Lords Sitting of 19 June 1997

Preamble
The House met at three of the clock (Prayers having
been read earlier at the Judicial Sitting by the Lord Bishop of Southwell.): The LORD CHANCELLOR on the Woolsack.
Several Lords—Took the Oath.

AIDS Survivors: Treatments
Earl Baldwin of Bewdley Earl Baldwin of Bewdley asked Her Majesty's Government:
Whether, in the case of long-term survivors of HIV and AIDS diagnoses, they are aware of what treatment regimes, if any, these patients have followed.
The Minister of State, Department of Health (Baroness Jay of Paddington): My Lords, the choice of treatment regimes for HIV and AIDS patients is a matter for discussion between the patient and the doctor. As your Lordships will understand, records of individuals' treatments are of course confidential. Information published from recent clinical trials currently indicates that so far the use of combination retroviral drugs is delaying the onset of AIDS and increasing survival. There is relatively little scientific analysis available about the types of treatments which have been used by long-term survivors.
Earl Baldwin of Bewdley: My Lords, I am grateful to the noble Baroness for her reply. Is she aware of evidence from surveys and indeed clinical trials suggesting that what long-term survivors may have in common is that they have mostly rejected conventional drug treatment and have embraced a range of unorthodox therapies including lifestyle changes? Would she not agree that if that is substantiated it has enormous implications for the direction of future research as well as for public policy?
Baroness Jay of Paddington: My Lords, I am of course aware that a number of people with HIV and AIDS have enjoyed great personal benefits from their use of what I suppose one might call complementary alternative therapies. The problem is that the scientific analysis of such therapies is difficult because a number of different therapies are used and individuals tend to change from one to another. It is the case, of course, that money is being spent on R&D programmes in this area and the NHS R&D programme has recently identified two specific topics which are being funded. They are the evaluation of manipulation therapies in the treatment of back pain and acupuncture for the management of pain in primary care. I realise of course that they are not directly related to HIV and AIDS, but I hope that they indicate to the noble Earl that interest in these subjects is being taken by the programme.
Baroness Gardner of Parkes: My Lords, does the Minister agree that patients are now gaining great benefit
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from the modern cocktail treatment using a multiplicity of drugs and that one should not rely just on complementary medicine? Does she further agree that there may be all kinds of interesting factors as regards personal resistance? It has been found that one or two people have survived for a very long time. Is the Minister aware that those people are being researched to find out what is occurring? Is the Minister further aware that no one has yet made a definitive statement that complementary medicine is better than standard treatment?
Baroness Jay of Paddington: My Lords, I agree with the noble Baroness that what seems to be most successful in achieving long-term help for people who are HIV positive is a combination of what one describes as orthodox treatment and other less orthodox methods. Data from some of the clinical trials—the multinational Delta trial is probably the most substantial—show that there is a relative reduction in mortality of about 30 per cent. when a combination—the so-called "cocktail"—of anti-retroviral drugs is taken. As I said to the noble Earl, there is not adequate scientific knowledge on the question of complementary therapies.
Lord Thurlow: My Lords, as research is so important, will the noble Baroness do all that she can to induce the research council to allocate a less derisory proportion of funds to complementary medical research because some of the results seem very promising?
Baroness Jay of Paddington: My Lords, I agree that research is the foundation of evidence-based medicine. The noble Lord, Lord Thurlow, and I have spoken often about the matter in the past. I shall do everything I can to look into the question of whether adequate funding is going into this area. As I said, I am encouraged by the fact that the NHS research and development programme itself has taken up specific questions of complementary medicine. There is evidence that where complementary medicine has improved the general health of individuals with HIV it seems to have a positive effect on the immune system, which makes it easier for people to fight opportunistic infection.
Lord Eatwell: My Lords, is my noble friend aware that while the triple combination drugs have had an enormous effect both in reducing the transition from HIV to full-blown AIDS and in reducing death rates from AIDS, most of those effects have been enjoyed abroad? In the United States and France, for example, the transition rates from HIV to AIDS are down by one-half whereas in the United Kingdom the figure has increased. In those countries also the death rates from AIDS have been reduced by one-half but barely reduced at all in the United Kingdom. Can the Minister say what is the Government's explanation for this rather poor record?
Baroness Jay of Paddington: My Lords, I believe the point is that the combination therapies have been only recently introduced into this country. As the noble Lord will know, there are trials in only the most limited areas, particularly in London, of up to three years using the particular forms of combination therapy to which

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I believe the noble Lord referred. In an earlier answer I referred to the encouraging data from the United States, which I am sure our clinicians are looking at very closely.
Baroness Cumberlege: My Lords, the Government will be aware, as, I am sure, will the noble Baroness, because she is an expert in this area, of what has been the experience in France—referred to by the noble Lord, Lord Eatwell—where people are living longer and where, through the combination therapies, there is evidence of improved survival. Can the Minister say whether her Government will continue the good work of the previous government in funding such therapies?
Baroness Jay of Paddington: My Lords, the noble Baroness was kind enough to say that I know a great deal about HIV. She knows a great deal about NHS funding; that individual funding decisions about individual therapies are taken by local health authorities; and that specific AIDS grants are given to health authorities for treatment and care. I am sure that those authorities which have the greatest problems will look at the issue.
Lord Wright of Richmond: My Lords, can the Minister say anything about exchanges, not only with the countries to which the noble Lord, Lord Eatwell, referred, but also with the World Health Organisation and those countries, particularly in Africa, which have been particularly afflicted by this disease?
Baroness Jay of Paddington: My Lords, the clinicians who are experts in this area in this country are very aware of the problems faced by people in the third world and particularly in Africa. One of the problems in dealing with the large numbers of people with HIV infection in sub-Saharan Africa is the expense of the combination therapies to which the noble Baroness, Lady Cumberlege, referred.
Lord Stoddart of Swindon: My Lords, can my noble friend say what is the latest figure for the total cost of treating HIV and AIDS? Can she say how much we are spending on research, care and treatment centrally; how much local authorities are spending; and whether there are any plans to increase or decrease those amounts?
Baroness Jay of Paddington: My Lords, on the overall question of funding, a total of £199.6 million has been allocated for AIDS treatment and care in 1997–98, which represents an increase of over 7 per cent. on the previous year. That is seen as a contribution to the new and expensive combination therapies. As I said in answer to the noble Baroness, Lady Cumberlege, local funding is a question of discretionary funding to individual health authorities and emphasis is given to those who have the greatest need.
Earl Baldwin of Bewdley: My Lords, may I press the noble Baroness a little further and refer back to the question of long-term survival and what patients may or may not have done to stay well? Is it not the case that
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there has been no proper formal study of these survivors? Does that not represent a very serious omission which ought to be rectified without delay?
Baroness Jay of Paddington: My Lords, I believe that the noble Earl is right and that there has not been a long-term scientific retrospective study of survivors. That is simply because it is difficult to ascertain at what point you would begin to study them, as it were—if that is not a convoluted way of putting it—in order for them to be part of any scientific trial. The scientific evidence that there is suggests that those who have survived are those who have been involved at the cutting edge of medical developments and who have been exposed to the original Zidovudine treatment and then the triple combination therapy. As I hope that the noble Earl will understand, there is evidence that where complementary medicine has been added, people have done very well.

Antiquities: Illegal Traffic
3.11 p.m.
Baroness Rawlings Baroness Rawlings asked Her Majesty's Government:
Further to the Answer given by Lord McIntosh of Haringey on 3rd June (H.L. Deb., col. 563), how it is possible to define or prove in law that antiquities have been illegally excavated in, or illegally exported from, their country of origin.
Lord McIntosh of Haringey: My Lords, any legislation in this country would need to define an illegally excavated or illegally exported object as being one which was excavated or exported contrary to the law of the country of origin. Evidence would be required to establish the relevant foreign law. Factual evidence would also be required about the circumstances surrounding the excavation or export. For exports, it should be straightforward to prove that the export contravenes the law of the country of origin. However, proof of the circumstances surrounding an excavation may be more difficult.
Baroness Rawlings: My Lords, I thank the noble Lord for his thoughtful and constructive Answer. We all abhor the illegal import of antiquities. Will the Government press for more official provenances and encourage more stringent policing from the countries concerned?
Lord McIntosh of Haringey: My Lords, to achieve congruity between our laws and those of other countries, we shall need a combination of changes to our law and adherence by many countries to international conventions. That is not an easy process, but it is reassuring that every advance that we make provides additional protection, as was seen by yesterday's conviction in the Bullrush case.
Lord Strabolgi: My Lords, will my noble friend confirm that the Criminal Justice Act 1993 allows

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prosecutions for acts committed abroad? If that is applicable in this case, when will the relevant section be brought into effect?
Lord McIntosh of Haringey: My Lords, I am grateful to my noble friend for that question. As I said when the matter was debated earlier this month, officials of the Department of National Heritage have approached the Home Office about this issue. I am happy to be able to confirm that the Secretary of State for National Heritage has now written to the Home Secretary seeking to make progress on the implementation of Part I of the Criminal Justice Act 1993.
Baroness Trumpington: My Lords, is the noble Lord aware of the scale of the market in looted antiquities, and does he agree that it is in the nature of successful looting and successful illegal export, as with most crime, that there is no available documentation of the circumstances?
If the noble Lord says, "You are reading", I am doing so because my noble friend Lord Renfrew, who is not here today, asked me to put a supplementary question.
Lord McIntosh of Haringey: My Lords, I would not dream of telling the noble Baroness that she was reading; but she has answered her own question. If we knew the extent of illegal exporting and illegal excavation, we would know the cases involved and we might be able to make some attempt to deal with them. As the noble Baroness said, it is an unknowable statistic. Indeed, illegal activity usually is.
Lord Campbell of Alloway: My Lords, I should like to ask the noble Lord whether, apart from practice and voluntary custom, there are not circumstances in which an auction house has a legal obligation to prove affirmatively that the goods were legally excavated and exported? In that context, may I ask the noble Lord also whether our courts do not have extra-territorial jurisdiction?
Lord McIntosh of Haringey: My Lords, the noble Lord was a great help when he raised this issue when we last debated the matter and suggested that one protection would be further advance knowledge of what was about to be put on sale. I gave the noble Lord a not entirely accurate answer; but perhaps I may now be able to help him by saying that it is possible, using the auction search service which is provided by a company called Thesaurus, for countries of origin, victim countries and public museums to learn shortly before an auction takes place what is likely to be displayed for sale, and thus to take action to remove an article from the sale if that seems appropriate.
Lord Hankey: My Lords, as the Getty Information Institute has, after three years' research, had considerable success in the establishment of Object ID, an identification system for cultural objects, and as proving the provenance of the objects is essential to the control of the illicit trade, does the noble Lord agree that common recording standards must be adopted and that
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the use of a system such as Object ID should be co-ordinated at national level by the Home Office encouraging police forces to use a common system, by the Department of National Heritage encouraging its use by heritage bodies, and at the international level by the Foreign Office and the Department for International Development?
Lord McIntosh of Haringey: My Lords, I am grateful to the noble Lord for his question and for drawing my attention to the details of Object ID. I can confirm that the Department of National Heritage has been in discussion with Dr. Robin Thorns and that we are very interested in the proposals which have been put forward by the Getty Information Institute. We shall be pursuing those discussions.
Lord Campbell of Alloway: My Lords—
Noble Lords: Next Question!
Lord Marlesford: My Lords—
The Lord Privy Seal (Lord Richard): My Lords, I think that perhaps we should move on. We spent a little long on the first Question.

Digital TV: Regulation
3.18 p.m.
Baroness Miller of Hendon Baroness Miller of Hendon asked Her Majesty's Government:
What steps they consider that the Office of Telecommunications (Oftel) should take in the public interest to investigate and if need be to regulate the proposed £0.5 billion joint venture between Sky TV and British Telecom to subsidise set-top black boxes to receive digital TV and to develop interactive services.
The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): My Lords, Oftel already regulates the operation of so-called "conditional access" services for digital television; that is, services which will control access to broadcast television through digital set-top boxes. Oftel has broad powers covering all questions relating to subsidy and operation of the set-top boxes in respect of broadcast services. I can also confirm that the Government intend, at the earliest opportunity, to extend the scope of the existing regulations to provide the same safeguards covering the use of the same "black boxes" to control access to interactive services.
The proposed joint venture will be subject to scrutiny by the European competition authorities and by the Director-General of Fair Trading; since Ministers may have some statutory role to play as part of this process, I cannot comment further at this time.
Baroness Miller of Hendon: My Lords, I thank the Minister for that Answer, which is topical since the matter appeared in the Financial Times only yesterday. Perhaps I may take this opportunity to welcome the Minister to the Dispatch Box to answer our questions and tell him how pleased we are to see him here. Do the Government share the reported concern of the Independent Television Commission about the ever-increasing influence of Mr. Rupert Murdoch, a foreign citizen who controls five of our national newspapers with a readership of 26 million, and who, through cable and satellite television, also controls one of Britain's main news channels with worldwide viewers numbering 70 million? What do the Government propose to do about that?
Lord Simon of Highbury: My Lords, I thank the noble Baroness for her kind welcome. It is a pleasure to stand opposite her twice running. I congratulate her on the topicality of her Question. As to bidders and competitiveness, it is clear that the ITC also has a regulatory responsibility to ensure that there is quality in broadcasting, competitiveness in the market place and free choice. Therefore, let the ITC take its decisions, backed up, of course, by the OFT and the Commission. I believe that it is for them to judge at what point the offerers of services have too much power. I leave that to the authorities to whom it applies.
Lord Thomson of Monifieth: My Lords, is the noble Lord aware that we on these Benches welcome the Minister's response? However, the Question comes from a side of the House which when in Government steadfastly opposed any effective regulation of the Murdoch domination of these matters. Will the new Government take a fresh look at competition in the media field generally not only in the matter of black boxes but in the matter of the new award of multiplex franchises by the ITC, which has also been referred to in the press in the past few days? If I may put a Scottish point of view, Scottish Television is being allowed to have excessive domination not only in the west of Scotland but in taking over the excellent regional franchise holder, Grampian Television.
Lord Simon of Highbury: My Lords, I thank the noble Lord for his question. I cannot comment on the position taken on media bids in the past. I am so young in the House that I have not yet caught up. I believe that we must strike a careful balance between the capacity to bring on new technology, where there will be few players with the ability to fund these options, and the creation of opportunities that this wonderful revolution in information services provides. The challenge to look again at competition policy is probably an early one. We want to make the offers available and see who is there to bid, and then we will consider competition issues.
Lord Inglewood: My Lords, on 4th June the noble Lord, Lord McIntosh of Haringey, was asked by my noble friend Lord Lucas whether the Government had confidence in the ITC, which was taking crucial decisions about digital terrestrial television. The Minister's response was (how shall I put it?) somewhat
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opaque. I have advised the Minister now at the Dispatch Box—whom I should also like to welcome—of my intention to seek further clarification. Bearing in mind that confidence is like virginity—either it exists or it does not and there is no scope for qualification—can the Minister tell the House whether the Government have confidence in the ITC? I ask the Minister to bear in mind that in giving his reply any qualification must mean that his response is negative.
Lord Simon of Highbury: My Lords, I also thank the noble Lord for his welcome. I am still trying to assemble the full import of the last sentence of his Question. The answer is that the Government have full confidence in the ITC.
The Earl of Northesk: My Lords, do the Government have any plans to make use of set-top technology as the means of delivering their promise to install Internet capability in schools?
Lord Simon of Highbury: My Lords, I thank the noble Lord for his Question. Currently, we do not have any plans because the state of the development of the technology is still open. I believe that it is an extremely good suggestion and it is one that we shall take seriously and comment upon at a later stage when the technology is available.
Lord Annan: My Lords, can the Minister confirm that after next year we will be unable to see rugger internationals involving England, Scotland, Ireland and Wales unless we watch them on Sky?
Lord Simon of Highbury: My Lords, I was unaware of it because of late I have been more inclined to watch football than rugby. However, the consumer should always have choice. If not, the competitive bidding process is not working correctly.
Lord Annan: My Lords, in other words is the Minister willing to review the list of sporting events that should be available to terrestrial television?
Lord Simon of Highbury: My Lords, I ask the noble Lord to put the question to the appropriate department.

National Health Service: Policy
3.25 p.m.
Baroness Cumberlege Baroness Cumberlege asked Her Majesty's Government:
What is their policy on charging for National Health Service services in view of the recent announcements of the Secretary of State for Health that charges for visiting a National Health Service doctor or staying in a National Health Service hospital are not to be ruled out.
Baroness Jay of Paddington: My Lords, I am very grateful to the noble Baroness for giving me the opportunity to repeat the Government's manifesto

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commitments on the National Health Service. Access to the NHS will be based on need, not ability to pay. The manifesto also promised that we would raise spending on the NHS in real terms every year and put the money towards patient care. Every aspect of the Department of Health's comprehensive spending review, which is part of the Government's comprehensive spending review announced last week, will naturally be judged against that commitment.
Baroness Cumberlege: My Lords, I am grateful to the noble Baroness for her reply. Will the new Labour Government honour their manifesto pledge? As I understand it, the Secretary of State for Health has said that no charges are to be ruled out. Bearing in mind that yesterday the noble Baroness told us about cancer services, can she now give a commitment that no one who is dying of cancer or who has a terminal condition will have to pay for a hospital stay or a visit from his or her GP?
Baroness Jay of Paddington: My Lords, I can confirm that no one will have to pay for cancer treatment. Without wishing to be discourteous, I am rather surprised that after several years as a Minister in the previous government the noble Baroness accepts the truth of media speculation. The rather frenzied speculation about NHS charges for this, that and the other is just that—unfounded speculation.
Lord Stoddart of Swindon: My Lords, can my noble friend confirm that the spending review will not simply take into account charges but will deal with the whole administration of the National Health Service, its priorities, how it is run, those treatments that should be given priority and those that should not and, above all, whether real progress will be made in phasing out mixed sex wards, a matter about which I, and indeed the House, which passed a Bill to outlaw such wards in the National Health Service, are concerned?
Baroness Jay of Paddington: My Lords, my noble friend Lord Stoddart is aware of my genuine concern about, and attention to, the question of mixed sex wards. It is part of the responsibilities we shall be looking at in the comprehensive spending review. The review is about setting priorities in the medium and long term—not just the next two years—and it will consider the matters the noble Lord has raised. Its purpose is to channel resources of the public sector towards the achievement of the manifesto promises and so advance the key principles of fairness, opportunity, employment and investment that we hope the National Health Service will always represent.
Baroness Seccombe: My Lords, I should first declare an interest as a pensioner. Does the Minister agree that such charges as are referred to in the Question would be a tax on pensioners, because it is the elderly who use the services of the National Health Service?
Baroness Jay of Paddington: My Lords, I understand the concerns of the noble Baroness. I can
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only repeat what I said earlier. All speculation about individual charges is just that—speculation.
Earl Russell: My Lords, is the Minister aware of opinion poll evidence that 56 per cent. of those who voted Labour at the election did so expecting that increases in taxation would result, presumably agreeing with the mistaken view of Polly Toynbee: trust them, they are liars? Under those circumstances, since the Government must inevitably disappoint nearly half their voters whatever they do about taxation, do they accept the view, which I would commend to any government, that they will not rule out prudent increases in taxation when they appear to be in the national interest?
Baroness Jay of Paddington: My Lords, the noble Earl, I think, is trying to take advantage of the fact that I am a newly appointed Minister, and, as in the debate on the Queen's Speech, is inviting me to speculate about the Budget and future tax arrangements, which I am sure he will understand that even someone as green as I am is unlikely to do.
Lord Ashley of Stoke: My Lords, on how many occasions were prescription charges raised by the previous government?
Baroness Jay of Paddington: My Lords, prescription charges today are 28 times more expensive than they were in 1979. Even after allowing for inflation, they are 10 times more expensive than they were in 1979.
Baroness Cumberlege: My Lords, would the Minister like to confirm that it was a Labour Government who first introduced the principle of prescription charges? And is it not the case that today 80 per cent. of people are exempt from paying prescription charges and only 20 per cent. have to pay, which is a reversal of the situation before the Conservative Government came in? The Minister talked also about press speculation. Will she comment on what Mr. Dobson was quoted as saying in The Times of 14th June 1997:
"We are ruling nothing out. We are looking at every aspect so that we can get the health service on an even keel and get through the pressures of this coming winter. We are going to look at charges"?
Baroness Jay of Paddington: My Lords, there is nothing inconsistent with what I have said and the press speculation to which the noble Baroness referred. As she raised the subject of the situation when her government took over and our government came in, what is true is the appalling state of NHS finances today. We have inherited a service which is £300 million in debt. A record number of health authorities and health trusts are in deficit; waiting lists are at record levels; and, as was

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revealed today, prescription fraud, which was totally unchecked under the previous government, is losing the NHS over £85 million a year.

Firearms (Amendment) Bill
3.32 p.m.
Brought from the Commons; read a first time, and to be printed.

Imperial College Bill Southampton International Boat Show Bill
The Chairman of Committees (Lord Boston of Faversham): My Lords, I beg to move the first Motion standing in my name on the Order Paper.
Moved, That the promoters of the Bills which were brought from the Commons in the last Parliament but had not received the Royal Assent shall, notwithstanding anything in the Standing Orders or practice of this House, have leave to proceed with the said Bills in the present Session and the petitions for the Bills shall be deemed to have been deposited and all Standing Orders applicable thereto shall be deemed to have been complied with;
That, if the Bills are brought from the Commons in the present Session, the agents for the Bills shall deposit in the Office of the Clerk of the Parliaments a declaration, signed by the agent concerned, stating that the Bill is the same in every respect as the Bill brought from the Commons in the last Parliament;
That the proceedings on such Bills shall in the present Session of Parliament be pro forma only, in regard to every stage through which the same shall have passed in the last Parliament, and that no new fees be charged to such stages.—(The Chairman of Committees.)
On Question, Motion agreed to, and a message was ordered to be sent to the Commons to acquaint them therewith.

Bodmin Moor Commons Bill [H.L.] King's College Bill [H.L.]
The Chairman of Committees: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, That the promoters of the Bills which originated in this House in the last Parliament but had not received the Royal Assent shall, notwithstanding anything in the Standing Orders or practice of this
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House, have leave to introduce the said Bills in the present Session and the petitions for the Bills shall be deemed to have been deposited and all Standing Orders applicable thereto shall be deemed to have been complied with;
That every such Bill shall be deposited in the Office of the Clerk of the Parliaments not later than 3 o'clock on Monday 23rd June next with a declaration annexed thereto signed by the agent concerned, stating that the Bill is the same in every respect as the Bill at the last stage of the proceedings thereon in this House in the last Parliament;
That the proceedings on such Bills shall in the present Session of Parliament be pro forma only, in regard to every stage through which the same shall have passed in the last Parliament, and that no new fees be charged to such stages.—(The Chairman of Committees.)
On Question, Motion agreed to, and a message was ordered to be sent to the Commons to acquaint them therewith.

National Health Service (Private Finance) Bill [H.L.]
3.34 p.m.
Baroness Jay of Paddington: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Baroness Jay of Paddington.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Clause 1 [Powers of NHS trusts to enter into agreements]:
Lord Brightman Lord Brightman moved Amendment No. 1:
Page 1, line 7, after ("agreement") insert ("(which includes a series of connected agreements)").
The noble and learned Lord said: The amendment seeks to clarify a short point which arises on the certification of what is called an externally financed development agreement. The purpose of the Bill, as the Committee will be aware, is to remove any doubt about the power of NHS trusts to enter into such agreements; for example, an agreement for a hospital project where finance is to be provided from the private sector.
The Bill is designed to set at rest any question that the NHS trust is acting ultra vires, and that those who provide the private finance may lose their money as a result. To be legally watertight under the Bill in the area of ultra vires, an externally financed development agreement will usually need to be certified as such by the Secretary of State. In practice, an important project is likely to involve a series of separate agreements, not necessarily all between the same parties, which together form the total package; for example, a project may involve the lease of a hospital site and such subsidiary matters as the provision of laundry facilities for staff and patients. The lease would normally be in one

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document in the usual form, and the laundry services would probably be the subject matter of a totally different document.
It would be inconvenient and cumbersome if everything involved in the project had to be contained in one document. However, I have been told by the Financial Law Panel that the department has indicated that it is its present intention to certify only one document in any project. Does that mean that if, for convenience, the project is contained in five separate documents, only one agreement will be certified, and therefore made legally watertight in the area of ultra vires, and that the other four agreements will not be certified and therefore can be vulnerable?
The amendment is designed to make it clear that the Secretary of State can be asked to certify all the agreements which form a particular project, by saying that the agreement includes a series of connected agreements. I beg to move.
Baroness Anelay of St. Johns: I thank the noble and learned Lord for his explanation of that legal point. If the amendment were to be considered necessary to ensure that agreements are properly certified and that no part of such an agreement remained vulnerable, is it not a pity that the definitions could not be contained within just one clause? As a layman, it is difficult sometimes to find one's way through legislation. I have had to read social security law and regulations over the past 20 years, and sometimes still feel no better off when trying to unravel them. Clause 1(5) contains definitions of two other terms which fall within subsection (3). I am referring to the terms "another party" and "facilities". If it were necessary to have the amendment to secure the underlying nature of the agreements, we might be able to look at having all definitions within one clause.
Baroness Jay of Paddington: I am grateful to the noble and learned Lord for employing his legal erudition to move the amendment. I, too, feel rather like the noble Baroness, Lady Anelay, that we are, as it were, amateurs in the legal minefield. I am also grateful to the noble and learned Lord for acquainting me with the reasons for putting down the amendment before he did so. The amendment, as he said, seeks to clarify the fact that a series of connected agreements may be treated as a single externally financed development agreement, and certified as such by the Secretary of State. I entirely appreciate the noble Lord's intention to improve and clarify the Bill, but my advice is that the amendment is unnecessary. The purpose of this Bill is simply to give bankers reassurance that NHS trusts have the power to enter into externally financed development agreements; in other words, private finance contracts. We have been in close contact with the banking community at all stages, and they have signalled their satisfaction with the Bill as drafted.
Their confidence in the Bill is not misplaced. My legal advice is that the Interpretation Act states that the singular includes the plural. This allows the Secretary of State to certify a group of agreements as constituting one externally financed development agreement. This, in practice, is what we see happening.
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Typically, a major PFI scheme involves a contract between the NHS trust and the private sector consortium, and a series of further contracts between the consortium and its individual members; in other words, a whole group of contracts. However, it is unnecessary to certify each of them separately.
What we envisage is what already happens in the leading PFI schemes: there is an overarching project agreement between the trust and the consortium which incorporates all the others by referring to them. The Secretary of State will issue one certificate which lists or refers to all the documents that constitute the externally financed development agreement—that is, the overarching project agreement and all the related contracts—and will certify that they together constitute such an agreement. Certification of the project agreement will therefore provide certification of all the related contracts.
It is, of course, true that this approach would not allow the certificate to cover contracts made subsequent to the certificate, which might happen if, for instance, a member of the private sector consortium were replaced by another company. However, I am advised that the proposed amendment would not solve that problem. The easiest way of covering such contracts would be to amend the overarching project agreement to include the new contract and to issue a new certificate. This could also be done if a contract were accidentally left out when a project agreement and its related contracts were being certified. I have to say that, given the time, money and amount of legal brain power applied to these agreements, I find that particularly unlikely.
Some lawyers have asked what would happen if a satellite or subsidiary contract fell outside the scope of the Bill. In practice, it is hard to see this happening since in Clause 1(3) the Bill refers very loosely to agreements "in connection with" the provision of facilities to enable a trust to discharge its functions. If the satellite contract were omitted accidentally from the overarching project agreement, the agreement could, as I have said, be amended and recertified. If the satellite contract were not related to the functions of a trust, it is hard to see why it would form part of the PFI scheme in the first place.
While we understand that the intention behind the amendment is sound and is meant to be helpful the approach we are taking makes it unnecessary. We are grateful to the noble and learned Lord for tabling the amendment, but hope that he will not press it.
Lord Brightman: I am grateful to the noble Baroness for that explanation, which is entirely satisfactory and relieves me of all anxieties. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Ezra Lord Ezra moved Amendment No. 2:
Page 1, line 13, at end insert—
("() he is satisfied that the provision of those facilities in the circumstances proposed is in the interests of the population of the area served by the trust and is in the wider public interest; and").
The noble Lord said: In moving this amendment I shall speak also to Amendment No. 3. They derive from the experience at Norwich in relation to the Norfolk and Norwich Hospital project. Reference was made to that during our Second Reading debate on 3rd June by the noble Baroness, Lady Cumberlege, my noble friend Lord Addington and the noble Lord, Lord Rea. Therefore, there was reference to the issue from all sides of the House.
The purpose of the amendments is to obtain reassurance that when the Secretary of State is deciding to give his certificate under Clause 1(2) he must be sure that, according to Amendment No. 2, the proposal he is certifying is in the local and wider public interest. Amendment No. 3 provides that he must make sure that the proposal he is certifying has been the subject of adequate public consultation.
The relevance of the Norwich affair is that the project, although subject initially to detailed public consultation, was subsequently changed to a material degree. In particular, a smaller existing hospital within the city of Norwich, which was to have formed part of the project as initially discussed, was scheduled to be closed under the revised proposition. That has created a considerable amount of public concern. It is for those reasons that the amendments have been tabled. I beg to move.
3.45 p.m.
Lord Rea: The amendments could well be categorised as constructive opposition, which is the way the Liberal Democrat Party has said that it will behave certainly during the first part of the Government's term in office. They allow my noble friend to speak on a topic of strong local concern in at least one part of the country. There is no doubt that the citizens of Norwich, as represented by their elected council, do not feel that,
"the provision of those facilities in the circumstances proposed is in the interests of the population of the area served".
Nor do they feel that there has been,
"adequate public consultation".
as provided in the amendments.
One of the pledges of the Labour Party in its manifesto was that health service provision should become more locally accountable, since the previous government steadily eroded local democratic representation on health authorities and trusts. A meeting of Norwich City Council just over a week ago resolved that:
"The proposals for a new district general hospital at Colney received planning permission from South Norfolk District Council and tacit approval for PFI-funding from the previous Tory Government, despite strong local opposition.
"Norwich City Council opposed the approval particularly on planning grounds: the proposals are environmentally damaging, economically damaging to the City and very poor in access for both service users and staff.
"Norwich City Council therefore resolves—
To request an independent review of all decisions made with regard to new hospital provision in the Norwich area. This review to be held in public and 'transparent' in all details, including finance. The review to consider environmental impact, sustainability and access issues as well as economic impact".
That is the first of a series of clauses. There are six other clauses.
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I understand why the noble Baroness is anxious that the Bill should pass through this House unamended. One of the reasons is the ability to go ahead quickly with this and other schemes. However, this scheme in particular is very expensive, environmentally disruptive and opposed by local opinion. Surely it is time to step back and not be in such a hurry. Alternative and much cheaper schemes have been drawn up in outline and costed. Surely they should be examined. It is unnecessary and unfair to suggest, as did my right honourable friend Mr. Alan Milburn, that if the current scheme is not accepted lock stock and barrel Norwich will go to the back of the queue. Is that fair when a much cheaper and more acceptable alternative has been drawn up in outline by a highly respected architect and is waiting in the wings?
Baroness Jay of Paddington: I am grateful to the noble Lord, Lord Ezra, for reminding us that all those important decisions about private finance schemes should not be taken by politicians or bureaucrats locked away in ivory towers, without consideration for the public in whose communities they will be built and who will use the new hospitals. I very much take on board the specific points made by the noble Lord and my noble friend Lord Rea about the Norwich situation. But as my honourable friend Mr. Milburn, who has been referred to, made clear in another place in announcing the wider review of PFI in health, on 10th June, in future we must be satisfied that the projects have taken due account of the needs and wishes of local communities. I am sure that all Members of the Committee will wish to endorse those sentiments.
However, despite sharing the noble Lord's concern on this matter, I cannot agree that the right way to address it is by amending the Bill in this way, as there is already legislation in place which requires consultation on such matters.
It is not possible to consult every single member of the public on every single local health service issue. Instead, the Committee may be familiar with the expression that the community health councils are the "patients' watchdog.". Paragraph 1 of Schedule 7 to the 1977 NHS Act states that it is the,
"duty of a Community Health Council … to represent the interests in the health service of the public in its district.".
We continue to acknowledge the pivotal role played by community health councils in articulating the views of local people, and they are required to be consulted on important changes to health services. Regulation 18 of the 1996 Community Health Council regulations state:
"It shall be the duty of each relevant Health Authority to consult a Council on any proposals which the health authority may have under consideration for any substantial development of the health service in the Council's district, and on any proposals to make any substantial variation in the provision of such service".
I am sure your Lordships will agree that a major PFI development is precisely the sort of "substantial development" on which a council could expect to be consulted. Given the requirement for consultation which already exists, we cannot agree that the Bill should be amended to make yet further provision.

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But my honourable friend, Mr. Milburn, is looking at the whole prioritisation of PFI schemes. He has made it clear that in the future, that will be done on the basis of major capital schemes and their relevance to the health service. Service need will be paramount. These conditions build upon the existing, well-established framework for approving major capital schemes as set out in the Capital Investment Manual, which requires the Department of Health and the Treasury to give their approval for major projects. Those bodies are also able, at a stage in the approval process long before the certification point with which this Bill is concerned, to ensure that consultation has taken place and that the interests of all parties have been taken into account in deciding whether a scheme should progress. That is the general point of the amendment which has been put forward and which lies behind the contribution from my noble friend Lord Rea.
I understand that there are particular anxieties in Norwich in relation to the proposals for the building of the hospital there. But the health authority carried out a formal consultation along the lines of the general principles that I have discussed. Although I understand there is controversy about it, the people in the local community realise that it is the best possible solution to the local problem of where to build the hospital.
Perhaps I may quote from a letter to my honourable friend in another place from one of the Members of Parliament for Norwich, Mr. Charles Clarke. He said that when he was elected he reviewed the facts about the situation in Norwich in relation to the new hospital and had a series of meetings with Ministers and civil servants:
"It became very clear to both myself and my colleague, Dr. Ian Gibson",
who is another Member of Parliament for Norwich,
"that the real choice here was between the particular site which was being proposed and no new hospital at all".
Without in any way wishing to sound heavy-handed in relation to this matter, that really is the situation. As my noble friend Lord Rea suggested, there are particular problems in that community. The hospital has been given a high priority in my honourable friend's review of the PFI in the health service. There are many other competitors for immediate funding who are wanting to go ahead with their contracts and who have the interests of their local community at heart. I am afraid that it is the case that because of that prioritisation system, any project where there has been a problem, which has been properly reviewed and where discussion has been going on for many years, will find itself pushed back down the queue.
However, I hope that the noble Lord, Lord Ezra, will understand that the specific legislation which is in place will allow proper and appropriate consultation to be held on future schemes. Proper consultation has taken place on the specific matter that he raised, although I know that subsequent controversy has occurred. Given that it is also in the interests of the whole NHS building
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programme which lies behind this measure to go ahead as quickly as possible, he will find it unnecessary to press the amendment.
Lord Ezra: I thank the Minister for her full answer to the issues raised by the amendments. I am reassured by what she said: that there is already in place in other legislation an obligation to carry out full public consultation and to consider the interests of the local population and any wider areas which may be involved. Therefore, on those grounds I agree that it does not seem necessary to introduce such an obligation in the present Bill.
However, the second reason for moving the amendments was to relate them back to the Norwich case which seems to have been particularly long drawn out and complicated. I have done that. We referred to it on Second Reading and it has been referred to again now. The Minister must be well aware that there is continuing concern about that issue. Having achieved my two objectives, I beg leave to withdraw Amendment No. 2.
Amendment, by leave, withdrawn.
[Amendment No. 3 not moved.]
Lord Ezra Lord Ezra moved Amendment No. 4:
Page 1, line 25, at end insert ("other than services provided by professional staff which have direct impact on patient care").
The noble Lord said: I move this amendment on behalf of my noble friend Lady Robson who unfortunately cannot be with us this afternoon due to other urgent commitments.
The purpose of the amendment is very simple and again relates back to the discussions that we had on Second Reading. The concern is that the reference to "services" in the Bill does not make it clear that that would exclude clinical services.
There seems to be general agreement by the Government and everyone else that clinical services should not be affected by any project by private investment; and that those should always be kept apart and fall within the public domain.
The wording used here to cover that point is proposed by the BMA. Having looked at the matter very carefully, that is what it proposes. I can read it out in full; but in summary the BMA defines clinical services as services provided by professional staff, whom it describes as doctors, dentists, pharmacists, nurses and other health professionals, which have a direct impact on patient care. Those are the words used in the proposed amendment.
The BMA then goes on to describe in full what it means by those services. I do not need to detain the Committee by going through those. Therefore, here we have the wording put forward by the BMA to support the views already expressed and assurances given by the Secretary of State for Health when he spoke to the Royal College of Nursing in May. He said that the Government would keep to their promise not to extend private finance to include clinical services. At a later date, Mr. Alan Milburn MP, Minister of State for Health, spoke in very much the same terms and in our debate

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on 3rd June the noble Baroness, Lady Jay, (at cols. 612 and 613 of Hansard) said very much the same thing. There is no doubt about it at all; that is the Government's intention. The purpose of the amendment is to put that intention on the face of the Bill. I beg to move.
4 p.m.
Lord Jenkin of Roding: I find the amendment as worded extremely obscure. The noble Lord, Lord Ezra, referred us to the brief of the BMA, but by merely excluding services,
"which have direct impact on patient care",
he would render the subsection nearly meaningless. However, when one looks at the brief of the BMA, it makes specific reference, as the noble Lord said, to diagnostic services such as radiology, pathology and clinical biochemistry.
The only point that I should like to make at this stage is that I believe it would be a great pity if the Government were to rule out the possibility of a PFI scheme for those services. I say so for one overwhelming reason. There must be very few radiology departments and clinical pathology departments where the professionals involved could put their hands on their hearts and say that they have all the equipment that they need. My experience is that most departments have been calling for some years for an upgrading of their equipment to take advantage of modern technology, to be able to buy new machines and, therefore, provide a very much better and often—especially in the case of pathology—much quicker service.
There is a second angle to the matter. Both this Government and the previous one have been looking for more collaboration in such fields for trusts, and perhaps neighbouring trusts, to form consortia to provide a more effective and cost-effective service in support of the substantive clinical services. It would be quite impossible to achieve that aim on the basis of no additional capital expenditure. I say impossible, but that is perhaps an exaggeration. There may be cases where it could be done. However, in the majority of cases, the clinicians and the technicians who provide a great deal of those services—although I am not clear whether they have a direct impact on patient care—and the other clinical services, for example, medicine, surgery, gynaecology, and so on, that need diagnostic services, would be far more enthusiastic if they thought that a scheme of rationalisation, or of collaboration, between neighbouring trusts would bring with it the prospect of substantial additional equipment, such as might be provided under a PFI scheme, than would otherwise be the case.
Therefore, with the greatest of respect to the noble Lord, I believe that the BMA has got it wrong. By seeking to rule out any PFI for these diagnostic services, we would in many cases rule out necessary improvements in the quality and cost-effectiveness of such services. When the Minister replies, I hope that she will take full account of that view. If the Government are to follow through what may have been their
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intention when the Secretary of State spoke generally at the conference of the Royal College of Nursing—namely, that they were intending to exclude such services—I believe they will find the improvements that they seek to make much more difficult to achieve. I cannot believe that that is their intention.
Lord Monkswell: The noble Lord, Lord Jenkin, has actually highlighted the difficulties that we have with the whole business of PFI. In contributing to the debate on the basis that amendment talks about services, the noble Lord mentioned capital equipment. That is the sort of confusion about which we need to be most careful. We all recognise the worry that clinicians and doctors have that they may end up being employed by a private company rather than the National Health Service. That is the main worry. However, the difficulty is where you draw the boundary. It is all very well for the BMA to say that it is concerned about the professionals with whom it works closely and that, "We should be protected and our immediate colleagues should be protected". Indeed, we recognise the justification of that concern, but it is not just them; it goes into other areas.
The amendment refers to,
"professional staff which have direct impact on patient care".
There are many other white-collar workers working in a hospital; for example, the manager of the cleaning staff, the manager of the catering staff or the manager of the boilerhouse. Which one of them does not have a direct impact on patient care? If they do not do their job properly, surely that impacts on patient care. As I said, it is most difficult to draw the boundaries.
There is one particular risk that I foresee in providing reassurance to those who are worried about the possible privatisation of patient care. If we set a list of those services or professions which could be construed as being directly involved, we effectively say that everything else that is not on the list is available for privatisation. We must be very careful in that respect. When considering the issue raised this afternoon by the Front Bench opposite about the review which is taking place, the question was posed in terms of the extension of charges. In any review process, I should like to think that we would actually consider how we can eradicate the charges that we have at present. We must think in both directions.
There needs to be some mechanism to provide reassurance not only to the professions involved but also to the public at large that the use of PFI for the next year or so, just to keep the capital building programme going, is not the thin end of the wedge of privatisation. I am fairly confident that my noble friend the Minister can provide that assurance.
Lord Winston: I find myself completely in agreement with the spirit of the amendment moved by the noble Lord, Lord Ezra. However, I also find myself, most surprisingly, in agreement with the noble Lord, Lord Jenkin, over the issue of definitions. It is impossible to define what is a patient service. I should like to extend the proposition made by the noble Lord to include, for example, the operating theatre. There are

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many examples in the working of a large general hospital where there is urgent need of investment which would pertain to, reflect and be important for patient services, which really cannot be distinguished.
What we need from the Government is an undertaking that we will not have a creeping privatisation of the National Health Service. I am sure that that is the spirit of this Government. I hope that we can look forward to hearing some kind of reassurance from my noble friend the Minister in that respect. That is the best we can hope for if the Bill is to proceed as it must.
Baroness Cumberlege: While I very much respect the views expressed by the noble Lord, Lord Ezra, we on these Benches cannot support the amendment for the two reasons given by my noble friend Lord Jenkin of Roding. First, we believe that the approach is too centralist; and, secondly, we have difficulty with the definition of what does or does not have a direct impact on patient care. We are back into those grey areas which so bedeviled the Minister on Second Reading. As the noble Baroness will remember, I pressed her during that debate to define what she meant by the definitions regarding subsection (3) referred to in Clause 1(5). At that time she was unable to do so.
When looking at the BMA evidence—and I am most grateful to the association for sending such evidence to me and other Members of the Committee—it is clear that the BMA has difficulty in defining clinical services. It starts with a list but there is a caveat at the bottom of the list which states that it is not exhaustive. That is the problem with lists. It is far better to build in a degree of flexibility. Those of us who do the weekly shop know how difficult it is to stick to a list and how much we would miss if we did so. We would have none of those little luxuries which make life worth living.
The RCN does not even attempt to define what is meant by clinical services. Although I would expect the new Labour Government with their roots embedded in a history of centralised bureaucracy, to deny local people the power of decision making, I am surprised and sad that both the BMA and the RCN are denying their members the choice which we gave them in our clear policy contained in the National Health Service (Residual Liabilities) Act which covered this ground.
At Second Reading of this Bill the noble Baroness, Lady Jay, was clearly not ready or prepared to define services. In answer to the probing questions that I put she admitted that although the Government had undertaken to present the Bill to Parliament, they had not yet defined what they meant by services. That was unlike the previous government. When I was asked at the Dispatch Box by the noble Baroness during the passage of the National Health Service (Residual Liabilities) Bill what was the position regarding clinical services, I gave a clear answer; indeed, one which her noble friend Lord Carter had no problem at all in understanding. I am glad that the noble Lord is present to listen to this part of the debate. My reply was:
"The noble Baroness also asked about the privatisation of clinical services. I remind her that it is no part of the Government's policy through PFI to transfer the delivery of NHS clinical services into the private sector … However, if a trust explores local arrangements
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for private sector provision of some clinical and clinical support services we would not stand in its way. As the noble Lord, Lord Carter, said, it is a matter of local determination and it cannot be carried through without the support of clinicians. If a PFI project is submitted for approval and its viability depends on the privatisation of clinical or clinical support services which does not have the consent of local clinicians it would not receive departmental backing".—[Official Report, 21/5/96; col. 785.1
With our policy the decision was left for local determination.
It seems to me a great pity that the people in the service, doctors, nurses, managers, scientists, laboratory staff and so on, who have by far the greatest knowledge of the local situation and of what will work both geographically and professionally, are, under this Government's proposals, being denied the power to influence their own destiny. The Government's approach is to ignore all that wisdom and understanding and to deprive local clinicians of their rightful opportunity to influence the shape of their new facilities—as highlighted by the noble Lord opposite—and give the best possible service to patients. Instead, they will have to conform to a template set centrally by a remote bureaucracy.
I understand from a letter which the noble Baroness sent to me yesterday evening—for which I thank her—that there is to be a list of which services may or may not be included in a PFI contract—no local decision making but a central government list, a diktat. While I have a sense of relief that the Government are at last getting their act together on this part of the Bill, I have serious misgivings that not only will the list be deeply problematical but, like all lists, it will prove to be rigid and inflexible.
One of the great strengths in the 50 years' life of the NHS has been its ability to respond remarkably well to advances in modern technology; to increasing consumer demand; to an ageing population; and to the shift away from institutional care to looking after people in their own homes. Many of those challenges have been met through a sharing of skills and flexibility in working. The enemy of innovation is to place people in a strait-jacket and to give them titles from which they cannot escape. That is exactly what the Minister proposes to do. The Government's unimaginative, rigid and centralised approach will, I fear, set in aspic some of the very attitudes which in extreme cases verge on professional tribalism. I urge the Minister, whom I know does not lack flair and imagination, to try to persuade her colleagues to trust those who work day in, day out, treating, caring and managing patients, for it is they who know and in our policy it is they who would have been trusted to make the important local decisions.
The noble Lord, Lord Ezra, said that he was in no doubt about the Government's intention. I admire his certainty. I refer to the document given to me by the Minister which contains the speech made by her colleague, Mr. Milburn, when he met key stakeholders on 10th June 1997. He said in that speech:
"Definitions of clinical service can he vague, especially in the area of so-called clinical support services, and I have commissioned advice on this thorny issue. I understand and recognise the benefits of including service elements in the current model of PFI scheme".

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That raises a whole series of questions. Perhaps the noble Baroness can give a definitive statement as regards what her colleague was saying on that occasion.
Lord Rea: My noble friend will be pleased to hear that I shall not say a great deal on this amendment except to record my view that the noble Baroness, Lady Robson, in tabling the amendment, and the noble Lord, Lord Ezra, in moving it, have performed a useful task because it allows my noble friend further to clarify the Government's position on what is certainly a thorny problem.
4.15 p.m.
Baroness Jay of Paddington: I thank the noble Lord, Lord Ezra, and my noble friends who have spoken, including my noble friend Lord Rea whom I thank for his helpful intervention. We are at one in seeking to exclude clinical services from PFI agreements in the NHS. As has been said by several Members on different sides of the Committee, the difficulty is to define those services in a way which is legally and professionally watertight as well as making common sense. I am aware of the BMA's contribution to that and its proposal which is framed in the amendment.
Since Second Reading I have tried—possibly without the flair and imagination which the noble Baroness opposite attributes to me—with officials to draft exclusions which appropriately reflect the concerns which the noble Lord, Lord Ezra, and I share. Some of our discussions have more resembled linguistic philosophy seminars than drafting committees for a Bill. Every attempt we have made has met with objections. That is why I feel that I cannot recommend the amendment to the Committee although I sympathise with its purpose.
If we look in detail at the wording of the amendment, the Committee may understand some of the difficulties we are all encountering in attempting to enshrine this policy in primary legislation. The amendment refers to,
"services provided by professional staff which have direct impact on patient care".
I can see endless scope for lawyers to argue over the exact definition of such terms as "professional staff'. My noble friend Lord Monkswell has already identified an area where that might happen. The phrases "direct impact" and "patient care" are other areas where I believe there is scope for enormous debate. For example, is the accountant who might negotiate effectively on the hospital's behalf covered by the definition, or the chef who prepares the food that helps the patient on the road to recovery? I am afraid I do not think the amendment helps us to get round those problems.
When noble Lords discussed this issue at Second Reading I reiterated the Government's clear commitment that we would not allow clinical services to be included in the PFI, or in public/private partnerships as they develop. That is an extremely important point and I am happy to repeat it here. We have decided that if we attempt to define clinical services on the face of the Bill we immediately introduce an element of doubt into the legislation whose sole purpose—as I have said before
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is to remove any doubt. I am sure that that is not what the noble Lord or the noble Baroness, whose name was to the original amendment, intended, but I believe that that is precisely what would happen. Once the banks and their lawyers detect any uncertainty of purpose this Bill will face trouble and the real overriding concern which it attempts to deal with, which is to get hospital building programmes off the ground as soon as possible, may be delayed again.
As there is not yet any agreed definition of the boundaries of "clinical services" and we cannot delay the Bill while the work is carried out to arrive at such a definition, my honourable friend Mr. Milburn, as the noble Baroness, Lady Cumberlege, mentioned, is looking again at the thorny problem. Members of the Committee are right to challenge the Government about their intentions regarding clinical services. It is right that we should be prepared to demonstrate that there is now more certainty than ever before about the commitment not to privatise the NHS.
Under the previous administration—the noble Baroness, Lady Cumberlege, explained it clearly—there was no commitment to exclude core clinical services from the PFI. Under this Administration, there is. It is our stated policy that clinical services are excluded from PFI and we will abide by that. However, there is ongoing debate—I acknowledge reference again to the fact—about some of the grey areas, in particular the definitions of so-called clinical support services. We have said that that is being addressed as part of the wider review of PFI in health which has already begun and which was announced on 10th June. It is obviously essential to consult widely on these issues before decisions are made, precisely to avoid the problems, to which the noble Baroness, Lady Cumberlege, referred, in somewhat alarming language, about central bureaucracy. Any schemes which come forward before the review is complete will be considered on a case by case basis. None will be allowed to proceed where projects transfer to the private sector categories of services which Ministers believe, in the interests of the health service, should be provided directly by the NHS.
Once the review is complete, we shall have a categorical statement of what may or may not be included in PFI. I am sure the Committee will understand that there would be no purpose in this widespread consultation if I sought to anticipate the detail of what that review may uncover. However, I am pleased to be able to answer one of the most pressing questions raised at Second Reading. I am sorry that this will disappoint the noble Lord, Lord Jenkin of Roding. We have decided that pathology and radiology services will be excluded from PFI. I know that there will be other services about which noble Lords may want immediate similar assurances, but I believe strongly that the review should be conducted before conclusions are drawn. Our commitments on pathology and radiology are given both to respond to specific issues raised by noble Lords during the Second Reading debate and, I hope, to act as a signpost for the future about our intentions.

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Perhaps I may make one further general point. Before this Bill, it was theoretically possible for clinical services to be included in PFI. The Bill does not make it any easier for clinical services to be included. Its impact is neutral in that respect. The important difference is that the present Government are committed to excluding clinical services from PFI; previously there was the discretion which the noble Baroness, Lady Cumberlege, explained. The wider review of PFI will result in a list of services which may or may not be included. But to amend the Bill today to try to make the commitment more explicit would be a serious mistake because it would undermine the purpose of the legislation which is to move quickly ahead on the organisation and start on hospital building programmes.
Following what I hope is a convincing restatement of the Government's overall policy on this issue, and the specific exclusion of pathology and radiology services from PFI, which I am happy to announce today, I trust that the noble Lord will not feel it necessary to press the amendment.
Baroness Cumberlege: Before the noble Baroness sits down, perhaps I may thank her for that clear explanation. I am left in no doubt that the Government are seeking a centralised solution. What are the Government's objections to leaving it to local determination?
Baroness Jay of Paddington: The noble Baroness's question reveals the Government's clear difference in philosophy in relation to PFI: to make it possible for hospitals to be built under private finance initiative, we hope with further public-private partnerships. The previous Government's intention was to allow such wide discretion that privatisation of individual schemes could occur at local level. We do not want that to happen. We want there to be safeguards for what we regard as a National Health Service, with all the guarantees that were in our manifesto.
Lord Jenkin of Roding: Before the noble Lord, Lord Ezra, responds to the noble Baroness, perhaps I may say this. The noble Baroness recognises that her announcement today causes me much disappointment; it will also disappoint many people in the health service. Schemes which have been in preparation for perhaps a year or more because of the need to find sources of capital to invest in new, modern, up-to-date equipment will now be abandoned. Schemes for collaboration between neighbouring trusts will probably founder. I do not know whether the noble Baroness realises that that will happen. It will be for my noble friends to form a view. However I suspect that we may wish to return to the matter at a later stage of the Bill. If that is the Government's final word, I think that they have made a silly decision and I hope that the noble Baroness recognises that.
Baroness Jay of Paddington: I am sure the noble Lord would not expect me to agree that what has been decided is silly. I said that I knew he would be disappointed. I
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confirm to him that as regards the initial schemes under the PFI hospital building programme none of the concerns that he expressed is relevant.
Baroness Cumberlege: Perhaps I may follow my noble friend to ask this. As regards schemes which are being stopped in midstream, will there be compensation for the developers who have invested so much in them?
Baroness Jay of Paddington: I am not sure to which schemes the noble Baroness refers. I can only repeat what I said to the noble Lord, Lord Jenkin of Roding. As regards those schemes under immediate consideration, none of the issues that I have raised in relation to pathology and radiology services will be affected. If the noble Baroness is so concerned about retrospective financing, I hope that she will think about the £30 million spent under the previous regime in private consultancy fees which did not result in one hospital building programme being started.
Baroness Cumberlege: Perhaps I may help the noble Baroness. I refer to the speech by her honourable friend Mr. Milburn. He stated:
"Those schemes that fail to make the list, for whatever reason, will be invited to stop any further work, decline any tenders they have and stand down preferred partners if they have selected them".
Baroness Jay of Paddington: My honourable friend Mr. Milburn was referring to the strategy of the national programme on PFI schemes as regards which, as with the noble Lord, Lord Jenkin, there will be people who will be disappointed because their schemes will not be included in the priorities.
Baroness Cumberlege: Will the noble Baroness say whether or not they will receive compensation?
Baroness Jay of Paddington: That will be up to the individual contractors to discuss with those with whom they were forming the financial arrangements.
Lord Ezra: Having listened to this interesting and lively debate, I believe that my noble friend Lady Robson was fully justified in putting forward the amendment. I am pleased that the noble Lord, Lord Rea, pointed out that the purpose of the amendment was to initiate just such an exchange of views.
I fully recognise the difficulty of achieving a proper definition. I agree with all noble Lords who made that point; we foresaw that at Second Reading. On the other hand, we believe it necessary before the Bill proceeds further at least to attempt some definition of clinical services. As do those on the Government Benches, Members of the Committee on these Benches believe that clinical services should be excluded from PFI. The problem as ever is the grey area. The announcement made today by the Minister has eliminated certain aspects of the grey area; it has become clearer in colour. No doubt, as time goes on, the issue will be further clarified. I hope that there will be clarification before the Bill finally passes through another place. All

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concerned will then be well aware of what is involved in the reference to services. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Chairman of Committees (Baroness Turner of Camden): I must tell the Committee that if Amendment No. 5 is agreed to, I cannot call Amendment No. 6.
Lord Brightman Lord Brightman moved Amendment No. 5:
Page 1, line 26, leave out subsection (6) and insert—
("(6) The absence of a certificate given under this section shall not affect the validity of any agreement to which a National Health Service trust is a party and which it had power to enter into apart from the provisions of this section.").
The noble and learned Lord said: This amendment and Amendment No. 6 seek to clarify subsection (6). I do not expect that the discussion on this amendment will prove as absorbing as the debate we have just heard. Subsection (6), omitting a few words for brevity, reads as follows:
"Nothing in this section affects the validity of any agreement … if the agreement … has not been certified … but would have been an externally financed development agreement … if it had been so certified".
Any agreement would by definition be an externally financed development agreement if so certified. I therefore have difficulty in seeing what exactly the subsection does. I think, although I am not certain, that it probably seeks one of two things. Either it seeks to say that the absence of a certificate does not invalidate an agreement if the agreement is one which the NHS trust had power to enter into apart from the Act; or, more probably, it seeks to say that an uncertified agreement is valid if it is one which the Secretary of State would have certified if an application for a certificate had been made because the requisite conditions are fulfilled. The latter construction seems to accord with what is said in the Notes on Clauses.
I have tabled two amendments to cover the two possibilities. Amendment No. 5 takes out the whole of subsection (6) and states:
"The absence of a certificate given under this section shall not affect the validity of any agreement to which a National Health Service trust is a party and which it had power to enter into apart from the provisions of this section".
Amendment No. 6 leaves in paragraph (a) of subsection (6) but rewrites paragraph (b) so that the subsection as a whole would read:
"Nothing in this section affects the validity of any agreement made by a National Health Service trust if the agreement—

(a) has not been certified under this section; but

(b) would have been so certified if an application for a certificate had been duly made".

I wonder whether the Minister would consider referring the wording of subsection (6) back to the draftsman to see whether its purpose could be more plainly expressed. I beg to move.
4.30 p.m.
Viscount Ullswater: I support Amendment No. 5. At Second Reading when we discussed the vires of a trust in concluding PFI agreements, I made a point which I believe was correct in its interpretation; namely, that the Bill will cover major projects which are externally financed but will not cover a deal where the private sector contractor finances the project from its own resources. In her reply—and I am grateful to her for putting the reply forward—she said that Clause 1(6), the clause that is now subject to this amendment,
"provides that nothing in the Bill affects the validity of an agreement between a trust and a private contractor which does not have a certificate … Apparently there is clear legal advice that trusts are able to enter into contracts without a certificate and the certificate process provides concrete reassurance to the banks which are funding the larger schemes".—[Official Report, 3/6/97; col. 612.]
That would seem to indicate that the Bill's concern is only with the larger projects and that perhaps there is not so much concern for the many smaller projects coming forward under the PFI initiative.
I wonder whether the Minister was in fact correct in the advice that she received on that occasion. As the noble and learned Lord, Lord Brightman, indicated, there are two halves to subsection (6). Clause 1(6) makes it clear that the section will not affect the validity of an agreement made by a trust only if, first, the agreement has not been certified under the section and, secondly, it,
"would have been an externally financed development agreement for the purposes of this section if it had been so certified".
Because of the second part of the requirement, only those agreements that fall within the definition of an externally financed development agreement will be protected by Clause 1(6) as it stands. I am advised that the definition does not include those contracts where the contractor or service provider is providing the finance itself.
Amendment No. 5 would set out clearly on the face of the Bill that, where there is no other party (it does not use those words, but has that effect) and therefore no certificate, the validity of an agreement is not at risk. Does the noble Baroness not see that as a form of clarification—not seeking to amend the terms of the Bill but merely making the provision clearer on the face of the Bill in relation to the many smaller projects?
Baroness Anelay of St. Johns: The noble and learned Lord, Lord Brightman, commented that discussion on this amendment might not be as absorbing as on the previous one. It is no less welcome than the previous amendment. The noble and learned Lord is trying to clarify a matter which underpins whether or not contractors feel secure in the way in which they enter into agreements. The noble Viscount, Lord Ullswater, drew to our attention the worries that smaller contractors might face.
On this side of the Committee we welcome any clarification in subsection (6) provided that it does not necessarily hold up proceedings. However, we should not wish any such clarification to alter the policy intention as we see it behind subsection (6) as it currently stands. On that basis, we are neutral in relation to this amendment.

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When I originally examined the noble and learned Lord's amendment I had some difficulty. At that stage, given the way in which it was phrased, referring to "any agreement", it appeared that agreements might go out with the normal range of PFI contracts. I am grateful to him for his explanation today. It clarifies that matter.
Provided the policy intention is not changed by this clarification, we remain neutral on the amendment.
Baroness Jay of Paddington: I am grateful to the noble Baroness, Lady Anelay, to the noble and learned Lord for his suggested amendment, and for the contribution made by the noble Viscount. As the noble and learned Lord said, the amendment reflects an interest in replacing the wording of the existing subsection (6). We have considered the amendment carefully. However, the legal advice we received is that it does not improve the meaning of the Bill, nor does it correct an error or omission. We feel that the existing text satisfies the reasonable concern that the validity of an agreement which meets the conditions set out in subsection (3) cannot be challenged merely because it has not been issued with a certificate under this clause.
The amendment suggests that the validity of any agreement into which a trust enters, whether externally financed or otherwise, should not be affected. However, the advice I received is that it is unnecessary to make the point since a trust has express powers to enter into such contracts—under paragraph 16 of Schedule 2 of the 1990 Act which set up the trusts. The Bill is specifically designed, as I have said several times both on this occasion and at the Second Reading, only to address the question of externally financed development agreements, about which the banks have expressed concern, and not any other kind of contract. It leaves the validity of self-financing deals entirely untouched. We therefore do not see any reason to accept the amendment. The self-financing equity funded schemes are not covered and it was never intended that they should be. I hope that that satisfies the noble Viscount. It was a point that he raised at Second Reading and I hope that my remarks clarify it.
In addition, there is the general financial case that I have made on a number of occasions that the banks, waiting to lend and go ahead with the schemes—and the noble Baroness, Lady Anelay, confirmed her point of principle in wishing to support that intention—have seen and agreed the wording of the Bill. Their legal advisers have made it clear that it satisfies all their outstanding concerns, which are related to major hospital building projects. If we now change the wording of the Bill with no good cause, it will risk creating doubt and delay, which I think we all agree would be unfortunate, on a matter which is generally agreed. Even if we do not agree on the detail, it is a timely piece of legislation. I therefore ask the noble and learned Lord not to press his amendment.
Lord Brightman: I have in my hand the Notes on Clauses. Paragraph 14 reads:
"Subsection (6) is designed to ensure that the validity of an agreement which meets the conditions set out in subsection (3) cannot be challenged merely because it has not been issued with a certificate under this clause".
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I ask why subsection (6) cannot simply read in this way, using the admirable wording of the Notes on Clauses:
"The validity of an agreement which meets the conditions set out in subsection (3) cannot be challenged merely because it has not been issued with a certificate under this clause".
Baroness Jay of Paddington: The noble and learned Lord raises an interesting and sensible point. I agree that anything which adds clarity in that way and simplifies the drafting is entirely to be welcomed. I am advised that the way in which it has been phrased is part of the legal understanding. Of course, I defer to the noble and learned Lord on a matter of such detail, but since the amendment seeks to ensure that the validity of all trust contracts should be included when the proposal is only dealing with the externally financed development agreement, it may unnecessarily over-complicate the issue.
However, if the noble and learned Lord would like me to take away his wording and refer it back to my officials, I shall do so. I believe that their response will be that the way in which the amendment is drawn up does not add to the clarity of the Bill as the wording is now expressed.
Lord Brightman: I am grateful to the noble Baroness and will take up her kind offer. Perhaps she would be good enough to refer this amendment back to the officials to see whether we have the best form of words. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 6 not moved.]
Clause 1 agreed to.
4.45 p.m.
Lord Brightman Lord Brightman moved Amendment No. 7:
After Clause 1, insert the following new clause—
ABSENCE OF RELEVANT DISCHARGE TERMS
(" .—(1) Subsection (2) applies where—

(a) the result of a determination or order made by a court on an application for judicial review or an audit review is that an externally financed development agreement does not have effect, and

(b) there are no relevant discharge terms having effect between the National Health Service trust and a person with whom the trust has entered into the contract.

(2) That person shall be entitled to be paid by the trust such sums (if any) as he would have been entitled to be paid by the trust if the contract—

(a) had had effect until the time when the determination or order was made, but

(b) had been terminated at that time by acceptance by him of a repudiatory breach by the trust.").

The noble and learned Lord said: The ultra vires question is central to the purpose of the Bill, as the Committee will know. Although the Bill is welcomed by the financial markets for what it does, there are two aspects of the ultra vires risk which are not covered: first, the risk that a certificate of the Secretary of State might be quashed; secondly, the risk that a contract might be upset on the grounds that the NHS trust exercised the power given by the Bill for an improper purpose.
The point raised in my amendment was highlighted in a paper published by the Financial Law Panel in May 1996 entitled Transactions with Local Authorities. I am not certain whether the Committee is aware of the existence or background of the Financial Law Panel but it is a prestigious body chaired by a former Master of the Rolls, with a High Court judge among its membership and a representative of the Treasury as a "participating observer". Its purpose is to identify areas of uncertainty in the law affecting financial markets and to seek to remove them or limit their scope.
In connection with a proposed certification procedure affecting public authorities which the paper was discussing in 1996, the panel said that a third party,
"should be protected absolutely against the consequences of a transaction, which has been certified, subsequently being held to be ultra vires. The simplest approach would seem to be that, on the grant of a certificate, the transaction is conclusively deemed to be infra vires, so far as concerns third parties acting in good faith".
I have been assured within the past few days that this approach is strongly supported by the British Bankers' Association, notwithstanding their satisfaction with the Bill as a whole. The amendment which I am advocating is lifted straight from Clause 7 of the Local Government (Contracts) Bill which the Government have just introduced in the other place. There is a close connection between the two Bills. They have common objectives. The Long Title of the NHS trust Bill which we are considering reads:
"An Act to make provision about the powers of NHS trusts to enter into agreements".
The local authorities Bill is described as:
"A Bill to make provision about the powers of local authorities … to enter into contracts".
There is the same wording in each Bill.
The local authorities Bill has the same kind of regime for certification of contracts as the NHS trust Bill. Clause 2(1) of the local authorities Bill reads:
"Where a local authority has entered into a contract, it shall be assumed that the local authority had power to enter into the contract if the contract is a certified contract".
So there are the two situations, one dealing with NHS trusts and the other with local authorities, with the same background and the same problems.
If a safeguard clause for third parties acting bona fides is contained in the local authorities Bill, why should not a similar safeguard be contained in the NHS trust Bill? I shall not bore the Committee by reading my amendment; it is in rather technical legal language. It is enough for me to say that it protects innocent third parties from loss if the certificate of the Secretary of State is set aside in precisely the same form, mutatis mutandis, as the protection set out in the local authorities Bill.
Perhaps I should add that Amendments Nos. 8 and 10 which are grouped with Amendment No. 7 are purely consequential. I beg to move.
Baroness Anelay of St Johns: The amendment deals with the absence of relevant discharge terms in contracts. As a layman, I approached it from the point
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of view of what it would mean to me if I were a contractor wishing to enter into a PFI agreement. As a contractor, I should expect that in signing the contract I would find that it would normally contain details about what would happen when it came to an unexpected end: that is, of course, unexpected to one of the parties. As a contractor, I should normally expect that those discharge terms would be written into contracts to detail what recompense I or the other party would have, depending on which one is considered to be the loser.
I then thought: what difference would the amendment make to the Bill? Perhaps as a contractor I started work in good faith, as the noble and learned Lord suggested. I started work for a trust thinking that it was a PFI contract. Then the contract turned out not to have been such a contract because a court decided thus upon a judicial review or upon an audit review. As I understand an audit review, it could be decided by an NHS trust that it had entered into a contract without having the appropriate resources to keep to the terms of the contract.
Let us say that the court made that decision. Then, under Amendment No. 7 proposed by the noble and learned Lord, the contractor still gets paid as the contract provides, even though there were no discharge terms within that contract. I assume that it makes the situation as though the National Health Service trust had repudiated the contract. To me it is a belt and braces amendment giving security to contractors and, as such, it would seem to be the sensible move. On that basis we would not oppose it.
Baroness Jay of Paddington: I am grateful again to the noble and learned Lord for his interest in trying to improve the Bill in this way. Ever since the idea of PFI was conceived and developed in detail what has been called a "safe harbour" clause in the contracts has been discussed at great length. I am also aware that there are considerable similarities between the wording of the amendment and the present Local Government (Contracts) Bill.
However, the provision would mean that the contractor would not be prejudiced if the contract turned out to be ultra vires—a point made by the noble Baroness, Lady Anelay. He could recover all the moneys due to him as though he could sue on the contract. In effect, the contract would be validated by the Secretary of State against the possibility of it being ultra vires of the trust. I understand that that approach was initially favoured by some members of the banking community because a similar provision exists in local government legislation and because of the "belt and braces" approach described by the noble Baroness.
However, we believe that the circumstances of the PFI contracts in the NHS are different from the circumstances with which the local government provision was intended to deal. In that instance there was usually a straightforward contractual relationship between two parties, whereas most PFI agreements are considerably more complex, as we discussed when the noble and learned Lord introduced his first amendment this afternoon.

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The Bill before the Committee works on an entirely different principle; it underpins the vires of the trust making clear beyond doubt that a trust has the power to enter into externally financed development agreements—EFDAs as we have learnt to call them. To attempt to amend it at this stage in order to introduce an element of "safe harbour"—though I acknowledge what the noble Baroness said about belt and braces—would be a mistake, if for no other reason than that it would create uncertainty and doubt where at present there is clarity and certainty. Moreover, it would be unfortunate. It would suggest that a Bill whose only purpose is to put beyond doubt the validity of PFI agreements, also contained a provision which contemplated their invalidity.
The banks who are ready to lend into the PFI schemes and their legal advisers, as I said, have seen and agreed the wording of the Bill as drafted. They have said that it provides sufficient reassurance for them to lend once the Bill is enacted. That is the sole purpose of the Bill. Since the objective to be achieved by the Bill before us is the one we have described so often in terms of its accelerating the much needed hospital building programme, I hope that the Committee will not accept the amendment.
Perhaps I can make a general point. We do not have a blank sheet of paper on this issue. We do not have a great deal of time to revisit endlessly what might be described as the intellectual arguments for what it is probably not unfair to describe as a Holy Grail of a safe harbour. I have already described this afternoon the numbers of hours spent and wet towels which have been used in trying to get some of the definitions right on this Bill. This issue has taken on a significance which may be out of proportion with its real importance. It will no doubt remain a topic of conversation, when PFI lawyers are gathered together. But I must emphasise that the simple fact is that the Bill before us today will enable real hospitals to be built under PFI. The bankers have agreed and understood the terms; that much is certain. I therefore ask the Committee not to accept the amendment and I hope that the noble and learned Lord will not press it.
Lord Brightman: I am grateful to the noble Baroness for her explanation. I shall consider the matter over the next seven days and, if necessary, bring it back. In the circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 8 not moved.]
Clause 2 agreed to.
Lord Ezra Lord Ezra moved Amendment No. 9:
After Clause 2, insert the following new clause—
DURATION
(" .—(1) This Act shall cease to have effect at the end of a period of three years beginning with the day on which it is passed.
(2) The Secretary of State may by order provide that this Act shall continue to have effect after the date in subsection (1) for a period specified in the order.
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(3) An order under this section shall be made by statutory instrument; but no order shall be made unless a draft of it has been laid before, and approved by resolution of, each House of Parliament.").
The noble Lord said: I speak to this amendment on behalf of my noble friend Lady Robson. Its purpose is quite simple. Its seeks to set a term to the application of the proposed legislation. The reason for that is that the Bill is being rushed through to meet a special situation. In the meantime we are well aware that much further consideration is being given to the whole issue of PFI in the NHS. In due course therefore we may expect further, more detailed, legislation and it does not seem necessary for this Bill to have a prolonged life. In any event, there is a safeguard in that in subsection (2) we say that the Secretary of State may prolong the period if need be. It is a simple proposition. I have explained the reasons for it. I beg to move.
The Earl of Home: I listened with some care to what the noble Lord, Lord Ezra, said on behalf of the noble Baroness, Lady Robson. I believe I understand his anxiety. However, I have four short but major worries on this topic.
First, if the Bill when enacted does not work, remedial legislation will have to be brought forward well before the proposed expiry period. If it is working well, why stop it at that moment? Secondly, projects of this nature will still take time, despite the Bill. For some of them a period of three years could turn out to be too short. Thirdly, the Secretary of State will be able to control the number and speed of these projects and that power in itself will regulate progress.
In relation to the powers of the Secretary of State, I understand that officials from the Department of Health have been talking with financial practitioners on the size and duration of eligible projects and I hope at some stage that the noble Baroness or the Secretary of State in another place will give us some guidance on their interpretation of eligibility.
Fourthly, while I accept that deadlines concentrate the mind of investors, financiers and sponsors, a three-year duration set at the outset will cause concern and uncertainty about a piece of legislation which is designed to remove just that uncertainty. I believe those points are supported by the British Bankers' Association, which represents many of the practitioners involved in PFI. For that reason, I do not feel able to support the amendment.
Baroness Cumberlege: I am not sure whether the Committee is aware that my noble friend has joined the Front Bench, though not for this subject area. I therefore welcome him onto the Front Bench. For the reasons that he so commendably outlined, the Opposition do not support the amendment.
Baroness Jay of Paddington: I join with the noble Baroness in welcoming the noble Earl to the Front Bench and look forward to his contributions in that capacity.
In a previous amendment we were discussing what is colloquially known as a "safe harbour" provision. I believe that this one should be referred to as a "sunset"

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clause. This is an unusual legislative device normally used only in circumstances where there is a potential problem about a piece of legislation—for example, the Prevention of Terrorism Act where habeas corpus was suspended—and where the need to review a piece of legislation is regarded as being part of the agreement to allow it to proceed at the time. I understand that is the principle behind the amendment, but the difference of circumstances is such that it would not qualify in that category.
I am grateful to the noble Earl for making points which otherwise the Committee would have been extremely bored to hear me make again in relation to the element of uncertainty which may be introduced into the Bill if the amendment is accepted. There is also the problem that all PFI contracts contain discriminatory legislation clauses which allow the contractor to terminate the contract if legislation is enacted which threatens that contract. Such clauses have been essential in the early days of PFI to reassure the private sector, as the noble Earl described, that it would have the right to orderly termination of contracts if the goalposts are moved after contracts had been signed in good faith.
We believe the amendment is precisely the kind of discriminatory legislation which could cause the private sector to walk away from the PFI, and, far from enabling deals to reach financial close, would—in the way suggested by the noble Earl—precisely reawaken the doubts which have been so unfortunate and so problematic in the past. I do not believe that we should doubt the Government's commitment to the private finance initiative. We take the view that it has great potential in the NHS; it is one model of public/private partnership that we want to develop. We will look at other models. We are currently reviewing the possibilities. The noble Earl was right to draw attention to the fact that my honourable friend in another place is at the moment prioritising strategies for schemes in the way that we discussed earlier today.
For many years, as we all know, so many of these projects have languished in the queue for Exchequer capital, and those which tried to progress through PFI found themselves gridlocked, for reasons that we all understand. When we discussed these matters at Second Reading, the noble Baroness, Lady Robson, whose name is on the amendment, argued for limiting the Bill's duration on the grounds that there was some uncertainty about the accountability of those providing services under a PFI contract. That was not a point raised by the noble Lord today. But, as the noble Baroness was concerned about it, perhaps I can provide reassurance on that point.
We believe that the Bill enhances the accountability process which already exists. PFI schemes, as the Committee will know, have always been subject to Department of Health and Treasury approval. Once the Bill is enacted, schemes must also be certified as EFDA (externally financed development agreements) by a senior civil servant, thereby introducing another level of control into the process.
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Trust chief executives are, as the Committee knows, formally accountable to Parliament through the NHS Chief Executive for the performance of their trusts. The responsibility for ensuring the integrity and efficiency of the trust's performance rests unambiguously with the trust board. We feel that those are very clear lines of accountability. We know who is in charge and we will know who is managing the contracts.
That is an extremely effective way of focusing the consortium's attention on the overall service provided, in the way in which the noble Baroness sought reassurance. I am sure that Members of the Committee will agree that it is accountability of the most direct kind, which we do not feel will be improved by limiting the duration of the PFI Bill or within the terms of the amendment to which the noble Lord spoke. I believe that the accountability of the trusts for their PFI schemes is very clear. I hope very much that the noble Lord will pass on those assurances to his noble friend and will not seek to press the amendment.
5 p.m.
Lord Ezra: I should like in particular to thank the noble Earl for his intervention, which I considered very important. I also congratulate him on his new Front Bench responsibilities. I listened with care to the Minister's remarks and in the light of the assurances that she gave to me to pass on to my noble friend, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 3 [Short title and extent]:
[Amendment No. 10 not moved.]
Clause 3 agreed to.
House resumed: Bill reported without amendment.

The Innovation-Exploitation Barrier: Science and Technology Committee Report
5.5 p.m.
Baroness Hogg Baroness Hogg rose to move, That this House take note of the report of the Science and Technology Committee, The Innovation-Exploitation Barrier (3rd Report, Session 1996–97, HL Paper 62).
The noble Baroness said: My Lords, I am most grateful to have this opportunity to draw your Lordships' attention to this report of the Sub-Committee of the Science and Technology Select Committee of this House. It was an honour to chair the sub-committee on a subject of such importance, particularly at a time when all economies are undergoing dynamic transformation, ascribed to the digital revolution though perhaps more correctly associated with the impact of the falling real price of computer power.
But I should like to start by thanking human power—the members of the sub-committee—for the energy and good humour with which they applied their formidable intelligence and accumulated expertise to the task of completing our inquiry by mid-March. My particular

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thanks go to our clerk, Dr. Don Rolt, who had to hit the ground running when he was parachuted into committee life from our embassy in the United States, as well as to Dr. Tim Bradshaw and our special adviser, Professor Peter Swann of the Manchester Business School. Those thanks are more than usually heartfelt, in that it was entirely due to their combined drafting marathon that we kept to the very tight timetable imposed by the looming advent of Prorogation.
Since the subject of our inquiry straddled both industry and finance, I should declare a number of interests. I am currently chairman of the consultancy London Economics. I am also about to become chairman of the Foreign and Colonial Smaller Companies Trust. I am a non-executive director of NPI, GKN and the Energy Group, and a member of the international advisory board of NatWest.
We were stimulated to engage in our inquiry by the Bank of England's recent report on the financing of technology-based small firms, in which the Bank called for wide debate on the height and—I should say—permeability of the innovation-exploitation barrier. But with limited time, our focus was necessarily narrow. We concentrated mainly on the interface between universities and new businesses, although we took the opportunity to review some of the issues related to the provision of capital raised in the Bank's report, whose conclusions we generally supported. We were extremely fortunate in the quality of our witnesses from industry, the venture capital business and the universities, many of whom appeared before the committee at extremely short notice, itself perhaps evidence of the increased attention paid to these issues on all sides.
To a certain extent we attempted to benchmark our findings against those which followed an earlier investigation by the Select Committee into innovation in manufacturing industry, which was conducted in 1991. Our general conclusion was that the climate had indeed changed for the better. We were greatly encouraged by the amount of evidence on the impact of a change of attitude towards risk taking, part of a general change in culture in this country since the beginning of the 1980s, which I hope all sides of the House would wish to acknowledge. Many of our witnesses indicated that research partnerships between industry and universities were increasing and that business incubation was hatching out bright ideas into viable enterprises.
But it was not all good news. Our report highlights important remaining obstacles to development. We believe that a number of the support schemes funded by government have not yet realised their full potential. In this country, we have clearly still further to go in dismantling the barrier before we can match the powerful academic-industrial relationships seen in the United States.
The committee identified a number of outstanding concerns. We believe that a funding gap continues to be faced by certain start-up businesses because of the disincentive effect of the relatively high cost of carrying out "due diligence" for small investments, although some of that cost may be self-imposed by investors at
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inappropriately high levels. New data from the enterprise investment scheme provide the opportunity for a more detailed evaluation of the contribution made by business angels and an assessment as to how their role could be expanded, which we urge the Government to carry out.
The committee also believe in the need for review of an area which we did not have time to investigate fully: the system supporting venture capital trusts. The intention was clearly to encourage risky investments in start-up businesses and we were warned of the need to ensure that it continues to meet its primary purpose. Other noble Lords may have more to contribute on that point.
We were surprised to discover how little hard evidence there was on the effectiveness of a number of different developments which carry the fashionable label "science park" or the slightly more clearly defined notion of a "business incubator". We were most fortunate in that our adviser, Professor Swann, is a recognised expert in the analysis of clusters and their impact on economic development.
Since we concluded, a report has been published urging the creation of more technology parks in the capital, commissioned by the London Planning Advisory Committee. This reinforces my view that some rigorous appraisal is needed in this area. As Microsoft pursues its widely-advertised intentions to create Silicon fen, Cambridge may provide a particularly useful case study. This area is one in which I know the noble Lord the Minister takes a great personal interest, so I hope that he can be prevailed upon to respond to our recommendation that government should help the spread of best practice by leading or initiating some serious research.
We also remained concerned about the patchy quality of management skills in high-tech start-up businesses. I hope business schools—perhaps indeed the new Oxford School of Management—will take note of our encouragement to promote the study of innovation. Business education and management theory tend to be disproportionately concentrated on the organisation (and re-organisation) of large companies.
In the time available we could not conduct a serious investigation on the condition of the science base, which is clearly the seed-bed of high-tech innovation. But we did receive some warning signals. A number of witnesses raised concerns about the standard of equipment in universities, arguing that this might lead industry to seek research partners elsewhere in the world. Although there is inevitably a danger of special pleading in such evidence—no doubt many businesses would like to see universities carry more of the capital costs of the exploitation of scientific ideas—we believe there is an issue here for the funding councils. We urged them not to spread gain or pain too evenly, but to ensure that a higher proportion of funds be channelled into creating centres of excellence. The corollary is that such special equipment should be available to researchers not merely from the university in which the centre is located, but those of high calibre from other institutions.

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We received a good deal of evidence about certain weaknesses in the operation of the Foresight programme. Certain lines of research fall across or between sectors on which Foresight is focused, and we recommended that a clear policy of seeking out "misfit" lines of research, and evaluating them separately if necessary, should be established. We also believe that this programme suffered from a common weakness: it was insufficiently well known by potential users. Communication is critical. We recommend that future Foresight reports should be made more accessible to small businesses.
An important theme of the report is the need for more rigorous evaluation of systems intended to support innovation in order to ensure their objectives are met. If I may be permitted a brief personal note, my experience inside government taught me that our system of administration is better geared to initiation than follow-through, and that conscious effort has always to be devoted to rebalancing this tendency. Monitoring and measuring the results of programmes, and feeding this information back into their application, may be a lot less exciting than announcing new ones, but it is crucial to the effective use of taxpayers' money. I beg to move.
Moved, That this House takes note of the Report of the Science and Technology Committee, The Innovation-Exploitation Barrier [3rd Report, Session 1996–97, HL Paper 62].—(Baroness Hogg.)
5.13 p.m.
Lord Winston: My Lords, it was a privilege to serve on the committee. The noble Baroness, Lady Hogg, has been very fulsome in her praise of the intelligence of the committee. I am sure that she is correct, but perhaps with one exception. Therefore, I apologise for the short interjection that I shall make during this debate.
I wish to draw attention to a couple of issues which are highlighted in the report which, from some personal experience, I believe are important in the academic sector. The first concerns the crucial question of the attitude of universities and university departments to intellectual property rights and their exploitation. As the report quite justifiably and correctly says, there is a very real need to increase awareness of the essential task of universities to draw on intellectual property rights, IPR, benefit from them and increase their budgets. But there also has to be a degree of realism in the universities. At the moment and in general, in my limited experience, there may not always be the right balance. It is fair to say that in some cases the universities are still somewhat unrealistic and we need to address that issue.
I wish to draw the attention of noble Lords to two examples that I came across recently. The first relates to a venture capital company I spoke to two or three weeks ago. I tried to interest the company in my work and some IPR in which I am involved. The company discussed with me its experiences in dealing with a university department with which I was connected. The company had spent over a year negotiating with the department, but finally accepted the fact that the
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percentage of return was not realistic. That simply held up the possibility of investing in that research. That is certainly still a risk.
The other experience concerns my own medical school, which involves only a small amount of money. I negotiated with a drug company in relation to a particular research experiment. I was perfectly happy to receive the money that the company was offering, but felt it appropriate to put the money through the medical school company that deals with that kind of work. I was clearly going to gain the financial benefit I needed, plus a little bit of overhead. The medical school was so hard-headed in its negotiations that eventually the drug company went elsewhere. I lost the money and the research, lock, stock and barrel. That experiment was finally carried out in another university department in Europe and the results were published last month. That is rather irritating.
In my experience, there is a slightly more flexible attitude in the United States. In biotechnology we are competing mostly with the United States and we need to look to their example for the moment. I should declare an interest as a university academic. I have been very interested in the notion of gene transfer and transgenics, not in small mammals (mice) but in rather larger animals, and have been looking at that technology in some detail. Some of the preliminary research has been done in my own department and some by a colleague in California. Patent applications are proceeding from that work and the work looks extremely promising. There is a great deal of interest in it.
It is very interesting to see the difference of approach between my American colleagues in California and the speed with which their lawyers got together and looked at the patent application, and the degree of flexibility that they showed, compared with the approach in my own university department.
The other concern I have works both ways. I was at a meeting in the United States on gene therapy at, I regret to say, a ski-ing resort, Snowbird, about two months ago. One of the net results of the interest in exploitation can be a degree of secrecy, which is very counterproductive to scientific research and basic research. I sat through one all-day session trying to unravel the secrets of gene technology, but found again and again that a series of commercial companies were clearly interested. Therefore, each experimenter in turn was not prepared to divulge the specific nature of the experiment being carried out. That is always a problem when we are trying to exploit a project, but clearly we have to try to find a balance in the universities on this issue.
The report makes a very important point about the creation of centres of excellence. There is very clear evidence from Professor Roberts that we are in a very critical state in the universities where most of our basic research is currently carried out. It is clear that the fabric of our universities is deteriorating. Laboratories are finding it extremely difficult to maintain equipment. There is increasing worry in the higher education sector, not least because decisions are currently being delayed.

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We await with anxiety the Dearing Report to find out what the fate of university spending will be. We are in a very competitive situation.
Europe as a whole spends less than 2 per cent. of its GNP on research and development. If we are to remain competitive in the world as a whole, particularly in biotechnology, we must look at how we can best focus our research. The report emphasises the need for that and the fact that in concentrating expertise in departments, we shall need to open up our university departments so that students and researchers from different universities can have access. Clearly, that will be a problem because, as has been pointed out, the money that is allocated by the higher education funding councils is not adequate to meet all our objectives. One of the real issues facing exploitation from academia is the serious concern about our lack of equipment and research facilities which are becoming inadequate.
We are living in an increasingly competitive world economy, as many of us have said repeatedly. It is clear that in the next century we shall live on brains, not brawn. This is a vital report. The exploitation of intellectual property is one of the most important areas not only for the development of this country, but for European development also. Because of the very nature of our science base which, particularly in the field of biotechnology, is one of the best in the world, we shall have to lead in Europe. We must therefore address this issue carefully. The report goes some way to helping, particularly with regard to focusing on such good university centres.
5.21 p.m.
Lord Kirkwood: My Lords, the ground covered by this report from the Sub-Committee of the Select Committee on Science and Technology, most ably chaired by the noble Baroness, Lady Hogg, on the innovation-exploitation barrier—sometimes described as the innovation or development gap—has been dug over many times in the past, including in a previous report by the Select Committee in 1991. Therefore, we cannot expect to have discovered any radical simple solutions to the problem.
The premise from which we start is that the UK is a fertile ground for generating new scientific ideas but is poor at nurturing them to sturdy plants in a commercial environment which is capable of producing abundant fruit. That view has been challenged by Mr. Ian Harvey, of BTG, previously the British Technology Group, who believes that the UK does pretty well in comparison with our European neighbours in exploiting new ideas. The culture certainly seems to have changed recently in the United Kingdom, particularly in the universities where academics are now much more aware of the importance of intellectual property rights, the need for patenting and the potential for the exploitation of their work.
Having said that, we are not as successful as the United States. Clearly, there is no room for complacency. The report points to a number of areas where fairly small and painless improvements might be made with little public investment. From the broad
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survey of the report which the noble Baroness has given us, the two areas which I should like to single out and to which I should like to draw the attention of the House relate to the provision of seedcorn funding and the need for business incubators at an early stage of innovation. The two are interdependent because the incubators provide a protective environment for company growth, with facilities which reduce the perceived risk of a new business venture and therefore encourage the investment of venture capital.
It is generally acknowledged that the difficult step in proceeding from the original laboratory concept or invention to a successful commercial product or process lies at the development stage where sums of about £100,000 are required—that is, after personal and family funds have been exhausted. At that stage, classic venture capital finds that the cost of "due indulgence", as it is called—that is, in assessing the risk—is just too high relative to the investment that is required to be made.
It is at that point that business angels can make an invaluable contribution. Business angels have often made their money by running technically-based companies themselves and they are well placed to make a rapid assessment of the technical viability of a new enterprise in fields of which they may have experience. Therefore, they are happy to accept the assessed risk and to invest small but significant sums in the enterprise, given the tax advantage that is available to them. Additionally, and importantly, business angels may wish to provide management advice and hands-on involvement at the early stage of growth. Having brought the company to a more viable stage, normal venture capital can then be attracted to allow further expansion. The rapid development of small ventures is another attraction provided by the business angels because at that stage the speed at which a venture grows is often important in securing a new market niche.
The problem then lies in bringing together innovator and investor in the form of the business angel—in other words, establishing an effective dating agency or service. That function is beginning to be undertaken by some banks and other bodies. However, it seems that there is a barrier which has not entirely been removed. The report makes the important recommendation that the role of business angels should be further examined by government in order to identify ways of expanding their role.
A complementary concept to that of the business angel is that of the incubator, to which the noble Baroness referred. An incubator is defined as a property with small work units, providing a supportive environment for entrepreneurs and investors during the start-up stage of their businesses. Incubators are often associated with the universities and provide a symbiotic relationship in which some technical problems can be fed back to the university departments as research projects, and where the staff can readily interact and migrate between the two. That is an exciting concept for bridging the innovation gap. The evidence of success in the United States is encouraging. However, there is limited experience of such ventures in the

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United Kingdom and the report makes the strong recommendation that research into the effectiveness of incubators is required.
It is to be hoped that the Government will examine all the recommendations presented in the report as well as the two to which I have referred as a contribution to improving the capacity of UK industry to create wealth from our very successful science and engineering base.
5.30 p.m.
Lord Dixon-Smith: My Lords, it was a great pleasure and privilege to take part in this particular examination under the leadership of our chairman. I commence my remarks outside the scope of the examination by acknowledging the tremendous drive for technological improvement that exists in the majority of commercial enterprises. "Innovate or die" is not a bad precept for any business in today's world. That thrust which often spills over into small firms and university research departments, and which is a continuous process for dynamic business, is not the focus of our attention but is a very important sector for innovation.
The report is directed particularly at an examination of the reasons for the often expressed criticism of British society that it is long on ideas but short on implementation, to explore the validity of that assertion and to see what steps might be taken or are being taken to improve matters. Critical to the future of our country's economy is success in developing new businesses, particularly in the new technology fields. While many new small firms may not become global businesses and some will fail altogether, a number will grow and become the giants of the future, so we neglect this area at our peril.
It is my opinion that first and foremost what we are discussing is a problem of human motivation. What is it that turns a researcher in a laboratory into a thrusting entrepreneur; or, if that question is inappropriate, how does one motivate university research departments to look for opportunities for commercial development and the establishment of new businesses that might result from their work?
I believe that there are three factors: mutual interest, peer pressure and money. I place no order of priority on those factors. I first became aware of this issue when in the United States undertaking an earlier examination by the Committee of Careers for Academic Researchers. In that country there appeared to be a fairly common approach in the university field where a circle of mutual interest had come into being. Universities funded research and researchers, and held the intellectual property rights to any discoveries. The researcher who made a discovery with commercial potential would set out to establish a new business. If successful, he would gain from the capital appreciation of the business and perhaps by salary. Of course, in so doing he would generate a stream of revenue that flowed back to the university, and investors gained through capital appreciation in the way that investors do. While it is becoming more common to see this pattern in the UK,
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there is still a wide variety of practice. As the noble Lord, Lord Kirkwood, has said, the committee received encouraging evidence in this area.
However, I raise two points that cause me concern. First, there is a strong temptation for the holder of intellectual property rights to sell them for immediate capital gain. Although this may appear to be beneficial in the short term, I suggest that it may well result in long-term loss. It is almost impossible to assess the true value of intellectual property rights in a market-based economy. It follows that inevitably sellers are weak sellers. In addition, if the intellectual property is sold abroad—Japan is particularly active in this field, and paragraph 3.6 on page 18 illustrates what is going on—the benefits of enhanced commercial activity, employment and tax revenues are lost to this country. I can only urge all who are working in this field to think very carefully what they are about.
The second potent factor is the background fiscal climate. Starting up new businesses in this field is high risk. Market potential is a slippery commodity and failure is always in the background. We tend to regard failure as unacceptable, but if we wish to encourage greater activity in this field attitudes to failure must change. In addition, one must recognise that because it is a high-risk process, it needs to be a high reward area if one is to see it expand. In particular, the successful entrepreneur needs an exit route that is not penalised by the tax system. If society at large wishes to encourage for everyone's benefit a high level of activity in this way, it must put in place a tax regime that encourages the activity.
Mr. Quysner, chairman of the British Venture Capital Association, gave evidence to the committee. I quote from page 63. Perhaps I may take the liberty of adding a couple of phrases in brackets to clarify his evidence:
"If I make an early stage investment in the [new] company alongside 3i and the entrepreneur, and the company is successful. then I exit [the company is taken over], 3i will pay no capital gains tax because it is an investment trust, my partners will pay no capital gains tax because they are exempt and the entrepreneur will pay capital gains tax at 40 per cent., having created a great deal of wealth and having created tax revenues".
Ouch, my Lords!
As we run up to another Budget we can only hope that the Government, and in particular the Chancellor of the Exchequer, will bear in mind that the impact of action in this area in the wrong way may quite literally kill the goose that lays the golden egg.
I end where I began. This is a problem of individual attitudes, whether they be among those who control research establishments, direct investment or actually undertake research. It is vital for the future of this country that there should be great activity in this area, and it is essential that we create the conditions that encourage that activity. It was a great pleasure to take part in this particular examination.
5.38 p.m.
Lord Tombs: My Lords, I, too, took part in the deliberations of this committee. I add my congratulations to the noble Baroness, Lady Hogg, who chaired the proceedings with great patience and

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considerable purposefulness. She needed to be purposeful because it was decided that, in view of the pressure of time caused by the electoral timetable, we should restrict ourselves to a limited part of the subject. That was a good decision, because innovation and its exploitation constitute a series of very complex problems. The fact that we had to focus on one particular area was valuable in concentrating our minds.
Over the past 15 years or so I have spent a great deal of time on this subject as an industrialist on various government bodies and, more recently, as chancellor of the University of Strathclyde, which has a very good record in this field. I have come to the conclusion that people try to be too prescriptive. It is not possible to be prescriptive on this barrier and the climbing of it because of the variability of the factors involved. Present in each case are considerations of financial needs, technological needs, market knowledge or lack of it, and management experience or, more often, the lack of it. Therefore one should not provide a prescriptive solution but a useful environment, encouragement and effective support in the areas where the workers—those who are trying to climb the barrier—are themselves deficient.
There are a number of ways in which this barrier can be surmounted. One route on which the committee received some evidence was via the supply chain of large companies. Some companies—not enough—encourage their suppliers to innovate. They guide them, help them and encourage them to extend their market to others. That is a great source of strength for those companies. The process could be extended by the Government's adoption of the US small business innovation scheme which is described in the report. Large customers, such as government or large industries, can encourage smaller companies to develop high quality and self-confidence in their products. They can also provide a useful seal of approval which those companies can use in the market.
A second way of overcoming the barrier is licensing. It is a short cut which involves sacrificing some of the potential rewards in exchange for the financial strength, marketing and technological resources of large companies which they license. The role of the British Technology Group has been mentioned. It is a valuable and highly effective one, with feedback both of advice and of finance.
The problems of inventors, whether they are individuals or universities, seeking to exploit their ideas correctly are manifold. They have been explored fully over the years, and they are well known. The provision of finance may, understandably, have attracted much attention and probably because of that the development of the venture capital market has been rapid and constructive. Other support is necessary for the overloaded entrepreneur, and the role of the recently developing participating business angels—individuals with experience of building their own companies who then invest in new, often similar companies—is a powerful one. They bring not just money but experience to people who are themselves almost, by definition, inexperienced. They provide an insight in management which is deeply lacking.
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The role of universities is well developed (though unevenly so) as innovators. Some are good at raising their own seed capital and at preserving their intellectual property. Others are not so good. There is a need to spread best practice.
The report also mentions the long-standing problem that small and medium-sized enterprises are too often unaware of university resources. Universities have to market their skills to a diverse and preoccupied audience in small and medium-sized companies. That is often not an easy task. There are things that can be done. The chemical industry has for long been active in this sphere, and the initiative of the Royal Society of Chemistry in running a series of conferences and exhibitions, imaginatively titled "Technology Car Boot Sales", is to be commended. It could be emulated by other learned societies in other disciplines.
The report mentions the lack of awareness in small and medium-sized enterprises of the Foresight programme. Frankly, I am not surprised at that. There is a similar lack of knowledge in large companies, I am sorry to say. The effects on small and medium-sized enterprises of Foresight will, at best, be second-order because of time pressures. Generally speaking, there is not time to read the reports that come out, valuable though they might be. We are baying at the moon when we hope that Foresight reports will be read by small and medium-sized enterprises.
The programme itself has had considerable influence on the way in which research funds are allocated but it is far too early to judge what effect it has had on wealth creation, which is its primary objective. It is probably too early to evaluate it, but that should be done in the next couple of years because we are changing the direction of science investment in a dramatic way and we need to be reassured that it is achieving its ends.
Britain is rich in innovation. It has become better at exploiting its commercial applications. The task remains to encourage it with sensitivity and discrimination by offering effective support in a way that does not increase the load on heavily burdened entrepreneurs seeking to be everyone in a company with only 24 hours in a day. The report makes a useful contribution to solving the problem.
5.44 p.m.
Lord Craig of Radley: My Lords, the subcommittee is to be congratulated on producing a readable and interesting report. The topic is one which has attracted a great deal of attention, interest and activity over the past decade or so.
Rather than dwell on many of the sound specific recommendations in the report, I should like to stand back for a moment to consider what has been going on. Even if we go back only as far as the committee's 1991 report on Innovation in Industry, I am amazed at the large number of initiatives, studies, reports and conferences which have been devoted to that topic. Those have not been confined to government, or even one government department. Scientific and trade associations, academics, the Bank of England, the CBI, and many others have all spent goodness knows how

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many hours and days on those issues. The question we must ask ourselves is not whether we have been giving enough thought to those problems, rather why have not all those efforts, and the man-hours devoted to them, produced the right results in the field? Perhaps we are not so good at spotting the successes.
Many of the studies start with a basic premise. Indeed, the report we are debating sets the scene in its title. It refers to a barrier. The premise, of course, is that there is a real problem which faces the UK. We are going to slip genteelly into industrial oblivion. The writing is on the wall. Everywhere else in the world seems to be able to do it better. Countless witnesses, in evidence to the committee, set the scene for their remarks, either overtly or by inference. That scene is that there is this barrier; that things are bad—perhaps worse than they have ever been before.
Even if someone starts their evidence by grudgingly admitting that things may not be as bad as they used to be, goodness, that is still no reason for complacency—shudder the thought. We have to do a great deal more, we are being told, if we are not to be overtaken and marginalised by the nearest developing world nation. I do not believe that I need to say more to sketch my point. It has been made by other noble Lords this evening.
Noble Lords who have read the report will have seen those pitches time and time again. Even Mme Cresson, the European Commissioner responsible for research and education, has spoken of an innovation deficit in Europe and the need to foster a genuine innovation culture. Has that British disease, too, crossed the Channel?
What we need to ask ourselves is why it is, despite all the many efforts, from Realising our Potential, through Foresight to SMARTS and SPURS and so on, we are not yet at the top of the pile. One reason is that the participants in many of those exercises, or those who take a close interest in them, are few in number, and keep reappearing, like well known actors and actresses, in each new initiative. It is all a bit esoteric—of deep interest to some, but not always very specific.
Universities are urged to do something. Funding councils are given some advice. Someone, usually the Government, needs to refocus their ideas or efforts. I am not sure how all that grabs the managing director of a small business, where cash flow and bottom lines, to say nothing of markets and staff problems, will be the issues which fill his or her in-tray. We have often seen good advice given to concentrate on a few key issues, to avoid spreading research funds too widely, and so on.
Always assuming that the basic assertion upon which so much of that work is based is correct—that is, that there are barriers and poor interfaces, and a serious widespread lack of enterprise—my feeling is that the messages that we are trying to transmit need to be given a great deal more thought; thought, not about their content or importance, but how to publicise and interest the real wealth producers and potential wealth producers in those topics. I fear that the ability, or the lack of it, to get the key points across too often goes by default.
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We are on to the next study or conference before we have succeeded in getting the findings of the last one to the real audience. I welcome the emphasis of the noble Baroness, Lady Hogg, on that crucial point. I was glad to note that the Royal Society of Chemistry recognises that there is "an awareness gap" and is working on closing it.
Finally, a passing thought on the reasons for clusters and science parks. Paragraph 6.18 of the report recommends that a study of science parks should be undertaken to determine the elements which are crucial to success. I ask myself why it is that antique dealers seem to group their shops together in a town; sometimes in one town but not in another. Why do we get half a dozen or more fast-food outlets within a few yards of each other? Why in souks and other bazaars, whose existence spans the centuries, do we often find shops and stores which sell the same product—for instance, carpets, material or gold—grouped together? If we knew the answer to that perhaps we would know the answer to the success of science parks.
Perhaps it has nothing to do with the reputation of the main institution, the accommodation on offer, the infrastructure, or easy access to public transport. Perhaps environmental and cultural features are an enjoyable extra, not a reason for a successful cluster. Perhaps, put simply, it is because customers like to go to a place where they will find what they want, be able to compare prices and strike a real bargain. Mind you, that does not explain why some towns are full of antique shops while others have none; or why in the souk gold shops are to the left and the carpets for sale are to the right of the centre alleyway. Perhaps it is all a matter of chance and is not scientific. If we knew the reasons for that perhaps the studies would produce better ideas. Perhaps the whole thing is as unscientific as the reason why No. 11 buses often travel in clusters.
5.52 p.m.
Lord Cuckney: My Lords, as a member of Sub-Committee II of the Select Committee whose report we are considering, I too wish to begin by paying tribute to our chairman, my noble friend Lady Hogg. She exercised her role in a particularly apt and constructive way when we take into account the severe time constraints under which we had to operate.
The report is clear and explicit in its recommendations. I do not wish to take up your Lordships' time by unnecessarily repeating what is stated so clearly in it. However, I wish to emphasise one or two particular points which I believe should receive continuing attention.
First, there remains a tendency too often to attempt to eliminate risk, yet risk is an essential feature and characteristic of entrepreneurial activity. By all means, expose areas of potential risk; by all means, identify areas of risk. However, it must be up to the potential investor to exercise judgment, and one must remind him of caveat einptor.
Attempts to minimise risk have, for instance, led to the apparently anomalous situation which has developed, and to which attention was drawn in our

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report, of the venture capital trusts which provide tax relief for investors. They are intended to invest in a range of small companies in order to spread a risk, but are founding asset schemes with a high property content. I emphasise the word "apparently" because our committee did not have time to look into the issue in any detail. I have no particular trust in mind, but one must recall that one of the reasons for the ending of the BES schemes was the number which became involved not in risk-taking propositions but in strong asset-backed schemes.
Secondly, the deterrent to the establishment, growth and development of small companies, in particular when trying to raise extra funding, is the high cost of due diligence. I recognise the fact that that poses a problem for professional firms providing due diligence services, particularly in the light of the problem of the costs of professional indemnity cover—that is, if they can obtain professional indemnity cover. It is a growing problem. There needs to be a fresh approach to due diligence, concentrating much more on identification and highlighting areas of risk in much broader terms rather than attempting to provide such excessive and costly detail. I recognise that that could conflict with the justifiable need for greater investor protection, but, again, it must be left to the investor to asses risk, provided that there has been no deliberate concealment.
Thirdly, I do not believe that there has been a shortage of venture capital, but I do believe that there is a shortage, on acceptable terms, of working capital and loan capital. I am therefore greatly in favour of strengthening and extending the small firms' loans guarantee scheme. I understand that in 1992–93 there were 2,342 loans worth some £52 million. In 1995–96 those had risen to 7,478 loans worth approximately £274 million. Of course, some encouraging changes were made to the scheme in March 1996.
Finally, I believe that the newer universities, especially in the former polytechnic sector and often with strong local connections, can do much to help not only themselves but also small businesses in their area, particularly with the development of business incubators. I and I am sure other members of the committee were particularly impressed with the developments by the University of Strathclyde in those areas—and it is pure coincidence that its Chancellor is a member of our committee.
5.58 p.m.
Lord Cobbold: My Lords, I, too, welcome the excellent report and congratulate the noble Baroness, Lady Hogg, and her team on its preparation and presentation. Two of the subjects with which the report deals are particularly close interests of mine. The first is the importance of developing relationships between the universities and industry. I have the honour to be president of the development committee and a governor of the University of Hertfordshire, which, perhaps together with the University of Strathclyde, is leading the way in its efforts to promote productive links with industry. As Hatfield Polytechnic, the university's foundation was closely linked with de Havilland and the aerospace industry, now sadly no longer at Hatfield. But
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as aerospace has declined, Hertfordshire is rapidly becoming a cluster of pharmaceutical and information based high-tech. industries. The university regularly tops the league tables of the new universities and it has already had many research links with industry. It is an active partner in Hertfordshire Business Link, working closely with the Hertfordshire TEC, Hertfordshire County Council and the chamber of commerce.
The university has long promoted sandwich placements of applied science and technology students in local industry so that theoretical knowledge is underpinned by practical experience. Such students have regularly found subsequent employment with those firms.
More recently, the university has been promoting teaching company schemes under which high quality graduates are placed in companies to tackle strategic issues under the dual supervision of a member of the university staff and a senior executive in the firm with financial support from the DTI. Ten such schemes are in operation or under negotiation and more are in the pipeline. I mention that because I believe that we are moving in the right direction and I welcome the report's support for those initiatives. I hope that those initiatives will be extended.
My other particular interest in the report is the problem already mentioned by several noble Lords of the availability of seed capital for start-up entrepreneurs. Through its various mechanisms, the City of London is an ample provider of venture and development capital to companies and entrepreneurs which have already established a track record of success. The problem area, as the report points out, is the first £100,000 which can transform an idea into a prototype, which in turn can begin to create a market.
The problem is not new. The various schemes identified in the report have all helped. I should mention in particular and welcome the small firms loans guarantee scheme, which the noble Lord, Lord Cuckney, mentioned and the SMART scheme. Both those schemes have achieved a great deal and I trust that the new Government will follow the committee's recommendations and give further support to those schemes.
The report stresses also the importance of business angels, as has already been mentioned by the noble Lords, Lord Kirkwood and Lord Tombs. It promotes the development of networks of business angels. In this computer age, it is theoretically easy to develop a national database of business angels. The problem is that many such persons are naturally reticent and often highly individualistic. They would not take kindly to being bombarded with hundreds of schemes. Therefore, it is likely to be difficult to persuade such people to allow their names to be included on such a database.
However, I believe that it may be possible to overcome that difficulty by having some sort of confidential filter; that is, a manager or a dating agency, as the noble Lord, Lord Kirkwood, suggested, to preserve the confidentiality of the business angels and also to act as an assessor of the projects submitted. Such a body could be funded by government, the private

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sector or jointly. That is a matter for debate. But I hope that the report will prompt serious consideration of that and similar ideas.
I believe that another possible source of that elusive initial £20,000 to £50,000 is the National Lottery. The new Government have promised already to divert some of the lottery proceeds to health and education. Backing young entrepreneurs with seed capital is another appropriate and positive use for lottery resources. Converting an idea into a successful business is itself something of a lottery and winning or losing is always a gamble.
The Prince's Trust does valuable work in that area but there is room for more. Two years ago, with the support of 3i, I put the concept of a millennium technology fund to the Millennium Commission for that purpose and 3i had agreed to evaluate the projects on behalf of the proposed fund. The idea was rejected by the commission as being outside the scope of the Millennium Fund as defined. However, I still believe that the concept has merit and I hope that the Government will give it some consideration in their review of the lottery.
As I said before, I welcome the report and again I thank the noble Baroness and her team. I look forward in particular to the winding-up speech of the noble Lord, Lord Simon of Highbury, for whom I had the pleasure of working for several years and whose presence in your Lordships' House I have welcomed already on an earlier occasion but it is now a pleasure to be able to repeat the welcome to him in person.
6.5 p.m.
Lord Lucas: My Lords, I too am very grateful to my noble friend Lady Hogg and her committee for coming forward with this excellent report. It seems a long time now since I was involved in venture capital and a great deal has improved in that time. I hope that I can offset, to some extent, the pessimism displayed by the noble and gallant Lord, Lord Craig of Radley. Things are now much better. I can scarcely recognise the present scene from that which existed 12 years ago. But there is clearly still a great deal left to do, as the report outlines. I hope that the report will prove to be a helpful catalyst in producing the changes which are required.
I wish to confine my remarks to two principal areas: the DTI and business angels. But perhaps I may first make a few asides. As regards diversity, it is extremely important to have a lot of different schemes providing help. Entrepreneurs have all sorts of different needs. It is extremely important to have different sources of advice and funding. It is very often the oddball who appeals to some other oddball who has money who turns out to be the most successful entrepreneur of all.
Secondly, there is the importance of celebrating failure because 80 per cent. of small companies will end in failure. That must not be thought to be a stigma by the people who have put their heart and soul into it. They must be encouraged to get up and try again. We should honour the people who are prepared to take those
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risks for taking them. They are not some kind of nuisance to society when they happen to go down, having done their best to succeed.
We must extend that tolerance of failure to the Government. If they are to be successful in promoting and backing such companies, they will fail on occasions and we must allow them to fail as part of the price of success.
I turn first to the DTI. It seems to me that the DTI has a very crucial role to play in technology transfer. A small business which needs technology needs to know where to go for it. It does not have the time to find out or the time to dig around and see what is going on. It needs to be able to go to one source for advice. That obvious source of advice should be the DTI, or an arm of it.
The DTI is also in a position to command the respect and admiration of most academics and those who are involved in research. They will feel comfortable in entrusting the DTI with information about what they are doing and what sort of applications that research may have. Perhaps the DTI should take on itself the task of providing a database of information on companies which are likely to be in the market for research and those providing it. It may perhaps be something based on the worldwide web, although one hopes it will not be designed by the person who designed the present world-wide web site, which is difficult to use. It seems to have been designed by someone who knew what was in it but was unaware that it would be used by people who did not know what was in it. That aside, the DTI could provide such a database and make it available to a range of intermediaries who would be paid by small companies to find the research they wanted or by entrepreneurs to find the people who could use their innovations. That would seem to me a very useful road for the DTI to go down. The one-stop shop concept has been a success as regards general business advice and such a database would fit very well with the DTI's portfolio, especially in view of the great improvement that has come about in that department in the past few years.
Secondly, there is the question of business angels. I pause briefly to pay tribute to the Prince's Youth Business Trust which has been such a successful source of such angels for so many companies during the past five years and which I am delighted to see has been taken under the wing of the new Prime Minister in a way which augurs very well for its future.
There are two aspects of a company which needs £50,000 to £100,000 of new capital which stand out. First, there is the risk. The risk is very high. Therefore, those providers of capital who are large providers of capital and whose capital comes from fundamentally risk-averse sources, such as pension funds, are faced with the problem that they want to carry out a lot of due diligence to assure themselves that the risk is not really as large as it seems. However, they do not have the people to undertake that due diligence and they come up against the familiar problem that arises with people who tip shares in newspapers; namely, that if those people were any good at tipping shares, they would not be doing so in newspapers.

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It is the same problem that you face if you are running a venture capital business. If you are any good at picking companies and if you are any good at carrying out the necessary due diligence, it is far better to spend your time doing the due diligence on a £10 million company than on a £100,000 company. Indeed, you would make far more money out of it for yourself and for your investors. The limitation on due diligence is not a financial matter. It is not a question of: if the Government paid you to do it you would do more of it. It is a personal matter. A good individual with good judgment only has so much time in the year and, however much anyone pays him, in a business like venture capital where you are making your money on capital returns you will do a great deal better if you concentrate on the big opportunities.
Then there is the problem that a business of that size needs all sorts of extra help. It probably only has one or two principal people in it and there will inevitably be areas of business expertise which it does not have. Its days will be full of trying to build the business and it will need help as well as cash. No institution is set up to provide that, except, looking back to the old days, the 3is. I believe that the 3is is the exception to the rule and that probably stems from the way that it was founded. Certainly in the old days I remember it being prepared to make investments of as little as £20,000. I believe that that is fading now, although I am not totally up to date with what is happening in that respect. I believe that even those concerned with the 3is are finding the strain of making small investments quite significant. It is possible that the gap is opening up again at the bottom of what they can do.
It is into that gap that the business angel fits perfectly. First, business angels will assess the risk on the basis of what they think of the entrepreneur. That is the risk in such businesses: is he good or bad? He can draw up a business plan but, if he is any good, the actual business that he is doing in three years' time will bear no resemblance to that business plan because he will have found all sorts of new opportunities and he will find new problems arising for which he will have to find new solutions. Indeed, the whole concept will have changed out of recognition. At that level, you are investing in the person, not in the business. That is a judgment which is best made by a business angel rather than by some kind of venture capital organisation.
Secondly, the business angel will be in a position to provide the personal help which is required. If the Government are to consider providing the help and support that such business angels need, I believe that that would be a very profitable way to go. The help that they need is two-fold. First, they need a network. If you are a business angel you will need to know where to go to find opportunities. Similarly, if you are an opportunity, you will need to know where to go to find business angels. It need not be a network in the usual sort of sense; indeed, it could be the souk mentioned by the noble and gallant Lord, Lord Craig—somewhere where you know you will find what you want. It could perhaps be the regional development agencies proposed
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by the new Government or the new site in Cambridge proposed by Microsoft. What better place for punting than Cambridge, unless perhaps it is Oxford?
Further, business angels need financial fairness. By that I do not mean a lot of tax incentives. If you look back in history at tax incentives, it will be seen that they have not worked well in the area because they tend to attract the sort of investor who is not really interested in personal participation and risk. I certainly remember the days of the BES when that was true and, if it is also true with venture capital trusts, I shall not be surprised.
The other aspect of tax incentives is that, if they are at all significant, the Treasury tends to put terms on them which are so totally uncommercial that they ruin the point of tax incentives in the first place. That was certainly true of the BES scheme and the rules surrounding it which made it almost impossible to make a commercial investment of equity. The Treasury will always tend to try to do that if the tax incentive is too great and the opportunities for loopholes and misuse of the incentive make it too much of an opportunity for those who are not really interested in risk investment to miss.
I shall listen with great interest to the reply of the Minister from whom we shall be privileged to hear twice today. I shall listen with even greater interest to what my noble friend Lord Home has to say in what I hope will be the first of many appearances on the Opposition Front Bench. He is in a fairly unusual position today as he will be making the first speech from this Front Bench after the accession of the new leader of our party. I hope that his telepathy has been working well since 5.15 p.m., so that he knows what our policy is.
6.15 p.m.
Lord Phillips of Ellesmere: My Lords, I hope that your Lordships will excuse me for rising to speak briefly during the gap, but I feel I must add my own contribution to what others have said about the excellence of the report produced by the noble Baroness, Lady Hogg, and her colleagues against a very tight timetable. I should like to make some comments about the debate, to which I have listened with great interest.
My main impression is that, as is quite common, a good deal of the emphasis has been on what universities and university scientists do, can do and might do. That is a quite natural emphasis as it is undoubtedly true that schemes proposed by government, industry or anyone else—indeed, even reports in this House—are listened to and read very attentively by university scientists. They have the habit, rather like children in a large family sleeping in the same bed, of all rolling over at the same time when one of them says, "Roll over". The industrial reaction to these imperatives is generally rather more varied and different. That, I believe, is a great problem.
I should like to follow up a little on what the noble Lord, Lord Tombs, said about the degree to which exercises like the Foresight programme have been successful in networking. To my mind, there is no doubt at all that scientists in industry, in government service

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and in universities are very well networked. They meet at meetings, they know one another quite well; indeed, they are often colleagues of long standing. In as much as the Foresight programme was aimed at networking—and, in my view, that was its principal objective—it did not really have much to add to the networking of scientists. Where it did have a great role to play was in the networking of that scientific community with the management community in industry. There, I am afraid, it was manifestly much less successful.
There are, of course, good exceptions to the rule that management and science are separate in industry. Indeed, one only has to consider the chemical, pharmaceutical, electronic and, perhaps, aerospace industries to see that it is possible for companies to have managements which are in good contact with their own scientists and with the science base in general. But, unfortunately, there are many companies, even large ones—I have in mind the construction industry, or many of the utilities—in which the managements seem somewhat unaware of the potential benefits to them, their products and processes from contact with the science base.
An equally difficult problem for those companies—indeed, perhaps it is an even bigger problem—is that there are very many small to medium-sized enterprises which employ no scientists at all and who are, therefore, not on the science network. Again, there are exceptions; for example, the new biotechnology companies are certainly not in that category, but many others are. It is a great problem for government to devise schemes that will somehow embrace the management community in these somewhat backward looking large industries and in very many of our small to medium-sized enterprises. My question for the Minister at the end of today's debate is whether he has in mind any possible approaches that would reach areas of the problem that previous approaches have hitherto failed to meet.
6.20 p.m.
The Earl of Home: My Lords, having successfully avoided sitting on any technology committee throughout 30 years in banking, it is perhaps rather alarming to be standing here on the first occasion at the Dispatch Box to comment on a report of such an august body as the Select Committee on Science and Technology.
As others have done, I thank my noble friend Lady Hogg for initiating this debate. She has received many congratulations from other noble Lords. I, too, thank her for her hard work in chairing the sub-committee. I also add my thanks to those members of the sub-committee for their hard work in producing what is a thought-provoking document. We are also grateful to those people and institutions who took considerable time and trouble in amassing and producing the evidence. From these Benches we welcome the report and we are pleased that the general thrust of it recognises that progress is being made in breaking down the innovation-exploitation barrier while correctly pointing out that there is still much further work to be done and that the barrier, while shaky, is still far from destroyed. I do not intend to take up much time by going through
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the report in detail for both it and the evidence given to the sub-committee make fascinating reading. I commend both documents to noble Lords. The recommendations in those documents are succinct and to the point and are supported by the evidence.
I receive one clear message from this report which is that the relationship between the small businessman and the financier still leaves a lot to be desired. There is nothing in the evidence which points the finger of blame at either side, and that would indeed be a sterile exercise. It is obvious from the report that the small businessman, particularly in the science industries, finds the financier tough and often expensive and the financier does not really understand the business, possibly because the businessman has not explained it properly or has, in the financier's eyes, got his priorities wrong. That is an awareness gap, identified by the noble and gallant Lord, Lord Craig of Radley, and also by the Royal Society of Chemistry which recommended bringing together academia and industry. That is right but financiers should also be included in a tripartite effort.
I elaborate on these conclusions by taking a few examples from the report and adding some thoughts on what might be done. The report states that personal and family savings are likely to be used in the earliest stages, and then we move progressively through seed corn. SMART funds, small loan guarantees and on to business angels. I have been involved in two start-up situations, admittedly not in the scientific field, where family funds were needed not only at conception but well into start-up. Many families do not have the money to continue funding beyond conception. I must say that in my experience, angels—business or otherwise—in most families are normally outnumbered by rogues.
I have some sympathy with those who complained about the rigidity of the small loan guarantee scheme, already mentioned by two noble Lords. On one occasion I found the bank involved inflexible not only as regards the 70 per cent. it was lending under guarantee; it was also extremely tough as regards how the other 30 per cent. might be provided, in effect requiring the 30 per cent. to go in as equity. I am aware that there have been some recent changes to the scheme of which I have not had personal experience but I hope that the Government will keep it under review. I hope that they will consider extending the two year repayment holiday sensibly advocated by Barclays Bank and also greater flexibility within and during the running of the loan scheme. Most small businesses experience hiccups from time to time and certainly in the case of which I have experience there was no willingness, even if there was ability. on the part of the bank to extend anything other than sympathy which did not solve the problem.
The report touches on the cost of due diligence, and here I agree entirely with my noble friend Lord Cuckney. It is indeed a problem. The report rightly states that business angels can reduce the cost of due diligence through experience and instinct. However, I believe that much more can be done to keep potential investors and financiers up to date with what is going on in various scientific developments. I wonder whether high-tech industries should not spend much more time

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inviting bankers and financiers to their science parks and to their clusters to bring them up to date with what is going on. In 30 years in banking I have never been invited to a science park. I have invited myself and that was not much liked. However, the ignorance that arises as a result of not going to these parks is considerable. Financial analysts visit these companies and although they provide data on which investment and credit decisions are taken they are not the members of the committees who say yes or no to an investment and it is those members the businessman needs to educate.
I agree with the report that the evidence seems to be that science parks and clusters are much more effective than scattered units. I was pleased to note that Mr. Kent from the Bank of England mentioned Silicon Glen in Scotland, one of our biggest clusters. I am afraid that I am not well acquainted with the clusters in Wales and therefore I may be a short-term member of this Front Bench. I admit to being biased but I believe that Silicon Glen has great potential to grow to become a centre of scientific excellence both in innovation and in the attraction of all types of investment. In due course I believe it could rival Silicon Valley, provided that the Government do not undermine the hard work of previous Secretaries of State for Scotland in promoting it as a venue for investment.
There is, however, one cluster where new concepts are constantly being invented and where cross-fertilisation of ideas occurs, often through exchanges in the pub or the canteen, and where the experiences of people from all over the world are shared to everyone's benefit and where co-investment happens because ideas are promoted by trusted and acknowledged experts. I refer to the City of London which initially thrived because of a requirement to be near the Bank of England. Although that requirement has long since gone, any financial institution with international aspirations will wish to locate in or around the square mile. I am not sure how far the analogy can be taken for I am not suggesting that each cluster should have a regulatory authority but it might be worth noting that centres of excellence attract investment. As has already been said, few would dispute that there are centres of excellence in science in the United Kingdom, especially in the universities.
Finally, the sub-committee noted that the CBI report Tech Stars suggested that new technology firms paid more attention to research and development than they did to sales and marketing. I believe that that is right. It is understandable that small firms should do so as marketing is time consuming. Whereas, in a small firm, R&D can sometimes be done late into the night or at home, marketing takes vital people off the premises and out of the office, and in some cases they do not know where to start with marketing. Some years ago the committee for Middle East trade took some small technical businesses to the Arabian Gulf, having already established through the assistance of the embassies that there was a potential market for their products. The embassies also contacted some potential buyers. As a result some of those small firms doubled their annual turnover in two days. Not all our embassies are in a position to do that. However, I hope that the Minister
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will ensure that the export promoters of his department are at all times fully briefed to assist small high-tech firms in marketing their wares.
It is an excellent report which I commend to your Lordships. I hope that the Government will take careful note of its recommendations.
6.30 p.m.
Lord Simon of Highbury: My Lords, first, perhaps I may say how pleased I am to reply, having listened to the noble Earl, Lord Home. I congratulate him on his elevation.
The Government recognise that innovation is central to improving the UK's competitiveness, be it in the industrial or the service sector. The President of the Board of Trade, in her recent speech launching Competitiveness UK, spoke of the Government's determination to build an innovative high-tech economy. She committed the Government to three important things: improving finance for emerging high technology firms; improving partnerships between industry, the science and engineering base and government; and encouraging greater investment by British business in best practice sharing and research and development. Those objectives are emphasised in the contributions made in this excellent report.
The noble Lord, Lord Dixon-Smith, is right. "Innovate or die" concentrates the mind wonderfully on the central challenge. We have our minds concentrated and the report has helped. It is excellent in its brevity and concise in its conclusions. I congratulate the noble Baroness. That is rare in reports on these difficult subjects.
To the noble Lord, Lord Phillips, I say this. We come with a fresh and positive attitude to innovation. From that new attitude let us hope that new ideas will flow. There may even be some in this reply, although there will probably be more later. For that reason I am delighted to be able to debate this excellent report so early in the life of the Government. I am also pleased to have had the opportunity to do so before the publication of our response. I am sure that today's proceedings have both raised the profile of the subject and brought many new and helpful insights to bear on the issues. In combination with the debate on 22nd May of the report on the EU's fifth framework programme, it would be appropriate today to say that we are off to a racing start in a discussion of the vital matter as regards how best to combine our science with the competitiveness that our companies need in world markets. Both reports have attended to those crucial questions.
As did the noble Lord, Lord Lucas, I think that the committee's report contains a great deal of encouraging news. However, while it is clear that the UK has taken significant steps towards effectively realising the commercial potential of our world-renowned research base, I agree that there is no room for complacency. We have much to do, and we have much ground to make up, as has been stated.
To achieve improved competitiveness and sustainable development, first, we shall have successfully to exploit a great deal more of our own research in this country

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rather than overseas. Too much of it is going abroad. I agree with the noble Earl, Lord Home. We must use our own research better; and we must proselytise that better in all our export discussions and drives. It is a crucial point. We have to encourage the successful launch and growth of many more small businesses. We have to take risks with that. Not all of them will flourish. But it is through them that we shall gain the benefits of increased employment. We shall have faster application of technology and more effective delivery of value added. That is really what international competitiveness is about.
We are convinced on this point and believe that we shall attain those goals only if we build lasting and productive partnerships. I speak here of the partnerships beyond the most crucial one. It seems obvious to say it, but the most crucial partnership is between the customer and the business. We should never forget that. Businesses will not exist without the customers. However, we must improve the crucial partnerships between the science and engineering base and industry; links between government and business; and in particular links between government and small business.
As the noble Lord, Lord Tombs, mentioned, it is important to understand the synergies between large and small businesses in the supply chain. It is an important point in successful regional or sectoral clusters such as those of which I am aware in California, Northern Italy and Bavaria. I now learn of the Fen Valley, Silicon Glen in Scotland, and Hertfordshire clusters. They are growing everywhere. It is important that we possess more examples of those highly dynamic, technology-based business centres. University research and small high technology firms, as the report makes clear, play key roles in developing such clusters which will sustain development longer. There will be failures, but that will sustain development longer. We must attend to the issues of the longer term growth and development which those partners must understand better. A stronger grasp of those issues would also help us to understand better the real nature of the spark in the science park, a topic raised in the report, which the noble Baroness, Lady Hogg, again emphasised today. It will be extremely interesting to see what additional impact will result from Microsoft's newly announced investment in Cambridge.
The report therefore addresses issues at the heart of government policy, and the Government warmly welcome this inquiry. As an aside, we warmly welcome, too, the small business task force which is to be set up following the Amsterdam Summit concluded this week. It was excellent to listen to one of the changes of focus that was reflected, I think from our own Government's urgings, on the importance of the development of small businesses in both technological and employment terms. I look forward to more stimulating work from that small business task force which, I am sure, the Commission will put in place quickly.
Your Lordships rightly identify three areas of major importance: the removal of barriers to the growth of high technology small firms, in particular financial
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barriers; the importance of extending industry/higher education links; and the future development of the Foresight programme.
Turning first to high-technology firms, the report, and that by the Bank of England on the financing of technology-based small firms, the CBI's Tech Stars report, and the Enterprise Panel's report on business incubation, pinpointed many issues surrounding the development of such small firms. The direction in which we have to go is much clearer now than in the past. We are on firmer ground, and action rather than extended inquiry and discussion is required on the issues raised.
The committee draws attention to a number of factors which are still inhibiting the birth and growth of high technology small firms, and we have taken those on board. We recognise that there is indeed a specific difficulty for high-technology firms in accessing finance initially. But simply bringing finance and technology together is not enough for success. We need to build a virtuous circle. There must be access to the right finance at crucial points in the lifecycle of a firm in order to allow it to grow. In addition, we need to be sure that there is a strong management. It would be wrong not to state that it is important that all of this is taking place in a sustainable and stable financial environment where inflation and the cost of money are low. We should not forget that the higher the volatility in general financial circumstances, the more difficult it is for smaller firms to make their way. After that—and I do not dismiss that task lightly—the challenge is that of the matchmaker, the midwife and the parent all rolled into one. (Perhaps the noble Lord, Lord Winston, is better at carrying us through that process.) I believe the DTI has that view of its potential role, and it is an important one. This is not merely a matter of start-up finance; it is the ability to help sustain what may be a lengthy process.
Finance is crucial in the early stage. It is a patchwork affair, drawn from many sources. No one financing package precisely resembles another. Studies confirm that, for all its success in growing such firms, that is the case in the United States as well. The patchwork seems to work. For that reason it would be wrong to be prescriptive in this area. As the noble Lord, Lord Tombs, made clear, a package needs to be available. It is also clear that the presence of one source of finance—venture capital, informal capital, business angels, bank financing or government research awards; we have heard much comment today on the different schemes—tends to draw more and more into the potential. So the more you have, the more you get. That is not a bad thing. It is also clear that all these different sources of finance depend upon investors' confidence in the managerial, marketing and entrepreneurial skills present in the management team. I keep returning to the people as much as to the technology and the idea itself. How we develop the skills of the people involved is a factor that we need to keep in mind as well as: is this just a financial barrier? The two are married closely together.
Many noble Lords raised the question of the Small Firms Loan Guarantee Scheme as one option for finance. I was glad to hear the support that the scheme received from the noble Lord, Lord Cuckney. It is designed so as to attract lenders to offer finance to firms

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with no collateral which would fall outside the normal criteria. It is interesting that only some 8 per cent. of lending under the scheme currently goes to what we define as high-tech businesses. The Government are committed to refocus the scheme, within existing resources, so that more high-tech firms can benefit. To achieve that we are reviewing applications to join the scheme from new, specialist lenders with experience and expertise in providing finance to small high-technology firms. I hope that the introduction of such lenders will also help address your Lordships' concerns about the scheme being unduly risk averse—although in my banking days within my old company we used to regard a no-collateral investment as quite risk averse from the start. So we must keep some balance in this respect.
The committee also drew attention to the small business innovative research programme in the USA. Of course our own SMART programme is based upon that highly successful initiative, the value of which is universally understood. It was recognised as such by the noble Lord, Lord Cobbold, whom I am also pleased to see again. I thank him for his welcome.
The problem, as was pointed out in the report, is that, given that we have SMART and a partner scheme such as SPUR, there are sometimes difficulties in the borrowers getting clear in their minds which option is for what. To that end, the report commented on the confusion felt by some in dealing with the schemes; namely, there are too many options. Even if we want a thousand flowers to bloom in terms of the financial options available, we have taken forward a simplification process in regard to DTI programmes. SMART, SPUR and the regional enterprise grants for innovation have now been combined into a single SMART scheme. I hope that will help.
Business angels were acknowledged by many noble Lords to be very important to firms in their early life. Even the bankers in this Chamber seemed to agree on that, which I regarded as extremely encouraging. The British Venture Capital Association's directory of business angel and introduction services lists over 40 business angel networks, over a quarter of those run by the Business Links programme. We encourage and welcome co-operation between these networks. I wish to underline the importance of Business Links. In another context the One Stop Shop for information, mentioned by the noble Lord, Lord Lucas, is available. The Business Links System is something to which all of us should attend as being absolutely key to this process.
While on the subject of early stage financing, noble Lords queried the inhibiting effect of due diligence costs upon investments. We are in contact with the venture capital industry about these concerns but there does not seem to be a common view among investors. For those investing in start-up companies the due diligence becomes more complex because of the lack of a track record. The emphasis is then particularly on the knowledge and technology of markets as well as on assessment of the competence of the management team. The costs of such investigations is entirely dependent upon the existing knowledge of investors and may be much more significant for the individual business angel.
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The CBI's report, Tech Stars, has widened this discussion to include the prohibitive effects of disproportionately high transaction costs alongside due diligence. We were interested to see that it pointed to an initiative by the Oxford Investment Opportunity Network to reduce some of these costs by making legal and due diligence packs available as templates to its members. The Government will continue their dialogue with the industry to establish more firmly the nature of the fundamental issues and whether more of that approach, namely the pack solution, will bring down costs.
Finally, I do not want to leave the subject of financing without two "plugs", as they are technically known in the business. We are particularly keen to see the alternative investment market in the UK and the new European initiative, EASDAQ, successful. We think that they will create greater liquidity at the lower end of the financial markets and we wish both experiments well.
I wish to say a word on some of the venture funds. I am happy to see that Merlin ventures focusing on biotechnology are also springing up. In welcoming Microsoft's investment in Cambridge, I should have noted that its venture capital trust is worth £10 million. It will be extremely interesting to see how it does.
In that brief résumé of what are the financial barriers and how we can get through them, I hope I have left your Lordships with the idea that there are many flowers blooming, there are many opportunities and we are intent on ensuring that they are most usefully used by the small companies which we are trying to encourage.
I also wish to emphasise the importance of management. In that sense, the incubator system about which many noble Lords spoke is an important place for bringing together new management and. through that system, encouraging the idea that the people and the money understand each other better.
I wish to say a word on education. I have talked about the importance of the quality of management in small companies. It is important that we concentrate more on collaboration between higher education and business. The links between the business schools, the old polytechnic/university structure and small businesses are ones which we should encourage more. The work done by the polytechnic sector has been much more enterprising than people have given it credit for. That is not to gainsay our old universities and the academic structure. I believe that we need to pay attention to the capacity for small businesses in local areas to work with the local polytechnic.
While on higher education, my noble friend Lord Winston and other noble Lords picked up the issue of intellectual property rights. The Government agree that universities need to be aware of the importance of managing the intellectual property. We welcome the work being done by the industrial liaison officers and the guidance on the subject issued by the Committee of Vice-Chancellors and Principals in 1992. We should like to see the wider adoption of IPR management best practice among institutions so that it enhances rather than inhibits the effect of the IPR capacity.

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I now revert to the emphasis which your Lordships put on Foresight. The Government agree that there should be a much wider awareness and take-up of the opportunities arising from this programme. In my business language, that means that we must market Foresight more clearly. I agree that reading long reports is not what most entrepreneurs enjoy, so somehow we must get the ideas marketed better to them. We shall do that. In the meantime, I note that Foresight has gone some way towards addressing the Committee's concerns about what it described as "misfit" lines of research, research which falls between sectors. I am glad to note, for example, that projects on nano-technology and investment science were among those funded by the £7.5 million Foresight package of initiatives in Scotland at the end of last month. Nano-technology is very small, for those of us who have to worry about the work. The Foresight programme needs better selling and better focus.
My next point is on relevance, which the committee made clear in its report. We have many initiatives, many options. The DTI is chasing lots of opportunities. I wish to revert to the noble Baroness's final thought: the important point is where these are adding value. Output matters as much as input, and output measurement, I have to say, is weak. I hope that my use of these economic terms is not confusing anyone. Where are we getting our bang for the many bucks we are spending? We must look at that; as the noble Lord, Lord Craig, said, entrepreneurs go for action, they do not go for reports. We must measure their action. I believe that we shall try to do that. We have evaluation systems in place whose findings help us to make improvements. We must do more work on them. These are not easy questions to answer but we must analyse what we are getting for our money and apply our limited resources more effectively. That will be a fundamental issue which we wish to develop in the Government's formal response to your Lordships.
In conclusion, perhaps I may say how stimulating I have found the help from the committee in painting the challenge as clearly as it did in its report, which the Government accept with enormous pleasure. Britain is changing, it is becoming more innovative and more competitive. We have work to do and the report helps. I thank all noble Lords.
6.56 p.m.
Baroness Hogg: My Lords, I shall not try the patience of the House much longer. First, I wish to renew my thanks to the members of the sub-committee for carrying me through the daunting task of chairing such a distinguished group and for their contributions to today's debate. I shall not single out any contribution for a response except to say to the noble Lord, Lord Craig, that I share his irritation with the gloom industry. I wish to reassure him again that the overall note of our report was positive. We concluded that the climate for innovation had improved which, no doubt, had the thoroughly admirable effect of ensuring that the report
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received no media attention whatever. That may, however, have had something to do with its coincidence with the prorogation of Parliament.
I wish to make one further point in responding to the gloom industry since it did not arise in the debate. We were impressed by the amount of evidence we received to the effect that the climate for innovation in the United Kingdom was now markedly better in many respects than in some continental European countries. Sometimes we are bemused by comparisons with the United States and the powerful engine of innovation created by the weight of strong industries and strong universities there and forget the comparisons with continental Europe on which we received much positive evidence.
My final remark in response to the intervention by the noble Lord, Lord Craig, is that whatever else we decide is the defining characteristic of a good cluster, I do not think that the behaviour of No. 11 buses constitutes best practice.
I wish to express my congratulations to my noble friend Lord Home and welcome him to the Opposition Front Bench. The debate was greatly enriched by his expertise and I know it will continue to enrich the quality of debates in this House on many issues where he has so much to bring to our discussions. I thank the Minister for his thoughtful and detailed response. I greatly welcomed his emphasis on added value and was delighted to hear that he will be keeping a sharp eye on what I think he called the "spark in the park". I beg to move.
On Question, Motion agreed to.

Planning Inquiries
7 p.m.
The Earl of Kinnoull The Earl of Kinnoull rose to ask Her Majesty's Government whether the rules of public planning inquiries should be reviewed to balance the democratic rights of objectors against the inordinate length of certain inquiries, lasting in certain cases over two years.
The noble Earl said: My Lords, in raising this subject today on the rules of procedure at public planning inquiries, particularly where major infrastructure is involved, I am mindful that there is a bonus for short debates that attract only eight speakers: we have a little more time—not too much time but more than the 14 speakers that joined in merrily with my noble friend Lord Bradford's sparkling debate yesterday.
I should like to thank in advance all those who intend to take part in the debate and who, I know, will bring both quality and experience to what I believe is a very important subject. I particularly look forward of course to hearing the reply by the noble Baroness, Lady Hayman, and I congratulate her on her recent appointment.
First, I should declare that I am a working surveyor, compared with the phenomenon of a working Peer. There do not seem to be many working Peers around this evening. Perhaps my noble friend who is very versatile is a working Peer. I should add that I am not

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involved in any current major inquiry. My brush with planning goes back quite a few years. It has made me respect the system that has evolved ever since the first planning Act of 1932. Today the planning system runs at approximately 480,000 applications a year, mostly on minor issues. Out of those come about 14,500 appeals, all of which are handled by the planning inspectorate, which, I believe, provides a very good service, often handling very contentious issues with firmness, fairness and professionalism. However, even with that excellent service, the planning system needs overhauling from time to time and it is generally agreed that that time is now.
The encouraging note is that there seems to be no political divide on that objective. How that objective is achieved may be another matter. The House will recall that last January my noble friend Lord Ferrers, when he was Minister of State for the department, announced that he was issuing consultation papers on improving the system, in particular with local development plans. Local development plans are of course of great interest to all property owners and developers. I understand that over 90 plans are due to be publicly examined during the course of this year, taking up a great deal of the inspectorate's resources. I am not sure what happened to the consultation papers, but soon afterwards the manifesto of the noble Baroness's party published very similar reforms. I hope that tonight the noble Baroness will enlighten us about the Government's plans for improving the system.
But the debate tonight is a little narrower than the general improvement of the system. It concentrates on the major planning inquiries that take a very long time to complete. The House will recall that most of them in the past have concerned such difficult subjects as nuclear power stations, opencast coal, motorways and ring roads around cities, with the most popular—or unpopular—subject being airports. The Channel Tunnel escaped such scrutiny as it progressed through parliamentary procedure which must be open to the question of how it compares with the public scrutiny of a full inquiry. There certainly was a difference in time.
Up to now, the blue riband for the longest public inquiry goes to Stansted Airport, some years ago, followed by the Sizewell inquiry, which I believe took two years. That dubious honour will undoubtedly be surpassed by the Terminal 5 inquiry when it is finally completed at the latter end of next year. I do not for one moment criticise the very great care and scrutiny exercised by that inquiry. I simply say that a three-year inquiry, followed by at least six months for the inspector's report, followed by scrutiny within the department, followed by the decision of the Secretary of State add up, in my view, to some four and a half to five years. However difficult a planning issue may be, it is surely a grotesque timescale for any inquiry to take over three years to complete its hearing.
Such inquiries represent only a very small part of the system. Yet, as they are very high profile there is a danger of dragging down public confidence in the whole system. The minuses of such a lengthy procedure must include blight on property, damaging uncertainty on the area generally and the despair of those taking part. Such
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a lengthy procedure also offers the real, practical possibility of the inspector or inspectors falling ill and the whole inquiry starting again. All those arguments are well known to the noble Baroness and her department and I shall not labour them.
In the hope of not being criticised for being critical but of being considered proactive, I have sought to see whether there are any procedures which might help to streamline the present system. The first point that has been put to me is an absolute must of any major inquiry—that the government policy on whatever is pertinent to that inquiry must be up to date. That must reduce the danger of a good deal of lengthy policy arguments.
My second point is that there seems to be a great deal of support for giving inspectors wider authority to establish the key issues of the inquiry and curtail a host of repetitive objections. Thirdly, there is the need to establish agreement on technical data between the parties before an inquiry sets sail. I am sure that would reduce the cost. Fourthly, there is surely the need for a timetable from when the department has received the inspector's report to when the final scrutiny report reaches the Secretary of State's desk. I see no reason why the Secretary of State himself or herself should not be subject to some similar discipline of time to announce his or her decision.
Lastly, on a general issue, I hope very much that the value of the cross-examination at the local plan inquiries will not be lost. I believe that there is a very great deal of value both for participants and the local authority to attain this discipline. Examination in public procedure in cases of structure plans does not have such cross-examination.
It is a truism to say that we are the trustees of planning for the next generation. Effective and efficient planning is a very important goal for which to strive. We have a very good system and I am sure that we can improve on it. Whatever happens on the broad issue of change of the system, I hope that we shall be able to say that the days of the giant public planning inquiry are over and we have learnt a better route without damaging the sensitive interests of all concerned.
7.7 p.m.
Baroness David: My Lords, I thank the noble Earl for introducing the debate. He is an excellent person to do so, as he has practical experience as a surveyor and I am sure has participated in a good many inquiries. This is not a huge subject but to me at any rate it is a very interesting one.
The fact is, as the noble Earl said, that most public inquiries are concerned with relatively limited proposals and are short. Proposals which are of significant size, whether by private companies, by government or by public bodies, are the inquiries which by their nature are time consuming. There are three reasons for that. First, the issues may be technical and complex—for instance, about noise or hydrogeology—inviting differences of expert opinion. Second, plans and policy documents have become over-lengthy, too numerous and excessively detailed, and they have to be discussed.

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Third, there is the endless repetition of similar arguments by third parties, usually the public, but including at times local authorities and pressure groups.
Civil servants usually blame counsel, solicitors or professional agents for the length of inquiries. As in all areas, they vary from the competent to the long-winded. But that is not the main reason for the length of time taken, certainly since the recent procedural reforms as a result of Circular 15/96.
There are only two effective ways of reducing the time taken at inquiries. First, one can reduce the scope and extensive character of the development plans of the policy documents themselves. They have grown since the 1960s from 10 to 20-page land use details to documents covering 120 to 130 pages dealing with economics, the provision of bicycle paths and anything politically correct that local authorities can think of. That has been encouraged by government, which issue endless, often ambiguous, planning policy guidance and discussion papers, and by the courts, which have, by subjecting the administration process to legalisation, made it sclerotic. The procedures have, through statutory instruments and the courts, become too formal and bureaucratic. Secondly, time at inquiries could be reduced by controlling rigidly the rights of third parties to participate.
Prior to the Skeffington report in 1968, inquiries did not have the public element and were short. The first review of the LCC development plan took a mere five weeks. Members of the public usually repeat themselves endlessly and raise many irrelevant issues. Inspectors try to control it but have no real authority to prevent the persistent from taking time. In any event, the political interventions of MPs in the planning field make it effectively impossible to deny objectors their day in court.
The department produced Circular 15/96, which introduced a number of improvements. Can the Minister tell us whether appeals have become shorter as a result or is it too early to tell? Two consultation papers came out in January this year, one on planning appeals. One suggestion there is that more appeals could be handled by hearing or written method, the Secretary of State to decide on the method. Primary legislation would be needed to bring that about.
Mediation between the parties is a novel idea. I am a supporter of mediation in a number of areas. I confess to being a little sceptical about it in the planning arena, but I should be interested to hear the Minister's comments. The promptness of delivery of statements is important, and the document comments on that and the possible cost penalties for late delivery. The second consultation paper is on speeding up the delivery of local plans and unitary development plans. I mentioned reducing the scope and the extensive character of development plans and hope we may hear about that. I was kindly sent all those reports and papers by the department, but they are from the time of the last government. I am sure that we would all like to hear from the Minister what, in the light of the manifesto
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commitments, the present Government plan to do. I am glad that privatisation of the inspectorate at any rate does not seem to be on the agenda.
To return to the matter we are debating, the length and number of inquiries seem to be in the public interest overall in a parliamentary democracy such as ours. Their character can be said to reflect a long tradition of participating government which goes back to Anglo-Saxon times. It is important in a true democracy for people to sense that they can influence affairs and participate in government in matters affecting their environment and their property. It induces better administration and decision-making because the decisions are subject to external testing. The length of time of inquiries is a price that may have to be paid for that.
The alternative—a Napoleonic European approach—is to issue directives in relation to large schemes without a public right to object (the French nuclear power stations are an example) or with only limited rights. That line of approach seems to me to be politically unacceptable. The plan-led systems here have probably reduced the number of appeals but have led to longer development planning inquiries, which is dealt with in one of the consultation papers. That still does not eliminate the need for appeals on planning decisions and I guess that they will go on.
7.13 p.m.
Baroness Thomas of Walliswood: My Lords, I am grateful to the noble Earl, Lord Kinnoull, for introducing the debate and hope that it will not be considered unsuitable if I concentrate my remarks—which I hope will be as brief as the two preceding speakers—on the inquiry T5 to which the noble Earl referred.
The T5 inquiry began in May 1995. Whenever I inquired of people how long they thought it would continue, the reply was always, "About another year". So it has dragged on and the noble Earl informed us that it is now suggested that it is due to stop officially in June of next year—informed opinion suggests that July or August may be more likely. The threshold for the end of this specific part of the inquiry process is therefore still moving away from us. After that, of course, there follows the consideration by the inspector and so forth.
Much as I support the democratic right to make lay objections to planning applications—T5 is a major planning application—the whole process has great costs attached to it. I want to address the costs to the British Airports Authority in putting forward this application. It is said that before the process began around £30 million had been set aside by British Airports Authority for the prosecution of the application. It is possible that over the intervening three years that sum has increased. For example, there is anecdotal evidence of the delight among consulting engineers at the fees that they have received; in the 1995–96 annual report the company put the cost of the inquiry and design costs at £144 million. Of course, the major part of that will relate to design but it is a large sum of money.
The major opposers in that inquiry consist of a group of local authorities—10 in all—known as LA T5. That group has so far spent around £3.6 million, of which

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£1 million has been subscribed by Surrey County Council, the lead authority in that group of objectors. Even for an authority as large as a county that is a considerable sum and resulted in growing doubt among councillors, understandably, as to whether the decision taken by the full council in that case can continue to be justified—because of the expense—in terms of the other demands on their budgets. I do not know what the situation is within the other nine authorities, but it is a justifiable doubt on the part of responsible members of a local authority.
There are therefore problems even for major authorities. If the length and cost of such an inquiry is a deterrent for a local authority, how much more of a deterrent is it to individual objectors or small special interest groups who feel their position to be threatened? They often have to attend the inquiries themselves. Someone commented to me the other day, "If even you, with all your background knowledge of the affair, were to turn up to the inquiry for a single day, you would find it difficult to understand what is happening". That is due to the judicial type of procedure adopted by a public inquiry. So individual or small groups of objectors are faced not only with costs, which means that they themselves have to act as legal representatives for their cause, but also with the difficulty of conducting that representation imposed by the process.
The application for T5 is perfectly legitimate; I do not say that it is not and I am not discussing the rights or wrongs of the case. It is justified by British Airports Authority in terms of the need to supply a growing market for air travel and to do so in this country rather than elsewhere in the European Union. As against that, the objectors also have legitimate objections. For example, there is a planning objection; that is to say, the over-concentration of a large amount of economic activity in one specific small area of south-west London/north-west Surrey on the edge of the conurbation—contrary to planning policy guidance to reflect a point raised by the noble Baroness.
The question of ground access must be considered. Heathrow Airport is now the largest single generator of traffic in the whole of the United Kingdom. It has 50,000 employees and once T5 is completed will have 80 million passenger per year going in and out of the airport. Of course, the 50,000 employees go in and out on a daily basis. Finally, to name but three of the objections, there is the problem of noise.
The system with which people are faced is that one is obliged to oppose an application in order to obtain mitigation of the circumstances which will arise if that application is granted. In other words, in order to gain concessions from the applicant one must oppose.
As an example, I refer to the question of noise. Before this already two year-long inquiry started, the British Airports Authority was simply not interested in making any kind of promise to cap the noise level at Heathrow, but, as a result of the inquiry so far, as I understand it, it is now willing to undertake a legally binding way to cap noise levels at Heathrow to their 1994 level. That may not be sufficient or exactly what is decided, but nevertheless a concession has been made. No doubt, as
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the process continues, other concessions will be made, but it is a very expensive way of putting forward mitigating circumstances when a major application is being made.
So what can be done to make the process more sensible? I believe that the noble Earl touched on one of the factors which make this kind of infrastructure inquiry so difficult. In the case of Terminal 5 there is no government policy on airport provision. So, when an application is made, the applicant has to justify the application in terms of need, the effect on employment, housing and so forth. One has to concentrate on all that before one can get to the effort to mitigate the ill effects of major applications of large economic growth on the surrounding area.
It is not like that in every other country in Europe. As I understand it, the Dutch have a totally different approach. Schiphol Airport is a planned airport for long-term investment. It is not subject to incremental growth at the will of the company which runs it as Heathrow has been. There is a great deal of discussion about the mitigating circumstances which should be engineered into the airport in order not to make its effect on the neighbours of the airport too bad. Now, a fifth runway is being constructed at Schiphol, not because it is going to have more than 80 million passengers, but because of a 40 million passenger threshold. The burden of noise from aircraft movement will be spread over the widest possible geographical area and therefore no one group of people will have the whole burden.
If we had a proper airports policy, then discussion about an application could go almost immediately to the relationship between that development and the local environment in the broadest sense of that word. I believe that we would then wish to see matters such as noise and how to mitigate it and ground access and how to improve it discussed between the parties in a sensible way, only bringing to a public inquiry those matters on which it is impossible to agree in an ordinary discussion as between equals. That is the way; namely, a basic policy and then the rational discussion of mitigating measures leading to an inquiry only when one cannot reach a sensible agreement. That seems to me to be the right way to go forward.
7.24 p.m.
Lord Chorley: My Lords, I add my thanks to the noble Earl for raising the question of planning inquiries. My own interest is that for many years I have been involved in the work of the National Trust. From 1991 to 1996 I was its chairman. The Trust is endlessly involved in planning inquiries, some of which are large and some are small, but collectively they account for considerable staff time and cost. Some of the inquiries we are involved in are very costly indeed. In the past couple of years at least two have cost us over £100,000 each and several more cost over five figures.
The inquiries are predominantly to do with road and similar schemes. They are my principal concerns this afternoon. The costs that we have to meet in these big inquiries are not just for legal representation, but the need for experts—traffic engineers, perhaps. There is

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not much point in attacking a road scheme, assuming the need is evident—and that is not always self-evident—unless you have a realistic worked-up alternative to put before the inspectors. That is very costly.
I also have the honour to be an honorary vice-president of both the Council for National Parks and the Friends of the Lake District. In relation to their size they probably spend even more time and effort on planning cases than does the Trust. Each of them has a huge amount of experience. I have consulted their staff widely and also the CPRE and barristers. In all this there is a common thread of interest: the environment. In that sense they are third parties—an important point which I shall come back to. I should add at this stage that I am not a planning expert, nor am I a lawyer. For better or for worse, my only interest, as it were, is as a user of the process.
It is important at the outset to record that whatever criticisms we have of the inquiry process, we at least have a process. I am not sure whether it was the noble Lord or the noble Baroness who said that we are not Napoleonic yet. It is a well worked out process and one that I believe we can be proud of. What I wish to do is to draw attention to a few points where the organisations I have referred to believe the process can be improved, whether it be in matters of fairness, efficiency or effectiveness.
As regards cases covered by the Town and Country Planning Act 1990, we have the DoE circular Planning Appeal Procedures. I have read that. It is an admirable document full of sound common sense. The question is then the extent to which these procedures and this common sense is reflected in practice in what actually happens, in particular for schemes that are not covered by the Act and, therefore, presumably not covered by that guidance.
I will start with one example. It is perhaps the commonest criticism that has been made to me. It is that fuller use could and should be made of pre-inquiry meetings to agree, for example, facts; to establish other common ground; to identify critical issues, and so forth. All that is admirably covered in the guidance note; but I believe I am right in saying that these rules do not apply to road or similar big infrastructure schemes which have been mentioned. As I say, it is perhaps the most common criticism that has been made to me.
There are several related points which have to do with planning meetings. First, if pre-inquiry meetings are to be effective, they should include all the interested parties. They should not be limited to the two main parties as apparently sometimes happens. Secondly, it is important at this stage—the scoping stage, if you will—to bring in the environmental dimension. A strategic environmental assessment at this stage can often identify options or courses of action on which there can be a degree of consensus or at least approaching a consensus. Thirdly, there is the need to get ordinary local people involved. They often have real sense and unique local knowledge to contribute. There are several ways of achieving that such as evening meetings, local conferences, and so on. If one is to obtain the local
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feeling, the local people should be informed. The way not to succeed is to allow them into the formal process of being intimidated by aggressive barristers. One notes as an aside that some inspectors often show undue deference to barristers, especially in what I would call the "heavyweight team". I dread to think what is happening at the Terminal 5 inquiry.
A good example of an early public consultation which included environmental organisations was the proposal by Northern Electric to upgrade the power line to Whitby, across the open moorlands of the North York Moors National Park. The developer was able to measure the level of public concern being generated by the proposal and settled for a lower key development instead, thus possibly saving himself the cost of a fullscale public inquiry.
I could go on, but shall simply conclude on this point by noting that properly organised pre-inquiry sessions can be enormously effective in, for example, saving experts' time in preparing evidence, attending the inquiry and giving evidence. Indeed, in some cases, as in the case of the North York Moors, it may even obviate the need for a fullscale inquiry.
I should like to make two points on appeals: first, third parties—those with a legitimate interest—should have the right to seek to secure the calling in of applications where the planning decision is clearly contrary to planning policy. I am sure that we all know of examples where consent has been, in a sense, "improperly" given. This is especially relevant to local plans. Secondly, the developer should not have an automatic right of appeal. Could not the planning inspectorate be empowered to decide whether an appeal should go ahead?
Once a lengthy public inquiry has been called, there are many problems for voluntary sector organisations. Earlier exchange of proofs of evidence—for example, six weeks rather than three—before the inquiry starts would enable organisations with small staff resources to muster an effective case. Extending the period of notification of the inquiry date from 28 days to 42 days would also be beneficial. Late submission of evidence by the developer should be discouraged. If proofs are submitted late, there should be grounds for an adjournment.
Numerous other points have been made to me about the process during the inquiry, many of which have already been mentioned this evening: for example, excessive time being spent on cross-examination; frequent repetition and duplication of evidence; and apparently occasionally, even today, the reading out of evidence. We must also guard against the tendency of the big heavyweight legal teams to go for overkill, giving rise, needless to say, to the impression that they are spinning things out and squeezing the little man.
Voluntary sector groupings should also be involved in the discussions that take place outside the inquiry on matters such as undertakings or conditions. This relates to mitigation. The inspector calls for such discussions to take place in order to speed up the formal process; but by leaving some groups outside the process, it is likely

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that the process will take longer. This may possibly lead to hardened attitudes and even to downright opposition if the development goes ahead.
I have given just a selection of a great number of practical and useful points that have been made to me. I do not suppose that any of them are novel. They will be familiar to many, whether or not they agree with them. The conclusions that I draw are therefore, first, that probably the great majority of appeals (whether by hearings or inquiries) are conducted expeditiously and satisfactorily, but that there are problems with the big inquiries, particularly with those schemes not covered by the 1990 Act; secondly, not enough attention is given to the environmental dimension, and to the important role of the environmental NGOs; thirdly, the policy guidance note is probably not working as effectively as it should; but, much more importantly, schemes that are not covered by the DoE rules should be covered by equivalent rules.
Just on a year ago the noble and learned Lord, Lord Woolf, produced his report Access to Justice. It was full of practical suggestions, so I conclude by suggesting that there is a case for a similar report to see whether we can make the planning inquiry system (in the widest sense of the phrase) work rather better. It is an important part of our justice system; it is important to the economy and it is important to our quality of life.
7.35 p.m.
Lord Ponsonby of Shulbrede: My Lords, I intend to speak briefly. I begin by thanking the noble Earl, Lord Kinnoull, for tabling this Unstarred Question on an important, if narrow, issue. The noble Baroness, Lady David, spoke most trenchantly in answering the specific point that our planning inquiries are of an inordinate length and that those times need to be reduced. I should like to speak in slightly wider terms than those of the Unstarred Question to say why there needs to be a general review of the planning process and to comment on the way in which I hope that some of the proposals in my party's manifesto should help to achieve that end.
Some years ago I was a councillor in the London Borough of Wandsworth and served on the planning committee for a couple of years. That certainly does not make me an expert—I make no claims at all in that regard—but I do know the importance of proper planning procedures, especially to local communities.
I also played a minor part—I was in opposition—in drawing up my local borough's unitary development plan. I was continually frustrated through not having any remit beyond the scope of the borough. There was no strategic guidance. Although some of the local boroughs got together to try to co-ordinate the unitary development plan, the whole process was frustrated by a lack of any sort of strategic guidance.
I do not think that I am being too parochial in talking about Wandsworth because we had to deal with some very typical planning issues. Perhaps two of the more famous—if I may use that word—related to large and prominent derelict sites in the borough. I am thinking particularly of the Battersea Power Station site and of the Gargoyle Wharf site which may be better known to
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your Lordships as the Guinness site where "The Land is Ours" protesters camped for a number of months before being removed by the police. Whatever one thinks of such protests, it is certainly a failure of the planning process in the most general terms that those sites have been derelict for so many years. I hope that guidance and strategic leadership from the Government will do something to get those sites developed. I know that many of the local residents' groups which try to work with my local authority are constantly frustrated by the lack of encouragement that they receive from the local council.
Of course, there needs to be a balance between the legitimate needs and financial requirements of the developers, the views of local residents and the general strategic aims for the regions of our country. It is difficult to achieve that balance, but three things could be done to help in that process. The first is to speed up decision-making, which is, I believe, the purpose of this debate. I know from my own experience in business that a quick decision is much more important than a wrong decision—if I may put it like that. It is better to know that the answer is "no" than to hang around for ages when you should be getting on with the other aspects of running your business. Speed of decision-making is very important.
I refer secondly to clarity of purpose. I hope that my party's manifesto commitment to a strategic authority for London will lead to greater clarity of purpose with regard to planning in my area of London. That is most important.
The third factor, which is perhaps more controversial, is the increase in the value of sites, particularly those in inner cities. There has been a great deal of pressure on greenfield sites around cities. I believe that there is a general consensus as to the need to build on greenfield sites. I am very much against it. My experience in London is that many infill sites, or brownfield sites, can and should be used for development. If the Government make crystal clear in whatever guidelines they like to set out that greenfield sites will not be developed under any circumstances, the value of brownfield sites will go up. That will help the developers to come up with schemes that they believe meet their financial requirements.
I have strayed wide of the Question but I believe that there are a number of planning issues that the Government now have the opportunity to look at. There are huge needs within our inner cities and opportunities which, if the planning process can be made right, mean that these sites can be developed.
7.41 p.m.
Baroness Hamwee: My Lords, I too thank the noble Earl, Lord Kinnoull, for raising this interesting topic. Many points have been made that one would like to pursue but perhaps they lead down alleys that should not be followed given the narrow area that is being discussed. I declare an interest as chairman of the Town and Country Planning Association, although I am not sure that that affects the comments that I shall make.

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I was interested in the way in which the noble Earl formulated the issue. He spoke of balancing the democratic rights of objectors against the inordinate length of inquiries. It is not only applicants who are prejudiced by the length of inquiries. One thinks of the resources of local authorities and those representing objectors, interest groups and communities, even when working in a consortium. That difficulty was raised by almost everyone to whom I spoke on this issue before the debate. The noble Lord, Lord Chorley, referred to heavyweight legal teams spinning out inquiries. They do. However, I believe that that is part of a much wider issue. I immediately thought that if anyone suggested that counsel could cut it down a bit he might think, "I must not expose myself to a claim for negligence for shortening the case". There may be formal or informal points to be made on this matter to those who have been involved in the McDonald's libel trial. I agree with the noble Lord that many analogies can be drawn between the planning inquiry system and the general court system, and there are lessons to be learned from the Woolf Report and how that is put into practice, possibly without having to begin a similar exercise to deal just with planning inquiries.
Objectors do not have many rights. They have no right of appeal. It is suggested in many quarters that one improvement to the system would be to allow objectors to have limited rights, for example if the application in question were a significant departure from the development plan. Appeals are in themselves something of a democratic safeguard. I am concerned that we do not subordinate fairness to efficiency in what is after all a disputes procedure, not necessarily between individuals and certainly not in the case of the inquiries we are considering, that attempts to reconcile societal conflict. I do not believe that the inquiry system can be a conveyor belt.
There is no doubt scope for adjusting the management of an inquiry. The previous government consulted on the subject. I understand that there were over 200 responses to the consultation paper on inquiries. The message I received was that the responses had been mixed in nature. I am not sure what that indicates. Like other noble Lords, I shall be interested to know how the Government intend to take forward that work.
Changes such as mediation, which was referred to by the noble Baroness, Lady David, do not address major inquiries, although I believe that there is scope for trying to bring people together at not such inordinate expense. The noble Lord, Lord Chorley, referred to particular sites being of such importance that public interest probably demanded wide and deep public discussion of their future, as in the case of certain major developments. I believe that there is scope even for community groups to receive funding to support their participation in that process, at the same time co-ordinating their comments in the hope that the process may be speeded up.
I smiled when I heard the points made about the abilities or otherwise of the legal profession as compared with the view that perhaps members of the public are often inept in presenting their case. Having
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chaired a planning committee in a borough next door to that of the noble Lord, Lord Ponsonby, which introduced a procedure that allowed public representation at a development control committee, I discovered that invariably those who were worst at presenting their case were the banisters, principally because they said, "The way I would put it to you is this", and used up the time with such language. However, I agree that the local knowledge of individuals and community groups is valuable and must not be lost as a result of any change to the inquiry process.
As my noble friend said, for the big developments the issue is: how is the policy made and where is the policy? I observed that the Minister nodded vigorously when my noble friend referred to the policy vacuum with regard to airports. If there is a policy vacuum, something must fill it, and it must be the inquiry. I do not believe that the inquiry should itself be the policy-making exercise. In referring to Terminal 5 I should declare an interest as a member of Richmond-upon-Thames Council that is part of the consortium LA T5, referred to by my noble friend. I have considerable personal interests in the outcome of the inquiry.
The Secretary of State said in 1993 (before he achieved that position) that the Government's aviation policy such as it exists was absurd. That is the point—such as it exists. We are in an odd situation. Policy has been made previously by an inquiry. Previous inquiries are now being disregarded in the current inquiry. In reporting on Terminal 4 the inspector said that it should be the last major expansion of Heathrow. Indeed, he approved Terminal 4 on the basis that in part there was a limit on flight numbers. That limit has been abandoned.
I am unable to resist the opportunity provided by today's debate to ask a question of the Minister, of which I have given her notice, in connection with the Terminal 5 inquiry. On 8th June The Observer carried a report which indicated that a senior government source had stated that Terminal 5 was to be approved. I shall be grateful if the Minister can refute that report on the record and confirm to your Lordships that the Government will not make up their mind until the inspector has reported and that they will have full regard to that report.
Planning is essentially a holistic exercise. I agree with the noble Lord, Lord Ponsonby, that development plans should assist and reflect the co-ordination of transport, housing, leisure, employment and so forth. There is real concern about the development plan process itself taking too long. I am told that the previous government's consultation paper on that issue attracted 350 responses—again, mixed.
I return to the issue of democracy. Local authorities have the main responsibility and are accountable. They are the bodies which create local plans. That process, too, causes problems for interested parties. Public local inquiries and indeed examinations in public in the case of structure plans impose their own strains. I have become aware of the real dangers of the outcome of those inquiries being skewed by the resources that large landowners and prospective developers can bring to the

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system as against local people who have valid points to make. There is scope for such inquiries to be much less adversarial.
We need to see the policy context set properly at each level, not in a Napoleonic way, as described by the noble Baroness. I am very much an enthusiast for involving local communities in the plan-making process. I am also aware of the tendency on the part of planners to want to impose plans neatly in a hierarchy at every level, rather ignoring the fact that life is not like that, and we are not starting from here. Nevertheless we have not yet achieved the setting of a policy context for what should be plan-led development. We still have an uneasy alliance with a presumption in favour of development because the plans are not adequate, and, in particular, take so long to make that they are often out of date by the time they come to be applied.
Having listened to the comments made this evening, it occurs to me that there must be scope, not necessarily for an enormous reorganisation of the system but for piloting some new procedures and good ideas which have arisen as a result of the discussion provoked by the latest consultation paper, and even more by people's frustration.
I wonder whether it might be possible to take some of those ideas forward in a minimalist way to see how they run rather than switch the whole system and then find that the new procedures do not work that well either. Let us not forget that the length of inquiries may be the result of the strength of opposition to an application. We should not agree to a new process which does not allow opposition to be expressed. Let us also remember the cardinal principles of openness, fairness, and impartiality.
7.53 p.m.
Lord Lucas: My Lords, I, too, am extremely grateful to my noble friend Lord Kinnoull for introducing the debate, which has produced an extraordinary succession of excellent speeches, full of thoughts and suggestions for our new government, to which I hope they will pay close attention. I hope that the Minister will be able to address at least a few of them, although I am sure that many will not be fitted in during the allocated time. I hope that she will not take up all the spare time that she now has, and will write to us all giving a more detailed reply to some of the suggestions that have been made.
I shall not take up a great deal of time. I must be the most ignorant person here when it comes to planning procedures. It is a key and complicated area of our democracy. It is one which will repay a good deal of study before any revisions are made to them. I am greatly attracted to the idea of piloting, as mentioned by the noble Baroness, Lady Hamwee. It is an idea which has worked well in other areas when difficult matters are being dealt with. I hope that it is something that the Minister will take into consideration.
I find myself, albeit I hope briefly, in a policy-free zone. So all that I shall attempt is to offer a few personal thoughts. One of the matters of which I am
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most proud during the 18 years in which we were in power was the way in which we were able to encourage people to take more responsibility for what was happening to them as a result of actions taken by the various arms of the bureaucracy. We may have run rather behind in reflecting them in our planning system. I should like to see much more active local involvement in producing local and regional plans.
What the noble Baroness, Lady Thomas, said about Schiphol was interesting in that regard. Consent to the development of Schiphol had, as it were, been agreed through whatever processes they have in Holland. They did not wait for each successive development to produce a new plan and a new controversy: it had been agreed how life should go; and then discussions could proceed to decide how to deal with the consequences of it. That is a much better way to involve people. If you can get their consent to local and regional plans, then many of the matters that people might wish to raise at a planning inquiry on a particular application would have been taken to have been dealt with already in consultation on the regional or local plan. That of course comes back to the problems raised by the noble Baroness, Lady Hamwee, about how long it takes to get the plans approved.
We could perhaps consider also the use of referendums in some circumstances. It strikes me that there are some planning inquiries where the democratic structures are already committed. Manchester City Airport is a project which is so strongly supported by the local authorities that local people may not have the access to the representation by their representatives that they should have. A consultative referendum again would be a way of producing a picture of the local attitude to the development which might shorten the inquiry, because it would be a substitute for a great many of the individual objections made by individual objectors and it would have much more power because it would be an expression of the will of the entire community and could not be dismissed as the will of just a few cranks.
Lastly, I support those who have emphasised the importance of cross-examination. It is key that individuals, organisations and others should have the right to cross-examine. No one, however august or important, should be able to get away with giving evidence that is not questioned. On some occasions that may lead to long inquiries. It might perhaps be said that T5 is running inordinately late. I agree. T4.30 has always been what I thought was right.
7.58 p.m.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Baroness Hayman): My Lords, the noble Earl, Lord Kinnoull, has given us the opportunity for a short but trenchant—if I may use the word that has been used before—debate on the planning inquiry system in this country. He asked a straightforward question:
"Whether the rules of public planning inquiries should be reviewed to balance the democratic rights of objectors against the inordinate length of certain inquiries".

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I am tempted to give a trenchant answer and reply simply, "Yes", to the noble Earl. But such a brief reply would be more than even the noble Lord, Lord Lucas, was looking for from me. It would not give me the opportunity to respond to some of the important issues that have been raised this evening. I shall try to deal with the main themes, and write to noble Lords who have taken part in the debate on specific issues if I am unable to cover them.
It is very much an issue of getting the balance right, as the noble Earl points out in his Question. The noble Lord, Lord Chorley, said that we were not Napoleonic yet. I endorse the view that we should not be Napoleonic in the future either. There are serious democratic issues about the rights of objectors to be heard properly and fairly and we should not be willing to sacrifice those rights.
I turn, first, to a recurring theme of tonight's debate; that of major infrastructure projects and how we deal with them through the planning process. The Heathrow Terminal 5 public inquiry is an obvious and controversial current example. It might be helpful if at this point I respond to the specific issue raised by the noble Baroness, Lady Hamwee—I am grateful to her for giving me advance notice of it—about the press reports on the Government's attitude to the inquiry. For the record, I can assure the noble Baroness that the Government have reached no conclusions on the outcome of this application. We will not take a decision on whether planning permission should be granted until the inspector's report has been received and carefully considered. Clearly, it is impossible for me to say at this stage what the outcome will be. That was made clear in another place in an Answer given by my noble friend the Minister for Transport in London.
A major issue connected with infrastructure projects causes great concern throughout the House and elsewhere. It relates to the concern which arises from the delays associated with coming to conclusions about the projects. That concern was reflected in our manifesto commitment to take urgent action to look at the issue. It must be tackled in the context that has emerged from tonight's debate; that of getting the policy structure right. Speeding up the delivery of major infrastructure projects—for instance, road schemes, rail links, airport developments, reservoirs and large waste incinerators—is a priority for this Government. Such projects are often of national significance and can have major effects in terms of regeneration and regional developments. It is therefore clear that one of the first requirements is to have in place an explicit strategic policy framework against which to assess the need for such projects. At present, we have discussion at inquiries and, as was pointed out, sometimes sequential discussion of the same issue at sequential inquiries. When such issues are of national policy and principle, that is an inevitable recipe for delay.
We hope to bring forward later this year proposals for improvements in both the practice and procedures in this area for consultation and to be innovative in
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the measures that we are prepared to examine for speeding up the system overall. I would not like to prejudge the content of the proposals that we would bring forward, but it is interesting that next week we will have a debate in this House under the Transport and Works Act 1990 setting out the policy framework around the order for the station at Stratford for the Channel Tunnel Rail Link. After a general decision is taken about the strategic policy issue through both Houses of Parliament, it will be possible to have an appropriate local planning inquiry at which the rights of objectors are safeguarded, but where we have put clearly on the record the national policy in this area. It will be interesting to see whether we can build on such examples.
As noble Lords have made clear tonight, the occasional notorious, long inquiry must be seen in perspective. In each of the past five years, between 89 per cent. and 94 per cent. of inquiry appeals were dealt with by inquiries lasting no more than a week and in many cases only one day. However, although those are numerically few, the major infrastructure projects frequently have a wide significance and potential impact. Furthermore, in such inquiries, as regards the issue of costs, referred to by the noble Baroness, Lady Thomas, it can be difficult for the individual voice to be heard as a result of the structure, the legal representation and resources that are available. There is no doubt that we consider it essential to find a better way of dealing with such projects.
As regards the call-in powers of the Secretary of State, it is the Government's policy to interfere as little as possible in the day-to-day running of the planning system by local authorities. My right honourable friend the Deputy Prime Minister intends to be very selective about calling in applications for his determination and will in general take that step only when planning issues of more than local importance are involved. As with previous governments, we will use the power only rarely, but it exists for situations when it is appropriate that it should be invoked, as the noble Lord, Lord Chorley, will recognise.
The major infrastructure projects that have been mentioned tonight need a national policy framework, which can be established only at that level. However, the Government believe that there is greater scope for decentralising the consideration of planning policy to the regional level and for applying the same kind of principles. We have indicated our intention to set up regional chambers, building on the arrangements already established by local authorities, as a better means of co-ordinating land use, transport and other planning issues at the regional level. I say to my noble friend Lord Ponsonby that in the consultation process on the Greater London Authority we shall examine how we can provide a London framework for policy making into which local authorities can feed their plans and from which they can take a policy direction. I hope that that will be a helpful development.

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The noble Baronesses, Lady David and Lady Hamwee, were interested in what action the Government propose to take following the department's publication of consultation papers on proposals to speed up the planning appeal system and the process for adopting development plans. Development plans are prepared by local authorities and are important because they can provide the basis for planning applications which are coming forward. If we can get those district-wide development plans in place there will be more certainty as regards policy, speedier decisions and, it is hoped, fewer appeals. Unfortunately, it has taken a long time to get those plans in place. Only marginally over 40 per cent. were adopted by the end of last year, which is five years after the present arrangements were introduced.
A review was undertaken last year to identify the reasons for delay and the scope for amending the procedures. A report of the review and a consultation paper were published in January, alongside that on the planning appeal system. The report indicated that, while there were some exceptions, the inquiry stage of the local planning process and the time taken by the inspector in reporting were not the main causes of delay. A number of options for change were put forward, including the possibility of statutory time limits for all or part of the development plan process; changes to procedure to encourage the resolution of objections through negotiation ahead of the inquiry, an issue that was raised tonight; the adoption of procedural rules for inquiries to give inspectors additional powers to control proceedings, which was another area of concern; and simplifying adoption procedures following the inquiry. All those matters were raised today and it is interesting to look at the possibility of some pilot schemes in some of these processes to see whether they will be effective.
Most of the proposals have received substantial support, but, as regards balance, two of the proposals—those of restricting the right of objectors to be heard at a public inquiry and making the report of an inspector binding on a local authority—were widely opposed on the grounds of natural justice and democratic accountability.
The noble Earl who introduced the debate was very anxious to safeguard those rights of democratic accountability. That is a very clear illustration of the sort of balance that he was calling for and that has been widely recognised as necessary. The planning system will work only if local people have ownership of that plan and confidence in it as a framework for decisions which actually affect their lives. We propose to publish draft revisions to guidance and regulations on those matters in the autumn.
On planning appeals, the consultation paper contains a number of suggestions designed to improve and to speed up the handling and determination of planning appeals. Those include changes to the way in which the procedural method is chosen; reducing the scope for extended exchanges of statements in written representation cases; the introduction of a non-statutory
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mediation service to resolve disputes and changes to the costs regime.
The issue of mediation was raised by my noble friend Lady David and the noble Baroness, Lady Hamwee. There was general support for the notion in the responses to the consultation. Alternative dispute resolution is a field which is growing in its application in a variety of areas and we should look to see whether it has an application within the planning framework.
Two changes have been suggested to reduce the length and scope of inquiries. The first applies to called-in planning applications and will enable the Secretary of State to call in a proposal in order to examine not the whole proposal but a particular aspect of the development. The noble Baroness, Lady Thomas, referred to that. In such situations, the local planning authority and developer would prepare an agreed joint statement of case on those aspects of the proposed development not in contention, thus leaving the inquiry to deal only with the contentious issues.
The second proposal is to extend the existing requirement in called-in cases for the Secretary of State to specify those matters which concern him particularly to planning appeals which are recovered for ministerial decision. That should encourage the parties to focus more closely on the essential issues.
The public reaction to all these proposals has been extremely positive, although some reservations have been expressed. A number of the proposals are capable of being implemented either administratively or through secondary legislation but, where necessary, we do not rule out the possibility of primary legislation if and when the opportunity arises.
As well as speeding up the appeals process, we believe that it is important to simplify the various procedures. That was an area referred to by the noble Lord, Lord Chorley. The department has already issued detailed guidance in Circular 15/96 on how that can be achieved without compromising the quality of decision or the ability of parties to have a fair hearing. It includes the more widespread use of informal hearings, which I believe will be welcomed by the House this evening, and, where practical, to have tighter control over cross-examination.
The implications of delay caused by lengthy inquiries—and indeed, by the planning system as a whole—are extremely far reaching as many noble Lords have said this evening. There are the economic costs, which are substantial, the resource costs for those involved, and environmental considerations. There is also the human element: the uncertainty caused by delays can be as worrying for third party objectors as it can be for developers. We take very seriously the need to speed up our planning system while protecting people's legitimate rights to be heard.
There is no doubt that some improvements have been made over the years but that has been achieved largely through amendments to the procedural rules and through guidance. But I fear that we have failed to address the fundamental problems about the policy

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context in which those decisions are taken. That has led to the problems caused by long inquiries for large-scale, controversial development proposals which really should be determined in a different forum.
The Government believe that more can and must be done. We want to ensure the delivery of sound planning decisions much more swiftly than hitherto. At the same time, we must protect the ability of interested parties to put their views fully and fairly. We are determined to make the planning system as efficient and effective as possible. We recognise the problems—delay, uncertainty, blight and costs. Therefore, we are looking at the operation of the planning system at every level; at how national policy is formulated; at regional and local level as well. It was mentioned this evening that there is a need for a holistic approach. I hope that it is possible to have a more integrated consideration of the environmental and transport issues. We believe that the creation of the new department of which I am a member and which brings together the regional interests of regeneration, the environmental interests which it is so important that we take on board, and the transport issues, will help us to consider those issues in the round rather than sequentially.
As I have said, we are examining closely how to improve the way in which major infrastructure projects of national importance are considered and implemented. We must achieve the right balance so that we can deliver on developments; we can ensure that the environmental considerations—responsibility for the next generation—play a central part in policy-making; and that the democratic rights of citizens are taken fully into account.
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We believe that, by setting out strategies and policies which are firm and unequivocal, we can set the scene for swifter and more focused inquiries. I believe that that would be widely welcomed throughout the House.

Bodmin Moor Commons Bill [H.L.] King's College London Bill [H.L.]
The Chairman of Committees acquainted the House that, pursuant to the resolution of this day, the Bills had been deposited in the Office of the Clerk of the Parliaments, together with the declarations of the agents; the Bills were presented, read a first time, passed through all their remaining stages pro forma and sent to the Commons.
Imperial College Bill
The Bill was brought from the Commons and, the declaration of the agent having been deposited in the Office of the Clerk of the Parliaments pursuant to the resolution of this day, the Bill was read a first time pro forma and referred to the Examiners.

Southampton International Boat Show Bill
The Bill was brought from the Commons and, the declaration of the agent having been deposited in the Office of the Clerk of the Parliaments pursuant to the resolution of this day, the Bill was read a first time, read a second time pro forma and committed to an Unopposed Bill Committee.
House adjourned at sixteen minutes past eight o'clock.