school level. But, as I have said on a number of occasions, it is important, too, for partnerships and links to be established at universities. Again, that is happening, but in a patchy way. Not all universities make an equal contribution. I must say with some pride that my own university, Bradford, has an excellent record in this respect. And it is not entirely altruistic. It brings a number of benefits to the university as well as to the community—benefits and links with local companies; the sharing of resources; a better understanding of problems so that the university can help to respond to some of them; and an increasing link between particular departments and appropriate companies. I refer to engineering departments and to our optometry and pharmacy departments all of which have important links with local communities. It is important that those links should be encouraged and that they should not be overlooked when we consider the importance of the contributions of universities at national level. National level links are vital, and there are a number of ways in which they are taking place.
Again, perhaps I may use Bradford as an indication. We have a number of tailor-made courses with some of the important national companies such as Ford, Rover and the BBC, meeting the specific needs of those companies. The university is also involved in the
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Teaching Company Scheme which is operated by the DTI. I understand that, like other links, that scheme is also being reviewed. However, I suggest that the annual report of that body indicates how successful such schemes can be in terms both of opportunities for the academics in the institutions involved and also in terms of the increased effectiveness and profitability of the firms that are involved.
In all these activities universities are more and more showing a full awareness of the needs of companies in terms of the type of courses to be offered, and in terms of in-company training programmes and the innovations with which firms need help in order to increase wealth and job creation. For all that to be maintained and increased, the future funding of the higher education system needs to ensure the present high quality of our products coming from the universities. Core funding for teaching is one of the major issues emerging at the present time.
So, too, as referred to by my noble friend Lord Desai, is the future of research funding. I should like to comment particularly on that since there has been discussion in the media as to the future of research funding post-Dearing. I believe that the dual support system should be maintained since it seeks to provide infrastructure support through the higher education funding councils for universities and the provision of the well-founded laboratory within the university on the one hand and grant support for specific research projects through the research councils on the other.
Perhaps I may illustrate that point by again referring to the University of Bradford. Last year, a new company, Bradford Particle Designs Ltd., was set up. It arose out of the blue skies research of a young PhD student who experimented in making powder from liquids, a safer powder than that currently used by the pharmaceutical companies. The pharmaceutical companies showed interest in the research and, as a result, the research has been patented, bringing welcome income to both the university and the new company that was set up, as well as to the pharmaceutical companies that became involved.
A second example is also based on blue skies research in one of our engineering departments dealing in polymers and the production of the kind of synthetic materials referred to by the noble Lord, Lord Desai. It started in a simple way within a department, but was later taken up by the research council and is now part of an important inter-disciplinary research centre, one of the centres of excellence in this country. Those are two examples that could be duplicated in many universities and in many other ways. They underline the importance of giving universities the opportunity to contribute in this way, not merely confined to some of the excellent projects foreseen under the Foresight programme but pushing the barriers further forward so that universities can make a unique contribution to the future competitiveness of British industry.
6.26 p.m.
Earl Kitchener: My Lords, there are many types of goods which are best made in low-wage countries or

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which we in this country have no tradition in making. But there is something odd about seeing our policemen on BMWs and not on Triumphs. I shall refer to customers and retailers, but the ideas can be extended to buying and selling on a larger scale.
Our manufacturers could do more to help themselves, and the most important thing is informative labelling, on the lines of, "Made in Sheffield at the Britannia works of the General Engineering Company, 1997. If you are satisfied, tell your friends; if not, tell us". Among other things, that would encourage the people who make the goods to take a pride in their work and would stimulate dialogue between makers and users. I have been told that directors need to watch for buyers who may well prefer a visit to Paris to one to Birmingham.
Retailers obviously cannot stock everything, but they could have copies of catalogues of British-made goods. I often ask shops selling foreign versions of items that might well have been made in this country whether they receive visits from UK salesmen, but the usual answer is no. Many people have to buy what is offered, and even a small effort by retailers to sell British would be helpful. Usually I find almost no interest among retailers in selling British goods.
Customers who want to help their unemployed fellow countrymen can ask if there is a UK product and, if so, why it is not stocked; and then pass the information on to a UK maker. I have done that in some cases. The most extreme related not to an item I bought but to a pack of cards that I saw which had on it a picture of Buckingham Palace. I asked about it, and found that it had come from the shop there. It was marked, "Made in Switzerland". I wrote to the manager of the shop, who was very polite. He replied that it was bought before his day, but he did try to give some preference to goods made in this country. When I said that there was no cheap labour in Switzerland, I was told that perhaps they had cheap Turkish guest workers. I do not know the cause of that but I hope it is not still going on. What it looks like to foreigners if they buy something at Buckingham Palace made in Switzerland I do not know.
What should the Government be doing? I hope that they will want to hear. Not legislation, noble Lords may be glad to hear, but they and the other bodies over which they have influence must be buying large quantities of almost everything. They could offer information on UK manufacturers. I had quite some correspondence about that which I am afraid I looked at only this morning. I must admit to not having brought myself up to date about something called the Regional Supply Network, but like railway timetable inquiries, I feel that such information should have nothing to do with regions; it should be centralised. Soon it will probably come in an electronic form, which has the advantage of making searching much easier.
Another thing the Government might do is to form an opinion on the question of the usefulness of informative labelling. Manufacturers may not read Hansard and they might be inclined to take more notice of the Government than of me. It may be objected that "Buy British" is
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unfair to other countries, but where something can reasonably be made here, that is where we should look first.
6.30 p.m.
Lord Monkswell: My Lords, like other noble Lords I welcome the debate and draw attention to the careful way in which the noble Lord, Lord Borrie, phrased the terms of the debate. It is worth reminding ourselves that they are:
"To call attention to the case for improving the competitiveness of British industry; and to move for Papers".
We should recognise the background to the debate. It is that we suffer, and have suffered for a number of years, from a deficit in international trade in industrial production. We are talking about how Britain competes with the rest of the world. The only way in which we can do that effectively is by all working together. We need to instil a sense of co-operation. A number of noble Lords on this side highlighted that. We also need to learn the lessons of the past.
Since the election I have been accosted by people who say: "How can you support the new Government who are adopting all those Conservative policies?". The answer is simple: if the policies are right, it is right that we should adopt them. I take as my text that the old policies of the Conservatives are having an effect on the floor for wages. We talk now in terms of having a minimum wage; that is our policy and we shall implement it. But it is an old Conservative policy, it goes back to Winston Churchill and the early part of the century. It was then recognised that, unless there is a floor for determining wages, we get ridiculously unfair competition between employers. I believe there is a phrase that the bad undercut the good and the totally unscrupulous undercut the bad. That is an example of Conservative policy which I am happy to support.
It is also worth looking back at our real experience. The situation in the 1970s described by the noble Lord, Lord Burnham, was quite different from the situation I remember as someone who worked in industry during that period. I can remember a situation where it was recognised by management that if changes were required the sensible way of achieving those changes was to discuss them with the workforce, usually through the organised trade unions.
However, we were also subjected to external pressures. One was the competitive pressure from Japan where people took a long-term view in developing their industries; we saw the development of, for example, the motor cycle industry and the television production industry, funded with low long-term interest rates. In this country there was a lack of investment in those areas and we lost out because of lack of foresight.
We were also subject to the buffeting of external stimuli. I can remember one event which affected the company for which I worked—Massey Ferguson, which builds tractors and combine harvesters for the agriculture industry. A decision by Jimmy Carter in the late 970s that America would no longer feed the world resulted in a 30 per cent. drop in the demand for

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agricultural equipment. That had an enormous effect all round the world. The reaction to that decision was significant.
One of the difficulties that we faced with the Conservative Government that came to power in 1979 was that, instead of providing support for the long term, they made the situation worse. We had incredibly high levels for the pound which raised our export prices through the roof. There was effectively a reduction in UK home demand and my company was subjected to enormous pressures. I remember asking our managing director, "Why don't you go down to London and tell the Conservative Government what they are doing to us?". He said: "I have been part of a delegation which met the Minister at the Department of Trade and Industry". At the time that happened to be Keith Joseph. He went on, "It was like talking to a brick wall. He could not understand the effect that government policies were having on our industry". I am sure that we have learnt quite a few lessons from that.
The noble Lord, Lord Desai, pointed out how well the American economy is doing and a number of noble Lords suggested that the British economy had done well over the past few years. It may be useful to consider one of the major events of a few years ago that affected the British and American economies. I suggest that the end of the Cold War may have had some effect because of the significant reductions in defence expenditure that occurred on both sides of the Atlantic. Perhaps that has had a stimulating effect on our economies. I see the noble Lord, Lord Desai, nodding. It might be interesting to conduct some academic research to see whether the idea is right.
We have seen a roller coaster ride through the 1980s and 1990s in terms of trade. Immense problems have been created for British industry because of the way in which the value of the pound has increased and decreased and interest rates have gone up and down. We can credit the new Chancellor of the Exchequer, Gordon Brown, with the iron will to eradicate that up and down factor in financial terms with its effect on trade that besets British industry. I am sure that we all wish Mr. Brown success. Many of the things he is doing suggest that he will have that success.
We are a small country in world terms. I postulate that the only way in which we shall achieve lasting success in a global situation is to be part of the European single currency. Obviously we must ensure that it is run and organised on a sensible basis. But make no mistake, my Lords, outside the single currency we shall not survive. I can imagine Mr. Soros periodically taking £500 million out of the British economy when the whim takes him. It is too horrible a prospect to consider.
With that stable economic framework, which I believe is so important, we have to think in terms of how British industry competes, so to speak, on a level playing field and in terms of supply and demand. I hope that the demand side will be sustained and developed through injections of economic activity at the lower level, where it is needed: the minimum wage policy. As the noble Baroness, Lady Lockwood, pointed out, if people's incomes increase at the lower end, they can
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buy the goods and services that British industry and commerce provide and thereby generate even more economic activity.
We can also look at the policies of the new Labour Government in terms of the supply side. Other noble Lords have spoken of education as a priority and that is, perhaps, the supply of human talent that is so essential. But there is also a need for the supply of investment. Long-term investment policies are essential to ensure that a supply of new capital is available to British industry, so that industry can invest not only in research and development, in new machinery and new technology, but also in new markets and be able to invest in the worldwide distribution networks that are important in delivering our products to the marketplace.
In conclusion, I take great pleasure in the remarks made yesterday by the President of the Board of Trade. She explained that over the next few months an audit will be conducted by the Department of Trade and Industry into all the strengths and weaknesses and all the assets and liabilities of the British industrial scene; and that out of that will come a long-term project to ensure that British industry and our society are fit, capable, willing and enthusiastic about entering the 21st century.
6.42 p.m.
Lord Ponsonby of Shulbrede: My Lords, first, let me congratulate my noble friend Lord Borne on giving us the opportunity in this debate to talk about competitiveness. I apologise for having missed his opening contribution. Nevertheless, I believe that he will be pleased to hear that my boss decided that my own company's competitiveness was better served by me going and making some of the net present value calculations that my noble friend Lord Currie extolled in his speech. I must explain that I worked out how to do those calculations from a book and not by attending one of his institutions.
I wish also to concentrate my remarks on education and the general need to raise standards. Yesterday I had the privilege of visiting a corporate research centre just outside Cambridge. The company is one of the largest oilfield service companies in the world. It has research centres in Japan, Europe and America. The centre was everything that one might expect it to be: modern, well resourced, flexible and with staff who were highly qualified, international in origin, extremely mobile and, no doubt, well paid. At this end of the education spectrum, Britain can and does compete at the highest level. Only last week we heard about Microsoft's intention to set up its own research centre. That centre will be next door to the centre that I visited yesterday.
But to be successful at the high end of the education spectrum is not enough. In fact, I believe that that masks our lack of success in educating the majority of people for the challenges of working within industry. Last week, I was disturbed to read an article in the Financial Times by Professor Alison Wolf of the Institute of Education. The article was about her reports on GNVQs from 1993 to 1997. It explained that the failure of the

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NVQ and GNVQ qualifications was due to the very high drop-out rate and the very narrow embrace of the qualification itself.
Britain is already near the bottom of the international skills league. We have fewer 16, 17 and 18 year-olds in full-time education than any industrial nation except Turkey. Nearly two-thirds of the British workforce do not have good educational qualifications compared with a third or less in the Netherlands and France and a quarter in Germany or Switzerland. Britain's skills deficit is crippling British industrial competitiveness. Vocational qualifications need to be upgraded and, above all, employers need to believe that they mean something and have achieved that raising of standards at the lower end of the education spectrum.
I know that the Government are very concerned about this issue and are introducing their Target 2000 programme and their University for Industry. Those are exciting measures and deserve to succeed. Almost every Peer who spoke in this debate referred to the importance of education. I simply echo that call. We have also heard about the importance of innovation, health and safety and flexibility. Those are all parts of the jigsaw and are necessary to build a competitive economy.
But I should like to make a simple point, which I believe is so blindingly obvious that nobody has yet made it; namely, that competitive success is most dependent on economic strength. It is a simple point which is constantly brought home to me in my working life, when I work in Russia. The company with which I am associated develops oilfields in Siberia. We have about 1,000 Russian employees and produce oil which is sold internationally. I know from my working experience in Russia that our Russian employees are on at least an educational par with British people. The company has spent a great deal of money putting up-to-date computer technology into its operations—in fact, computer technology is cheaper in Russia than it is in Britain. We have put money into training. The transport systems, although antiquated, are relatively reliable. However, we are operating in an economic environment that is bankrupt by western standards. That single fact completely overwhelms our operations. Even though all those elements of the jigsaw are present, we are not competitive by western standards. So, I make my single, simple, blindingly obvious point that economic strength is the overwhelming factor in building a competitive economy.
I close by saying that I could not help noticing that I seem to be the only contributor to today's debate who is currently working in British industry. I stand to be corrected on that and maybe the noble Viscount, Lord Thurso, if he were in his place, would correct me on that point. I do not know what that means—whether it means that I should be working harder or that people who work in industry tend to work too hard so that they cannot listen to the experts and what they have to say. Nevertheless, I look forward to any legislation that this Government may seek to bring forward as a result of the work of my noble friend Lord Borrie.
6.49 p.m.
Lord Wedgwood: My Lords, I join all noble Lords in welcoming this debate and congratulate the noble Lord, Lord Borrie, on introducing the subject in such a timely manner. I must declare an interest as I represent a company, based in Staffordshire, by the name of Wedgwood, a manufacturer of solid things, as described by the noble Lord, Lord Desai. Travelling globally to support marketing and sales efforts, we are often presented alongside a number of other companies that exude the elements of which we are justly proud, elements such as quality and design.
In fact I have just returned from the United States. My tour included a visit to San Francisco where we participated in an event appropriately called "Britain meets the Bay". Thanks to the efforts of Her Majesty's Consul-General, a number of companies were encouraged to showcase their products in the San Francisco Bay area, which includes Silicon Valley. The highlight of the events was the visit of His Royal Highness the Duke of York. His Royal Highness seemed to be extremely well briefed, and his enthusiasm added considerably to the occasion. I cannot speak for all who participated, but sales have increased, not to mention the vast amount of good will generated in great part through the local press and media.
In 1996 a similar event took place in Salt Lake City entitled "The UK/Utah Festival". The honoured guest on that occasion was my noble friend Lady Thatcher. My noble friend will be pleased to hear that sales have increased considerably as a result of her efforts.
It is events like these that give us the winning edge in a very competitive global market. I applaud the Government for their initiative to increase support for regional offices that are designed to help drive the sales and heighten the awareness of British products on an international level. Hopefully these agencies will work closely with Her Majesty's trade representatives in all continents.
I have said in your Lordships' House before that there have been occasions of disappointment when industry has not benefited from the full support of embassy and consulate staff. Perhaps with greater encouragement and co-operation from regional offices the examples of San Francisco and Salt Lake City can be repeated. I am interested to note the recent appointment of the noble Lord, Lord Simon of Highbury, as Minister with responsibility for trade and competitiveness in Europe. Should we not consider such a position on a more global basis?
We are experiencing tremendous growth in several countries that require a serious focus. The Japanese are an example of a consumer obsessed by the tried and true manufacturers of quality and design. Companies that have conveyed this to the customer in Japan have been successful. The rewards go beyond Japan, as retailers who carry our products wherever the Japanese travel will attest. In a recent survey by the Corporate Intelligence on Retailing it was shown that the Japanese department store, Mitsukoshi, here in London sells more per square feet than any other store, including the great emporiums of Harvey Nichols, Selfridges and Harrods.

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In the same survey, Wedgwood was number one of the top ten buys in luxury goods which also included Burberry and Dunhill. Japan heads the list of other Asian countries that are emerging with excellent opportunities to market our products; to name a few, Malaysia, Thailand, Indonesia, Taiwan, Korea, Vietnam and the Philippines—not all without their own problems, but with enormous potential and increasing demand.
For most of us it is very difficult to predict the development of trade in China. No doubt His Excellency the Governor of Hong Kong will have an interesting insight on his return at the end of the month. Also, India, which recently lifted some very restrictive tariffs on certain luxury products, presents us with a market with which we have close links.
This is all very well, but we live in a global market that is in itself very competitive. The legacy of our forefathers spanning many generations, even those of this century, is not sufficient to bring success. Our competitiveness must start in the workplace, as many noble Lords have said, and on the shopfloor.
The painful exercise of downsizing and reducing overheads has been essential for many companies in recent years. For those that have accepted this challenge and been successful the rewards are significant. No longer is it acceptable to have numerous management layers with complicated reporting systems. Individual responsibility and accountability is the required direction. This can be achieved with a number of programmes and initiatives. Educating the employee through programmes like NVQ has gone a long way to improving professional skills in the workplace and, in turn, providing greater efficiency. Sadly, as has been pointed out, the NVQ programme has been subject to some criticism recently. The value of these awards to a wide variety of employees is enormous and should not be underestimated. This continuous process of training and improving skills should be constantly re-evaluated to ensure that vigorous standards are maintained together with the value and prestige of the awards.
In the area of production alone many companies have had to focus on reorganisation. The rapid development of technology and information systems is available universally. To remain competitive—and even the Japanese are price conscious—it is necessary to reinvest in equipment and machinery, and because of the expense it must be maximised. In other words, responsibilities are brought right down to the shopfloor and the individual employee's motivation takes on an even greater significance.
By improving the competitiveness in British industry, we could better respond to the rapidly changing demands of customers on a global basis, but there can be no compromise on quality and design.
We should avoid preserving any legislation that restricts our companies from operating on a level playing field. While we agree that, for example, health and safety standards are essential—an area well covered by my noble friend Lord Astor of Hever—we must ensure that British companies are not penalised for
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following the law while other European companies pay scant regard. I hardly need remind the House that we compete on a global basis, not just in Europe.
We would do well to consider how other nations support their valued manufacturers. The Irish are fiercely proud of Waterford Crystal, a company with which I have a unique corporate association. From its dynamic chairman, Dr. Tony O'Reilly, downwards, the product is championed the world over by the widely dispersed Irish family. We have much to be proud of in British industry. The legacy can continue but it requires considerable vision, vigorous support and direction. In this instance we can competitively continue to make quality products here in Britain and not in some far-flung country in east Asia. In fact we can further create demand in those countries for our products. It is my fervent hope that the Government are equal to the challenge.
6.57 p.m.
Viscount Hanworth: My Lords, I wish to join my colleagues in thanking my noble friend Lord Borrie for introducing this timely debate on the topic of Britain's industrial competitiveness. I should also like to thank my noble friend Lord Haskel for challenging some of his more reluctant colleagues, including myself, to speak on this topic for 10 minutes without repetition, hesitation or deviation.
I must say at the start that I may fail this test since, instead of grappling with abstract notions of industrial competitiveness, I intend to tell a story. The story is to illustrate the thesis that many of the policies that have been pursued by large industrial corporations in the past two decades have been utterly inimical to our long-term economic prospects. The new Government are mindful of the need to enhance the skills of our industrial workforce; but I fear that, without a fundamental change in the industrial policies of large corporations, their efforts will not be rewarded.
I will declare three propositions. The first is that the unbridled pursuit of profit is liable to be self-frustrating, even in the short term. The second proposition is that industries which are based on sophisticated technologies need to be managed by technologists. The third proposition is that the industries themselves must play a major role in training their workers and in sponsoring their careers.
In telling my story, I shall conceal the true identities of the parties concerned. Three years ago, I was invited by two friends to accompany them on a routine engineering inspection of a large industrial plant. The plant in question is the brewery at Merton-on-Weir which is owned by the multinational conglomerate corporation Grand Amalgamated Brewers. Since the interests of the corporation nowadays extend far beyond brewing, its directors prefer it to be known simply as Grand Amalgamated; but it is commonly known on the stock market by the acronym GRABS.
The brewery itself was founded in the 1850s; and the original building still stands as a brick precipice on the bank of the river. Set behind this facade and towering above it is a massive steel-girdered structure erected in

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the 1970s to house a state-of-the-art continuous-process plant. The plant was modelled on a brewery in Hamburg and it resembles a small petrol refinery.
I am told that the design was unprecedented in this country. The German firm responsible for its construction reproduced most of the features of the prototype plant in Hamburg with the consequence that the plant was expensive and overspecified in engineering terms. There were in fact no industrial designers of such plants on the payroll of GRABS, nor could any be found to give independent advice to the directors, and it seems that a considerable amount of money was wasted.
I visited the plant during one of the monthly inspections which my colleagues had contracted to undertake. My own interest is in the electronic technology which is used in inspecting the machinery. We were using electronic sensors to transduce a record of vibrations from the outer casings of machinery. The aim is to determine its fitness much as a doctor aims to assess the health of a patient with a stethoscope. A so-called spectrum analysis of the vibration record is liable to highlight any aberrant vibrations which are due to excessive wear in the bearings of the rotating parts or to the loosening of some of the fixtures.
I should say that our high-tech apparatus is simply a substitute for a well-trained human ear. In truth, our task could have been performed more easily and more effectively by the resident engineers of the brewery given their intimate knowledge of the machinery in question. However, some five years ago, Grand Amalgamated sacked its resident engineers in favour of the seemingly cheaper solution of contracting-out. They reduced their workforce to a skeleton. This sort of policy was, in fact. the basis of many of the much-vaunted productivity gains of the later years of the Thatcher administration.
I should describe the plant itself. This consists of three parallel production lines, each of which encompasses a process which begins with the milling of the grain and which ends with the piping of a premium lager—Steinpilz—into waiting tankers. The original intention was that, at any time, two of the three lines would be in process whilst the third would be undergoing maintenance. More recently, the brewery has been running all three lines simultaneously in pursuit of greater efficiency and against the advice of engineers.
During our visit, only one of the lines was operating. The other two were awaiting the attentions of an engineering task force—engineering mercenaries if you will—who had been called for in desperation but who, at the time, were tied up in another job. The delay was entailing a considerable loss of profit. The sad conclusion was that the value of the lost production was so great that it could have easily financed a meagre resident force of engineers who could have averted a mechanical breakdown—but it has to be admitted that it is difficult these days to find the engineers to employ in some capacity. Companies such as Grand Amalgamated—which is nowadays best described as a holding company—no longer have any interest in training them.
My two engineering colleagues both have personal histories and work experiences which are characteristic of a bygone era and which cannot be reproduced. They both
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owe their training to their former employers, who were the Coal Board and British Aerospace respectively. Both of them started as 15 year-old apprentices and one of them was sponsored by his employer to attend a university engineering course. Few such avenues of training survive these days and the conclusion is that the very skills on which Grand Amalgamated has been predicating its modern industrial policy are no longer in adequate supply.
As regards the brewery itself, this is scheduled for closure. For the reasons that I have already alluded to, its profitability has fallen far below expectations. It is now proposed that on the site of the dismantled plant a new bottling plant should be established. This facility, which would be highly mechanised and computerised, would be installed by the Esel Machine Tool Company of Milwaukee. The beer itself will be imported in tankers from Hamburg.
I believe that this story speaks for itself, but I should add a few observations. My first observation is that any attempts by the Government to enhance the productivity and the competitiveness of British industry are in danger of being stymied by the gentlemanly and the not-so-gentlemanly pursuit of immediate profit of which the directors of GRABS are exemplars.
Next, I would contend that we cannot expect any great improvements in industrial competitiveness until the control of industry is devolved to some considerable extent to the workplace. One measure which might be adopted is a legal requirement for the appointment of worker-directors. Such a requirement has existed for many years in West Germany where it is regarded as unexceptional.
My final assertion is that I believe that the emphasis on labour mobility and flexibility which has characterised some of the recent political debate is misplaced and that such precepts may be inimical to the acquisition of industrial skills.
My two friends, whom I have mentioned, both envisaged giving lifelong service to their companies until their careers were cut short by redundancy. From the start, they were able to identify their personal interests with those of their employers; and, in return, the employers were keen to invest heavily in their training. Nowadays we seem to expect individuals to acquire such skills independently and in advance of their employment. Then we expect them to market their skills. These are unrealistic expectations.
Of course labour mobility is highly desirable if it serves to mitigate the effects of industrial failure; but it cannot be argued that it is a precondition of industrial success. Job security is doubtless a bugbear in failing industries which require restructuring, but to suggest that it is an impediment to industrial recovery is nonsense.
7.6 p.m.
Lord Graham of Edmonton: My Lords, this is the speech that all noble Lords have been waiting for: it is the one before the winding-up speeches. I am delighted to follow the excellent opening to the debate given by my noble friend Lord Borrie. We are indebted to him.

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On Monday I attended a conference organised by the Fabian Society. It was launching a pamphlet called Sold short: Government and retailing. Around the table were representatives from Tesco, Sainsbury, Marks and Spencer, Superdrug, the Civil Aviation Authority and others. The raison d'être for the conference was that over the years governments, when talking about industry, were really talking about manufacturing industry and exports. Retailing as an industry has perhaps been neglected. The argument was not that it needed hand-outs and financial incentives because, as we all know, the major retailers are well able to look after themselves. What they were really pleading for in the Fabian pamphlet and in general around the table was that the retailing industry ought to be taken more seriously for its contribution to the national economy.
Britain's retailers have a massive impact on our daily lives. Be it prices, opening hours, location or wages, we are all affected by the way stores are run and regulated. Yet our politicians seem to have little to say about one of the key sectors of our economy. I was delighted to hear the contributions of the noble Earl, Lord Kitchener, and the noble Lord, Lord Wedgwood, who certainly did not neglect the contribution that retailing can and is making to the general economy. Therefore, I am very pleased about that. They will share my view that retailing adds real value to the economy. It has been the backbone of our economic growth for much of the past 20 years. Politicians should recognise that simple fact and act in the best interests of all sectors rather than pine after the "manufacturing good old days" which are unlikely ever to return.
Any political party which claims to protect the interests of consumers needs to work with the retailers who directly serve them. Many of the policy issues on the horizon—the protection of quality standards along the food chain; the regeneration of town centres; and the introduction of the single currency—will depend on effective collaboration between government and retailers. I believe that this Government (my Government) should seize the opportunity to develop a new partnership with the sector. We are not primarily concerned with the past. I believe that we start from a bright new beginning. Retailers and retailing are waiting and eager to make that partnership a vibrant, living thing.
One of the issues raised at the conference was the lack of a strategy. Most of the big companies have their own strategy. They know where they want to get to and the market penetration they want to achieve in various parts of the country, but nobody can point to what one might call a national strategy for retailing. Of course, that is difficult because we are talking about both big and small businesses. However, I detect a willingness on the part of major retailers to involve themselves with the Government in working on the development of the retail sector of our economy over the years.
Reference was made to the disparate way in which planning applications are considered. Of course, the ministry gives guidance on town-centre, edge-of-town and out-of-town developments, but decisions are left very much to the local councils. Speaking as a local councillor, like many noble Lords present, I say that that
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is right but that there is a positive lack—if that is not a contradiction in terms—of direction from the centre on how we can achieve a more vibrant and more efficient retailing industry. Many retailers are blamed for social and economic changes which are beyond their responsibility and control. Encouraging examples suggest that local authorities can work with retailers through town centre management to the benefit of local residents and shoppers. Best practice should be disseminated to stimulate urban regeneration and partnership between local authorities and retailers.
The expansion of the economy in the past 20 years has come largely through the service sector, including retailing, and not from the manufacturing sector. That trend has been matched across all OECD countries. Between 1975 and 1995 the output of UK service industries grew by 57 per cent. in real terms while the output of manufacturing industries grew by only 17 per cent. The service sector now accounts for almost two-thirds of GDP while manufacturing accounts for less than one-quarter. Within the service sector, retailing and distribution account for more than 10 per cent. of GDP. Those figures ought to impress.
I have the great pleasure of being the honorary secretary of the All-Party Group for the Retail Industry. Naturally, we look to the views of the British Retail Consortium, which represents 90 per cent. of retailers—all of the large ones and many of the small ones. In a Budget submission earlier this year, the consortium said that an efficient and competitive retail sector is a valuable contributor to the health of the UK economy in two important areas—control of inflation and job creation. The appreciation of sterling has lowered the cost to retailers of goods sourced abroad. Fierce competition in the retail sector has resulted in those savings being passed on to the customers. Annual retailed goods inflation in March and April was just 0.9 per cent., with the prices of many goods lower than a year earlier. Retailers can continue to play their part in controlling the rate of price increases if the Government avoid changes which impose extra costs on, or hamper the efficiency of, the retail sector. The existing cost and tax burdens need to be kept to an absolute minimum.
In addition to their influence in containing inflation, retailers are also significant employers, accounting for over 2.3 million jobs or about 11 per cent. of employees. Retailers created 75,000 new jobs in 1996 and there is scope for further employment growth in the sector if the costs of hiring labour do not become a disincentive.
The British Retail Consortium would welcome the early introduction of a competition Bill. It shares the view that the current UK system is ineffective and that a new Bill is therefore needed to address both restrictive agreements and the abuse of market power as well as the structure and operation of the competition institutions.
Retailing impinges on a great many of our social problems. That is why retailers in general welcome a review of the criminal justice system. The House will be aware that the retail industry arrests some 1.6 million customer-thieves a year, of whom 49,000 are convicted in a magistrates' court, from an estimated 5 million known offences. That situation clearly sends the wrong

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message and undermines any moral authority that retailers, schools and others may wish to instil. One way forward could be a "civil recovery" system which would address the fact that there are currently no tangible disbenefits for the majority of shop thieves. Such a system would not devalue crime; nor divert from it those who should be so diverted. Only retailers really appreciate the brake on efficiency and competitiveness suffered by retailers and, ultimately, by the consumer as a result of thefts. The Government should take that point on board.
Retailers in general would welcome a strategy to bring together policy making and implementation covering the environment, transport and the regions. They believe that that will be vital in developing the integrated planning and transport system which this country needs. An example is the vitality and viability of town centres. Retail outlets are subject to planning controls, but a key ingredient in the success of a town centre is accessibility. Retailers will be pleased to see that decisions about development and the infrastructure will no longer be taken in a vacuum. That is why they would welcome an integrated transport policy.
Much could be said about improving the competitiveness of British industry. We need to find a way to look more closely at the employer/employee relationship. There needs to be a rethink and that is why, through the BRC, retailers welcome and participate in the industry forum. That demonstrates that under new Labour partnerships with business can be constructive.
Finally, I should like to refer to a speech made by the Secretary of State for Trade and Industry, Mrs. Margaret Beckett, on 4th June this year, when she laid out a series of propositions upon which the Government's policy in this vital area will be predicated. Mrs. Beckett told the audience that the department often looked as if it was there for big business and not much else. She said that she would change that and that the Department of Trade and Industry would be looking to assist everyone. I am glad to see the noble Lord, Lord Burnham, in his place. When speaking for the Opposition, he made a splendid opening address and was bullish about the state in which the economy had been left. However, Mrs. Beckett told us to remember that we are the poorest of the G7 countries and that GDP per head in the UK is 8 per cent. below the OECD average. Despite many excellent firms, productivity in both the manufacturing and the service sectors lags substantially behind the productivity rates of our major competitors. Our share of world trade has fallen below 5 per cent. Despite welcome falls in claimant unemployment, the fact is that employment is still more than 400,000 below its 1990 level and nearly one in five households currently has no one in work. All that shows that while the noble Lord may select his statistics, I can select mine too. They are not incompatible; they are part of the overall picture.
I warmly endorse what has been said today. What we need is a fresh look arising from a fresh opportunity. Forget the past: there is a great deal of good will towards the Government from all sectors of industry. I very much hope that they have the courage to build upon it, not least because of tonight's debate.
7.20 p.m.
Lord Vinson: My Lords, I am indebted to the noble Lord, Lord Borrie, for inviting me to make a brief contribution in the gap. I apologise for not being in the House earlier to hear the other excellent speeches. There are many routes to competitiveness. The particular route to which I wish to speak briefly is the exchange rate. I believe that this matter was raised earlier by the noble Lord, Lord Ezra. I recall that during the early part of the previous Conservative Administration the policies being followed created a situation in which the pound went to two dollars. The effect of that dramatic rise in the exchange rate at that time was to obliterate the competitiveness of a great many British companies. Paradoxically, for somewhat comparable reasons, in the past six months the exchange rate has swung by a factor of 20 per cent. against many of our competitors. However good and efficient a company may he, very few have a profit margin that can absorb a swing of 20 per cent. in the exchange rate when it comes to making a deal overseas. Although the noble Lord, Lord Graham of Edmonton, is absolutely right to state the importance of retailing to the GNP today, it does not contribute much to the balance of payments or to our overseas tradables. It is for that reason that the competitiveness of the exchange rate is so vitally important.
The purpose of my brief contribution is merely to express the hope that this will be well considered when this debate is assessed and government Ministers are debriefed in their appropriate departments. Perhaps they remember that this time last year British Steel was, and still is, regarded as one of the most efficient steel-makers in the world. It has had to cut its prices dramatically and its profits will be cut dramatically. That is due entirely to the exchange rate. That will put pressure upon it to become even more competitive, but it cannot do so overnight. It will take some years to absorb a swing in costs of that magnitude. I hope that our policymakers, when looking at all the other factors that have been mentioned this evening to make British industry more competitive, will conclude that there are only three ingredients to national success and prosperity: productivity, productivity and productivity. In seeking to promote it, I hope they will remember that behind it all hangs the backdrop of the importance of the exchange rate and that our fiscal and monetary policies are so tuned to ensure that the price of sterling remains competitive.
7.23 p.m.
Viscount Thurso: My Lords, I also begin by congratulating the noble Lord, Lord Borrie, for bringing this extremely important matter to our attention. While agreeing with the point just made by the noble Lord, Lord Vinson, about the exchange rate, I cannot accept his comment about retailing. Retailing makes a very strong contribution to our balance of payments. As someone who has been greatly involved in tourism all of my life, I have spent much time trying to persuade retailers in London to contribute to the tourism marketing budget. Overseas tourists spend substantial amounts of money in Oxford Street and Bond Street.

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Some people have difficulty realising that overseas visitors to this country are an export and British tourists who go overseas an import. If I may, I should like to correct the noble Lord on that point.
I congratulate the noble Lord, Lord Burnham, on his arrival on the Opposition Front Bench. He painted an extremely rosy picture of the economy over the past 18 years with a majestically straight line of growth. I just happened to have in my hand as he spoke a paper entitled Economic Indicators that I obtained from the Library. It contains all kinds of wonderful graphs; I do not have a clue what they mean. I do not know a great deal about economics. I am sure that the noble Lords, Lord Desai and Lord Currie of Marylebone, would make far greater sense of them. However, I am struck by the fact that every single graph is like a yo-yo; it wings up to the top and then whizzes down to the bottom. The period covered is from 1975 to 1996. Even I can work out that if the graphs are winging up and down it can hardly be claimed that they show stable management of the economy.
The noble Lord, Lord Burnham, reserved his best shots for the minimum wage. There are a number of points that should be considered. First, average earnings in this country currently run at about £20,000 a year. If one takes an hourly rate of £3.50, for example, it produces an annual salary of about £7,000. If one takes a rate of £4 per hour the annual salary works out at about £8,300, if my mathematics are right. I believe that the noble Lord suggests that in order to have a competitive economy it is necessary for a certain number of people to be paid at a rate that is so low as to be virtually institutionalised slave labour. I cannot accept that. I am wholly in favour of the minimum wage.
Lord Burnham: My Lords, I thank the noble Viscount for giving way. The specific point I sought to make was about the effect of the minimum wage on inflation. No workman at the current level would accept an enormous increase paid to someone who was coming up to the minimum wage without taking the same increase plus a differential for himself.
Viscount Thurso: My Lords, I thank the noble Lord for making that point, but I disagree. I put in place in my own company a minimum wage of £4 per hour just over a year ago. I told my workforce that I believed that it was a just thing to do and that I was not increasing the wages of anyone else. My workforce fully understood the justice of the argument. I am confident that other workforces throughout the country will also understand it. There is absolutely no moral defence for the management of an economy whose legacy, however good the figures, is one of poverty and division such as we have in this country on an almost unprecedented scale. That is the true legacy of 18 years of Conservative management of the economy.
When I decided to intervene in this debate I asked one of my colleagues if we had a particular policy on competitiveness. His light-hearted answer was, "We are all in favour of it, but not too much." That light-hearted
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response, however, contains within it an extremely serious point and one which I would like to touch on before moving to the main points of the debate. We want to increase the competitiveness of British industry in order to ensure its success both at home and abroad, which in turn makes us more efficient in creating wealth and consequently delivers a better standard of living for our citizens. Thus, what we do in the wealth-creating process generally, and in particular in making ourselves more competitive, must be within a framework that combines long term and sustainable economic growth with social cohesion and a satisfaction of the aspirations of our citizens. It is important to remember that wealth creation is not an end in itself but a means of helping to deliver a socially cohesive and just society.
Noble Lords will, I am sure, recall the excellent report by the commission chaired by my noble friend Lord Dahrendorf entitled Wealth Creation and Social Cohesion in a Free Society which was debated last year. The noble Lord, Lord Borrie, touched on the very point in his opening remarks. I know that my noble friend would have liked to be in his place today; he was prevented from doing so by a long standing engagement. I am sorry that he is not with us as he would have made the point far better than I can. When we seek to increase our competitiveness and to become more efficient at wealth generation, it is essential that that is for the benefit of all our citizens and that we do not fall into the trap of either jobless growth or the creation of the working poor.
There is a huge range of factors that can impinge on the nation's industrial competitiveness. My noble friend Lord Ezra spoke about macro-economics. A number of other noble Lords have touched on other points. For example, the noble Lord, Lord Borrie, mentioned the transport infrastructure. I believe that there are three key areas that, more than any others, determine the wealth-creating ability of the nation: first, the economic environment; secondly, the availability and cost of capital; and, finally and probably most importantly, the quality and abilities of the human resource. I should like to touch on each of them.
It is generally accepted that stable economic conditions are a pre-requisite for successful long-term industrial growth. I believe that all three parties in their manifestos made that point. We on these Benches had long advocated that a main plank of achieving that stability was the creation of an independent central bank, as my noble friend said. It was with pleasure, a sense of flattery, and some amusement that we observed that virtually the first act of the Chancellor was to enact our policy. However, as already mentioned, monetary policy is but one part of the control of the economy. It is equally important to use fiscal policy to ensure the correct balance in the economy and a sustainable level of economic growth.
There is no doubt that the current strength of sterling, as pointed out by the noble Lord, Lord Vinson, in the past six months, has caused real problems for our exporters. I urge the Government therefore to look closely at fiscal policy. I have no doubt they will do so. I confidently expect an increase in taxation in the Budget.

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I turn to the subject of capital. The second major plank to which I referred relates to the cost and availability of capital. In a speech, referred to by the noble Lord, Lord Graham of Edmonton, the President of the Board of Trade, on 4th June, used one phrase which caught my ear. She said:
"The DTI too often looks like the department not for all business hut for big business. Under my leadership … we will do everything we can to promote enterprise and to assist small firms".
I am glad that the Government have recognised the importance of small business. I was staggered to discover that 99.5 per cent. of all businesses in the UK employ fewer than 100 people and that those businesses account for 29 per cent. of turnover and 51 per cent. of employment.
In terms of contribution to employment, small and medium enterprises are key to our future. In a Bow Group research paper published in March, the author clearly highlights the difficulties that SMEs have in raising finance, being so much dependent on overdraft finance. As a result, SMEs in the UK have often paid much higher interest rates than their main competitors and have been particularly vulnerable to recession.
Finally, I turn to the subject of people. I have kept this point to the end because I believe it to be the most important. By far the most effective way of improving competitiveness in British industry is through the development and training of the human resource. There is no quick fix, and nothing can be achieved overnight. It is of course essential that we invest in and improve our education system so that when our young citizens leave school they are properly educated and equipped. No one pretends that that objective can be achieved overnight by waving a magic wand. It will be a long haul. We on these Benches believe that it can be achieved only by a considerable increase in resources. The Government should look at the possibility of putting a penny on income tax to fund education. Were they to say openly and honestly to the people that the problem in education is greater than they supposed and that they intend to put another penny on income tax, I have no doubt that they would receive the full support of the vast majority of our citizens. Furthermore, that would have a beneficial effect on our fiscal policy.
The point upon which I should really like to touch concerns those already in work and what we can do to improve the quality of our current workforce. The noble Lord, Lord Currie of Marylebone, mentioned management education. I am currently chairman of the Master Innholders, a trade body of hoteliers which operates under the patronage of the Worshipful Company of Innholders. Last year I suggested to the worshipful company that a worthwhile way of supporting the industry would be to put together a series of bursaries to send middle and senior managers to management colleges before they were promoted to general managers. That idea was accepted and we had four bursaries for Ashridge and Cranfield. That was a great success. My point in telling your Lordships about that is not to blow my own trumpet but rather to draw attention to the excellent management colleges we have in this country, and, more important, to the rather sad
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fact that they are used almost exclusively by big business. The opportunities for managers to learn are ignored by smaller firms.
Cranfield recently sent me a fascinating paper entitled Developing Businesses Through Developing Individuals. Because I am running out of time I cannot tell noble Lords a great deal about it. I would recommend anyone interested in management education to get hold of that paper. It deals with wonderful things called "meta abilities", which are the cognitive skills of managers. It is well worth reading.
I congratulate the noble Lord, Lord Borrie, on having brought this matter before your Lordships. These are incredibly important challenges. I return to my main point of departure, which is that competitiveness must be within a framework of social cohesion. The wealth-generating process must be the servant, not the master. Above all, we must be clear that the objective which we are seeking to fulfil is to give all our citizens an inclusive, socially just life of dignity.
7.35 p.m.
Baroness Denton of Wakefield: My Lords, I, too, thank the noble Lord, Lord Borrie, for initiating this debate and those noble Lords who have participated in it, proving once again that this House is an unequalled depository of knowledge and experience which always brings added value to any subject. I, too, share noble Lords' pleasure in the speech of my new colleague at the Dispatch Box.
I hope that industry will read the debate and that someone will ensure that the Treasury reads it, because the Treasury will set the climate in which British industry is competitive and flourishes or wilts. It is not an easy task, but one thing is certain: it is on a global scale. Being the best in Britain is not to be sufficiently competitive. To achieve its objective of winning, British industry must be the best in the world. It must also be of size. Competition policy must be based on global not national standards.
Holding inflation is important, but not while letting the pound run away, as my noble friend Lord Vinson said. The noble Lord, Lord Borrie, said that giving the Bank of England control of interest rates would give business the stability that it wants. I agree that that is what business wants, but I fail to see that handing over decision-making gives stability. If you are to be competitive you learn never to say "never". The noble Lord, Lord Desai, might bring some of his flexibility aims to the attention of the Chancellor.
The noble Lord, Lord Borrie, said also that inward investors were put off by the xenophobic speeches at Conservative Party conferences. I have never met an inward investor so naïve as not to understand the nature of party conferences. I wonder how they will regard the noble Lord's statement this afternoon that it is wrong for skills to come from other countries.
The noble Lord, Lord Currie, drew attention to the weakness of British management. We need to benefit from competitiveness in all skills and we require openness in the exchange of skills. Much skill training is in place, but I hope that we will not say to those who

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qualify that they can only work in this country. That would be to their detriment and would not be along the lines of the Government's new friendly European policy.
I always recall that on the day I stood up to make my maiden speech, sheet of paper trembling in my hand, words honed and polished over several hours, the noble Lord, Lord Desai, stood up subsequently and made a brilliant maiden speech with his hands behind his back. Today he fluently said much of what I believe: competitiveness must be based on innovation.
The great news is that we are good at it. We used to struggle with the subsequent processes, and we gave away the opportunities because of that. Now, much too slowly, but steadily, design is valued. In Northern Ireland I saw unique creativity in software—the skills which had brought forward music and poetry in that island showed by the production of software a whole new medium in which innovation and creativity flourished. I share the admiration for retailing of the noble Lord, Lord Graham. That is an industry which skills people who often failed to benefit from their earlier education. It is sharp edged and globally competitive. I believe that it grows because it lets its young people through—it grows talent based on pure skill and not on age.
Manufacturing has suffered because it has not always done that. It has believed that somehow age and not ability brings skills. The attitude is slowly changing, but for the sake of competitiveness I should like to see it change more quickly. It will be valuable to encourage schemes such as Young Enterprise which share with children the excitement of industry. I still think that too many parents believe that the professions and the Civil Service, not the creation of wealth, hold the future.
If we are to be competitive we must accept that there will be winners and losers. I fear that we are close to the development of a culture of envy. As was said by the noble Viscount, Lord Thurso, it is important that in creating wealth we create a safety net. We must allow people to create wealth. I believe that Camelot and the windfall tax bring severe challenges to management. I wonder whether the noble Lord, Lord Currie, believes that a windfall tax is downsizing by legislation. I certainly share his fears of downsizing and believe that the tide has swung in recognising that that is not the way to grow. I believe that the Government could afford to carry out their programmes by encouraging the creation of wealth and not its restriction. One certainly needs every management skill one has in facing retrospective taxes of an unknown size.
Returning to competitiveness, when IBM and General Motors lost their way they invested in garden-shed operations. It worked. Companies must be left with resources to invest in research in partnership with academia. I heard some not so subtle pleas for increases in university salaries, but I am sure that I did not hear the requirement to be fat cats in ivory towers. As was said by the noble Baroness, Lady Lockwood, research is best done in partnership with business. The noble Viscount, Lord Hanworth, confirmed that competitiveness comes from working together; from
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working as a team and sharing the message. I believe that every Member of the House was filled with horror at the story of the gold watch recipient who, after 50 years, said, "Well, that was for the use of my hands. With a little more understanding you could have had my brain for free". I am not convinced that it is for the Government to legislate on what should happen. One of the best directors at Harland and Wolff is its senior trade union member, but that would not have worked a few years ago. There is a part of every company's growth which is best left to be flexible.
It would be wrong of me to stand here today without mentioning the area of my affections where I spent the past three years; indeed, it would be impossible. In many ways, Northern Ireland ideally shows the importance of competitiveness because politics work against growth. Yet Northern Ireland continues to grow. I was pleased to leave the Province with more people in work than ever before and with exports up 50 per cent. on 1992–93. It has benefited not only from the Government targeting assistance to companies capable of improving their international competitiveness but also from business taking up the challenge, rejecting a dependency culture and forming the Northern Ireland Growth Challenge in order to plan strategies in sectors in which Northern Ireland is competitive. It works in many areas, including, my noble friend Lord Astor will be pleased to learn, exercises to reduce the cost of industrial injuries. There can be nothing better than industry recognising its needs and then organising itself to meet them.
Perhaps I may move to another favourite topic, which is the role that women can play in industrial competitiveness. If a nation uses only half of its resources there is no way it can be competitive. At the recent CBI dinner there were about 1,200 men and 50 women. We must change that. It means more encouragement in the education system, in training and in flexibility in the work place and more opportunities for women as their families grow up to return to a career, not just to a job. It is important that their skills are harnessed if we are to be globally competitive. However, I cannot resist asking noble Lords opposite how they reconcile their minimum wage policy with the appointment of a Minister for Women who is not paid.
I believe that there is a whole debate to be held on the competitiveness of small firms. The noble Viscount. Lord Thurso, drew attention to the part those companies play in industry. There is a need to recognise what will work for them in terms of the size and timing of their programme. My definition of a small firm is not the number of its employees but a company in which at the end of the day work comes first and no one else does the work tomorrow. It is where there is great pressure on resources and there is a need to concentrate on programmes for that sector. I pay tribute to the DTI regional supply network which helps the local sourcing of materials, parts and components and encourages the linking of small and large companies to the benefit of both.
In order for British industry to be competitive, government and industry must work together. They must talk to each other and listen to each other. That is

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why we were happy to see the Government appoint to their Front Bench a senior industrialist and were pleased when he was named Minister for Trade and Competitiveness in Europe. But will there ever be a debate in your Lordships' House more relevant to that Minister's role than today's debate, and yet again he is not here to reply. I worry that our expectations of the role might be too high.
The noble Lord, Lord Borrie, explained that we cannot build competitiveness for industry with only one government department. I hope that the Deputy Prime Minister will recognise the fact that, if he does not give industry the roads and the airports that it needs and does not contain the fuel costs, if he does not ensure environmental changes are brought in at a speed which industry can absorb, and if the planning process is too long and expensive, we shall never encourage competitiveness, whatever the skilling levels. If the Prime Minister cheerfully accepts all the demands of the social chapter without close and regular consultation with industry, I fear that we may lose competitiveness.
I believe that today has seen a useful debate and that this has been an afternoon well spent.
7.48 p.m.
Lord Haskel: My Lords, this is a subject in which I have been passionately interested for many years. Therefore, I too am most grateful to the noble Lord, Lord Borrie, for tabling the Motion on competitiveness. I congratulate him on his role in the Competition Policy Advisory Group as one of the three wise men. He knows that a strong competition policy is vital for the competitiveness of our economy. I also welcome the noble Lord, Lord Burnham, to the Opposition Front Bench.
In our Manifesto for Business, we indicated that there is no issue more fundamental to the prosperity of this nation than the competitiveness of our firms. Not only does it enable us to sell our goods and services on world markets, raise living standards and improve our public services, but competitiveness is essential to create a fairer society in which opportunities are available for all.
This Government recognise the importance of competitiveness for commercial and social reasons. We shall work in a new partnership with business—employers and employees—to improve our competitive position. We have brought the competitiveness unit back where it belongs: to the DTI to reflect our commitment to working with business to achieve improved competitiveness in Britain.
Some noble Lords may say that there is nothing new about that commitment to competitiveness. After all, the previous government published three competitiveness White Papers. Those, however, were based on a partial view of our economic circumstances, and offered a narrow set of solutions.
Our approach to competitiveness will start from an honest appraisal of Britain's strengths and weaknesses. Not that everything the last government did was wrong. They got some things right and we shall not make changes where that is the case. But their competitiveness White Papers tended to gloss over some of our
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weaknesses. We do have fundamental structural weaknesses which must be addressed. Many noble Lords have listed them. We have many excellent firms but, although we have narrowed the gap, productivity in manufacturing remains 25 per cent. below that of France and Germany and even further behind the USA. As my noble friend Lord Graham reminded us, employment is still over 400,000 below its 1990 peak. The previous government's skills audit showed that our workforce is less well educated and skilled than that of our main competitors. In the past decade income inequality has grown faster in the UK than anywhere else in the OECD, except for New Zealand.
By not properly acknowledging those weaknesses, the previous government's efforts to improve competitiveness, while welcome, did not go far enough. In addition, they failed to build common ground with all those involved in industry, seeming to forget that employees are just as vital a part of business as employers. They often talked as if improving workers' pay and conditions was always bad for competitiveness. Perhaps with the notable exception of the noble Lord, Lord Vinson, they forgot that to be competitive productivity is as important as hourly wage rates. And, as the noble Lord, Lord Wedgwood, reminded us, quality is even more important. They forgot that a competitive economy needs to provide opportunity for all people to use their talent in the economy. The noble Viscount, Lord Thurso, remembered that.
The noble Lord, Lord Burnham, says that all is well, but clearly there is an ongoing challenge. The extent of competition accelerates every year. As we improve so do our competitors: in Europe, in south-east Asia, in the Americas and elsewhere. We must run to stand still. The challenge is all the greater because we cannot compete with countries like China on wages but we can on quality, service and innovation. That is the way forward. We must build an innovative, high skilled, high technology economy.
Many noble Lords have spoken of flexibility. We need what the Government call flexibility plus—flexibility plus investing for the long term: in people as well as in equipment. We must have flexibility plus innovation and flexibility plus creating a culture in which we face up to weaknesses and maximise our strengths. Flexibility is not just easy hire and fire in the absence of regulation but the ability of people to be flexible at work.
Unlike the Opposition, the Government recognise that the economy is both social and commercial. Our vision is of one nation sharing our increasing prosperity, of opportunity for all, not just the few. We simply cannot afford to waste any of our workforce. After 18 years of widening income equality and marginalisation this is indeed a radical vision. Through measures such as welfare to work and initiatives to improve the skills of the workforce we will ensure that all our people contribute towards Britain's improved competitiveness and have a stake in it.

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So that is the task. The Government cannot do it alone. We must pursue it in partnership—Government, business, the workforce together. To be a government for business we must also be a government for all our people. And Britain works best when we work together.
I assure the noble Baroness, Lady Denton, that it certainly is not the job of government to tell people how to run industry. We will not try to do the job of industry. Where we are different from the previous Government is that we will not fail to do our own job. This Government will listen, then act. The President of the Board of Trade has invited a range of businesses to take part in an advisory group on competitiveness. She will host a competitiveness summit in July, where a new competitiveness audit will be launched. This will be the benchmark for our competitive position. Where progress has been made, this Government will be pleased to report it. But we shall also face up to current and potential problems. Future achievements will be judged against this audit.
Various aspects of our competitiveness will be examined by a working party, some sessions of which will be chaired by DTI Ministers. Their task will be to produce advice which will be taken into account in a new competitiveness White Paper to be launched early next year.
The noble Lord, Lord Ezra, spoke about the relationship between government and industry. He spoke of stimulation, and I agree with him. As I said, the Government cannot and should not tell industry what to do, but it can provide the right market incentives and the right institutional structures to produce competition and growth. I agree with the noble Lord that the most important contribution that the Government can make to business is economic stability with low inflation.
The noble Lord, Lord Burnham, told us how well the economy is doing now, but business has experienced enough boom and bust under the previous government. I assure my noble friend Lord Ponsonby and the noble Viscount, Lord Thurso, that we are committed to long-term stability which contributes to lower inflation, higher investment and an improvement in most other economic indicators, including the containment of public expenditure. My right honourable friend the Chancellor of the Exchequer has already laid the foundations for that and many noble Lords have congratulated him on his actions.
As well as stability, there are many other facets to competitiveness. The noble Lord, Lord Borrie, mentioned integrity and many noble Lords have mentioned the long-term view. To build the innovative, high skilled, high technology economy that I have described, we need to improve the performance of individual firms and individual workers. We have excellent firms, but too many firms do not live up to their potential. Noble Lords will recall that while in Opposition praised the DTI's work with sectors of practice. Including more effective of technology. Much good work has been, done here and I am the first to say so. This Government
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will build on that to create a genuine and constructive partnership to improve industry's competitiveness and increase national wealth and employment.
We shall work with all sectors of manufacturing and service industries, including retailing, to build on their strengths and to tackle their weaknesses. As my right honourable friend the President of the Board of Trade said in her speech on 4th June, there will be precisely targeted support and small firms will be a priority for us.
On education and training, we shall lay foundations for the long term. I agree with my noble friend Lady Lockwood and others that the demands on those in the workforce increase all the time as layers of management are removed and the concept of empowerment takes root. We shall equip our workforce to cope with that by making the raising of standards in schools a key priority. We shall set new targets in relation to the three Rs. I assure the noble Lord, Lord Wedgwood, and my noble friend Lord Ponsonby that we shall address the variability mentioned in the recent report about NVQ and GNVQ standards by improving quality assurance and assessment.
Many noble Lords mentioned management as the key element in competitiveness. I agree with them. A commitment to innovation, a willingness to invest resources in the long-term, the vision to unlock the potential of the workforce—these are all aspects of management which can make the crucial difference between mediocre performance and excellence by companies. Many British companies have world-class management. One sure sign of that is their recognition that they need to improve continuously. However, as my noble friend Lord Currie told us, many more, particularly among the smaller firms, are weak in this area. Many firms of all sizes are complacent and underestimate how much they need to raise their game.
This Government will continue to help business to help itself by spreading best practice, creating standards and providing bench-marking measures. We must ensure that people have the opportunity continuously to upgrade their skills. The University of Industry will make a vital contribution to lifetime learning. Our overall approach to education and training can be summed up in one word—improvement.
Many noble Lords spoke about the need for competition policy. My noble friend Lord Borrie reminded us of the previous government's poor record in that regard. There is a need to bring forward long overdue legislation to introduce prohibitions on anti-competitive agreements and abuse of power. This Government will introduce a competition Bill in its first parliamentary Session. My right honourable friend the President of the Board of Trade has made it clear that competition will be the primary consideration in her reference decisions on merger cases.
I agree with noble Lords that competitiveness must apply to all aspects of our economy to complete the jigsaw, as my noble friend Lord Ponsonby put it. Certainly we need economic strength, design, innovation and health and safety. I congratulate the noble Lord, Lord on his work with RoSPA. I also agree that there is a need for management education and for links between

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the universities and companies, about which my noble friend Lady Lockwood spoke. Similarly, I note what the noble Earl, Lord Kitchener, said about better labels and catalogues. He also spoke about products made in Britain. Incidentally, I was very much involved with the first "Better made in Britain" exhibition which took place in 1978 and which was opened by the then Prime Minister, my noble friend Lord Callaghan. That was an important initiative on the part of the retailing industry. Indeed, I agree with the noble Lord, Lord Wedgwood, that we need trade shows to improve our selling and marketing overseas. There is no single solution; we must get the balance right. The problem is that the balance is changing all the time as markets change.
My noble friend Lord Monkswell and the noble Lord, Lord Ezra, spoke about the need for investment. Our manifesto made clear our commitment to consider how the tax system could promote longer term investment. My right honourable friend the President of the Board of Trade has invited the new Advisory Group on Competitiveness to report on the most effective way to stimulate and promote investment, including investment in manufacturing, in the present economic climate. I have in mind investment in design, in innovation, in training and in new equipment. I agree with noble Lords who spoke about the need for no investment in down-sizing.
My noble friend Lord Currie, and others, spoke about the need for skills. We recognise that the economies of countries that have higher skills levels grow faster than those of other countries at the same level of income. Indeed, several noble Lords reminded us that some firms are looking overseas for the skills that they need. If we harness the vitality, dynamism and the many talents of the British people, I have no doubt that our economy will move from strength to strength. I should tell the noble Baroness, Lady Denton, that we are not concerned about people taking their skills and training abroad. Training and skills belong to the individuals concerned and they can take them anywhere they like. That is an important part of a free economy.
I agree with my noble friend Lord Hanworth that good companies have undertaken training and broader education to enable staff to be more flexible and to demonstrate that they value people as individuals and as employees. Indeed, I take careful note of his cautionary tale.
My noble friend Lady Lockwood, and other speakers, emphasised the importance of school and industry links. There is a mutual benefit involved which we will encourage. We shall continue the work of the previous government. I welcome the remarks made by my noble friend Lord Ponsonby about research and I heed his wariness about NVQs and GNVQs and the need to upgrade vocational qualifications.
Several speakers mentioned the social chapter. By signing up to the chapter we are playing our full part in Europe and ensuring fairness for our workers. I do not agree with the noble Lord, Lord Burnham, that by doing so we are merely transferring decisions to
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Brussels. The Government have undertaken to examine any new measures proposed under the social chapter to see whether they will have an impact on competitiveness. Where a measure would threaten competitiveness the Government will oppose it. We will deploy our influence in Europe to ensure that the social chapter develops so as to promote employability and competitiveness, not inflexibility and high social costs. In the past few weeks there has been a major shift in priorities throughout Europe in that direction. I can only say that my 30 years' experience of running a business has taught me that people work better in an atmosphere of trust and co-operation rather than in one of fear.
Competitiveness is part of our policy of inclusion and fairness. It matters because only by being competitive can we ensure that there is the opportunity for everyone to participate fully in our economy. It is also the only way to ensure that all consumers get the best value-for-money products and services. That is the real "trickle-down".
There are no easy answers and no quick fixes. It is a long-term issue that requires serious analysis and an ongoing consensus. It involves all sectors of the economy, including services and manufacturing. There is also an international dimension. Like the noble Baroness, Lady Denton, I welcome the appointment of my noble friend Lord Simon as Minister for Trade and Competitiveness in Europe. It shows our commitment to the need for constructive policies at the European Union level, as well as at the national level. We will work in partnership with business to identify what needs to be changed and the best way of making those changes. Decisions will be based on what works, rather than on dogma. We shall certainly be open to ideas from all.
If there are any points to which I have not responded this evening, I shall write to noble Lords within the course of the next day or two. In conclusion, I should stress that everyone has a role to play in this effort and everyone will be able to share in the prosperity that will result.
Baroness Denton of Wakefield: My Lords, before the Minister sits down, perhaps I may ask him whether he can give us some guidance on timetabling as regards policy implementation. There is an advisory group which is due to report, an audit in process and a White Paper to be published. Are we to assume that the Government will collect the information from those sources before their precise targeting on allocation of resources is under way?
Lord Haskel: My Lords, I should tell the noble Baroness that such matters are still under consideration. The various advisory committees have yet to meet and the timing of their work is very much a matter for them. However, I can assure the noble Baroness that my right honourable friend the President of the Board of Trade is most anxious for this work to be carried out quickly. Some committees are already meeting and the intention is that this work will be carried out quickly.
8.10 p.m.
Lord Borrie: My Lords, I thank my noble friends and indeed noble Lords from all parts of the House for their effective contributions. Indeed there was a series of contributions covering a wide range of matters relevant to competitiveness. I congratulate the noble Lord, Lord Burnham, on his first appearance on the Opposition Front Bench.
I wished the word "industry" in the Motion to be treated widely, and I am delighted that it has been. Retailing industry, services and financial services have been covered as well as manufacturing industry. I was delighted that noble Lords took a broad view as regards the matters which are relevant to competitiveness, including human resources—as the noble Viscount, Lord Thurso, put it—skills training, education and even matters which I must admit I had not contemplated but which I now fully understand are relevant to competitiveness. I refer to safety which the noble Lord, Lord Astor of Hever, mentioned. I am grateful for the contribution in the gap by the noble Lord, Lord Vinson, on the importance of currency stability as regards competitiveness. We have had an excellent debate. It only remains for me to withdraw the Motion standing in my name. I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Tourism
8.11 p.m.
The Earl of Bradford The Earl of Bradford rose to ask Her Majesty's Government what measures they propose to take to ensure the continued growth of tourism to Britain.
The noble Earl said: My Lords, I hope your Lordships will forgive me for once again returning to a subject that is dear to my heart, and occasionally to my wallet, which is why I must declare an interest as president of the Wrekin Tourism Association, owner of Porters Restaurant, chairman of Weston Park Enterprises and president of the Master Chefs of Great Britain.
First, I welcome the noble Lord, Lord McIntosh of Haringey, to his position on the Front Benches opposite. His daughter-in-law, a delightful and lovely young Australian lady, worked for some time at my Porters Restaurant, so I feel we already have something in common.
Secondly, I thank in advance all the noble Lords who are taking part in the debate this evening. It illustrates the importance of the subject that we have as many speakers as in the previous debate. I note that there seems to be a slight imbalance in that nearly half the speakers come from Scotland—it is quite a notable gathering of the clans—but I feel that they should take notice of the fact that Scotland receives considerably more in grant for promotion per head of population than does England.
Unfortunately the previous Government never seemed to understand the difference between investment that paid back, as in funding the promotion of tourism, and spending, as in "kiss it goodbye" with no actual visible financial return. Always one heard that blandly quoted
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excuse, "no hypothecation"—the method by which the Treasury absolves itself from any responsibility in making positive decisions by continually stating that it needs to keep government spending under control.
Now we have a new Administration which I hope is receptive to sensible proposals, and which is certainly prepared to stand up for its pre-election pledges. It is already quite apparently demonstrating that it has different ideas from those of previous Labour Governments. The Government have a clearly stated commitment to bring down unemployment which, although it has decreased considerably from former high levels, is still well above the post-War average. The Government particularly wish to get the youth and long-term unemployed back into jobs. I wish to demonstrate to the Government an easy and relatively inexpensive way to achieve that laudable aim, and at the same time ensure the continued growth of an industry projected to become the world's largest by the year 2000. It is an industry that already produces 5 per cent. of gross domestic product in Britain, and employs over 1.7 million people.
Regrettably, tourism to Britain went through a period of relative decline under the previous Administration. I refer to its falling share of world tourism, its poor standing in the European league tables of growth in tourism, and its appalling balance of payments performance, from being in the black in the early 1980s to a still increasing deficit of £3.9 billion.
Professor Stephen Wonhill of Cardiff University has demonstrated that it takes an increased tourism spend of only £28,500 to produce one new full-time job. If we had merely maintained the previous balance of payments position, we would have expanded employment in Britain by over 150,000, as opposed to effectively exporting the jobs instead. All in all, that was an exceedingly negative performance. Yet estimates by the World Travel and Tourism Council suggest that the UK travel and tourism industry presently contributes well over £25 billion in tax revenue to the Exchequer.
Some people have stated that, given the size of the industry and its relative success, it should raise the money for its promotion from the private sector. However, 175,000 of the 225,000 tourist businesses are owner operated. How would they ever manage to promote effectively unless it was done centrally and paid for by the Treasury? In fact the niggardly amount allocated to the statutory bodies to promote tourism to Britain is a paltry £93 million in the current year; a figure that has not been raised in real terms for the past 18 years. Surely, given all the evidence, including that of the previous Select Committee, chaired by Gerald Kaufman, a Labour Member in another place, the argument for increasing this sum has been proven time and time again.
During that same period tax upon tax has been loaded onto the industry. VAT increased from 8 per cent. to 17.5 per cent. There was the imposition of the airport tax, which is now raising £400 million a year, many times the annual grant, and which is about to double as a result of the previous Budget. There is also the horrendous financial effect of business rates. Now is the time for the Government to stop just taking and instead to support; to

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spend sensibly to achieve some necessary ends. However, there are certain factors that also need to be taken into account. Tourism is not necessarily a boon to everyone, as one business's or town's benefit can be another person's nightmare. It must be sustainable and produce a satisfactory return in compensation for the undoubted burden that it can create on this country's infrastructure, whilst the effect on the local population must also be considered. After all, how many people would have predicted that some simple amusing stories written by a vet or a television series about three elderly gentlemen behaving irresponsibly would have transformed life in two rural Yorkshire villages and altered their character for ever?
It is absolutely vital that we look at re-orientating how we target potential visitors and stop the constant pursuit of ever-increasing numbers. Instead we must turn our attention to raising the overall spend by attracting the business traveller and the more upmarket tourist. As many of our attractions are what might be termed "real history", they can only cope with limited numbers going round their facilities before they begin to suffer under the strain. If one of the important aims of attracting tourists is to pay for the upkeep and improvement of our great buildings and institutions, we have to be careful that the patient is not overwhelmed by numbers, and ultimately succumbs under the overload.
Surely it is self-evident that Great Britain plc derives greater benefit from catering to one person splashing out £5,000 on a luxury trip than from 100 parting with just £100 each, or even 1,000 spending just £5. This is not being elitist, merely practical. However, on studying the reaction to my recent statement that we might need to consider limiting low spending cross-Channel day visitors to London, who even bring their own packed lunches, one might have thought that I was a latter day Marie Antoinette saying, "Let them leave their baguettes at home and buy British cakes"!
We must encourage the development of more out of season tourism, as we shall derive greater benefit by boosting full-time employment. Most importantly, we need to educate potential tourists that Britain is not just London and persuade them to be adventurous and move out to other parts of the country.
Another geographical problem is that the two major airports, the ferry ports and Eurostar are all based in the south east of England. We would all gain, and spread the benefits of tourism, if more visitors could be persuaded to enter Britain through gateways in the rest of the country.
That is why projects like Manchester Airport's second runway are so important. Perhaps Swampy might feel slightly differently about it if he realised how much unnecessary traffic the project will remove from the roads by giving people in the north of England better and more convenient services nearer to where they live, while also providing an entry point to Britain which should be closer to many visitors' ultimate destinations.
Let us hope that salutary lessons will have been learned by scrutinising the previous Government's attitude towards tourism promotion, and that by examining the reasons for their relative failure the new Administration will produce a very different plan of action. After all, it
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would seem that increased spending on tourism promotion would be in accord with all their aims. Surely there cannot be any other kind of government expenditure which achieves all the following: a net effect of actually raising revenue; a reduction in unemployment; and a positive impact on our balance of payments.
8.21 p.m.
Lord Graham of Edmonton: My Lords, what a splendid opening to a reunion of the old lags—the repertory company is assembled once more! The only difference is that the Government have changed. Let us hope that the attitude of the new Government will also have changed. However, I congratulate the noble Earl on his opening remarks.
I have the needs of the consumer much in mind, with my background in the Co-operative movement to guide me. I wish to share with your Lordships what has happened as a result of the impact of tourism upon a not inconsiderably-sized business, the Co-operative movement.
Over the past five years there has been considerable rationalisation within the travel industry. This has led to formal links being developed between the major high street travel agency chains and the key tour operators. Those links are between Thomson Tour Operator and Lunn Poly, Airtours and Going Places, Sunworld and Thomas Cook, and Inspirations and A.T. Mays. That is vertical integration.
In order to counter that move, the majority of the retail co-operatives formed an alliance under the banner of Co-op Travel Limited. That created a group of 432 travel agencies which is the only truly independent group of any size within the United Kingdom. The function of the alliance is to negotiate with tour operators as a group, improve the commercial terms, and thereby reduce the costs of holidays to Co-op clients. The retail trade industry has been discount led over the past few years, and therefore without the ability to enhance our commercial terms the Co-ops would not have been able to compete in the high street and as a result consumer choice would have been restricted still further.
Let me illustrate the changes that have been made. In 1974 the Co-op travel turnover was £12.6 million; this year it has grown to £680 million. In 1974 it employed 220 people; it now employs 2,400. That indicates that when we talk of the tourist industry it is a very disparate, wide organisation, a point mentioned by the noble Earl, Lord Bradford. People think of package holidays, going abroad or visiting this country, but there is a great deal more to tourism.
I was delighted to see earlier this year that the Labour Party has produced a strategy for tourism and hospitality called Breaking New Ground. I am sure that the Minister will comment on that. I am delighted to note that the noble Lord, Lord McIntosh, will speak as a Minister for the first time in this debate. He will

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have noted the intention of the Government to produce a new development of tourism Act. We are told that,
"The new Act will build upon the sound foundations of Labour's 1969 Act. [It will concentrate on] updating tourism structures, enhancing standards in service and provision, introducing a co-ordinating mechanism for overseas tourism marketing [and] encouraging partnerships between local authorities, tourist boards and the private sector including hospitality interests"—
whatever all that means.
We have had not just promises but assurances that everything will be all right. The noble Earl touched upon the point of the ludicrous amount of spend by the Government direct to the tourist boards out of the enormous sums of money which tourism brings into this country. We know that the figure is ludicrous. I believe that it is £90 million to the tourist boards, and that has to be sub-divided to the regions.
Perhaps I may conclude with a renewed plea for a Ministry for Tourism and a Minister of Tourism. Many of our major competitor countries have such a structure. It concentrates the mind wonderfully. It elevates and enhances the stature of tourism and indicates that those countries believe that tourism is vital to the economy. I, too, believe that it is vital to our economy.
Perhaps I may ask the Minister to comment on three issues. I refer, first, to the unfairness of the recently imposed insurance premium tax whereby a tax rate of 17.5 per cent. is levied on policies sold by travel agencies but only 4 per cent. on policies sold direct to the public by insurance companies. Whoever that benefits, it is punishing travel agents. Why?
Secondly, are the Government concerned at the growth of the Internet, with its dangers to consumer protection compared with that provided in the high street?
Thirdly, and finally, can the Minister comment on the situation if and when Scotland and Wales secure devolved powers? Will he agree that there will still be a need to maximise co-ordinated marketing overseas with a strengthened BTA? I thank the noble Earl for allowing us to air an important topic.
8.27 p.m.
The Earl of Mar and Kellie: My Lords, I, too, am grateful to the noble Earl, Lord Bradford, for drawing my attention to this short debate. I must declare a non-pecuniary interest. I am a member of the Council of the National Trust for Scotland and the Clackmannanshire Heritage Trust.
There is no doubt that tourism makes a substantial contribution to the Scottish economy, achieving at least an annual turnover of £2 billion. Clearly tourism demands that visitors must be attracted to a locality in preference to other locations, have a range of places in which to stay, have many things to see and do and have a means of both getting to the area and getting around. Similarly, any visitor attraction needs to provide three basic services: somewhere to park, a "loo" and a cup of tea. After that, visitors are ready for whatever the attraction can offer them.
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In Clackmannan we have the historic background and layout of a medieval village built on a crag-and-tail hill, with a 15th century tower-house related to the Bruce family, and local walks which take in parts of the Mar and Kellie estate. There is adequate parking space. There are nasty public loos, and nowhere for a cup of tea. The issue of the dismal public loos raises an often ignored fundamental of a tourist economy: residents in the area must want tourism. Having strangers poking around may not suit everyone. The residents need to believe that they benefit from what they may feel is an intrusion.
The off-putting public loos are mainly the result of vandalism. Of course I do not suggest that vandalism to these facilities is directly aimed at stifling an embryonic tourist economy. It is obviously the result of much deeper problems. That there is no tea room is something of a commercial Catch-22 situation. I have no doubt that an entrepreneur would open a tea room if the tourist market was there, but we cannot market Clackmannan as a tourist venue until there is one. There is a solution in the form of temporary intervention by the state, either by the local tourist board or by the Clackmannanshire Council.
I now turn to experience of the early stages of running a tourist attraction. Ten years ago my late father and the chief executive of the then Clackmannan District Council drew up an agreement to repair and bring into public use the Erskine family's historic home, Alloa Tower. The district council backed the project and appointed a dynamic project officer, in the person of Mr. Andrew Millar, to make it happen. It has happened, and Alloa Tower will be opened by Her Majesty next month.
In the interim, the Clackmannanshire Heritage Trust has been opening the tower on a daily basis in the summer months, under the management of the National Trust for Scotland. Funding from the lottery has been delayed by a year, so we are left to run the tower without the tea-room in the stables. I tell this story to draw out the operating problems of a tourist attraction. We have parking, loos, facilities for taking people's money and completely unbiased stories to tell the visitors about the tower and the contribution of the Erskine Earls of Mar and Kellie to Scotland's past, and no doubt the mess we are currently in!
It is the temporary lack of a tea-room that shows up. As the leader of what feels like a thousand guided tours, I feel the missing link of not being able to sit down with the visitors afterwards and speak with them informally or even listen to them. Curiously, during the nine-year repair phase this was accepted as I led tours around the ever less derelict towerhouse.
I look forward to the reply of the noble Lord to the Question. I have not troubled him at all. I hope that increased and well targeted investment in the tourist industry will be part of the new Government's strategy.
My noble friend Lord Thurso, who is an undoubted professional in this industry, will be glad that I have not distorted the tourism strategy that he has developed for these Benches. May our tourist industry flourish.
8.31 p.m.
Lord Palmer: My Lords, I, too, thank the noble Earl, Lord Bradford, for asking this important Question tonight.
I must declare an interest as my home is open to the visiting public and I am chairman of the Historic Houses Association for Scotland, which represents 40 of the largest privately owned stately homes and castles open to the public and last year we were enjoyed by 2 million visitors thus generating major public benefit.
Scottish tourism generated £2.4 billion last year. This included £389 million from within Scotland, £1,100 million from the rest of the UK and £935 million from overseas. So these figures prove how vital the tourism industry is and prove how important it is for the Government to continue to support it. In the past five years overseas tourism in Scotland has grown from £578 million to £935 million, an increase of 62 per cent. There cannot be many other industries which can claim such an increase.
Last year. Scottish tourism sustained 177,000 people in employment, which is some 8 per cent. of the Scottish workforce. It is hoped that with government support a further 20,000 jobs will be created before the turn of the century.
Many of Scotland's traditional industries—coal, steel, textiles, fishing—have declined and now country sports are also under a very real threat. Country sports keep the countryside alive and well—without them the countryside would literally die. Country sports sustain 60,000 full-time jobs and indirect employment is estimated at a further 31,000 full-time jobs; and I urge Her Majesty's Government to give no support whatsoever to Mr. Foster's Bill to outlaw hunting. The countryside rally in Hyde Park on 10th July will prove just how many people depend on country sports for their livelihoods and their very existence.
In many areas of Scotland tourism is the only growth industry with the prospect to create and safeguard future jobs on any meaningful scale. It has the potential of becoming the industry upon which the future of many of Scotland's small and medium-size enterprises depend. It is for that reason that government support is so vital.
Tourism regenerates local culture, providing amenities and benefits for visitors and residents alike. It is no surprise that tourism features so strongly in the Scottish economy, in the industry portfolio of the Scottish Office, and in the economic development plans of all local authorities.
Scotland has a rich inheritance, and her national assets are world-class in tourism terms. Her heritage, her environment, her natural history, and her culture provide a product which can stand beside the leading destinations of the world.
Scotland has a unique and distinctive brand image, evolved over years of emigration, pageantry and, crucially, the resourcefulness and success of the whisky industry. Doctors the world over have endorsed it for its medical qualities!
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A recent survey of "Tourism Futures" by the Henley Centre concluded that tomorrow's tourist is looking for: a genuine heritage; a quality environment; active leisure; and a fulfilling experience. All these things Scotland can and does supply. The same research indicates that tourists also expect: good quality accommodation; appetising food; quality service; and affordable and efficient transport.
In the field of training we have been most deficient in the past. However, more than 26,000 people have completed the Scottish Tourist Board's "Welcome Host" scheme and a further 3,500 have completed "Scotland's Best".
Seasonality remains an Achilles Heel; more than half of the overseas visitors to Scotland are here during the three-month period June/July/August. A genuine 12-month tourism season is needed to ensure the success of many of the smaller businesses, and to provide quality and viable employment for those in the industry. This again is where country sports are so vitally important for Scotland.
We know that change lies ahead and so far as Scotland is concerned we look forward to an understanding of the extent to which a Scottish parliament will be involved in the promotion and development of this vital industry to the Scottish economy.
There are exciting times ahead for the UK tourism industry and for Scotland in particular and I hope and pray that the Government will give the tourism industry the support it so rightly and justly deserves.
8.35 p.m.
Viscount Montgomery of Alamein: My Lords, while not in any way dissenting from anything that has so far been said in this splendid debate on what is a vast subject, I want to move away from the tribal areas, controversial though they may be, and concentrate on two issues which arose in the debate on licensing reform introduced by the noble Viscount, Lord Thurso, on 29th January. I have spoken many times in this House on licensing reform. It is an issue that directly affects the restaurant trade, which plays a major role in tourism in the United Kingdom. I must declare a non-pecuniary interest as Patron of the Restaurateurs Association of Great Britain.
The first issue concerns supper hours certificates. The RAGB hopes that the permitted hours for serving drinks with meals can be extended to midnight on weekdays and 11.30 p.m. on Sundays, without the need for a supper hours certificate. In practice, such certificates are rarely refused, so the requirement is merely a bureaucratic imposition on what are, generally speaking, extremely small businesses.
The second issue concerns extended hours orders (EHOs). At present, if a restaurant wishes to serve drinks with meals up to 1 a.m., there is an even more complicated procedure. First, a restaurant needs a supper hours certificate, and then has to provide entertainment with a minimum of two live musicians. That is costly, impractical and severely limits consumer choice since

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many customers want to dine late and have quiet meals. The RAGB hopes that the entertainment requirement can be dropped in order to qualify for an EHO.
In the debate on 29th January, the noble Baroness, Lady Blatch, then speaking for the Government, stated (at col. 1238) that the matters to which I just referred were being studied and that possibly a short licensing amendment Bill might be required. We now have the splendid and robust noble Lord, Lord McIntosh of Haringey, on the Front Bench speaking for the Government. That is very welcome. I know that he has a great deal of knowledge on this subject. I have already given him notice of these matters, so I hope that in replying he will be able to comment as to whether there has been any progress and when we might expect a solution. There are a whole number of other licensing issues which need simplification. I appreciate that the noble Lord may not have enough time in replying to mention them; perhaps in those circumstances he could write to me, and to others who are interested in the subject subsequently.
The proposals that I have mentioned are part of a most desirable move towards deregulation. They would simplify life for an industry which plays a major role in our national life and provide a better service to tourists, both national and international, and to the community at large.
As I have two more minutes, I shall stray on to one other subject which I have not talked about before; namely training, which was mentioned by other noble Lords. The RAGB runs an annual event to award a major prize to the young chef and young waiter of the year. This award attracts enormous attention and is a great stimulus to people who usually go on to other successes. Likewise, the Academy of Food and Wine Service—and here I have to declare yet another interest in that I am its honorary President—runs a wine waiter award and also provides training packs on service skills to promote training in a large industry. I think those are important organisations which do valiant work in improving standards in a vast industry. I am sure that this is something which the Government much appreciate.
8.40 p.m.
Lord Montagu of Beaulieu: My Lords, the number of Peers speaking in this debate tonight possibly reflects the expertise in this House on tourism rather than self-interest. These days we live in an age of political reviews, but I do not think we can blame the present Government for the current tourism reviews which have been going on for about two years. It was, after all, a previous Secretary of State, Stephen Dorrell, who first acknowledged that Britain was losing its world share of tourism to our competitors. After that, much good work was done by his successor, Virginia Bottomley, and my noble friend Lord Inglewood in raising the profile of publications on accommodation quality standards, human resources and bench marking. The appointment of senior industry representatives to the Tourism
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Advisory Forum was helpful in improving the dialogue between government and the industry, and the interest of the CBI in tourism has further raised the profile.
The Conservative strategy document, Successes Through Partnership, setting out the Government's intentions, was launched last February. It took into account the comments of the advisory forum, whose 30-plus members ensured a broad consensus on its proposals. It fairly reflects the status quo on tourism but was not on its own a strategic plan, although it set out a programme of work and consultation. Some were impatient with this approach, but after so many years without a definitive government-backed national policy on tourism it was necessary to engage in fairly widespread consultation on the key issues to be addressed in the future strategy.
Consequently, the major ETB consultative exercise entitled "Agenda 2000" was commenced, aiming at consulting the tourism industry and local authorities. Never before had the ETB engaged in such a widespread, open, consultative exercise. To engage in such a comprehensive consultation in England at this key time was a major and laudable commitment by a board with scarce resources.
The timing of this exercise was such that it continued beyond the election, but it was indeed commendable that after the election the Labour Party approved the process, the findings of which will soon land on the desk of the present Secretary of State. Labour's post-election record is of immediate progress in pursuit of its mandate promises. It pledged "New Labour—New Development of Tourism Act". Now perhaps it is time to move forward on that promise. Tourism is the world's biggest growth industry which presents unparalleled opportunities, matched by growing global challenges, which even the Labour Government's massive parliamentary majority may not readily or easily resolve.
However, the Labour Party has a good precedent, as Labour's decision in 1969 to introduce the first Development of Tourism Act coincided with the first jet taking to the air, starting the revolution in international mass tourism. The Act established the framework for government sponsorship of tourism, creating the British Tourist Authority to market Britain overseas and the boards for England, Scotland and Wales. These national boards subsequently set up the non-statutory regional and area boards. I must declare my interest as President of the Southern Tourist Board. That has achieved many otherwise unattainable benefits such as information collection and dissemination, research, quality standards, IT and networks for advice and co-ordination—all vital to the industry's operational efficiency, especially because it is fragmented, comprising over 200,000 businesses, mostly small.
Over recent years the BTA budget has been maintained in real terms but the ETB funding has been cut, coupled with a directive that most of its grant in aid should go to its regional boards. This has seriously weakened the central infrastructure, yet England is the dynamo that drives all of Britain's tourism. Introverted nationalism is often divisive. The national boards for

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Scotland and Wales have been administered by the Scottish and Welsh Offices, with no structured co-ordinating mechanism with ETB, although they have board representation on the BTA. The original clarity that BTA would promote Britain overseas has been weakened by allowing Scotland and Wales to spend some of their grant independently.
Labour has announced that it will, if necessary, introduce statutory classification and grading of tourist accommodation. After two years attempts to amalgamate the AA, RAC and tourist board schemes have failed. Scotland has opted out and confusingly intends to adopt the same symbols with different definitions. How does such independence square with the demands for devolution? There can be no justification or right for any national or regional entity to frustrate the effective co-operation of these systems if they are publicly funded. Here lies a tourism devolution puzzle for Labour.
Labour plans to create regional development agencies with a remit for tourism. Regional tourist boards must adapt to work closely with the new bodies at regional and national level. Perhaps the number of regional tourist boards and their boundaries should be looked at anew to see whether they can fit more closely with the new regional development agency areas. Certainly their relationship must be defined.
Finally, this disparity encourages national differences to persist, and I believe that they do great damage to tourism as a whole. Tourism should not be a politically divisive subject. All parties believe that tourism has great potential and there is a vital role for the Government to play.
8.46 p.m.
The Earl of Dundonald: My Lords, may I also thank my noble friend Lord Bradford for initiating this short and useful debate. I should like to stray north of the Border to Scotland and to re-emphasise the points made by my noble friend Lord Montgomery of Alamein on licensing and licensed premises in particular. I disclose at this time an interest in the sector as a director and founder of a small family entertainment business which provides licensed entertainment in a number of towns and cities in Scotland.
Tourism, as we have all heard this evening, is a major employer and critical part of UK plc. Scotland as a whole is probably more dependent on tourism than other parts of the UK. We have benefited in the last few years from increased awareness of what Scotland has to offer, in part from a weakened pound and a number of Hollywood blockbusters. Last year was a record for Scottish tourism. This year has been disappointing in the areas of Scotland where we are located. I should be surprised if the financial returns for this year for the industry as a whole are not substantially down on the previous year. No Hollywood blockbusters and a much stronger pound have certainly played their part.
I am certain that the new Government are keen to show their credentials to small business in this sector. It is, after all, these businesses which provide a large proportion of the licensed premises in Scotland. Perhaps
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tonight I can tempt the Minister in his reply to demonstrate them in a positive way by taking action in the area of licensing law.
As the House will be aware, the previous Government made an attempt at reforming our Dickensian system by consolidating and tidying up previous legislation in this area. While that has helped, it has in no way solved the problem. If you operate licensed premises in Scotland you can apply for a public house licence, an entertainment licence, a restaurant licence, a family licence—the list goes on and on. The licence has to be renewed annually at one of the quarterly board meetings. One can apply for regular hours, regular extension to hours, further extension of hours, special one-off extension of hours—the list is endless.
If one wishes to make a material change to one's premises, not only must one seek planning approval—building warrant—but also consent of the full board. That can only be done at the quarterly meeting. It makes making even minor alterations a nightmare. Even moving an AWP requires the board's consent.
If one is opening new premises, one applies for a site licence which is then confirmed by a board member once all statutory authorities approve the building: environmental health, building control, planning, licensing police and the fire brigade. No one person is in charge of the process and unless the licensee arranges the whole process himself it can take weeks. Meanwhile a building stands empty, fully staffed, while the various departments take their time—or not, as the case may be. While it is critical that the premises meet current standards, I can see no reason why the system that delivers the results has to be so cumbersome and bureaucratic.
Different boards use different procedures, different time periods and different forms. Nothing is standard and everything is up to the individual board's interpretation of the law.
When you open premises you cannot be granted a regular extension to trading hours. You have to wait until the next quarterly board meeting to make the application. Businesses usually succeed, or not, in the first three months. In the licensed trade, a new operation, even if the licensee has an exemplary record in the area or in another board's area, is precluded from competing on a level playing field on day one. That is not very helpful, as I am sure your Lordships will agree.
The tourist, whether he is a British citizen or comes from overseas, expects and increasingly demands good quality licensed facilities. Today's regulations and licensing law do not help matters. I do not criticise the licensing boards. They put in their time voluntarily and do the job to the best of their ability. The trouble is that the system is cumbersome, open to too much procedural interpretation and is non-standard throughout the country.
I hope that the new Government can be persuaded to look again at that whole area of the law and greatly simplify it, so that the licensed leisure industry can concentrate on improving its standards and its training and as a result make the UK a more comfortable and convivial place to visit. I have no doubt that that would

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help to attract more tourists to the UK, and Scotland in particular. I look forward to the Minister making a positive reply in relation to the matter I have raised. I know that it will be greatly welcomed in the industry.
8.52 p.m.
Lord Rathcavan: My Lords, last year I completed eight years as chairman of the Northern Ireland Tourist Board and a member of the British Tourist Authority. That experience has left me always alert to the efficient development of this hugely important industry.
I wish to make only two points in the short time available. The first concerns the classification and grading of hotels, which my noble friend Lord Montagu of Beaulieu mentioned briefly.
The noble Lord the Leader of the House gets justifiable pleasure from often quoting to us his party manifesto and its endorsement by the electorate. I should like to remind the Minister tonight of his Government's commitment in their manifesto, for Wales and Scotland as well as England, to bring in new quality assurance for hotel accommodation. In fact, in a Labour Party policy document last year, that proposal was set out more clearly. I quote:
"Labour … will introduce statutory registration of all accommodation premises in the country".
If the various organisations do not voluntarily agree and harmonise internationally recognisable classification and grading schemes, then:
"Labour will … [introduce] a statutory national accommodation grading scheme".
I hope that the Government will do just that and do it as soon as possible.
The English Tourist Board has recently gone out on its own to introduce a voluntary star grade scheme with the AA and the RAC, a scheme based on physical facilities and not on quality. Scotland has broken away, as the noble Lord, Lord Montagu, mentioned, to launch a new and voluntary star grade scheme with a quality-led approach. It is rumoured that Wales may follow Scotland. So we shall then have in Great Britain the confusing situation in which grades and stars indicate different standards. The real problem remains in London, where much accommodation is not even registered and cowboy operators continue to fleece the visitor. Surveys show that one third of visitors to Britain are unhappy with the standards of accommodation, as are over 50 per cent. of visitors to London.
In Northern Ireland we introduced a scheme which is now common to the whole of Ireland, with statutory registration and classification to an international standard. It has done an enormous amount to improve standards, encourage investment in better facilities, make hotels concentrate on which area of the market they wish to serve and join in joint marketing schemes orchestrated by the tourist boards. In Ireland it is illegal to offer to visitors accommodation which has not been registered, inspected and graded. There are no cowboys. Such is the attraction and strength of the scheme that it has not been necessary yet to take anyone to law.
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It is clear that the voluntary approach is not working in Great Britain, as England, Wales and Scotland go their different ways and so many hotels are still neither registered nor classified. I hope that the Minister will confirm tonight that the Government will soon introduce the statutory quality assurance scheme that they promised, so that the bad standards of so much visitor accommodation in London at least can be tackled.
The second and final point that I wish to make concerns the future of the British Tourist Authority and its branding of Britain in overseas markets. The further away one gets from home, the more important an easily recognised brand becomes and the Far East is now the fastest growing market for inward tourism to Europe. There have been suggestions that the Government are proposing to give a more important role in tourism promotion to local authorities and councils. To promote Hull, Cumbria or even Wales in the Far East is not practical. The launch of the British Tourist Authority's new Branding of Britain, which starts this autumn, will be very important in the whole development of selling Britain overseas. It would be folly to dilute that effort.
The BTA is now recognised worldwide as the most effective and efficient tourism body. The devolution proposals may make the Wales and Scottish Tourist Boards even more independent of the BTA, but England is where 80 per cent. of visitors to the UK go. I hope that the Minister tonight will give his full backing to the BTA as the pivotal body to market Britain overseas.
8.56 p.m.
Lord Cochrane of Cults: My Lords, first, I must thank the noble Ear] for drawing up such a tightly defined and useful Unstarred Question. Secondly, I must declare an interest. I have been engaged in a caravan industry family business for some 25 years. It is a great pity that, on a subject of such importance, time is so short.
I must reluctantly take issue with the previous speaker, my noble kinsman Lord Rathcavan. After long study, I am convinced, as I believe the noble Lord, Lord Inglewood, is also, that a mixture of the two methods of definition of standards, classification, and grading, in the accommodation business is inevitable and that the only symbol that the public recognise—which is due to the pioneering work of the AA over many years, far longer than my lifetime—is stars. Therefore, I fully support the decision of the Scottish Tourist Board to go down that road. I am sure that it is right.
I gave the noble Lord, Lord McIntosh, notice that I proposed to speak on an exceptionally complicated and indeed rather boring issue. But it has enormous implications for the tourist industry in that it deters tourists from coming into this country and encourages our indigenous tourists to leave the country. It arises as a result of the distortions caused by the Tour Operators' Margin Scheme. I assure the noble Lord that if he does not want to reply to me tonight, I shall be happy to receive a letter, which I am sure he will agree to publish.
The effect of that scheme, which is part of a Brussels directive, would be neutral if VAT rates were uniform across the European Community. It sticks in my throat

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to call it a federation or anything else. There is a huge difference between 5 per cent. VAT in much of the Community and 17½ per cent. in this country. That has the effect of making it artificially—or apparently—cheaper to go abroad from this country to another EC country and correspondingly more expensive (because our VAT rate is higher) for other citizens of the European Community to come into the country. Surely that cannot be sensible.
There have been numerous protests about that situation. The British Tourist Authority has raised the issue on numerous occasions with the Treasury, which has always said that the tax base would be eroded if it were to reduce the applicable rate of VAT. I suggest that that is nonsense—my Lords, nonsense. What would happen would be that the cost of holidays in this country to foreigners—that is to say, other citizens of the European Community—would fall. More of them would come here.
As is well known, and as the previous speaker said, the tourism industry has plenty of spare capacity available at marginal rates, so every extra chap you get works directly through to your profit and loss account. The result is that tourism businesses, whether large or small, would become more profitable and employ more people, and the Government in due course would receive more tax from those businesses, whether by corporation tax or individual taxation. The amount disbursed through the social security budget in unemployment pay and suchlike then falls. Perhaps I may say to the noble Lord, Lord McIntosh, that that would be even better news than a windfall tax, which apparently will prevent, among other things, the modernisation of Paddington Station.
With those words I commend this change in the VAT scheme to give a level playing field. I apologise for that cliché. I am sorry that so far it has been resisted. I hope that the noble Lord will be able to give us good news in due course.
9 p.m.
Lord Mountevans: My Lords, five minutes a head concentrates the mind wonderfully and so I shall start with three brief bullet points. First, I must declare an interest as an occasional consultant to the British Tourist Authority. Secondly, I must thank my noble friend Lord Bradford for tabling this Unstarred Question and for the speech with which he introduced it. He has attracted, as usual, a good list of speakers, a select club, if I may say so. Thirdly, I join him in welcoming the noble Lord, Lord McIntosh of Haringey, to our club; select, I have said, and small, but, as I am sure the noble Lord will have gathered, well informed and wide ranging, reflecting an industry which has a great deal of which to be proud. Much has been said by other speakers and much has been positive, but that does not mean that there are no problems which need to be addressed. I should like to raise two of these. The first is the balance of payments deficit on tourism and the second is devolution.
On Monday of last week a Written Answer in another place (cols. 310 to 312 of the Official Report) highlighted the success of our inward tourism industry
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but also underlined the ever increasing sums we spend on travel overseas. Going beyond the Written Answer I found a yet to be published study. Balance of Payments and Travel Account—Surplus or Deficit. It was written by the British Tourist Authority's Chandra Sonpal and was funded by means of a grant from the British Travel Education Trust.
Chandra Sonpal's figures show that in cash terms the travel account had a deficit of £23 million as long ago as 1946. In 1985 the surplus—our profit—peaked at £571 million but by 1994 the deficit was £4,600 million, reducing to a provisional 1995 figure of £3,700 million. Income—the thing we are very good at in terms of selling ourselves abroad and welcoming overseas visitors—had risen 637-fold since 1946 but, sadly, the amount we spend on travel abroad—our import figure—started with double the base and had risen 373-fold.
Governments have done well by the industry. Our attractions have been improved. The commercial sector started by getting its act together and continues to enhance its act. Transport costs have fallen. Our habits have changed. I can remember being best man at a wedding in 1964 when the Channel Islands were the honeymoon destination. That was going abroad. It was venturesome. Nowadays a honeymoon couple can reach almost the whole of the known world in 24 hours. The numbers I have quoted are horrifying. May I ask the noble Lord, Lord McIntosh, what plans the Government have to address them.
I turn to devolution, which was touched on just once in yesterday's debate. For decades we in the tourism industry have enjoyed a bipartisan approach—for as long almost as the figures I have quoted, and I started in 1946. Harold Wilson was President of the Board of Trade during the Attlee Government and embarked on establishing the framework of statutory tourism as we now know it. During his premiership the Labour Government passed the Development of Tourism Act of 1969. This established the BTA as a primus inter pares and as the overseas promotional arm. It also established the English, Scottish and Welsh boards as both product development organisations—through Section 4, now alas lost in England—and as promoters within the domestic market. On our side of the House we can take pride in giving the Scottish Tourist Board overseas marketing powers in 1984 and doing the same for Wales in 1992.
On both occasions there were reservations—I do not mean bookings, I mean concerns—that this would rather wreck things. But in practice that sequence of legislation has given us a model to consider. It is illustrated by the inputs that the national boards achieve through their chairmen being ex officio members of the British Tourist Authority and, at a lower level, by national board staff being fully involved in the development and execution of BTA's marketing plan each year. The national boards have the product knowledge while the BTA's specialty is the market place.
Last, we have national board evidence to the Select Committee of another place last year, a point touched on by other speakers, welcoming the ability to have

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implants in BTA's overseas offices—a synergic benefit—and expressing no wish to set up overseas offices on their own account. BTA was by implication welcomed as an umbrella organisation—a 1969 concept that I hope the noble Lord, Lord McIntosh, can confirm by reminding us of the Labour Party's document Breaking New Ground, which recognised the need for a pan-Britain approach. Better still, may I hope that the devolution White Paper, which was mentioned rather more frequently—probably 100 times—yesterday, will recognise that fact?
I have gone over time. I cannot argue that all is for the best; I cannot say that all is Panglossian. I remind your Lordships of the British Tourist Authority's annual report and a quote from Richard Branson on the competence of the British Tourist Authority and, two pages earlier, a factor which my linguistic and mathematical knowledge does not quite cope with; namely, that two plus two equals fünf. Britain is best sold as Britain and not as its separate constituents.
9.8 p.m.
Lord Luke: My Lords, I am most grateful to my noble friend Lord Bradford for introducing this debate. I would like to add my name to those who welcomed the noble Lord, Lord McIntosh, to his new position. As we are so short of time and I have only five minutes, I must attempt to gallop through a series of soundbites and I ask your Lordships' pardon for that.
The splendid river on which this palace sits is one of the most important tourist attractions, or should be. Why do we not restore direct access from the river to the palace? The line of route, up the steps, through the security barrier and round the palace, would take quite a lot of pressure off the local road network, which needs it. It would also encourage the proper use of a vital facility of this city, which has not been properly utilised for over 100 years. London's attitude to the Thames is so inexplicably different from that of Paris to the Seine.
Adding to what the noble Lord, Lord Rathcavan, said, why is it that, whatever the authority, whether it is the British Tourist Authority or the English Tourist Board, at entry ports it publicises almost exclusively London, Windsor, Stratford and Bath when these main centres, throughout the whole of the tourist season, are grossly overcrowded whereas nearly all tourists coming to England will want to come to London to shop otherwise their wives will be extremely angry? With a selective and imaginative marketing campaign it should be possible to persuade far more of our visitors to travel to the North, the Midlands and the West. A friend of mine was lecturing to 900 Americans at Williamsburg, Maryland, recently and he asked them how many had visited England. The answer was all 900. To the question how many had visited points north of Stratford, the answer was precisely three.
It has long been a bugbear to me that we in this country have some of the finest scenery, features, buildings, museums and galleries yet our motorway network is almost completely neglected as a means of persuading tourists to divert. I am sure that many noble
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Lords will have driven down European motorways, particularly in France, where hardly a mile—or should I say a kilometre—goes by without some local feature being depicted on a large brown sign. Some are perhaps overlarge, but they certainly work. Windsor on the M.4 and Hardwick on the M.1 are the only ones that I can call to mind in this country and they are very poor by French standards. There must be many more which are also not very good, because I cannot remember them.
Tentatively, I remind the Government in relation to their difficult problem over what to do about the millennium project at Greenwich that we must surely provide a show at least as good as those that our European competitors in the tourism field will certainly stage, as I am quite sure that in the year of the millennium tourists will decide which country to visit largely on the basis of the attractiveness or otherwise of that individual country's millennium show. A watered down scheme—or worse, some diversion to the regions of a collection of small schemes of no interest to foreigners—will be a disaster. I ask the Government, who have made a very good start in their ideas about vision and daring, to go all the way with Greenwich.
As an example of an organisation which really goes for the international aspect, perhaps I may mention the Royal Show of the Royal Agricultural Society of England. That is our premier agricultural event. It attracts some 20,000 foreign visitors over four days every year. That provides an example to many similar organisations of what can be done, with effort.
I conclude by saying that one of the greatest advantages that we have in Britain compared with some other tourist destinations is that in this country places which say that they will be open to visitors at a particular time are open to visitors at that time.
9.12 p.m.
Viscount Thurso: My Lords, as always, I am extremely grateful to the noble Earl for bringing to your Lordships' attention the importance of tourism and for setting out in his opening remarks, with his customary elegance, the case for tourism. I have spoken on a number of occasions in your Lordships' House on the subject of tourism. My interests are fairly well-known and in the interests of time and of not wishing to bore your Lordships, perhaps I may take those as read.
On the last day of the debate on the humble Address I had the opportunity to express my concern to the Government that they were not placing tourism as high on the agenda as their policy document Breaking New Ground had indicated. I am delighted to be able to tell your Lordships that the Secretary of State for National Heritage has written to me making very clear the Government's commitment to tourism and indeed his own enthusiasm. I would like to take this opportunity to ask his noble friend whether he will be kind enough to pass on my gratitude both for his response and for the reassurances which it contains.
Given the shortage of time, I should like to concentrate briefly on just two points. First, we should ask ourselves exactly what we want from tourism, as the noble Earl mentioned when he opened the debate. It may

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seem a rather self-evident statement, but tourism is an economic activity which, just like any other economic activity, has a downside. The objective of tourism must be to provide maximum economic benefit for the minimum disruption to the local community and the environment in which that activity takes place. That point was well made by my noble friend Lord Mar and Kellie.
Shortly before the election, the last government produced a policy document entitled Success Through Partnership. It contained a number of interesting statistics, showing that the inbound tourist's average spend per visit has steadily declined since 1989, with the exception of one year, from £561 per visit to £504 per visit in 1995. The downward trend is also largely mirrored by domestic tourism trips of one night or more. Although the number of visitors has increased, the overall value of tourism over the period 1989–95 remained largely static. That leads me to the conclusion that the number of visitors is a false measure of the prosperity of the tourism industry and that we should turn our attention from numbers of visitors to the yield given by those visitors. In order to do that, we need a clear and well understood strategy for tourism.
That brings me to my second point, which is that the extremely fragmented nature of the tourism industry, with virtually all businesses within it being either micro or small businesses, makes it extremely difficult for the industry to formulate a clear strategy. It is imperative that the Government provide that leadership. I give one example of why I believe that such a strategy is important. There are a great number of tourism assets in this country which have become outdated and run down. I am thinking particularly of our seaside resorts. We need to look at those assets, in both physical and human resource terms, to see how best we can revive them.
Furthermore, if the BTA and the ETB are to have a clear understanding of what is required of them, there must be an easily understood and coherent strategy which all the players in the industry can follow. To do that, we on these Benches have proposed a tourism commission. It would be a body led by the Minister responsible for tourism and would have representatives from other key departments, such as the Department of the Environment, Transport and the Regions; the Department of Trade and Industry, and the Department for Education and Employment, together with some representatives of the industry. The commission would report to the Secretary of State and would be required to develop and recommend a national tourism strategy and to monitor its prosecution. It would have four key objectives: first, to analyse existing assets and to recommend the best policies for their revival; secondly, to examine the role and the work of the BTA and to recommend measures to create a coherent and effective national marketing policy; thirdly, to examine the current local and regional tourist board structure and to recommend measures for improving their effectiveness in selling local and regional tourism products; and fourthly and finally, to advise the Government on which areas of the industry are most suited for future development towards achieving the goals of supportable and sustainable growth.
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We believe that the tourism and hospitality industry is an essential plank of the future economic development and prosperity of the United Kingdom. We believe that it is essential to the strategic development of the industry to have an agreed, integrated national strategy. I very much hope that that is what the Government will do.
9.17 p.m.
Lord Inglewood: My Lords, one of the characteristics of your Lordships' House is the regularity with which we debate tourism, and I should like to add my thanks to those already given to my noble friend Lord Bradford for tabling this Unstarred Question. In our tourism debates, some things change and I should like to welcome the noble Lord, Lord McIntosh of Haringey, to the Dispatch Box where I served for two years. Sadly for me, I now find myself on this side of the Chamber. Other things, however, do not change; for instance, I have noticed the tie worn by the noble Lord, Lord Graham—
Lord Graham of Edmonton: It is a Co-op tie.
Lord Inglewood: My Lords, not only do we debate these matters more frequently than the other place, but I believe that, on the whole, we do it better with our more consensual approach. Before going any further, I must declare my interests. My own family home is open to the public and I am involved in my family's hotel business.
The point at the heart of all my remarks tonight was first mentioned by my noble friend Lord Bradford. I refer to the fact that the tourism, hospitality and leisure industry has very much come of age. It is a central part of our national economy and is very important to the country as a whole. Its importance is recognised by economists, and politicians, and is axiomatic to this debate.
There are a number of important consequences for the industry. I should like to touch on one briefly. I make the following remarks in a spirit of amity, not hostility. The case is often made for there to be almost a quantum leap in the amount of public money that is made available by the Treasury for the institutions through which the industry is organised. My right honourable friend the then Secretary of State and I advanced those arguments to the Treasury because we recognised as well as anybody that a bit more money would be of considerable benefit. While the Treasury accepts that there is some market failure in this area, it is illusory for the industry to believe that there can be some kind of sea change as opposed to additional money being made available to it in the way I have described. After all, when viewed in comparison with the demands of hospitals, schools and so forth, the Treasury will say, "Well, if it is such a good deal why not do it yourselves?"
I believe that in looking for leadership from government one should not focus on the money but on other aspects so long as the industry is not starved. The Government cannot deliver tourism, but what they can and should do is set the framework and provide the context. One is talking about an industry that is not homogeneous. It has a multiplicity of players with different needs and different relationships with other people involved. The noble Earl, Lord Mar and Kellie,

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gave a very good example of that. Partnership must be at the centre of policy for tourism in this country. When we were in office the success through partnership emphasised this point. I was very pleased that the Secretary of State made the same point in his speech to the British Resorts Association in Sunderland on 4th June.
The Department of National Heritage should act as intended—as the focus in Whitehall for the industry and as a sponsorship department in the manner described by my right honourable friend Michael Heseltine. I believe that it and the government agencies for the industry—the ETB and the BTA—should focus on positive practical steps to help it.
I should particularly like to touch on the classification and grading schemes and pay a tribute to the work of David Quarmby. Many of the establishments in our country can compare with the best in the world. But, sadly, there are those—many of them not very far from where we are today—that are not good enough. That should concern not only them but the industry as a whole. I believe that the work that has been done to try to find a way to produce a classification scheme that is understandable to visitors to this country is of the greatest importance. As I understand it, the description provided by the noble Lord, Lord Rathcavan, of the differences between the English and Scots schemes is not accurate. We have heard about the differences between the English and the Scots. All I say is that I understand the constitutional reasons that lie behind them. At the same time, I urge those involved not to focus on minor points of theology. There is something much more important at stake. As a number of your Lordships have said, what are the implications of devolution? I believe that we should focus on practical matters.
I should also like to mention briefly some work that I carried out in the Department of National Heritage on the relationship between government and the other responsibilities of that department: museums, theatre, the lottery, film, design and so on. They are terribly important to the tourist industry. The money and support that they give is of paramount significance in the long and medium terms.
I have already spoken for five minutes. There are many other matters on which I would have liked the opportunity to speak but I shall not. I conclude by saying that it is often thought to be the hallmark of the cynic to say that business succeeds despite governments. That view may be born of cynicism but nonetheless it is realistic. We all recognise that in the world in which we now live governments must raise tax, set rules and provide proper consumer protection to enable the market to work properly. At the same time they must resist the temptation—I urge it on this Government—to overdo it, contain their impulse to do too much and remember that the best may be the enemy of the good. If those on the Benches opposite
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do that they will earn the gratitude of the industry, because the industry will flourish and the Government will have treated it right.
9.25 p.m.
Lord McIntosh of Haringey: My Lords, the noble Lord, Lord Mountevans, referred to the participants in this debate as a club. He welcomed me to the club. I am not sure that I am being welcomed unequivocally to this club. What is happening is that I am being put through a tribal initiation ceremony. Those noble Lords who have a vast experience, which they have properly declared in introducing their contributions to the debate, have so much to teach me that it will be difficult for me to continue, when noble Lords have heard me through, with the kind of response that I am expected to make. I express my appreciation to the noble Earl, Lord Bradford, and all who have taken part in the debate for the great expertise that has been shown and the considerable degree of wisdom which has permeated many of the contributions.
Let there be no doubt, the Government are fully seized of the importance of tourism to our economy and to our society. My noble friend Lord Graham and other noble Lords referred to the Labour Party document Breaking New Ground and challenged us to give effect to that document. I have to say that in a period of fewer than six weeks, for all practical purposes, in which the Government have been formed, it is not realistic to expect that we will have made real progress towards the implementation of all of those policies. I fear that our response will be, as is the response of so many departments, that there will be reviews of existing policy; that we will consider our position; and all the cant phrases that go with that.
However, we do not for a moment yield to other noble Lords who have taken part in the debate in our appreciation of the importance of tourism and coherent policies to deal with it. That is not necessarily to say—here I follow the noble Lord, Lord Inglewood—that the measure of government action should be direct spending on tourist facilities or, indeed, even on tourist promotion.
I am not sure that there is such a thing as a tourist industry. It seems to me as an outsider that what we have is a ganglia—if that is the correct number for such a thing—of interdependent sectors—the hotel sector, the hospitality sector, the entertainment sector, transport and many others—which come together in a consumer-defined concept; in other words, their own expertise can be different but they come together because they are looking to the same customers.
What is characteristic of that ganglia is that we have imperfect competition. Some people have used the words "market failure". I think that that is going a bit far. We have imperfect competition mainly because of imperfect knowledge. There is inadequate guidance to consumers on the products and services and the best way to take advantage of what is on offer.
Under those circumstances, the role of interventionism—it is interesting that so many noble Lords from the Conservative Benches are looking to

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government interventionism—is entirely justified. But we would not necessarily be justified in spending money directly on the provision even of the tea room of the noble Earl, Lord Mar and Kellie, to take a specific example. It is much more likely that we will achieve what we want in partnership with the industry rather than by subvention to it. That is my outsider's starting point in relation to government support.
A number of noble Lords have particular expertise on Scotland—it is notable that there do not happen to be any who are interested in Wales—and have raised the prospect of devolution. It is true that the interrelationship of the British Tourist Authority—to which I pay tribute, as I am invited to do—and the country tourist boards is complex. However, it will not become more complex or difficult after devolution comes into effect.
After all, what happens now with the Scottish and Welsh tourist boards? They voluntarily collaborate with the British Tourist Authority; they participate in the preparation of the marketing strategy; they contribute their own ideas to it; and where the two coincide they can contribute financially to overseas promotion. As the noble Viscount, Lord Thurso, said, they are not looking to set up their own overseas trading posts but seek to use the advantages of a British Tourist Authority. Surely that can and will continue after the establishment of a Scottish parliament and a Welsh assembly. The relationship between the British Tourist Authority and the tourist boards is a good example of the way in which the Scottish parliament and the Welsh assembly will want to take part in nationwide—Great Britain-wide—public sector activities.
I readily acknowledge that employment and training are critical to the economic and financial success and contribution to our economy and society of tourism. It is not adequately recognised how closely the demands of noble Lords from other Benches coincide with our policies on this matter. It is almost as though our welfare-to-work policies were devised in order to encourage people to come into the tourist industry. The whole concept of attracting young people into the industry which was referred to by noble Lords on other Benches fits in so well with what we want to do in taking young people off the dole and giving them an effective guarantee of training and work. It is surprising that there should be any question about that. The tourism industry already provides 1.6 million jobs. Without wishing that our young people should unnecessarily go into uniform, it is a critical part of what we want to do that we should be providing exactly the kind of jobs which tourism can provide.
There was no particular reference to the minimum wage. Even the noble Viscount, Lord Thurso, did not refer to it, although he usually does. However, I am delighted to recall that he referred to it in the previous debate. The minimum wage can be a contributor to the guarantee of quality in our tourism industry that we all want. I am delighted to welcome noble Lords to that recognition, which I believe is widespread in the industry.
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The membership of the Low Pay Commission is not yet established, but I have no doubt that the tourism and hospitality industries will put forcefully to the commission their case for the setting of a suitable minimum wage and the evidence it submits will be carefully considered. I am grateful in particular to the noble Viscount, Lord Montgomery, for his remarks on that issue.
I turn to the issue of accommodation rating. Noble Lords will know that the English Tourist Board is on the point of going out to consultation on its proposals, together with the AA and RAC, for accommodation rating which will combine rating of quality, facilities and services. I believe that that is absolutely critical. If that works, we can provide something comparable to the Nomenclateur National in France together with the Michelin and other quality grading. In the past, there has always been a lack of a conjunction of those three important elements—qualities. facilities and services. A number of noble Lords referred to that.
I was asked whether we should be moving rapidly towards a statutory accommodation rating system. We shall certainly be moving towards statutory registration but we should first like to try a voluntary rating system before we see whether we are forced to move to a statutory system. In the first instance, it can apply only to England, although it will he available for Scotland and Wales. But 80 per cent. of visitors to this country come to England and I believe that the system will be very successful and will leapfrog rating provision in other countries.
I have great difficulty, in the time available, in referring to the points made in particular by the noble Viscount, Lord Montgomery, and the noble Earl, Lord Dundonald, about licensing. From my previous contributions from the other side of the House, it is no secret that I am no friend of having regulation in that area. But it is a matter for the Home Office, and Home Office Ministers are considering whether and how any changes should take place to our existing licensing regulations. I shall certainly draw to their attention the particular points made by the noble Viscount, Lord Montgomery, about supper hour certificates and EHOs and what seem to me the horror stories of the noble Earl, Lord Dundonald, as regards the way in which licensing works in his part of the world.
I do not have time to respond to the questions of my noble friend Lord Graham about tax but I shall write to all noble Lords on the points made in their very constructive speeches which I have not been able to cover in the debate.
I am asked how quickly we should move towards a new development of tourism Act to upgrade and, if necessary, replace our own 1969 Act. My answer can only be that we are consulting like mad. We are seeing everybody who wishes to see us and we are going around the country to talk to people in the tourism industry. But we must legislate now for the 21st century. It would be extremely foolish to do so

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without having considered fully all of the issues and views which are available to us. For example, it would be very foolish to do so without having considered fully the results of the English Tourist Board Agenda 2000 consultation process which has been one of the most widespread in the tourist industry for a very long time.
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The well-informed and constructive contributions which have been made in this debate by many noble Lords will be of great value to us in considering what future steps should be taken. The Government are very grateful to all noble Lords who have taken part in the debate.
House adjourned at twenty-two minutes before ten o'clock.