Lords Sitting of 1 April 1998

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

Benefit Payments: Computer Project
Lord Campbell of Croyasked Her Majesty's Government:
When they expect the work on the computer project intended to distribute social security benefits by automation to be completed.
Lord Haskel: My Lords, the computer project to automate benefit payments at post offices is scheduled for completion by the end of the year 2000.
Lord Campbell of Croy: My Lords, I am grateful to the noble Lord for that reply. Is one of the aims of this project to make the social security system less vulnerable to fraud? As this is a very expensive project, can the noble Lord say whether the estimates have been exceeded and, if so, from where the extra money needed will come?
Lord Haskel: My Lords, this is certainly a system which is designed to combat fraud. Unlike order books and giro cheques, the payment card which will be part of the system has no intrinsic value and so carries little personal information. The system will be more convenient. Any changes to the benefit card will be made automatically on the system.
This is a huge project, which is under constant discussion, and Ministers meet to consider it from time to time. I am not in a position to say what the situation is regarding the budget.
Lord Waddington: My Lords, can the Minister help me as to how a computer can make a decision as opposed to carrying out the instructions of those who program it?
Lord Haskel: My Lords, the system is not designed to make decisions; it is designed to automate payments and thereby eliminate fraud at the point of encashment.
Lord Gisborough: My Lords, can the Minister say how it will be possible to stop people applying for, and obtaining, more than one card in different parts of the country?
Lord Haskel: My Lords, there are systems in place to combat that kind of fraud. The system itself will help to check that there is no duplication and therefore people will not be able to have more than one card.
Lord Higgins: My Lords, in view of the Government's proposals to transfer responsibilities for a
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number of social security matters to the Inland Revenue and of the increasing tendency of computers to talk to one another, can the noble Lord give a clear assurance that the normal rules with regard to confidential information on individuals not being transferred from one department to another—for example, from the Inland Revenue to the Department of Social Security—will be strictly observed and that there will be no question of any leakage from one department to another?
Lord Haskel: My Lords, the announcement that that transfer would take place was made recently in the Budget Statement. Decisions on that matter have not yet been made and I can therefore give no assurance at this stage.
Lord Addington: My Lords, can the Minister give an absolute assurance that all new computer systems being put in place will be totally immune to the effects of the millennium bug?
Lord Haskel: My Lords, yes, I can give that assurance.
Lord Campbell of Croy: My Lords, will post offices all over the country take part in this project once it is completed, and will they therefore have much more to do? Will that relieve the burden on local social security offices if they have less to do in future?
Lord Haskel: My Lords, the system is designed for all post offices to be wired-up and automated. Post offices in all parts of the country will be on the system. I shall write to the noble Lord about how the work of local social security offices will be affected.

Reserve Forces: Future
2.41 p.m.
Lord Mottistone: My Lords, on behalf of my noble friend Lord Milverton, who is unable to be here today, I beg leave to ask the Question standing in his name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether the TA and other reserves will be protected against excessive reductions in size and support capacity.
The Minister of State, Ministry of Defence (Lord Gilbert): My Lords, the future size and shape of the Reserve Forces is being considered as part of the Strategic Defence Review, together with all other elements of our force structure.
Lord Mottistone: My Lords, in view of the fact that the Territorial Army, in particular, is such a strong recruiting base for the Regular Army—I understand that 10 per cent. of Army personnel are recruited from the

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Territorial Army—will the Government bear carefully in mind the need not to reduce the numbers of the Territorial Army more than is absolutely necessary?
Lord Gilbert: My Lords, I can assure the noble Lord that no final decisions have yet been taken in the course of the Strategic Defence Review in respect of the total size of the Territorial Army. In that review we are taking into account precisely the considerations that the noble Lord has offered us.
Lord Grenfell: My Lords, does my noble friend the Minister agree that producing 10 per cent. of the totality of the British troops in Bosnia from the Territorial reserves demonstrates how important a role they play? Can we be sure that, since they have a vital role to play, particularly in support and peacekeeping operations, every effort will be made to maintain their strength?
Lord Gilbert: My Lords, I have no difficulty in accepting the first part of my noble friend's question. We are all very proud of the role of the Territorial Army in Bosnia. As to future force strengths, I am afraid that I have to crave your Lordships' patience for just a little while.
Lord Walton of Detchant: My Lords, I have to declare an interest as more than 30 years ago I commanded the No. 1 Northern General Hospital TA. In view of the fact that the present establishment of the regular defence medical services is so far below what it ought to be, does the Minister accept the crucial importance of maintaining the medical strength of the reserve army and the other support services which have played such an important role in the Gulf and in Bosnia?
Lord Gilbert: My Lords, I am delighted to give the noble Lord the assurance that we are interested in sustaining the defence capabilities not only of the reserve forces but also of the regular forces, which, very unfortunately, have been allowed to run down drastically over the past few years.
Lord Monro of Langholm: My Lords, does the Minister agree that since the passing of the Reserve Forces Act our reserve forces have been very much complementary to our front-line troops and therefore should be reduced only after very careful consideration? Secondly, does he agree that the reserves and the TAVRs are immensely important in maintaining the link between the forces and the community throughout the country, and they, again, should not be reduced without very careful thought?
Lord Gilbert: My Lords, I am very happy to accept both suggestions of the noble Lord.
Lord Callaghan of Cardiff: My Lords, will my noble friend convey to the Secretary of State, who is a Scotsman, that in Wales these proposals will be scrutinised very closely in view of the fact that there are
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only two battalions at the moment—one in the north and one in the south—and that if one were removed it would create a great deal of disturbance for the Government?
Lord Gilbert: My Lords, I view my noble friend's admonitions with great trepidation. I will of course convey his comments and his compliments to my right honourable friend the Secretary of State.
The Earl of Carlisle: My Lords, has the noble Lord read the letter that recently appeared in the London Times signed by the chairman of the Council of Territorial, Auxiliary and Volunteer Reserve Associations, General Sir Edward Jones, which sets out the problems that the Territorial Army will face if it is severely cut? If the Minister has not read that letter, will he assure the House that he will do so before he initials the Strategic Defence Review?
Lord Gilbert: My Lords, I do not normally read the correspondence columns of any newspaper because of the "nutcases" who normally write into the most respectable broadsheets. But, having said that, I did read the letter in the name of General Sir Edward Jones. It was a very serious letter. I also read the reply sent to him by the Chief of the Defence Staff. I hope that General Jones accepts that he has had a very thoughtful reply. As to the noble Earl's last question, it is not for me to initial Strategic Defence Reviews.
Lord Renton: My Lords, is my noble friend aware that in each of the two World Wars we would have been at a grave disadvantage if we had not had a large and well-trained Territorial Army? Is he further aware that in each of those wars we stood alone for several years without allies? Will the Government bear that in mind in planning for the future?
Lord Gilbert: My Lords, one will certainly take into account all historical precedents and the lessons we can learn from them. However, I have to say to your Lordships that the principal consideration we bear in mind when undertaking a defence review is not to look back to the past but to prepare ourselves with modern strategic forces for the future.
Lord Burnham: My Lords, it is unreasonable to expect the noble Lord the Minister to say anything meaningful at this time when the Strategic Defence Review has left the Ministry of Defence and is, as we understand, with the Treasury or possibly with the Cabinet. But will he ask his right honourable friends in the Treasury to bear in mind the major part that the Territorial Army plays in the social life as well as in the defence life of the country and the dangers which would be achieved by a very small cut in the budget compared with a very large cut in the Territorial Army?
Lord Gilbert: My Lords, I certainly take seriously the comments that the noble Lord makes about the social contribution of the Territorial Army to life in the country, particularly in certain small, outlying

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communities. Whether one can ever get a Treasury Minister interested in such considerations is another matter.
Lord Boardman: My Lords, does the noble Lord accept that for review purposes we should take into account not only the potential reserve power which the Territorial Army possesses but also its aid to the civil power when called on to provide it and the social benefits which come from membership of the Territorial Army?
Lord Gilbert: My Lords, I can assure the noble Lord that we are taking all those considerations into account.
Lord Trefgarne: My Lords, I declare an interest as vice-chairman of the Army Cadet Force. Is the noble Lord aware that a very large number of cadet forces have their premises within Territorial Army units? Any significant reduction therefore in TA headquarters units would have a disproportionately grave effect upon the cadet forces of our country.
Lord Gilbert: My Lords, the noble Lord makes an extremely important point. We are very seized of the interaction between the territorials and the Army Cadet Force. I can assure him that this is one of the points that has been specifically considered in the course of the Strategic Defence Review.
Lord Campbell of Alloway: My Lords, may I ask the noble Lord—
Noble Lords: No!
Lord Campbell of Alloway: No, I will not.
Noble Lords: Yes!
Lord Campbell of Alloway: My Lords, I had better declare an interest: over 50 years ago I was a senior subaltern on the supplementary reserve of officers. I am concerned about this matter. Can the noble Lord say that the views expressed on all sides of your Lordships' House will be seriously considered?
Lord Gilbert: My Lords, I hope that I have conveyed to your Lordships that we have considered all these points very seriously. As the noble Lord, Lord Burnham, was good enough to recognise, there is little definite that I can say at this moment. No representation has been made this afternoon which has not been considered seriously by Ministers.

Gypsy Sites: Police Operations
2.50 p.m.
Lord Aveburyasked Her Majesty's Government:
Whether they will consult police authorities about the advisability of formulating national guidelines for police operations on gypsy sites, with a view to
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ensuring that the use of police manpower is commensurate with the criminal activity likely to be uncovered.
The Parliamentary Under-Secretary of State, Home Office (Lord Williams of Mostyn): My Lords, decisions about what police resources to commit to any particular police operation are the responsibility of individual chief police officers and not something on which it would be appropriate for national guidelines to be issued. Chief officers have the full support of the Government in dealing firmly with criminal activity on gypsy sites or anywhere else.
Lord Avebury: My Lords, has the noble Lord studied reports of an incident that happened on 7th October last in north Oxfordshire when over 200 police officers raided a gypsy site, bashed down the doors, separated parents from their children, prevented children from going to school and people from visiting the doctor? Is the noble Lord aware that the police spent 11 hours on the site with minimal results in terms of the detection of criminal activity? Is the Minister further aware that this kind of practice is reported from counties as far afield as Kent, Northamptonshire and Somerset? Is he also aware that the police seem to behave towards gypsies in a manner which they would not adopt if they were dealing with the settled population? Does the Minister not believe that some kind of guidelines are necessary to ensure that, when police conduct these massive operations, the results in terms of the detection of criminal activity are commensurate with the police resources employed?
Lord Williams of Mostyn: My Lords, Home Office guidance has been issued to police on the need for welfare checks when they use their power to remove trespassers. Police may wish to take into account the personal circumstances of the trespassers, the presence of elderly persons, invalids, pregnant women, children and others whose well-being may be jeopardised by a precipitate move. I have no evidence that the police are disregarding that.
Lord Dean of Beswick: My Lords, is the Minister aware that there is another side to the coin? Some of us have had experience of this matter in the areas that we represented, both on local authorities and in another place. Is the Minister aware that bands of these people—sometimes droves of them—settle in an area and completely blight it? From my own personal experience I know that they have terrorised the people living in such areas. Is he further aware that one of the complaints has been that the police have not been active enough in those cases?
Lord Williams of Mostyn: My Lords, I have heard complaints of that sort. It is perfectly plain that gypsies are entitled to even-handed, equal treatment under the law, and no more than that.
Lord Naseby: My Lords, instead of worrying too much about complaints about the police implementing

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the existing law, is not the real problem that the Government should be addressing the unsatisfactory nature of the law as it exists at the moment? Can the Minister give us an assurance that that will be looked at as a matter of some urgency?
Lord Williams of Mostyn: My Lords, obviously we are keen to ensure that the law in this area is sensible and effective. There are no plans at present to change the law. We believe that the police have ample and sufficient powers, subject to the individual operational discretion of the chief constable. Of course, we keep this matter under review.
Baroness Ludford: My Lords, does the Minister agree that in discussing matters such as this we need to be very careful to avoid pejorative language and stereotyping which may inflame prejudice? Even if there is a difficult problem to be dealt with, does the Minister agree that it is important not to use unpleasant language?
Lord Williams of Mostyn: My Lords, I thought that I had made that perfectly plain. Our stance is that gypsies, like anyone in this country, are entitled to equal treatment under the law. They are entitled to no special favour: they are equally entitled to no particular detriment. I for one have used no inflammatory language about any group in our country. I realise that the noble Baroness was not imputing it to me. I deprecate the use of prejudicial language against any section of our community.
Lord Monkswell: My Lords, the Minister referred to trespassers. Can he give the House an assurance that the Government are seeking to ensure that in every area of the country there are sites where gypsies can park legitimately?
Lord Williams of Mostyn: My Lords, any gypsy community, in appropriate circumstances, can apply for the appropriate planning permission. Local authorities already have discretionary powers to provide additional caravan sites for gypsies. The guidance from the DETR advises local authorities to consider providing emergency stopping places for gypsies visiting their areas—as they do on occasions—for short periods.
Lord Calverley: My Lords, perhaps I may declare an interest in that I have been a police officer who has visited gypsy sites in the early hours of the morning. The gypsies should be referred to as "itinerant travellers". They have not always shown total co-operation. Their dogs are trained, too. How does the Minister define police manpower commensurate with the criminal activity that is likely to be uncovered?
Lord Williams of Mostyn: My Lords, with great respect, that question is wholly incapable of precise answer. Under our system an officer of the rank of chief constable is given, rightly in my view, operational discretion. He knows the local conditions, what police
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officers he has under his control, what other problems there are and what is the local public view. He then comes to a reasoned conclusion. That is as it should be.
Lord Burnham: My Lords, the noble Lord rightly says that gypsies should receive equal treatment with anybody else. Therefore, is it the case that he is prepared to accept that other sections of the public may be permitted to cause the filth, damage and vandalism that the majority of people on these gypsy sites cause at present?
Lord Williams of Mostyn: My Lords, I do not accept that the majority of gypsies are vandals, filthy or criminal. If they commit criminal offences or civil trespass, they are liable to be dealt with under the law, as is anyone else. I return to what the noble Baroness said. Sometimes it is better to act on evidence, however disagreeable that may be, rather than prejudice.
Lord Avebury: My Lords, is the Minister aware that on this particular occasion I was talking about criminal activity and not trespass? What concerns me is the evidence which exists that very large numbers of police officers are being employed in a trawl such as the one I described in north Oxfordshire, with a view to uncovering criminal activity which, in the event, is proved not to exist. Is the Minister aware that in north Oxfordshire they are developing guidelines for these operations? Does he agree that it would be better if it were done on a national scale than for each county in England and Wales to reinvent its own wheel?
Lord Williams of Mostyn: My Lords, there is no question of each county in England and Wales reinventing the wheel. These are matters for the operational discretion of chief constables. That is the system under which we operate. We do not have a national police force in this country. If the noble Lord has any evidence of police malpractice, he ought to report it fully and in detail to the chief constable concerned and the Police Complaints Authority.

Digital Satellite and Terrestrial Television
2.58 p.m.
Lord Razzallasked Her Majesty's Government:
What steps they are taking to ensure the compatibility of decoder technology for digital satellite and terrestrial television.
Lord McIntosh of Haringey: My Lords, the design of the receivers of broadcasting services is a matter for the manufacturers and broadcasters operating on those platforms, subject to the relevant regulations and licence conditions which apply. The application of British Digital Broadcasting for digital terrestrial multiplex licences contained a number of commitments to deliver

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interoperability between digital terrestrial and satellite services. The licences granted to BDB last year require it to meet those commitments.
Lord Razzall: My Lords, I thank the Minister for his Answer. I recognise the complex nature of these issues, but does he accept, first, that the Government have a significant interest in ensuring that the analogue switch-off takes place as quickly as possible in the next millennium; and, secondly, that they have an interest in ensuring that the "box war" over digital TV which is likely to occur between BSkyB for the digital satellite providers and BDB for the digital terrestrial suppliers will not be damaging to the Government's aim? Will the Minister agree that this is a major issue and that the Government should ensure that there is interoperability between the two systems? Most particularly, in the light of the events of the past few days, will the Minister confirm that, if the Prime Minister has a telephone relationship with Mr. Rupert Murdoch which enables him to discuss the question of Italian TV, he could use that relationship to ensure that this problem is sorted out, and quickly?
Lord McIntosh of Haringey: My Lords, I am sure that the House will agree with me when I refuse to answer the noble Lord's fourth and last question. On the matter of analogue switch-off, of course we have an interest in the switch-off not taking place too late, but we must also have regard to those households with an analogue television who cannot afford to change to digital. We must bear that point in mind when we consider what decision to take. Of course the Government have an interest in interoperability, but so do the manufacturers and the broadcasters. It would be thoroughly undesirable for anybody in this business if there were to be a set-top "box war" of the kind which the noble Lord implied was likely. I do not think that it is likely because it is not in anybody's interests for that to happen.

Business of the House: Amendments
3 p.m.
The Lord Privy Seal (Lord Richard): My Lords, I rise following the exchanges that took place in the House last night during which the noble Lord, Lord Henley, questioned my right as Leader of the House to offer advice to Peers about whether or not amendments should be moved. The noble Lord rightly indicated that it is for the House to decide whether an amendment is within the scope of a Bill.
I am sure that many of your Lordships will be aware that when the Clerks in the Public Bill Office offer advice to a noble Lord that an amendment falls outside the normal rules of your Lordships' House and the noble Lord nevertheless insists, as is his right, on that amendment staying on the Order Paper against that advice, the Clerk of the Parliaments draws the correspondence to the attention of the Leader of the House. There is nothing new about that. It has happened for a very long time. The Leader of the House often
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discusses the advice of the Clerks with the noble Lord concerned. In the interests of self-regulation and good order in the House, it is normal for the Leader to have such discussions. I should add that conveying the advice of the Clerks to noble Lords is a duty which the Leader of the House is expected to perform. He does not act on his own initiative. He acts as the vehicle for conveying the advice and discussing it with the Peers in question. If necessary, he can convey that advice to the House on the Floor of the House.
I am moved to reply today to the question asked in the House yesterday by the noble Lord, Lord Henley, for two reasons. First, the advice to which the noble Lord referred was not, as was suggested then, about the relevance of amendments, but about the rule in your Lordships' House that an issue which has been fully debated or decided at an earlier stage should not be reopened by amendment at Third Reading. Secondly, I am sure that the House will expect me to put the record straight in explaining, as I have, why I acted in that way.
The House might like to know that after correspondence with the noble Lords, Lord Hylton and Lord Renton, to whom the noble Lord, Lord Henley, yesterday referred, I decided that it would not be necessary for me to intervene on the Floor of the House when the noble Lords moved their amendments yesterday. Perhaps I may add—I thank him for it—that I have today received a personal letter from the noble Lord, Lord Henley, offering me his apologies.
Viscount Cranborne: My Lords, the whole House will be grateful to the noble Lord the Leader of the House for his courtesy in laying to rest the misunderstanding that occurred last night. The occasion of his doing so enables me to re-emphasise the importance that this side of the House attaches to the rule which the Leader enunciated this afternoon, which is that we rely on the Leader for guidance in matters governing the control of business and the proper observance of our procedures in this House. I should like once again to take this opportunity to emphasise how grateful we are to the noble Lord for the way in which he carries out those duties and our complete acceptance of the ruling that he has given us this afternoon.
Lord Renton: My Lords, having been personally involved in one of the decisions which the Leader of the House had to take yesterday, perhaps I may say how grateful I am to him for his decision with regard to my amendment, which enabled a 40-minute debate to take place on a matter affecting 700 years of our history. It was a debate in which noble Lords who hold views on both sides of the argument were able to express those views fully for the first time. I am grateful to the noble Lord for the decision that he took.
The Viscount of Falkland: My Lords, we on these Benches thank the noble Lord the Leader of the House for his clear exposition of the position and his clarification of the points involved. It seems to us that there was no serious breach of procedure or serious quarrel among your Lordships. What happened seems

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largely to have been an offshoot of the groupings system. Normally in such a case, the amendment would have been withdrawn, but in this case there was some difficulty in detaching it from the grouping. That problem arises from time to time. We are most grateful to the noble Lord the Leader of the House for making the position clear.
Lord Hylton: My Lords, since my name has been mentioned, perhaps I may say that I am fully satisfied with the statement made by the noble Lord the Leader of the House.

Tyne Tunnels Bill
3.5 p.m.
Read a third time, and passed.

Business of the House: Debates this Day
Lord Richard: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the debate on the Motion in the name of the Viscount of Oxfuird set down for today shall be limited to three-and-a-half hours and that in the name of the Lord Campbell of Croy to one-and-a-half hours.—(Lord Richard.)
On Question, Motion agreed to.

Export Sales
3.6 p.m.
The Viscount of Oxfuirdrose to call attention to the importance of export sales to the economy of, and employment in, the United Kingdom; and to move for Papers.
The noble Viscount said: My Lords, I very much appreciate the opportunity that I have been allowed this afternoon to introduce a debate on export selling, which is something with which I have been involved for most of my working life.
This afternoon we are privileged to hear the maiden speeches of two noble Lords whose backgrounds seem almost to have been sculptured for this debate. We shall hear from my noble friend Lord Hunt of Wirral, whose experience as Parliamentary Private Secretary to the Secretary of State for Trade during the early years of the last government, whose time as Secretary of State for Wales—an area of great inward investment—and whose position as Secretary of State for Employment must equip him well for the task ahead. His experience will be most welcome in your Lordships' House.
We shall hear next the maiden speech of the noble Lord, Lord Simpson of Dunkeld. In the noble Lord this House has a man with the greatest experience of manufacturing industry. His career is an inspiring one indeed, having been appointed to the most senior
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positions and leading such companies as Rover Group, ICI, Pilkington and GEC. Such experience and involvement with industry will be of great benefit to your Lordships' House over the coming years. We await with great interest the contributions of both noble Lords.
In a variety of guises, I have spent most of my career promoting the export sale of British manufactured goods throughout the world. It is a subject that we have not debated in any depth since July 1995. I am a committed exporter. Even today—here I must declare an interest—I regularly visit Korea and the Far East in my role as a non-executive director of a managed investment fund.
In considering the importance of export selling, we should also bear in mind the role that it plays in stimulating employment and all that that means for the wellbeing of our economy. Today, one job in three in the United Kingdom depends on international trade which in itself is very significant. Because of our long history as a trading nation, perhaps that is something that we take for granted. I shall concentrate my remarks on export sales and employment in the manufacturing sector, where my own expertise lies. In doing so, I acknowledge the great importance of trade and employment in the service sector which, in trading terms, has achieved a surplus every year since 1966 and indeed it achieved a record surplus of £7·1 billion in 1996.
In the manufacturing sector, export sales have been the main driver for growth during the 1990s and have helped to bolster a relatively modest domestic demand and hence sustain and increase employment in that sector. Manufacturers depend heavily on export selling, with over one-third of manufacturing output going to export markets. In some sectors, for example electrical and electronic engineering, over 90 per cent. of output is exported. In seeking to highlight the importance of exporting, I hope that I shall not be too controversial if I extol the virtues of global free trade and highlight the contribution that the United Kingdom has made towards achieving that. I believe it is no accident of history that, broadly speaking, the English language and our legal and fiscal systems have been adopted by many of the major trading nations of the world.
I give a few important numbers. The UK's exports of goods and services to the rest of the world in 1997 accounted for over £233 billion compared with only £1·4 billion at current prices in 1946. We must not forget that at the height of our trading influence in the middle of the 19th century, the United Kingdom was responsible for over half the world's trade. One of my purposes in initiating this debate this afternoon is to seek to create an environment that allows us to move back in that general direction. We must not forget that the United Kingdom is still the world's fifth largest trading nation. It exports more per capita than either the United States or Japan, and for at least the past 10 years the UK has stabilised its share of world trade for the first time in over 100 years.
Very major changes have occurred in the pattern of the United Kingdom's export trade in the past 40 years. In 1972, the year immediately prior to our entry into what was then called the Common Market, the current

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15 Members of the European Union accounted for about 30 per cent. of the UK's exports and imports. Now it is over 50 per cent. It is surprising that Japan still accounts for under 5 per cent. of both our imports and exports. It is clear that any debate on exports must consider the European dimension. We are striving to create a single market in Europe that puts an entirely different complexion on the way in which we have traditionally viewed our export numbers.
We know that overall the exports of goods and services represent slightly under 30 per cent. of our gross national product, of which over half goes to the other Members of the European Union. Trading within Europe between partners is a very significant factor for all member states. That makes a big difference when we view the same numbers from the perspective of a single European trading bloc. Looking at the numbers in that way, only 8 per cent. of the gross national product of the European Union is exported outside the Union.
I suspect that some noble Lords will find these figures somewhat reassuring; and perhaps I do. However, one wonders whether a return to the womb of a larger European trading bloc is all that we should strive for. Is there not a global dimension that we should also consider'? The fact is that Europe, including the United Kingdom, accounts for only about one-quarter of the world's trade. As a bloc our trade has been declining recently. There is no single reason for that decline.
I am sure that many noble Lords will wish to present other perspectives later in the debate. My view is that throughout many parts of the European Union we appear to have lost a belief in the work ethic and the need to match our own productivity with world class productivity benchmarks. In short, there is a growing tendency in Europe to price ourselves out of the market. Here in the United Kingdom that aspect of what may be called the European disease is less evident, thanks, in part, to the changes in attitude brought about by the Conservative Government in the period 1979 to 1997.
I believe that the European Union stands at a cross-roads. Are we to regress into the fortress of Europe—protectionist zone as it may be—or are we to become full players in the march towards global free trade? In this European debate we in the United Kingdom with our tradition of world trading—thinking back to Drake and Raleigh, perhaps global piracy—have a pivotal role to play, and it is one from which our future will be derived. I congratulate Her Majesty's Government on the positive steps that they have taken to restore the United Kingdom's relationship with the rest of the European Union. I also congratulate them on the positive steps that they have taken to maintain our relationship with the United States of America. The United States is still the most positive force for world peace and stability around today. It is also a very significant trading partner and accounts for about £40 billion worth of exported goods and services or 18 per cent. of our total exports. We must not forget to look west as well as east in our quest for increased export sales.
There is a large consensus in this country which supports a free trade area based on the European Union, with or without a single currency (to which subject
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I shall come later), but there is no consensus that seeks to cut us off from a long-term vision of a whole world with no trade barriers and hence full global free trading. It would be a tragedy if the present generation of Euro-enthusiasts condemned us to a future as a marginal player in a regional free trade zone and a regional zone whose influence in world terms appeared to he contracting.
Any debate on export selling must consider the important subject of currency and trading currency fluctuations. I am sure that other noble Lords will wish to raise the significant problems that the present strength of sterling is causing for our exporters. I remind your Lordships of only one point. It can take literally decades to establish a sound trading relationship with an export partner, but that relationship can be destroyed very quickly if sterling remains at an uncompetitively high level.
In dealing with currency, we in Europe have been concerned mainly for some time with the debate about a single European currency. It is a subject of great importance. As an exporter, I positively support any steps that make the job easier, and a European single currency when trading within Europe would certainly be extremely useful. But—this is a big "but"—at what cost? I know that each noble Lord appreciates that we, in the UK, are more than just a European trading nation, we are an established world player. With that in mind, perhaps I could be just a little controversial and suggest that, as an exporting nation, we should set our sights a little wider than just a European currency and aspire to a truly global currency.
Having floated that idea, the next question that one must ask is: from what starting point should a global currency be established? To start the debate, perhaps I could give an unequivocal answer: the answer is the US dollar. Why? Because, in my area of experience, in many corners of the world—eastern Europe, Russia, South America, the Caribbean, South East Asia and Africa—the US dollar is still the only truly universally accepted currency benchmark and a currency in which we exporters think.
As I have already said, I know that that is a controversial conclusion to draw. The political ramifications are, if that is possible, even more controversial than the political implications of EMU. For some noble Lords I suspect that a global currency based on the dollar may be too controversial a step to contemplate. Perhaps I might suggest therefore that we strive to create a new global currency—a new global currency unit. We might call it the "global". To my ears, global has a far warmer ring than euro. Whatever the new currency may be called, I would draw to your Lordships' attention the possibility of some form of global currency in the interests of freer trading and a better world.
I am drawing my remarks to a conclusion. I should like to finish on two practical points. What can exporters and government do to help increase UK share of world trade? There are a number of positive ideas. I shall suggest but two.

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The first, research and development; the second, reduced bureaucracy. Dealing with the first—research and development—the links between innovation and trade are difficult to measure but, if we segment UK trade according to the R&D intensity of the underlying industries, we find that for the past three decades the R&D-intensive industries consistently experienced a trade surplus while all the rest were in deficit. There is certainly a small lesson there.
My second concluding point relates to bureaucracy. The Defence Manufacturers' Association has drawn to my attention the conclusions of a survey that it carried out in the middle of 1997 on the operation of the procedures for granting export licences. It found that major complaints crop up repeatedly associated with the very long delays in processing open individual export licences. It claims that the requirements imposed on companies with respect to end-user statements are over-bureaucratic and simply ludicrous. It further claims that that situation has worsened noticeably in recent months with desk officers rejecting end-user statements submitted by companies on seemingly farcical grounds. I have no direct personal experience of that problem, but it might be a matter into which the Minister could look.
Finally, today is the 165th anniversary of the Crown Agents—an organisation which has set the highest standards in exporting over so many years. I look forward eagerly to listening to the rest of our debate. I beg to move for Papers.
3.24 p.m.
Lord Simpson of Dunkeld: My Lords, it is with a great sense of privilege and an even deeper sense of trepidation that I rise to make my first contribution to the workings of this House. The combination of the history of this place and the truly great men and women who have spoken here provide the foundation for a very acute case of maiden speech anxiety syndrome.
Having said that, those feelings have been balanced by the warmth of the welcome afforded to me by my noble friends since my introduction to the House. Indeed, even when I have sought, through inexperience, to transgress the unwritten rules of the House—like trying to sit on the Bishops' Bench when the House was full—or even worse—trying to leave the Chamber when the Lord Chancellor was on his feet—the corrective process was administered not only with firmness but also fairness and great understanding. Perhaps there is a lesson here for industry.
My own background is, of course, one of a long-time industrialist, having spent a career spanning more than 30 years working in, and latterly running, some of the UK's most important manufacturing companies. During that time I have gained a deep understanding of the motor industry, the aerospace industry and the defence industry and have indirect experience of many others. The companies I have worked for, as my noble friend said, are all household names in this country and hold important positions in their respective global industries. They have all experienced good times and bad times and
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have all seen massive transformational change as they have sought to respond to the increasing challenges of today's globalised economy.
It is the knowledge and experience gained from involvement in those changes which I hope I can deploy to the benefit of this House. Sadly, the pressures of modern business are such that I may get less opportunity to do so than I—or indeed my Whips—would like.
The subject of today's debate is, of course, of great significance to anyone involved in manufacturing and industrial activity—and there can be no doubt that export sales are of paramount importance to the economic well being of this country and therefore to employment potential in the UK.
Against that basic premise I should like to make the following points. First, we live in a fast-changing and increasingly complex world. Exports used to arise from UK-owned companies making products in the UK with parts sourced from UK suppliers and selling them abroad. In today's global economy and in today's free trade environment, exports are quite often the result of foreign companies making products in the UK from parts sourced globally and then sold abroad. Indeed, as companies like GEC seek to compete in this new global environment they often have to create manufacturing capacity overseas, thereby not only reducing export flow but indeed in some cases creating an import flow. The point here is that in the new global environment simple fixes are unlikely to be the answer. The real issue is our ability to make the UK an attractive environment for manufacturing industry and the real challenge—to maximise value added in the UK from such global trade flows.
The second point I want to make is that export performance is an outcome—it is, if one likes, a result: a result which arises from achieving international competitiveness. I believe that that is what this debate should be about: how we as a nation can achieve genuine international competitiveness and thereby create the long-term platform for export success.
Clearly international competitiveness derives from a whole raft of issues. The status of technology leadership in this country; the existence of high level skills; our international marketing capability; the flexibility of our labour market; the state of our fiscal and regulatory environment; the efficiency of our education system; and, last but not least, the capability of our corporate management and its willingness to embrace best practice, all play a part in achieving competitive advantage. My second point, therefore, is that we need to concentrate on the causes of good export performance—for example, competitiveness—rather than the result.
My third point is that success in this field is all about mindset. It was Harold Macmillan who said, "Exporting is fun". I am sure that he was right, but it is also very hard work. However, with the right mindset, like the Scandinavian countries which have a very small home market but are hugely successful in world markets, great things can be achieved. Unfortunately, in this country we have developed a mindset which relates the possibility of export success to the relative value of sterling. This, in my view, is the wrong mindset.

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From his remarks yesterday, it would seem that the Chancellor and I share a common view on this issue. Of course, I would be among the first to welcome a more realistically valued pound. It would certainly help my company's sales prospects and financial results in the short term. However, I believe it is much more important that we develop a mindset which aims to achieve international competitiveness regardless of the value of the pound.
It was that mindset which helped the Germans and the Japanese to a long period of sustained economic success, despite the millstone of a strong currency. It is that mindset which should drive us to concentrate on seeking comparative advantage, on moving up the value chain and creating better quality and higher added value jobs and on the need continually to restructure our businesses and processes in the search for even greater productivity impetus. It is this mindset which will create internationally competitive industry in this country and therefore the prospects for increased exports and employment. Without this mindset, the prospect of the British economy prospering in the long term is, in my view, remote. Indeed, in the advent of the UK's participation in the European single currency, it is only this mindset which will provide the route to deal with the economic discipline implications of that change.
So in conclusion, I would summarise by reiterating that in today's fast-changing global economy the only real guarantee of export success is to create an environment in this country which will allow companies, UK and foreign, to become truly internationally competitive. Failure to do so will mean that companies with export generating capability will simply go elsewhere.
I should like to thank the noble Viscount, Lord Oxfuird, for introducing today's debate. He has raised a fundamentally important issue for this country and at the same time has allowed me to overcome one of the more difficult personal hurdles in my life.
3.32 p.m.
Lord Sanderson of Bowden: My Lords, it is a great pleasure for me, as a Scotsman, to congratulate the noble Lord, Lord Simpson of Dunkeld, on a very effective maiden speech. I am glad to see in this Chamber taking part in such an important debate someone with so much experience, having come up the hard way through various companies during his business lifetime. He has been managing director of GEC since September 1996, and therefore he is well placed to be of great service to this House. On a lighter note, perhaps I might suggest that he and I discuss our political differences on the golf course. I am happy to invite him to join me at Muirfield. We look forward to hearing from him on many occasions.
I thank my noble friend Lord Oxfuird for initiating this extremely important debate and I give him full marks for his timing. I look forward to hearing the maiden speech of my noble friend Lord Hunt of Wirral.
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I must declare an interest as a director of a bank, but also, and more importantly for this debate, as chairman of a small successful knitwear company which has won two export awards in the past five years and whose exports total 80 per cent. of production.
Your Lordships will appreciate that my interest in the currency market is far from academic, and I agree with the Chancellor of the Exchequer that in order to succeed we need a stable and competitive pound over the medium term. The short term is the problem and we must reach the sunlit uplands by some means or another. I note that only today the Scottish Engineering report states that the strength of sterling and labour shortages pose real current dangers. The Bank of Scotland's business survey reveals a sixth consecutive drop in monthly export orders.
That is a serious situation, as any noble Lords involved with exporting will understand. It is a serious dilemma. I deplore those who seek to suggest a difference of opinion between the Bank of England and the Treasury over these matters; the current situation is far too serious for that. If I were addressing Members of the other place today perhaps I would say in the well-known words of the noble Lord, Lord Steel (who, when Leader of the Liberal Democrats said, "Return to your constituencies and prepare for government") "Return to your constituencies and prepare for slowdown".
The uncertainty over the single currency has undoubtedly made sterling more attractive vis-à-vis the deutschmark and is now reaching serious proportions. The real threat to our economy is surely the double whammy of a lasting period of uncompetitive exchange rates causing our export orders to slump while cheap imports are sucked in.
Rightly or wrongly, short-term economic management has been shifted solely to monetary policy, confronting the Monetary Policy Committee with a real dilemma in that there must be genuine doubt about how high interest rates—the only policy weapon left—need to rise in order to head off an inflation threat. The signals about inflation in the pipeline are themselves contradictory, with producer price inflation now at zero, but wage inflation at 4·5 per cent. and, despite the entreaties of the Chancellor of the Exchequer, threatening to rise further.
That tends to exaggerate and exacerbate the outstanding feature of the current economic situation; that is, the widely divergent performance of consumer spending on the one hand and manufacturing/exporting sectors on the other. While retail sales volumes are around 6 per cent. up on a year ago, manufacturing is effectively in recession, not to mention farming, where the high pound makes exports uncompetitive and reduces the real value of the financial support provided through the CAP.
While there may be disagreement about how high interest rates need to rise in the short term, there is consensus that growth is now peaking. However, there is less agreement about the severity of the rate of the slowdown which we may face. For business, the greatest danger is that the markets are right and that interest rates

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fall sharply in the second half of this year, but in economic circumstances which are more severe than currently envisaged by most forecasters.
The tourniquet of interest rates and strong sterling has been twisted still tighter at a time when there are signs that domestic demand is actually beginning to slow. No matter what the outcome in terms of the performance of the economy as a whole, it is, in my view, inevitable that some sectors—most particularly small businesses and small exporting businesses—will be hit hard in an unexpectedly sharp downturn. Again, I agree entirely with the Chancellor of the Exchequer when he wrote in his book that our ability to produce manufactured goods and compete in our own and world markets that is central to our industrial and economic performance.
Where do we go from here? Since the forecasts which accompanied the Budget also show inflation exceeding targets at the year end, it looks like an open invitation to the Monetary Policy Committee to raise the rates—thus the strength of sterling and the surge in recent days—deepening the divide in the two-speed economy and increasing the risk of an unnecessarily severe downturn. For all its good intentions, the commitment of the Chancellor of the Exchequer to long-term stability may have heightened the chances of another boom/bust situation.
I read that the Chancellor of the Exchequer is urging the banks and bankers to do what they can to help their exporting customers. I have no doubt that bankers will listen to that plea. I just hope that, in return, the Bank of England will listen to those who are saying, "What we need now is a signal that interest rates are at their peak". We have a serious United Kingdom problem before us at present. We must address it or we shall face a very distressing winter next year.
3.40 p.m.
Lord Ezra: My Lords, I join in the congratulations which have been extended to the noble Viscount, Lord Oxfuird, on initiating this debate. As he pointed out, it is the first that we have had for some years on this important element of our economic activity. His precise timing has been impeccable. One cannot pick up a newspaper today which does not write about the possible adverse or, in some cases, beneficial impact—depending on which newspaper one reads—of the high level of sterling on our overseas trade.
I was delighted to have heard the speech of the noble Lord, Lord Simpson of Dunkeld. I agreed with everything that he said and I shall turn later to some of the issues which he raised. I am glad that I shall be able to emphasise some of the arguments which he put forward based on his remarkable expertise and experience of industry.
I greatly look forward to hearing the maiden speech of the noble Lord, Lord Hunt of Wirral, with whom I had a close relationship when he was a Minister at the Department of Energy. He spent much of his time visiting the pits so that he could speak with assurance of what was going on in the industry. That was most helpful at that time.
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As the noble Lord, Lord Simpson, pointed out, trade between nations now is much more complex than it has ever been. He talked about globalisation and the freer movement of goods and services. But there is also the massive transfer of components and transfers of capital and ownership. The noble Lord illustrated how one can have a foreign-owned firm in this country, resourcing its materials from abroad, assembling them here and sending the product abroad. Therefore, we really are in a global economy.
Furthermore, there is now much less distinction between the manufacturing side and the service side. Having been the world's first major manufacturer, we have always felt that somehow manufacturing was losing out. I felt that for many years. But there is now a much closer inter-relationship and it is difficult to draw a line. For example, much more out-sourcing is going on. I am involved with a company which provides the service of energy management. We provide that service to a large number of manufacturing companies. They are out-sourcing more and more of their business. Therefore, nowadays, when one talks about manufacturing, the totality of the effort is very closely inter-linked with the service side. That is another important change in the background of our business as a nation.
Then we have the ever-challenging situation of information technology. We no sooner seem to scale one height than there is a new one. But as we know, everything is not plain sailing and there is the problem of the millennium bug facing us. I am delighted that the Prime Minister has seized on that as requiring substantial effort. I was rather disturbed by previous government statements which seemed to indicate a degree of complacency. But I am glad that that complacency no longer exists because it is a very serious matter indeed. However, that in itself can provide opportunities to export methods to cope with debugging the system.
The environment also provides enormous opportunities. If we can lead the way in dealing with climate change, a major enormous market potential opens up in developing countries such as China, India and elsewhere.
The last time that the whole overseas trade scene was reviewed in depth was by the Select Committee on Overseas Trade which met in 1984 and reported in 1985, and which was led so ably and effectively by the noble Lord, Lord Aldington, whom I am delighted to see here today. That was a remarkable report. I had the honour to serve on that committee as one of its members. The report made a substantial impact. I tried to get hold of a copy of the report to give to somebody, but I was told that it was sold out and had long been sold out. A further edition is urgently required.
It made many important recommendations. It would be interesting to know how far we have gone in carrying them out. The most important recommendation, of which the noble Lord reminded me last night when we met in his club, was the emphasis on competitiveness, the very point which the noble Lord, Lord Simpson, has made today. We were stressing that very strongly in our report over 10 years ago.

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The reason for establishing that committee was that 1983 was the first year in which we ran into deficit on our visible trade. We had previously been running substantial surpluses. After all, we had been first in the field with the Industrial Revolution. But 1983 was a watershed year in that respect. We ran into deficit. That has been a feature of our trade balance ever since. For example, in 1997 there was a shortfall of nearly £19 billion in our trade in goods other than oil. However, it was offset by a surplus in our oil trade with the benefit of North Sea oil, and a substantial surplus in services—in what is known as invisible trade. Therefore, we have reached a different sort of trade balance. That is another factor with which we must live.
However, when one looks at a breakdown of the sector of goods other than oil, half the deficiency was in food, drink and tobacco where we have traditionally imported more than we have produced. But the other half is in manufactures. One might ask why we are running a trade deficiency of £9 billion in manufactures and what can be done to put that right, bearing in mind that manufactures and services now go much more closely together.
As the noble Viscount, Lord Oxfuird, pointed out, there is no doubt that exports remain a very large part of our total economic activity: namely, more than 25 per cent. of GDP. Creating the right sort of framework, to which the noble Lord, Lord Simpson, referred, is something which not only goes for exports but for our total economy. Therefore, we should look at our overseas trade in a much wider context. That is a point which came out very well in the report for which the noble Lord, Lord Aldington, was responsible.
Of course, there is strong concern about the effect of high interest rates and the value of sterling. But there is a healthy debate about that. There are some who say that that is very harmful. There are sectors, such as the engineering, steel and chemicals, which suffer immediately in their margins. But it can be contended that a high value currency can act as a stimulus. An arresting statistic which I read in preparing for this speech was that our rate of improvement in productivity ceased to move up from September 1992 when sterling was massively devalued by coming out of the ERM. In other words, the impetus was removed. Strong benefits could be derived from the lower value currency and people traded on that.
This is a debate which can well be continued much further. We have the Chancellor putting his view on the subject and the CBI putting another. I have referred to the report of the Select Committee which was published in 1985. I should like to make a recommendation to your Lordships. The time has come when we should set up another Select Committee on overseas trade to look at the situation as it now exists in the light of globalisation, all the changes to which I referred, the position of sterling, what is happening within the European single market and the approach of a single currency. These are massive changes. The report of 1985 made a very important impact. I think that the time has come to review the situation once more. I hope that the usual channels will look upon such a recommendation favourably.
3.50 p.m.
Lord Hunt of Wirral: My Lords, I should like to say how grateful I am to my noble friend Lord Oxfuird for choosing this subject for today's debate. I believe that the House owes him a great debt. Several speakers have already referred to the fact that one only has to pick up virtually any newspaper at present to see that this is a topic which occupies the nation's interest and that it is a matter of considerable controversy.
I am also most grateful to my noble friend for allowing me to rise and make my maiden speech in this Chamber, exactly 22 years to the month since I made my maiden speech in the other place. On that occasion, I chose the theme of jobs and employment. If I may seek the indulgence of the House, I should like to do so again. I must say how much I appreciate my noble friend's very kind words about me and how delighted I was to be privileged to hear—that is, if one maiden speaker is allowed to refer to another—the outstandingly good speech of the noble Lord, Lord Simpson, who has a breadth of experience in these matters which virtually no one else can rival. He has been an outstanding figure industrially for many years. However, as I am not allowed to be controversial, all I would say to him is that we have to bear in mind the medium-term as well as the short-term effects of a rising pound on employment. Employment is seriously affected, both in the short and medium term.
I made my first maiden speech at a time in 1976 when the rate of unemployment stood at 5·7 per cent.—much higher than it is today. I remember feeling that that was far too high, and especially so in my own area of Wirral; indeed, I am proud now to take that name into my title. Wirral relies very much not only on having a magnificent quality of life and a beautiful environment, but also on jobs in manufacturing. I am delighted to see the former Prime Minister, the noble Lord, Lord Callaghan, present in the Chamber, because—speaking if I may as a Scouse Taffy—we in Wales also believe very strongly in manufacturing industry being the life-blood of our nation. These are vitally important jobs for Wales, Wirral and the rest of the UK.
In my first maiden speech I set out most clearly my strongly held view that high levels of unemployment, especially when they are concentrated in certain parts of the country, can destroy the social fabric of society. I was therefore very privileged, as my noble friend said, to enjoy a period as Secretary of State for Employment and as Secretary of State for Wales; and, indeed, during that time, to do everything that I could to bring down unacceptably high levels of unemployment. Moreover, I became absolutely convinced then that, as the noble Lord, Lord Simpson, said, so much depends on our competitiveness.
I turn now to the real problem. The noble Lord, Lord Ezra, with whom I had a close working relationship at Energy, will understand this. I believe that the real problem is that our economy is quite unlike any other economy in the world. I may be wrong, but I am scarred by that experience in 1992 of being involved, as I was then, in the decision to suspend our membership of the exchange rate mechanism. I am also

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scarred by the early 1980s because of the damage that was done to manufacturing industry by an escalation in the value of the pound.
Of course, we need stability; but stability must be buttressed by a policy which co-ordinates both the monetary and the fiscal side over the medium term. That is why we must do everything that we can now to persuade the Government that we cannot allow a dual economy to develop, with manufacturing industry moving into recession and service industry going from strength to strength. Our economy finds great difficulty in managing such a situation. I should tell my noble friend Lord Oxfuird that his ideas of a world currency are very stimulating. Indeed, I look forward to the debate and hearing the comments of those who are far more expert than I on some of the ideas that he put forward.
We are also most fortunate to have as the Minister who is to respond to the debate, the noble Lord, Lord Clinton-Davis. He was Parliamentary Under-Secretary of State at the Department of Trade and Industry during the 1970s and knows a great deal about the subject of trade, exports and the level of the pound. Indeed, perhaps I may pay a tribute to the noble Lord. He took under his wing a newly appointed Opposition spokesman on shipping. After a short six months on the Back-Benches, he made sure that I was well briefed. His ministerial objective was to ensure that the Opposition was as well briefed as he was. I am very grateful to him for having got my parliamentary career off to a reasonably good start.
Looking ahead, we must ensure that we balance the needs of manufacturing industry against the needs of our competitiveness and the needs of our economy as a global economy. I very much agree with the remarks made by my noble friend Lord Sanderson, with whom I have very happy recollections of working closely on the voluntary side of the Conservative Party. I have always been a One-Nation Conservative. I believe that the whole purpose of being in public life is to improve the lot of others: to ensure that the greatest help goes to those in the greatest need; and indeed to present young people in particular with a menu of opportunities, which does not include the opportunity of life on the dole. When I was Secretary of State for Employment, I believe that one of the most exciting ventures upon which I was able to embark through the vision of the former Prime Minster, my right honourable friend John Major, was the establishment of new modern apprenticeships. They are so important in underpinning the skills of the future.
Perhaps I may just add here that I did step down from the Cabinet to become senior partner of my firm of solicitors where I had been a partner for over 30 years, Beachcroft Stanleys. I am very proud of my legal profession. I look forward to participating in debates on the law. I am spurred on in that respect because I had to sit silently, recently, through a debate in which many learned judges, extremely learned banisters and the noble and learned Lord the Lord Chancellor pontificated on what it was like to run a solicitors' office. Sadly there was no contribution from any solicitor. I shall ensure
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that that does not happen in the future. We in the legal profession have established London as the legal capital of the world. I take great pride in the fact that my firm has 44 graduates either in training or in the pipeline, and that we have made training such a feature of the profession that people come from all over the world to participate in it. I have also always been an insurance lawyer. Just as the law provides invisible exports of £536 million a year, according to the last figures, so the insurance industry has much to be proud about in providing over £6,000 million of invisible earnings.
I return to my main point; namely, my great concern for the future of jobs and employment. That is why I want to support many of the measures brought forward by this Government, which I believe mirror many of those introduced and piloted by myself and several of my colleagues at the Department for Employment in the past. I do so because they will breathe life-blood into our manufacturing industry and improve the skills and the opportunities for all generations, not just the young. We must also ensure that we make greater use of older people.
Therein lies the future, but we must have a stable currency. That is the only way to underpin our competitiveness.
3.59 p.m.
Lord Paul: My Lords, the Motion before us touches the lifeline of the British economy. I am grateful to, and congratulate, the noble Viscount, Lord Oxfuird, for bringing this subject to our attention.
We have had two excellent maiden speeches. First, I congratulate the noble Lord, Lord Simpson. He brings with him a profound experience of manufacturing industry. I am sure the whole House will be enriched by his contributions. I congratulate too the noble Lord, Lord Hunt of Wirral, on his maiden speech. He brings with him great experience in business as well as in government. As Secretary of State for Wales he took a keen interest in industrial development there. I had the pleasure of welcoming him to our plant in Tredegar. His knowledge of industry is remarkable. We look forward to his future contributions.
We live in a global economy where levels of trade are rising. This has been helped by the reduction of tariffs and trade barriers in recent years. As communism declines, we see the awakening of eastern Europe as a commercial force and even the People's Republic of China is turning towards a market economy. The economic powerhouse of the US goes from strength to strength. Despite the recent financial malaise of many Far Eastern countries, their rapid move to manufacturing and international trading of sophisticated products will not be reversed.
The United Kingdom is part of a world market and therefore has to compete on world terms. Our position in the world economy has historically been dependent on trade. In 1997, according to the Government's Red Book, exports of goods and services equated to nearly 36 per cent. of gross domestic product. Without the benefit of export earnings, our domestic market is

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insufficient to support the population in the manner to which it is accustomed. For its population size, the UK has traditionally boxed above its weight.
Old allegiances and trading patterns are disappearing. Today the sale of products and services internationally is carried out increasingly on the basis of the highest quality at the lowest cost. If UK producers of goods and services cannot meet those criteria they will lose out. I have no doubt that United Kingdom enterprises can meet, and indeed set, international standards of quality. But they find themselves increasingly disadvantaged against both our near neighbours and those further afield on relative cost.
Budget statistics report that sterling has appreciated against the dollar by 8 per cent. since August 1996. Of greater concern is the 25 per cent. movement against the deutschmark over the same period. On the surface, UK exports over this period appear to have been resilient, but this has masked longer term trends which are now beginning to appear. Many UK exporters have continued to achieve sales volumes at previous or even higher levels, but at the cost of lower or negative profit margins. Clearly this cannot continue. While we congratulate our exporters on maintaining the export drive, we must realise that the losses they are suffering on margins will restrict their investment in long-term technology, and that will be to the detriment of all.
If this weakness in Britain's terms of trade continues, I fear for the health of the economy as a whole. However, I wish to congratulate the Foreign Secretary, the right honourable Robin Cook, on his initiative for increased co-operation between government and the private sector in promoting exports. In particular, while the value of invisible exports and those from the service economy are of great importance, the trading position of UK manufacturing industry is ignored at our peril.
I wish to dwell for a moment on manufacturing industry. There seems to be a tendency to look upon manufacturing as a kind of obsolete activity whereas services and semi-finished products appear to captivate policymakers and pundits. A major portion of our exports are manufactured items and this is one of the more stable parts of our trade. Manufacturing is less vulnerable to the fluctuations of fashion and fad. By its very nature it provides for long-term trade relations and creates a number of ancillary exports.
UK manufacturing is said to support 4 million employees directly and a further 4 million indirectly. In the industrial heartland of the West Midlands and the north, manufacturing remains the engine of the local economy upon which the service sector and many other activities depend. If industry is allowed to die in these areas through neglect, so will the communities themselves. It is accepted that the previous government did not attach much importance to manufacturing industry, but Labour has always been pro-manufacturing and I think the time has come to show that support.
I declare an interest. As chairman of Caparo, a company with a strong export emphasis, I am seeing throughout the business a reduction in the level of orders from UK customers who are beginning to lay off employees as a result of a fall in overseas demand and
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decisions by multinational customers to source elsewhere in the world than from the United Kingdom. Unless this trend is soon reversed I fear it will lead to recession and all that that implies.
The Government have announced many laudable measures to encourage employment. It would be a tragedy to see the results of those efforts offset by increasing redundancy in the current workforce.
I congratulate the noble Lord, Lord Ezra, on suggesting the establishment of a special Select Committee to study international trade. I hope the House will take that up. There is a cynicism creeping into the minds of UK manufacturers that this Government are indifferent to the fate of manufacturing industry, and this has nothing to do with the pound alone. I know this is not the case, but industry needs reassuring; otherwise the position will be dangerous for the UK economy and its future potential.
4.8 p.m.
Lord Trefgarne: My Lords, I, too, thank my noble friend Lord Oxfuird for giving us the opportunity to debate this important subject. As my noble friend and several other noble Lords have already said, it is not since July 1995 that we have had an opportunity to consider this important subject in any depth.
I shall concentrate my brief remarks on the plight of small businesses, particularly those in the manufacturing sector, to which the noble Lord, Lord Paul, referred, and highlight some of the problems that the current strength of sterling is causing both to employment prospects and the profitability of those businesses. Here I must declare an interest as President of the Mechanical and Metal Trades Confederation (METCOM), which is a group of trade associations which through its members represents some 5,000 small and medium-sized enterprises which employ upwards of 300,000 people.
Immediately after the Budget Statement sterling rose to a nine-year high against the currencies of the United Kingdom's major trading partners. Taking the deutschmark as an example, before the Budget sterling was hovering around 3.00 deutschmarks. In the days since the Budget it has risen further and today stands at nearly 3·1 deutschmarks.
Yet this has been hailed by the Government as a Budget for the small business community. We are told to "stop whingeing" and to "learn to live with a strong pound". That seems to me a little like being told by matron to forget about the side effects of pleurisy and pneumonia and to rise from the sick bed for a cross-country run in the rain followed by a cold shower.
We are faced with a pound that has risen by more than 30 per cent. in a year—to well above the level where we left the ERM—which is destroying so many businesses, especially embryo new businesses in their infancy and hence destroying a prolific source of new jobs; and all at a time when the Government have dedicated their term as President of the European Union to the theme of employability.

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It was, of course, very generous of the Chancellor to cut corporation tax in his Budget. But I am afraid that that is of little consolation to a small manufacturing enterprise which has had its profits cut to zero or less on export sales as a result of the strong pound.
The writing is already on the wall. In the final quarter of 1997, manufacturing output fell by 0·4 per cent. on the previous quarter. This must be of great concern and, I believe, is due in large measure to a fall in export sales. In January 1998, the most recent month for which I have figures, there was still no improvement in sight and last month's Budget has almost certainly made matters worse. It seems clear that manufacturing industry is faced with a downturn in output after a period of steady growth stretching all the way back to 1992. This cannot fail to impact upon the positive rise in employment that we have seen in the United Kingdom over the same period.
Given the high level of sterling for some months, it is a surprise to me, with a little experience in these matters, that things are not already worse than they seem. I suspect that our present trading figures are being bolstered artificially by the foresight of the larger manufacturers who have been able to buy forward in the currency markets and hedge against an anticipated rise in the value of sterling. And of course present figures also relate to orders placed some time ago, now being delivered at zero or negative margins.
Last week I was interested to note that even the Treasury's head of economic briefing and analysis, Mr. Christopher Kelly, when asked by the House of Commons Treasury Select Committee whether officials regarded the manufacturing sector as likely to go into recession replied,
"It is certainly a possibility—we are forecasting zero growth for this year".
There is no such thing as zero growth. It is either positive or negative—with negative growth now by far the most likely.
Even the Chancellor's own Red Book admits that the strength of sterling is having a drastic effect on British manufacturers. At page 95, it states:
"There is now clear evidence that the appreciation of sterling of around 25% … is having an impact, with net trade making a negative contribution to GDP growth in the final quarter of last year".
It goes on to acknowledge that,
"the full impact of the appreciation can he expected to come through more fully over the coming year, with a widening of the deficit of trade in goods and services".
All that is straight from the Chancellor's own pen.
I can conclude on a rather more positive note. As my noble friend Lord Oxfuird observed in opening the debate, whatever the strength of sterling, it is the duty of all of us working in the manufacturing sector to do everything we can to optimise export sales. My noble friend mentioned investment in research and development as one positive factor to assist in achieving that objective. I should like to mention another, and that is investment in people—that is, continuously improving the skills of our workforce by making an investment in training and in the concept of lifelong learning. Here,
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too, I must declare an interest as Chairman of the Engineering and Marine Training Authority. In that capacity, I am privy to a whole range of data showing that those manufacturing firms which are already making positive investments in the training of their workforce—many of them having already achieved the Investors in People award—are doing far better in their overall business performance, including their export performance, than those who are not.
I think it was my noble friend Lord Hunt of Wirral who referred to the increase in modern apprenticeships. In the Engineering and Marine Training Authority in particular, we are indeed noticing a startling growth in those particular new qualifications, and very welcome that is. So there will always be something that we can all do if not to solve, at least to alleviate, the problems that we face.
That is all I have to say. I hope that in his response the Minister will acknowledge the genuine problems that the current strength of sterling is causing for small businesses. If maintained, it will lead to a further reduction in overseas business, lower exports and a loss of jobs. One job in three in the United Kingdom depends on international trade. It is not too late to halt the decline.
4.15 p.m.
Lord Montague of Oxford: My Lords, I echo the congratulations to the noble Viscount, Lord Oxfuird, on introducing the debate today and enabling me to look back on my 40 years both as a manufacturer and exporter. Listening to the speeches, I cannot help but feel—this is said with no disrespect—that I have heard it all before, in particular about the currency.
It was Michael Edwardes, I believe, who said, wish we'd leave the bloody oil in the ground." The noble Baroness, Lady Thatcher, did not take that advice. And I do not think that Gordon Brown is likely to take much notice of the advice we have been hearing today. In fact he told us that yesterday.
So what can we do? There are two kinds of exporters: those in the commodity business; and those who add value. To those in the commodity business, one can give little advice. They can make their businesses as efficient as possible, but their commodities have an international market price, and whatever is the going rate for it is the going rate, depending upon one's currency. But for those who add value, what we have to do is clear. Every business has to look at itself again and ask, "Are we applying enough importance, are we giving enough resources, are we rewarding enough those whose job it is to put USP (unique selling points) on to products?" In my experience you cannot go too often to a research and development department to improve morale. And you cannot incentivise too much. I really am just a little disappointed when I see some of the market rates offered to research and development engineers at present. They are the gold. They are the honey of manufacturing industry. We need to reward them appropriately. I do not think that we are yet doing that.
We have many companies which are led by accountants. Financial engineering seems to engage much of their attention. I believe that they must spend

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time visiting their research and development department checking whether it has sufficient resources and ensuring that morale is high. Without that the prospects for those companies may be good in the short term but not in the long term.
We have heard reference to smaller companies. The smaller companies are dependent on the Department of Trade and Industry and its posts overseas. We should congratulate our posts overseas which do a wonderful job in servicing the small and the larger companies. We tend mostly to berate them in public and tell them that they are out of touch and do not understand commerce. There are some like that, but I think that it is a rather unfair generalisation. We have heard that the Foreign Office is to introduce experienced businessmen to take on some of our posts. I hope that approach will be successful. I believe that to some extent it will. But it can only be a minority matter. General enthusiasm in relation to posts everywhere is what counts.
At present the Department of Trade and Industry seems to be doing quite a good job. It has come up with lots of initiatives. I wish to refer to one or two of them. As noble Lords will know, our posts overseas are given specific market leads. It was a decision of the previous government that those should be sold to commerce. It was not a great success. When the new Government came to power the number of people buying those market leads had fallen to 3,000. This information is now to be made available, free, on the Internet, to over 60,000 companies. That is a very useful step and is worth mentioning. Also, the whole question of overseas fairs and the amount of funds made available for them is being reviewed. By 1999, more generous facilities will be available. The department should be congratulated on that score.
Before coming to the House, I was over at Horse Guards Parade where the department has a magnificent exhibition which noble Lords should see. It is called Powerhouse UK. A number of noble Lords may have visited it. It displays four areas of Britain's creativity at the present time. The exhibition is being mounted coincident with the arrival in this country of the Asian leaders. The themes are creativity in lifestyle; creativity in communicating; creativity in networking; and creativity in learning. It is a first-class exhibition. It is open to us all from Friday. I thoroughly commend it to any noble Lords who have not yet seen it.
There are, however, other improvements which the department could make, and they should be drawn to the attention of the House. One of them, put simply, is to make even more resources available to overseas trade at the present time. The department has been steadily reducing its manpower. That cannot go on forever.. It is time that the department examined the budget to see what it can do to provide a "touch on the tiller" at this very delicate time.
We have heard from the Chancellor that as a result of the Budget we are to have £50 million available in universities—I speak partly as a university man—as venture capital, so that some of the new products identified by those in universities can be put into the commercial world. I hope that this very good initiative
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will be implemented speedily. Only yesterday we heard from the Department for Education the full details of the initiative in education for industry which is about to be started. So there are things going on, and all of them good.
In this important debate, we must be careful not to he too despondent, not to utter contagious pessimism, as it were, in every direction. Our exporters are doing a fine job under very difficult circumstances. They need all the help and encouragement they can get. Every time we are asked to visit a factory and unveil a plaque because there is a new extension, I ask your Lordships: please go into the research and development department there. Talk to those people. Their morale is most important. Whenever your Lordships meet an industrialist, do not ask him how he is doing. Ask about his new products. They are the lifeblood of his company.
We are so ingenious in this country. Time and again we have overcome hurdles. Sometimes, I think: was that last great war merely from 1939 to 1945? Did we invent all those new products in that brief period? Did we put all our energy towards the battle of the time? And did we actually win in such a short time? Whenever we are faced with difficulties, we have no great problem in rising to the challenge. I rather think that is what our exporters will do.
4.25 p.m.
Lord Howell of Guildford: My Lords, it was a great pleasure to hear the speeches of the noble Lord, Lord Simpson, and my noble friend Lord Hunt. Both have vast experience in their areas—the noble Lord. Lord Simpson, in industry and my noble friend Lord Hunt in several high offices of state. We need to weigh their words very carefully. I am grateful to the noble Viscount, Lord Oxfuird, for initiating the debate. I am also personally grateful to the noble Lord, Lord Montague, for telling me what is in those huge silver mushrooms which have just sprouted on Horse Guards Parade. I wondered as I went past: now I know.
There is in this debate a tone of some gloom in relation to export prospects. On the face of it—but only on the face of it—that is understandable. First, before I turn to the currency issue, there is the matter of the Asian turmoil, the effects of which are far from over. Many people predict, and I would certainly agree with them, that in the European market we are about to face a tidal wave of high-quality, cheap exports in everything from motor cars and electronics to petrochemicals and steel. It will have an extremely tough effect on our industries and make the lives of our exporters and those competing with exporters in the home market very much tougher. If one talks to some of the Asian leaders who are in town this week for the ASEM conference, there is a tone amongst their comments that suggests that, despite the difficulties, they are getting their act together again, and the export machine of Asia is about to crank up again—only this time with far more competitive prices. That will he extremely painful and worrying.
The second worry is one that almost every noble Lord has mentioned; namely, the question of the pound—if indeed it is a worry. The noble Lord, Lord Simpson, had

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some wise, cautionary words about being too obsessed about the currency level—bearing in mind the fantastic performance of the Germans in the 1960s and 1970s on a rising currency. If it is a worry, then I am afraid that I have more gloom to add to it.
Let us reflect. The pound is not a petro-pound at present. The oil price is heading south, and will probably go down to about 10 dollars a barrel before it bounces back, as it usually does for obvious reasons—namely, when it becomes cheap, more people "drink" oil and fewer people go out looking for it, so the matter corrects itself. It will return to the median level at which it has been over the past 20 years, with huge ups and downs and volatility, of about 15 dollars in 1986 money. It may go lower than that, to about 15 dollars in 1996 money, but it will rise a little. So that is the pound now—alleged to be high, with oil "flat on the floor". What is going to happen when we begin to see the oil price pick up again?
That leads me to a broader reflection, which I believe is shared by some in the financial markets; that is, to question whether the pound really is high, or whether we are not seeing a sea change in the relationship so gloomily familiar to us for the past 30 years. We have always assumed that the pound is a sort of passenger, a weak currency which will continue to depreciate against the gilder, the deutschmark and the Swiss franc and all the rest. Could it now be that, for various reasons, the tide has turned?
If one looks back into the history of the deutschmark/pound relationship, that cannot be to do with the differential in the short-term interest rates. We have had a high differential several times in the past. Indeed, to put it differently, we have had a lower short-term differential in the past, but with a much, much higher sterling/deutschmark exchange rate. In 1984 it was 3·78, when the differential was considerably lower; in 1974, it was 6·03; and in the 1960s it was 11 and I2 deutschmarks to the pound. The point is that at all those times Britain was hideously unfavourably placed vis-à-vis Germany in productivity and competitiveness. Our inflation was much higher; we were a strike-ridden nation. We could not hold a candle to the German economic performance. Today we can. Today, on the competitive side, this country looks much better and can become better still. On inflation, for instance, it can be much nearer to the German rate, perhaps not quite so low. General labour costs are extremely good in comparison with those in Germany. Take-home pay is in many cases higher, as the over-taxed German workmen frequently complain. Therefore if one looks at the situation now it could well be argued on cold analytical grounds that the pound ought to be much higher against the deutschmark and not much lower.
That, I know, is a very gloomy message to give to industrialists who are struggling to make an honest turn with the present level and hoping that it will somehow go down to 2·60 and he manoeuvred into the European Monetary Union at that level, but they may all just be hideously wrong, and it could well be that we are moving back to the more normal patterns when the
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pound becomes again—as many of us have spent years in politics and public life hoping it would—a strong currency which can perform very well against whatever lies ahead, whether it is the euro or separate currencies.
That is the slightly gloomy message I have to add to those which have already been put forward in your Lordships' House about the pound. I think we have to prepare for the fact that it will not go down and may go up considerably further and, whether we like it or not, we have to adjust for that. There is some solace, looking at the overall export situation, and it lies in the fact that while manufacturing against this rising exchange rate for the deutschmark is tough, it has not been quite so bad against the dollar. There is also the fact that in terms of export earnings, as your Lordships have observed, half our export earnings—just under half as a matter of fact on 1996 figures, but I suspect it is just about half now on 1997 figures—come from so-called services and not from merchandise exports at all. Furthermore, within the merchandise exports sector huge amounts of what are called merchandise and manufactured goods are in fact services. As the noble Lord, Lord Ezra, said with great perception in his contribution, this whole area of trying to define what is manufactures and what is services is getting into a huge muddle.
Knowledge products infiltrate all these sectors and cannot be distinguished. Indeed the Office for National Statistics are telling me—as I am sure they are telling others—that they are having enormous trouble in defining what "manufacturing" is nowadays and also in collecting statistics of what "services" are, and indeed in putting all these things into the monthly trade figures—which, it is worth reminding ourselves, usually are only for something called "manufacturing" and do not even include the other half of the economy and the other half of our exports and the other four-fifths of the economy in terms of employment, since four-fifths of the workforce now work in the so-called service sector.
Of course, manufacturing is the spearhead and we have to have good, high quality manufactures, but it is a small and tough spearhead. The service content of it is huge and all the time we are discovering that more and more of the things that we used to be told could not be exported and were not tradeable, are. The joke used to be that you could not export a haircut, but it now turns out that the design and delivery of a hair-cutting service and the associated and ancillary equipment and all the rest is a major export and British designers are beginning to earn a great deal of overseas currency for that kind of thing. We have heard from my noble friend Lord Hunt—and I am very glad to hear it—how you can export if not lawyers then legal services, and earn huge sums. It is the sort of category, rather like educational services, which only a few years ago you could not even find listed in the invisible exports sector.
Finally, it is worth remembering before we get too gloomy that the real driving force in world trade now does not come from goods crossing borders in the conventional sense: it comes from investment flows and from the affiliates which are set up and sell into the foreign markets concerned. It is a fact now—a strange fact but it is so—that the total of activity generated by corporations passing to their subsidiaries and the

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subsidiaries selling into world markets is actually larger than the entire total of world trade, measured in the conventional sense.
As the noble Lord, Lord Ezra, said, it is a completely new set of global conditions that we are looking at in which old worries about trade in the narrow sense are no longer the relevant concerns. I believe the key here is in foreign investment flows: we are a giant investing nation. Most of our investment in fact is outside the European Union, and most of our earnings come from outside the European Union on the investment side. That does not mean to say that Europe is not important, but we should remember, as the noble Viscount, Lord Oxfuird, said, that the wider world is also our oyster. Therefore, as long as we are saving and investing powerfully and effectively around the world, I believe we shall prosper, even though for the manufacturer at the moment obviously life is tough and in my view is going to get a great deal tougher.
4.34 p.m.
Lord Palmer: My Lords, I too am grateful to the noble Viscount for instigating this important and timely debate. When I was a small child my parents went on a world tour to promote the sale of our biscuits, and I remember so well the pins on the world map and taking them out as each postcard arrived, announcing that they had arrived safely at their next destination.
My father was for years a member of the British National Export Council and I well remember him telling me how vital export markets are to individual companies and to the well-being of our nation as a whole. When I worked within our export department we were selling our delicious biscuits to 159 different markets worldwide. I was also fortunate enough to be on one of the largest United Kingdom trade missions to Hong Kong and Japan back in the 1970s—one of the most exciting three weeks of my life, albeit very gruelling.
I must further declare an interest, as both my main businesses are hugely reliant on the export market: one being farming and the other being tourism, the latter of which, if the bookings we have materialise, will account for some 50 per cent. of our income. I believe that Her Majesty's Government's support to the tourist industry must be further increased. I gratefully acknowledge the increase that the Secretary of State for Scotland has given to the Scottish Tourist Board in this financial year. Overseas tourism is so vital to Scotland.
United Kingdom agriculture and all the related industry sectors are currently experiencing extremely hard times, perhaps even harder than the 1930s. Farm incomes are down by 47 per cent. this year—I repeat, 47 per cent.—and many, many thousands of jobs are threatened. It must not be forgotten that this is the industry which produces the vast bulk of our country's food requirements. Protecting our food supplies and jobs needs above all else a vigorous cereal sector. In recent years the United Kingdom has become established as the world's sixth largest exporter of
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wheat and barley. Last season we exported 6·8 million tonnes of cereals to more than 50 countries. This was worth £711 million—I emphasise that figure—to the United Kingdom's balance of payments. The premium Italian biscuit manufacturers rely heavily on British wheat, and bakers elsewhere in Europe use it for their bread flours.
Food and drink exports account for a further 3·2 million tonnes of cereals, and this is up from 1·4 million tonnes 10 years ago. A similar increase in the next 10 years would do wonders for our balance of payments. United Kingdom manufacturers and retailers selling high value products abroad have been increasingly successful and this, thankfully, has created many new jobs. To give just one small example, sandwiches made and packed in Britain are travelling through the Channel Tunnel overnight and are put on the supermarket shelves of Paris, Amsterdam and Cologne and even as far afield as Madrid.
One of the fastest expanding areas is the export of malt. The United Kingdom is now the world's largest exporter of malt, particularly to the Japanese market. Likewise, another expanding market, particularly within the European market, is breakfast cereal. Again, I would urge Her Majesty's Government to give these sectors their maximum support and financial encouragement.
The grain exporters, with tremendous help from the industry's promotion bodies such as British Cereal Exports, have greatly expanded this trade in the last 10 years. However, the export drive needs to be vigorously supported by Her Majesty's Government. Help to open up the huge market for malting barley in China is already being offered, but this does need to be sustained. I greatly look forward to hearing how the delegation led by Dr. Cunningham, leaving in 18 days' time, gets on in China. I remember two years ago entertaining a group of Chinese malt buyers on the terrace of your Lordships' House. I wish the mission every possible success.
In markets such as north Africa there is a huge and continuing demand for wheat. It must not be forgotten that competitor nations receive credit guarantee support to succeed in such markets. This is where Her Majesty's Government could greatly support our home-grown industry; I urge them most vehemently to do so.
The United Kingdom's farmers are world leaders in their professional approach to cereal production and marketing. They are the first to have in place an effective and credible farm assurance scheme. All international buyers recognise the integrity of the UK supplier, but, with the current strength of the pound, as other noble Lords have mentioned, every fair means of help must be offered to sustain this valuable trade. I urge Her Majesty's Government to give all their support to this vital industry in order to enhance the value of our exports and to increase the job security of our nation's workforce.
4.40 p.m.
Lord Selsdon: My Lords, until this moment I was enjoying myself, feeling as though I was back at some

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university listening to most interesting speeches; all of which makes me a little worried about my own speech. I believe it was Emerson who said in regard to England, that she has,
"a secret vigour and a pulse like a cannon",
when he was speaking about the problems of the pressures put upon us by the transition of trade. It is about this transition of trade that I wish to speak today.
I have been involved in trade, or the financing of trade, all my working life, and probably will be so forever. I find exporting fun, and I find trying to export even greater fun. I am very grateful therefore to my noble friend for introducing this debate today and for managing to get together such a remarkable collection of speakers.
With regard to the transition of trade, I recall that over the years on various trade committees the biggest problem has been the transition of Ministers. I believe the first Secretary of State to whom I had the pleasure of reporting indirectly—though he probably never knew who I was—was the noble Lord, Lord Shore, whose intervention I look forward to with considerable interest.
I have been fortunate enough to be involved in the financing of projects with the noble Lord, Lord Simpson. Being a fellow Scot, I cannot help reporting that the Scots in general have always been the most successful engineers and the most successful traders.
The excellent speech of the noble Lord, Lord Hunt, reminded me, as a director of a major Italian white goods company, of the efforts made, with Invest in Britain, to get the company to invest and make fridges, washing machines or cookers over here. We found that the best presentation came from Wales, but decided in the end that it would be cheaper to export from Italy goods which consisted of steel purchased from Britain and of air, which is all that the fridges were.
It is the question of competitivity and sourcing that I am concerned about today. I go back to the report of the committee, to which the noble Lord, Lord Ezra, referred, and on which I had the privilege of serving many years ago. The report was about what should happen if oil runs out and whether we really need to manufacture. The conclusion of the 236 economists, most of them from central and eastern Europe, who worked for the Government was that it did not really matter because we would not have to worry about the balance of payments. I do not believe that we have to worry about the balance of payments; I do not believe that we shall ever again need to worry about the balance of payments. Therefore, what we are worrying about is the impact upon employment and the economy as a whole.
Many figures have been touted. It makes me think of that lovely phrase, with everyone saying, "If only":
"If Ifs and Ans were pots and pans, there'd he no trade for tinkers".
I do not want to be classified as a tinker in your Lordships' House, but tinkering around with things by government never gets anywhere. For every hole that is repaired, there are usually three or four others. If the
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"if' at the moment is the currency, I have to go back to when I first worked in Germany, trying to sell British building materials to the German market. At that time there were 10·20 deutschmarks to the pound. I worked in a heavy industry which made cast iron bars, which we could still manage to sell somehow, even though they were outdated and outmoded. Now the level of the French franc is the same as it was 10 years ago. The Italian lira has not moved much; it is weaker.
Is it therefore the currency that is the problem? Our manufacturing industry base has been so eroded, and there is so much outsourcing, that probably the position has changed. Yesterday I telephoned three great engineering companies with which I am working at the moment trying to develop trade in strange parts of the world of which I had never heard until a few years ago. I asked, "Is the level of the pound really hitting you?" They said: "Yes, tell the Government it is hitting and hurting like mad. Seventy per cent. of our production"—this was the average of three large groups—"is exported. Our agents abroad, with whom we have worked for many years and whose children have been trained over here and gone to university in England, are saying that they cannot compete with other manufacturers and that they may have to think of taking on alternative ranges of products."
One asks another department, "What proportion of your total cost is imported?" I conclude that over 50 per cent. of the manufacturing cost to British industry is directly or indirectly imported. If that is imported, surely they have a great advantage? Energy costs are lower than ever before and costs of many raw materials are lower. The imported costs of goods such as diesel engines are way down through the floor. It seems to me that we have the leads and lags that often happen when stability is lacking in a currency. I do not believe it is the level of the currency that is important, because, if it is strong, it will work its way through the system. The noble Lord, Lord Simpson, pointed to the success of Germany and Japan. I believe that we are in a position to have considerable success. The difficulty is the question of sourcing and the key issue lies in added value.
The day of talking about exports has long gone. We are already talking of trade and investment which are linked together: perhaps first the trade and then the investment. We have been extraordinarily successful—more successful than any other country in western Europe—in attracting inward investment into this country over the past few years from people who a few years ago we thought would never have the financial resources to be able to invest abroad. The key players were in the early days when I was working in economic and research companies. One of our first clients was the Japanese export trade organisation, which said, "We need to sell abroad in order to build our economy. Will you be kind enough to help us and we will pay you 10 per cent. above the normal fees?" A start was made with the automotive industry. We decided that technically the right way to proceed was to try to sell Japanese cars in countries that did not make cars such as Belgium. After that, cameras. Japanese cameras had

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an awful image historically. Leica was always the best. A quality of product was gradually established by co-ordinating industry down to the size of the Philips screw and deciding whether to use stainless steel or ordinary zinc. It was all a great success; then came the come-uppance. Perhaps success was too great. The whole financing system was based upon the value of participation in industrial enterprises called shares and the value of land.
Our situation at the moment is that the British economy is sound and well. I believe that London is now probably the world's centre for almost everything—and I do not refer simply to services. We are a country in which almost everyone I know wants to live and work. We have one great advantage, but it is also a disadvantage. The English language is now used in almost all contracts and trade worldwide. If you are British and happen to be part of an international team, you end up, like one of those excellent civil servants in the Department of Trade, being the one who has to draft the minutes and agreements, since you are the only one who speaks English as your first language. It is a most tiring and back-breaking job when your international colleagues are off having dinner.
I have no complaints about the activities of our governments in trade; all of them have tried very hard. The only mistakes possibly made occurred when occasionally governments thought that they should and could trade. That is not their role. It is much better that they perform the kinds of acts that the noble Lord, Lord Clinton-Davis, performed when I was in Hungary recently. He took up a shovel and, I believe, dug a hole and put a tree in it. It was all over the television. Hungarian is very difficult to interpret or translate. My interpreter, who was very kind, said, "They are saying wonderful things about the British. You really are excellent. We intend to follow the rules of your Conservative Government and Mrs. Thatcher and privatise everything that moves." It is odd that a philosophy such as privatisation, which I still think is really a free market economy and the removal of bureaucracy and restrictions, should have been so successful as a British export. I do not believe my party takes any credit for that; I think it was accidental. I believe we are quite surprised that large tracts of central and eastern Europe should suddenly follow this route and understand such things as BOT and BOOT—both English language terms—and PFI, though in one place we stayed someone thought that that was the opposite of the "Ladies". It is in these areas that there is some fun. The first world, I suppose, is all of us. The third world—that is difficult. But the second world of central Asia, eastern Europe and even the Middle East is a wonderful growth area.
I have no fears for the future. I have no fears about the value of the pound. It makes my own life cheaper when I go abroad. When I decided that I would do these things myself, I recalled what my grandfather was told when he asked advice of his grandfather. He was told that there were only three jobs a man could do. He could advise people how to do it, in which case, like the noble Lord, Lord Hunt, he would join the professions to help people to do it, although I tend to find that the legal
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profession sometimes tries to stop it all. Or he could take the credit for those who do it and then, like the noble Lord, Lord Hunt, become a politician. But if he were a real man, he would go out and do it. I have been trying to go out and do it and my last declaration of interest is that I have had two grants from the Know-How Fund. Thank you very much, Government!
4.50 p.m.
Lord Monkswell: My Lords, I thank the noble Viscount, Lord Oxfuird, for initiating the debate. I want to say a few words about the importance of exports, the broad historical sweep and the current situation, and then pose a couple of questions. I approach this subject from the point of view of common sense and having read a little about it. I am also informed by my experience of working for 20 years for a large multinational manufacturing company in this country which exported between 80 and 90 per cent. of its product through good times and had.
In researching for this debate I had a look at some of the trade and export statistics of the past 500 years. It is quite salutary to learn that the basis of our export wealth derives from the wool trade, which by the middle of the last century had translated into the cotton trade. I shall come back to that point in a moment. The common-sense view of the situation is that exports are important for two reasons. First, by exporting goods and services we generate the income to buy the imports and services that we need. The other factor is that it generates economic activity and therefore employment.
A number of noble Lords have mentioned the difference between exporting what might be described as primary products and those products which have value added. The wool trade formed the basis of our national wealth 500 years ago and then translated into a significant cotton trade. How did that happen? Cotton does not grow in this country. It had to be imported, treated and then re-exported. In 1850, 40 per cent. of our exports were cotton, wool was down to 14 per cent. and iron and steel manufactures were 12 per cent. During this century the pattern of trade has changed. Finished manufactures now comprise more than two-thirds of our exports while textiles account for around 1·5 per cent.
Perhaps I may refer to the pattern of imports and exports for the last full year, 1996–97. The largest category was electrical goods, which my noble friend Lord Simpson will know very well from his industrial experience. In almost every category imports were of a higher value than exports. As the noble Lord, Lord Ezra, pointed out, since 1983 we have had a deficit in our balance of trade.
The two most significant items a family will buy are a house and a motor car. We think of motor cars as one of the strengths of the British economy. However, that is not so. Last year we exported £9 billion worth of motor cars but we imported £14 billion. We exported £34 billion worth of electrical goods but we imported £37 billion. Overall, the export figures were £171 billion and imports were £187 billion. For years we have imported more than we have exported. Partly as a result

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of that imbalance the value of our currency has declined. The latest long-term trends for the value of the currency show a continuing steep decline, which has been apparent since the end of the last war and mirrors a similar decline which was arrested in the 1930s after the Great War.
Two questions arise from those statistics. First, how can we organise our affairs to ensure that we sell enough to buy the goods and services that we want to import; or, turning it around, how can we limit our purchases to what we can afford? Secondly, why cannot we run our own affairs; why do we need the Germans, the Japanese, the Americans and the French to run our motor car industry? In the past couple of days we have heard that our last significant motor manufacturer owned and controlled by the UK, Rolls-Royce, is being sold to BMW; and that is after BMW bought Rover a couple of years ago. Why do we need the French to have a major say in running our water industry? Why do we need the Americans to have a major say in running our electricity and gas industries?
In the 18 years from 1979 to last May the previous government saw the selling off of the family silver, as the late Lord Stockton put it, as a major plus point. I would add that it was not just the public family silver that was sold off, but also private assets were sold off to foreign owners. I have already mentioned Rover and Rolls-Royce. Perhaps I may suggest that over the next 20 years we will have to find the answers to the questions I have posed. I am sure that with the strong Government we now have—the young, inexperienced government at this stage—over the next few years they will learn the lessons of the problems faced by previous governments and ensure that the answers to my questions are found.
4.58 p.m.
Viscount Montgomery of Alamein: My Lords, in his very thoughtful opening speech my noble friend Lord Oxfuird proposed a global currency. I find that a most interesting proposition. But he implied that the euro enthusiasts may not like it very much. As a euro enthusiast, I believe that it is an extremely good idea that currencies should eventually merge into one great unit for the world. My noble friend is very optimistic if he expects that to happen even in the medium-term, but let us hope for the best.
Since then we have had a wide-ranging debate with a number of contributions on different subjects. I want to narrow down the field. It will come as no surprise to noble Lords that I propose to concentrate my remarks on Latin America, which is an area of the world with which I have been concerned for some 43 years. It is a huge area which is stable and democratic, with new policies driven by market forces. Among the benefits that have resulted from these changes have been a great amount of privatisation and low inflation. For example, Brazil and Argentina both have inflation rates which are lower than European levels.
They are important countries. The gross domestic product of Brazil is greater than that of China. The GDP of the state of Sao Paulo, which is the industrial heartland
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of Brazil, is greater than that of India. Even Peru has a GDP greater than that of Ireland. In Latin America as a whole, GDP is growing at a rate greater than 4 per cent.
It is against that background that I am glad to say that we have good news in Latin America. Our exports of visible goods have increased remarkably from £2 billion in 1995 to over £3 billion in 1997. Those are not great figures set against our world position, but they represent very substantial increases in this important and growing area. There were major increases in 1997 alone in certain specific markets. In Brazil our trade went up by 21 per cent. to over £1 billion and in Argentina it was up from 47 per cent. to £487 million. In Mexico exports increased by 35 per cent. to £429 million. Those are valuable contributions.
Unfortunately, against these rather spectacular increases our share of the market continues to remain rather low and, as a whole, it is under 2 per cent., although we have had increases in Brazil, Argentina, Colombia and Venezuela of well over 2 per cent. But due to Mexico, the average comes down to well under 1 per cent. Possibly this low penetration of the market in Mexico is due to US domination of the market, which has become even more pronounced since the development of the North American Free Trade Area comprising Canada, the USA and Mexico. The US penetration of this market on a two-way basis is now 76 per cent., which is very high, despite the fact that over many years the Mexicans have tried to diversify their trade links towards Europe. But obviously, with the impact of NAFTA, that has not been possible, but more of that later.
Other noble Lords have referred to two other factors which affect our trade figures. That may mean that the figures I have given are much larger. One is the question of the service sector and what is known as invisible trade. That is very considerable. The other factor is that many UK companies use warehousing facilities in the USA, in Houston and Florida, for re-exporting through their own subsidiary companies into Latin America. If one adds those unknown quantifiable figures together our trade is probably much bigger than it would appear at first sight.
I want to say something now about regional integration. I have mentioned NAFTA, which is bound to affect us. There has been talk of it extending itself south under the umbrella of the free trade area of the Americas. That will probably be very slow to happen. There has been a remarkable development in the past four years of what is known as MERCOSUR. That is the free trade area of the countries in the southern part of the continent comprising Brazil, Argentina, Paraguay, Uruguay and Chile, which is an associate member.
It is probably the most ambitious single regional integration scheme in the world since the European Economic Community started about 40 years ago. It has shown a remarkable degree of development of inter-regional trade within the area. It is also extremely interesting that MERCOSUR is seeking greater links with the European Union.
There is a factor which may affect it in the trade flows. As regards the EU, 87 per cent. of exports to Latin America are manufactures whereas 73 per cent. of

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the imports from Latin America are primary products. That is completely different from what happens with US-Latin American trade, which is 65 per cent. in manufactured goods. This has been referred to by other speakers. It is possibly due to the fact that a large number of British companies have invested in that part of the world. There are also American companies. But the British companies that have invested in Latin America tend to be only the very large companies. The small and medium-sized enterprises cannot generate the capital resources necessary to invest in these slightly more complicated markets. That is a point that the Minister needs to take into consideration as regards the European Union when discussing how things develop with the WTO. If we have a fortress, we need to be working towards the development of much greater liberality in trade. Sometimes there is a tendency for the European Union to be seen to be doing the reverse.
I believe I have time to mention a couple of other subjects. One factor which has been extremely helpful in the past few years has been the development of Latin American chambers of commerce in the United Kingdom. They are free enterprise bodies. There has been one for Brazil for a long time. In the past few years we have seen chambers of commerce in the United Kingdom for development in Chile, Argentina, Colombia and central America. Peru has a trade and investment group, which is the same thing by another name.
The other factor which has contributed enormously has been the development of the Latin American Trade Advisory Group, which now has a first-class chief executive. I was chairman of that organisation about 25 years ago. Among my duties was to preside over a British exhibition in Brazil. At that time the Secretary of State for Trade was the noble Lord, Lord Shore, who is to speak next. I remember the extraordinary support that he gave to this enterprise. I looked after him for several days. We agreed about almost everything except Europe about which, I fear, we still disagree; otherwise, he was enormously supportive. It is of interest that the Latin American Trade Advisory Group is based at Canning House. On 24th June a seminar will be held there for parliamentarians of both Houses and all parties. I hope that as many parliamentarians as possible will attend because it will cover LATAG, what it is doing, and also our trade flows.
I am not at all gloomy about our export trade. As the noble Lord, Lord Montague, said, the future is all about added value. I once spent a number of years in the perfumery industry. If any industry signifies added value that is it. One starts with very low-value ingredients and one ends up with very high quality and high-cost products which one sells. Added value trade is something that we do extremely well in this country, and long may it last. I look forward to hearing what will happen in the future. I hope that Ministers will continue to lead trade missions to Latin America with great vigour. It should be not just Ministers for trade, but for health, food, agriculture and many other matters because they are extremely beneficial and these sectors are developing fast.
5.8 p.m.
Lord Shore of Stepney: My Lords, I am glad that the noble Viscount, Lord Montgomery, has mentioned the Latin American markets because they are one of a whole series of new, developing markets which offer great prospects for future exports. Of course, I am not thinking just of Latin America although its potential is enormous yet largely unrealised. I am also thinking of the opening markets in Russia and what was previously the Soviet Union, and is now 15 additional states. There is also the much-neglected area of southern Asia and particularly the Indian sub-continent. In all these markets we have those very great assets which arise from our investment and trade in the past. Above all, there is a the extraordinary advantage that we have with the use of the English language.
In my experience, our embassies have been very active in promoting British trade interests, at times almost to the—I was going to say—neglect of their more traditional diplomatic role. Anyone who thinks that our embassies are out of date and unaware of the need for exports, frankly, cannot have been in touch with them for several years—perhaps for two decades or more. So, we have a lot going for us. We have many prospects and possibilities.
One instrument of policy about which I should like to hear more is the use of the Export Credits Guarantee Department. The noble Lord, Lord Palmer, mentioned that. During my period as Secretary of State for Trade, the ECGD was a tremendously useful, highly responsive and flexible instrument for promoting UK exports. I hope that it has not been saddled and lassoed by external regulations emanating from Brussels and that it can still be used as creatively as we used it in the past.
I broadly associate myself with the optimists in this debate, but not in the short term. We listened earlier to the admirable maiden speech of the noble Lord, Lord Simpson of Dunkeld. As he said, we must never forget the many factors which make for underlying competitiveness and we must invest in the future. My noble friend Lord Montague of Oxford made the point very strongly that there is much that we can do. We do not have to accept that we are, as it were, always the victims of fate. There is much that we can do as individuals or as enterprises to deal with the difficulties and to create better opportunities for the future.
However, I fear that it is no good ignoring the here and now; and the here and now and the effects on British exports and exporters of the soaring exchange rate are very serious indeed. I have found most striking the speeches of those noble Lords who have the most direct experience of industry. I refer to the noble Viscount, Lord Oxfuird, who opened the debate and gave us this opportunity; my noble friend Lord Paul, who has very great experience indeed; the noble Lord, Lord Trefgarne, whose speech reflected the dominant opinion and sentiment among small businesses today; and the noble Lord, Lord Palmer, who spoke not only about business in general, but also about the appalling state of our agricultural industry at present, which is also grievously affected by the exchange rate. Anyone who thinks that those difficulties might be short-lived should study the remarks of the noble Lord, Lord Howell of

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Guildford. The noble Lord is almost certainly right that unless something is done, we shall be in for a very long period of high exchange rates. We cannot simply assume that market sentiment will change. It is very worrying.
I turn to what I see as the sources of the problem and I should like to venture at least one possible policy development to ease the situation. I am not confident in saying that. Indeed, I am diffident because the situation is so difficult. First, we must accept that currency holders in Europe anticipate that the euro will be unsatisfactory and that there is therefore a movement of money into the pound sterling in anticipation of a weak euro. It is, I suppose, just possible that we could help to influence that by striving to achieve a rigorous application of the convergence criteria when the heads of state meet on 1st May. Frankly, I do not have much hope of that happening.
Secondly, we must acknowledge the fact—at least, the Government will certainly have to acknowledge it—that there is still an underlying weakness in the economy. Annex A of the Red Book, on the economy, which was published not very long ago, begins with the words:
"The UK economy continues to suffer from a number of underlying structural weaknesses. As noted in Chapter I, the level of GDP per head is below that in the other G7 economies and below the OECD average. In part, this reflects the UK's relatively low capital stock per person employed—the result of years of under-investment".
That is the key—and it is something that cannot be put right in only a short period of time. There must be a consistent national policy of recognising the under-investment of the past and the need for sustained higher investment in the future.
However, there will not be higher investment in a market economy when firms are unable to break even by using all their present capacity. If they are to be driven into the red in their annual accounts, they will have neither the incentive nor the means to invest more heavily so that the future is secure. That is self-evident. Frankly, unless there is such a change in behaviour and attitude, we as a country (and as a government) will not achieve the many objectives which the Chancellor and his colleagues have set themselves, such as Welfare-To-Work, making changes in the welfare state and, above all, reducing the number of people who are unemployed in the United Kingdom. Although according to the old method of calculation the unemployment figure is down to about 1·5 million, the figure is really about 2 million if one uses a more realistic measure, as will become plain very soon.
If we are to deal with those matters, my goodness!, we cannot disagree with what the noble Lord, Lord Simpson, said in his maiden speech, which is that exports are of paramount importance. Unless we increase our exports and get the balance right, our national prospects and performance will not change for the better.
I believe that the difference in interest rates between the short-term interest rate set by the Bank of England and its advisory body and those set by competing
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countries in Europe and elsewhere is serious. That is bound to be the case because, unless other factors operate against it, if there is a substantial gap of the order of 3 per cent. between our interest rates and those of most of our continental competitors, money is bound to pour into London and the exchange rate will rise.
I come now to what I think is the crux of the matter. It was wrong—it was folly—to hand over the determination of interest rates to an independent body and council chaired by the Governor of the Bank of England. That determination should have been retained by the Chancellor of the Exchequer. The Chancellor is now unable to move because he no longer has the instrument in his hands. That was a great act of folly and may be the most disastrous of the decisions taken by the Government.
I have only one suggestion to make. I refer to the Bank of England Bill. Incidentally, where are all those noble Lords who participated in the Second Reading debate on 13th February when everyone welcomed the abandonment of the Chancellor's control of the Bank? I put that question to one side, but I should like to refer to the "emergency clause" of that Bill. Clause 19, which states:
"(1) The Treasury, after consultation with the Governor of the Bank, may by order give the Bank directions with respect to monetary policy if they are satisfied that the directions are required in the public interest and by extreme economic circumstances".
That is a very useful reserve power. I do not believe that my noble friend (indeed, he is a friend) who is to reply to this debate can give an answer to this matter, but I very much hope that he will try to secure from his right honourable friend the Chancellor of the Exchequer a positive response to my suggestion that this power be now used.
5.20 p.m.
Lord Razzall: My Lords, I do not believe that my noble friend Lord Harlech is able to participate in this debate. It falls to me to wind up on behalf of the Liberal Democrats. I join other noble Lords in thanking the noble Viscount, Lord Oxfuird, for introducing this debate and giving speakers with far greater experience and wisdom than me an opportunity to participate in it. The Motion calls attention
"to the importance of export sales to the economy of, and employment in, the United Kingdom".
That has gained the unanimous approval of noble Lords present. Having listened to the debate, it is quite clear that we are all in favour in the importance of export sales to the economy of, and employment in, the United Kingdom. I am sure that all noble Lords agree with the comments of the noble Lord, Lord Simpson of Dunkeld, whom we congratulate on a very wise maiden speech. In particular, I note his remark that exports should become a mindset irrespective of their value. Many noble Lords in the course of the debate have followed his lead by indicating that this is not simply a matter of whether the Government's economic policy is right or wrong.
Noble Lords should not lose the opportunity afforded by this debate to ask the Minister a number of questions as to what the Government believe they can do to

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improve export sales. I and a number of noble Lords entirely support the suggestion of my noble friend Lord Ezra that the Select Committee on which he and others served with such distinction in the 1980s should be revived to look at the issues that have recently arisen. In many ways we face circumstances similar to those that obtained in the 1980s. I am sure that noble Lords endorse my noble friend's suggestion and look forward to the Minister's response to that.
I should like to press the Government on the current economic situation. Noble Lords have indicated that this is an extremely topical debate. At present we cannot open a newspaper or turn on the television without reading or listening to complaints from manufacturing industry—in particular those with significant export sales—about the current exchange rate. Anecdotally, I can do no better than to quote a letter dated 26th February this year from the chairman of a well-known listed exporting company:
"Has everyone forgotten that our economic revival began on `white Wednesday' when we left the ERM in 1992 and our exchange rates became more realistic, exports improved, the balance of trade improved, industrial activity improved, unemployment fell—are we now going to see this reverse until we are forced to reduce interest rates to bring the exchange rate down?".
He wrote to me again yesterday in advance of this debate. He had last written to me in February about the sterling exchange rate. He went on to say:
"Since that time the situation has further deteriorated and as I forecast more UK manufacturers are now being affected. The high level of sterling is encouraging competitive imports and is making exporting financially unattractive: this I anticipate will result in a substantial deterioration in our balance of trade".
That is the anecdotal evidence. The economic case that we have all read in the newspapers and listened to is very straightforward. The argument is that since this Government came to power there has been inadequate fiscal tightening of the economy, which means that the only weapon available to control inflation is interest rates. There is a perception that interest rates will go up, which will simply exacerbate the export position in the economy. People who hold that view say that, as a result, the economy will have a hard landing rather than the soft landing that everyone anticipates. That is the basic case which is made against the method adopted by the Government in their exchange rate policy since the election.
However, as a number of noble Lords have indicated, life is not always that simple. Many sympathise with the Chancellor and believe that in running the British economy he is attempting to drive a car through a thunderstorm without windscreen wipers. A case can be made the other way quite easily. It can be said that there has been significant fiscal tightening through the measures taken by the Chancellor. Although the Tory Opposition do not accept that, a number of economists believe that that has taken place. Further, as the noble Lord, Lord Simpson of Dunkeld, and my noble friend Lord Ezra have said, these days a large volume of our exports has a very different structure from the exports to which we have become accustomed throughout the manufacturing history of this country. It has been said that if the exchange rate is high imports are cheaper. Bearing in mind that a good deal of our export
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manufacturing industry consists of importing products from outside the United Kingdom and reselling them with added value, the impact of a high exchange rate does not necessarily harm those exports.
A number of economic commentators have said that throughout its history this country has suffered from the fact that, as soon as there is a low exchange rate, productivity gains are given up by the manufacturing sector at the expense of the exchange rate because the opportunity is taken to sell cheaply and to have wage settlements higher than they should be without the discipline of a high exchange rate. That argument is being pushed very strongly at the moment.
The final point, which one tends to ignore, is that by and large those countries that have had a high exchange rate over the years have a higher standard of living. Countries such as Switzerland, which traditionally has had a high exchange rate, have a considerably higher standard of living than we have in this country. Many economists argue that to a significant extent, but not entirely, that is the result of that country's high exchange rate.
Therefore, I believe that the arguments are balanced. I should like to put two significant questions to the Minister. Whether I or other noble Lords are right or wrong in our comments about the exchange rate, the Government's policy on the exchange rate is not clear. I read carefully what the Chancellor of the Exchequer said in his Budget speech. Much of it is welcomed by these Benches. But it was very surprising that, in the context of what was being said by manufacturing industry and economic commentators generally, there was hardly anything in his Budget speech about the Government's policy in regard to the exchange rate. For a considerable period the Conservative Government, under the chancellorship of the noble Lord, Lord Lawson of Blaby, had a significant monetary and exchange rate policy which shadowed the deutschmark. Within all of our recent experience the Treasury has been running a significant exchange rate policy but we do not know what it is.
I read carefully the evidence given yesterday by the Chancellor to the Treasury Select Committee of another place. His line appeared to be that he was not prepared to take short-term action with regard to the exchange rate because of the long-term advantages to the UK economy flowing from our not taking short-term action. However, the Government must have an exchange rate policy. I do not believe that they do not have one, but I should like to know what it is.
The second point upon which I should like the Minister to comment is whether he agrees—if he does—with me (I know that the noble Lord, Lord Shore, will disagree with me) that many of the problems that we have been discussing will be resolved when this country goes into the EMU. Early entry into the EMU at the right level will undoubtedly solve many of the problems about which noble Lords and manufacturing industry have been concerned, but until the Government indicate what their policy is with regard to the exchange rate I do not see how we can have a policy about the correct level for entry into the EMU.
5.30 p.m.
The Earl of Home: My Lords, from this Bench perhaps I may add my thanks to my noble friend Lord Oxfuird for giving us the chance to discuss this important topic, at a most opportune moment. Perhaps I may say also how much we all appreciated the contribution made to our deliberations by my noble friend Lord Hunt of Wirral. Before one can export, one must first make the investment, and, when Secretary of State for Wales, my noble friend did so much to create the right environment for investment in Wales. I have to say that that was sometimes at the expense of investment in Scotland. He was successful and Wales is, of course, reaping that reward.
We also listened, with great fascination, to the first speech in this House of the noble Lord, Lord Simpson of Dunkeld, who has enormous experience in the export field and made some excellent points, of which I hope the Government will take note. I hope also that his busy life will allow him to make many more contributions when, perhaps, he may not be constrained by the tradition of a maiden speaker not being controversial.
The theme of many noble Lords today has been the strength of the pound and I make no apology for returning to that theme, for it is, as has been said, the biggest worry for exporters today. One point, however, which has not been brought out so strongly is that sterling's strength is not, as was the case for several decades with Germany and France, the reflection of any continuous and strong balance of payments surplus. Rather, sterling's strength is due to the tight management of the UK economy. As the noble Lord, Lord Shore of Stepney, pointed out, we have recently debated the Bank of England Bill which will, sadly, give formal powers to the Bank to control interest rates. However, those are still the responsibility of the Chancellor, until the Bill receives Royal Assent. With the Government formally abdicating that responsibility, the chances are that the Bank will continue to keep interest rates high compared with the dollar and the European currencies no doubt in an effort to control inflation, and the problems for exporters, as predicted by my noble friend Lord Howell, will only get worse, or continue to be bad.
I understand that the Minister, during the conference on helping smaller companies to export last week, made the point about Germany and Japan managing well when they had strong currencies. I would point out to him that, first, interest rates in real terms were considerably lower in those countries in those days and companies could borrow more cheaply than we could to finance their export efforts. Secondly, their governments made conditions more attractive for savers at that time and did not have to raise interest rates to curb consumer spending. Thirdly, Japanese exporters often used their own in-house trading companies to assume, on their behalf, some very high risks, some of which went badly wrong for them in Iran in the early eighties and later in Iraq. The right course for the Government to take would have been to encourage higher savings by restoring tax breaks for savers.
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At that same conference Mrs. Barbara Roche advised that
"Companies must learn to be more efficient".
Frankly, such a remark is insulting to exporters. The reality is, as everyone involved knows, except apparently this Government, that those days have long gone.
Neither the Chancellor, who yesterday argued that industry must be ready to take the pain of the high exchange rate, nor Mrs. Roche, seems to be aware, or to have taken any notice of the fact, that a vast number of British companies have already been through the enormous pain involved in down-sizing, redundancies and mergers. Industry, including most SMEs, as my noble friend Lord Trefgarne, pointed out, are working long hours with a minimum number of people at their disposal.
The Government's own 1998 Red Book makes disconcerting reading. My noble friend quoted from it the words that I was proposing to quote. I will not repeat them. The Red Book goes on to say that export growth is expected to be more than halved in 1998 from 8 per cent. to a maximum of 3·5 per cent. and the current account to move from a surplus of £4·5 billion last year to a deficit of £6·5 billion this year.
Export growth is still occurring, but that is a result of contracts and understandings entered into earlier. The Chancellor need only read today's Financial Times to see that groups such as the Birmingham Chamber of Commerce, which represents companies in the forefront of exporting, are forecasting serious problems in the near future. My noble friend Lord Sanderson of Bowden rightly mentioned Scottish Engineering as another of those groups referred to today in the press.
Those are worrying trends, particularly in view of the excellent performance of our exporting industry last year. As my noble friend Lord Howell said, it is certainly true that the Asian crisis has not helped but to put the crisis in context, the troubled Asian economies accounted only for less than 7 per cent. of UK exports last year and developments in Asia are, according to the Red Book, only expected to reduce British GDP by half a percentage point in 1998. Where the crisis will, of course, affect us in due course is in other markets, where Asian products will be much more competitive than our own, or indeed in our market where the rise in sterling will make our own imports very much cheaper. Imports in the fourth quarter last year were up 10·75 per cent. on the same period a year earlier and import growth will outstrip export growth for at least the next two years.
Speaking last week at the annual lunch of the Middle East Association the President of the Board of Trade emphasised the need for British companies to concentrate on quality and less on price. I wonder what she thinks British industry has been doing for the past 10 years. She said
"The need to compete on quality and not just price has, of course, been a consistent theme of my party, although it is a very different message from the one you were receiving up to a year ago".
I have to say that I find the last part of that comment quite extraordinary. Not only was it a totally inappropriate forum, with several foreign ambassadors

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present, to make a somewhat cheap political remark, but I seriously question its validity. In nearly 30 years of travelling to the Middle and Far East, including six years as chairman of the Committee for Middle East Trade, often accompanying Ministers, I have regularly heard Ministers of both political parties emphasising to industrialists the importance of quality. Indeed, the last time I had to endure a significant number of complaints about the quality and delivery of British goods was in the early eighties when British industry was still suffering from the malaise of the late seventies. I should like the Minister to ask his colleague what evidence she can produce to support those comments.
Under increasing pressure to remain in the export of manufactured products, companies are having to switch to using components from overseas producers whose prices are becoming ever more attractive. Overseas sourcing of this kind is a continuing trend and it may indeed be an inevitable feature of the globalisation of world trade, but it does, of course, have an obvious negative impact. When that trend is exacerbated by artificially high interest rates, then it is bound to have an adverse long-term effect on the fortunes of component suppliers and their workforce.
The natural extension of this policy, encouraged by a strong pound, will be that companies will either buy or set up manufacturing capacity in low-cost economies. I have no need to spell out to this audience the clear detrimental effect that such action will have.
However, from these Benches, we welcome some of the action which the Government have taken. We wish the Export Explorer initiative well and hope that the Support for Exhibitors and Seminars Abroad scheme helps the SMEs to find export markets. The Export Explorer scheme is, of course, limited and confined to Europe and Scandinavia, but I hope that the Minister will tell us that it can be extended soon.
Perhaps I may briefly pick up one or two comments made by other noble Lords. The noble Lord, Lord Palmer, spoke of the need to retain our agricultural export markets, particularly in the export of cereals. We have recently debated the plight of the farming industry and it would be yet another slap in the face for farmers, and indeed an abrogation of the hard work of British Cereal Exports, which has done a tremendous job in recent years, if we were to lose those markets for wheat and barley.
Secondly, I was fascinated by the different trade patterns coming out of Latin America, as described by my noble friend Lord Montgomery of Alamein. Surely, there are lessons for us to learn from those, and the fact that our exports to Saudi Arabia, at £3·8 billion, exceeded our total exports to the whole of Latin America must mean that there is still enormous potential if we can exploit those greatly improving markets. Nevertheless, my noble friend's figures on the increase in trade were encouraging.
I should be interested to hear the Minister's reaction to the proposal of the noble Lord, Lord Ezra, for a Select Committee on overseas trade. It is evident from the quality of the speeches we have heard today that many noble Lords are more than qualified to sit on such a
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committee. Furthermore, I echo the remarks of the noble Lords, Lord Shore of Stepney and Lord Montague of Oxford, in praising the work of our embassy staff. They do a superb job, often in difficult conditions.
In addition, the noble Lord, Lord Shore, mentioned the ECGD. Having sat on its advisory council for five years, I also share his hope that the ECGD will continue to prosper without being emasculated by European bureaucracy.
As was mentioned by the noble Lord, Lord Simpson, one Prime Minister said, "Exporting is fun". I doubt whether today he would find more than a handful of exporters who would agree with him. Yesterday, my noble friend Lord Marlesford gave the House some encouraging statistics showing virtually full employment in several parts of the country. Without exports to help us, redundancies and bankruptcies will quickly erode that position. We on these Benches beg the Government to take urgent steps to stop this trend.
5.42 p.m.
The Minister of State, Department of Trade and Industry (Lord Clinton-Davis): My Lords, I, too, begin by congratulating the noble Viscount. Lord Oxfuird, on initiating what has been a splendid debate. It has been wide ranging, somewhat controversial and inconclusive in respect of some material issues to which I shall refer later. Furthermore, it has come forward with the reasonably radical proposal of a global currency.
It is a privilege to reply to the debate. I say immediately to my noble friend Lord Monkswell that I speak as perhaps one of the youngest and most inexperienced members of the Government. now well versed after their experience of 11 months.
A number of your Lordships underlined the significance to our economy of international trade, manufacturing and the service sector. The noble Lord, Lord Ezra, commented on how complex that is. I share that view. It is made more complicated by the issues to which he specifically drew attention; for instance, information technology. He also drew attention to the opportunities which arose in certain niche areas, one of which he identified—the issue of environmental services. That is ever more important because of the growing influence and impact of ISO 14,000, which is designed to assist the development of environmental management systems. I believe that that is of particular significance in south east Asia, even at this critical time in the affairs of that region.
I was invited to comment on the proposal of the noble Lord, Lord Ezra, to set up a Select Committee on the issue, which arose some 12 years ago in this House. It is not for the Government to determine whether there should be such a Select Committee; it is a matter for the House. It is, in my personal view—and for that reason I cannot speak for the Government—an issue to which the Government should give serious consideration.
Before turning to deal with a number of issues that have arisen, perhaps I may compliment the two maiden speakers in the debate. Their speeches were of outstanding quality, based on a real experience of trade affairs. My noble friend Lord Simpson made a superb

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contribution. The fact that such a noted industrialist chose to make his maiden speech in this debate, and to speak so relevantly and with such expertise about some controversial issues, speaks volumes for the significance of the issues we have tried to tackle today. I hope that we shall hear a great deal more from my noble friend on this and many other subjects.
I turn to another good friend. I cannot refer to him as a noble friend because I am not allowed to do so. I refer to the noble Lord, Lord Hunt of Wirral. He and I were sparring partners for some time during the period of the Labour Government from 1974 to 1979. He always speaks from a firm base of knowledge and understanding. On this occasion he spoke with considerable passion, too. I welcome him here and I hope that we shall hear him on many occasions.
Whether fortuitous or planned I do not know, but the debate introduced by the noble Viscount, Lord Oxfuird, is a timely one. Perhaps it is a result of his perspicacity. However, the debate is especially opportune as we are hosting this week the second ASEM meeting and the third Asia/Europe Business Forum. We hope that the delegates, politicians and ministers coming to this capital from Asia and Europe will be able to make a number of recommendations and agree on conclusions which will help to relieve the severe financial crisis currently afflicting many Asian countries. We hope that those conclusions will further improve the conditions for trading between our two continents. Trade is the lifeblood of the UK economy and it is the foundation of our prosperity. As was said by my noble friend Lord Paul, speaking with vast experience of industrial affairs, exports really do matter.
Income from the sale of goods and services overseas represents almost 30 per cent. of our GDP. Compared with the United States and Japan, that is remarkable because their share of exports in GDP terms is much lower at around 10 per cent. each. I believe that my noble friend Lord Simpson was right in underlining the fact that exporting has a direct relationship to competitiveness. The noble Lord, Lord Ezra, made the same comment. A presence in overseas markets exposes firms to more intensive competition, new products, new ideas, more efficient technologies and better working practices.
The term "exports" takes on a much broader meaning today than it ever did in the past. After all, it includes not only receipts from the sale of goods but payments made for the sale of services. For example, it places financial services alongside major and successful manufacturing sector exporters. Services comprise about a quarter of our total exports.
We should not forget too the income from substantial overseas investment made by United Kingdom firms, although that is not, strictly speaking, classified as exports.
What is the linkage between exports and jobs? That is a point to which the noble Lord, Lord Hunt, drew special attention. What he had to say in that respect indicated his own very strong principled position in this
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matter. There is not a great deal of difference between us in relation to what he said about the significance of training and the importance of linking those issues.
The United Kingdom's exports of goods and services account for about 5.75 million jobs. I have been asked what the Government are doing to support exporters. We inherited a range of export promotion schemes and activities from the previous administration. Nevertheless, we held very significant pre-election consultations with business. We received suggestions from that consultation which were dealt with in our business manifesto. In fact, that is the first time that any political party has had a business manifesto. Those consultations suggested that there was substantial room for improvement. I believe that it was Helmut Schmidt who said that the largest room in the world is the room for improvement. That is a very sage remark.
Consequently, in July of last year we set up the Export Forum, a body made up of people from the private and public sectors. It was asked to undertake a candid assessment of our current export promotion programme. It reported in November with a report entitled Towards an Export Initiative. On 25th March we responded to the forum's report—although only the beginning of a response—with a new package of support aimed specifically at small and medium sized enterprises.
One of the forum's conclusions, which was quite important, was that to have an approach based on the UK's top 80 markets provided no real focus. Therefore, we are developing programmes of additional activity based on a few key markets where we believe extra effort will yield particularly good results.
For new exporters, we are putting together a new export initiative for western Europe and the United States. I unveiled the Export Explorer package for western Europe last week which will allow new exporters to undertake prepared visits to some of the more accessible markets and trade fairs in western Europe for £99, plus travel and accommodation.
Target markets for experienced exporters are—and I believe the noble Viscount, Lord Montgomery, referred to this—South Africa, India, Poland, Russia, China, Japan, South East Asia, Brazil, in the context of Mercosur, Turkey and Egypt, all of which offer enormous potential for British companies. Yet in all those markets we are seriously underachieving. In China, for instance, our share of total world exports in 1997 was only 0.7 per cent. Therefore there is a great deal of room for improvement. I hope that that will be regarded as a fairly uncontroversial observation.
Those markets represent the countries where there will be an additional effort. However, I wish to underline the fact that as a result of that, we shall not be doing less in other markets. Indeed, we are aiming to improve all our services in that field.
The Export Forum recommended that there be a new sales leads service which will aim to make greater use of the internet in supplying market information to UK companies. We have acted on that, too.

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On trade fairs, we removed that budget from the sector challenge as it made no sense to subject exhibitions which need long term planning to short term challenge principles. Therefore, in addition, we announced the largest ever programme of DTI sponsored trade fairs.
We shall also be launching our new programmes of activity in the target markets throughout the year. So the package that we launched on 25th March is certainly not the end of our response to the Export Forum. In many ways, it is just the beginning.
In parallel to our work on export promotion, we remain committed to helping British exporters by removing barriers to trade through multilateral trade liberalisation. This is a top priority for my department. That underlines the point made by the noble Viscount, Lord Montgomery. The benefits of unhindered market access speak volumes for themselves—simply witness the rewards we have reaped in the EU. In 1997 our exports to western Europe were worth over £100 billion.
Apart from that, the single market programme has undoubtedly resulted in an expansion of jobs and job opportunities which certainly would not have existed had we not embarked upon that great area of policy. I was going to call it an experiment but it is no longer an experiment. The Delors Commission on which I had the honour to serve and which was very well served by the noble Lord, Lord Cockfield, has indicated how important that really is.
On the global front, perhaps I may say a few words about the World Trade Organisation and its importance to us. It is not the job of government to become involved in telling business what to do. But we must try to establish the right environment which will allow our trading affairs to prosper. Establishing an international rule of law for trade and an effective disputes resolution process which must be respected are truly salient advances. I am a passionate believer in the paramountcy of that disputes resolution procedure and I am totally against the idea which has sometimes been articulated in Congress in the United States of three strikes and you are out. I believe that that would be the beginning and the end of the whole concept of a rule of international law. I hope that Congress will not continue to articulate that view.
What has happened in the WTO, which has been a natural consequence of previous events, is that there has been enormous help to liberalise trade in a range of information technology products, trade in telecommunications services and in financial services. As a government, we have played a leading role in enabling the European Union, through Sir Leon Brittan, to negotiate a successful conclusion to those negotiations. All that will benefit United Kingdom business by creating a more stable trading environment with fewer barriers to trade. Liberalising telecommunication services alone has been estimated to yield annual benefits to the world of some 140 billion dollars in terms of lower prices.
However, we need to- do much more. We have identified a number of areas for consideration by the World Trade Organisation, reflecting business and consumer priorities where real gains can be made. They
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include further tariff reductions; the simplification of trade procedures for imports and exports: better disciplines on state subsidies; improved respect for intellectual property rights; liberalising public procurement rules; removing technical barriers to trade; simplifying rules of origin and better domestic regulation. That is the right way to proceed internationally.
We have important interests in the further liberalisation of investment and in the examination of the interaction of trade and competition rules. We have existing commitments to liberalise further in the agriculture and services sectors from 2000.
Therefore, that is the right way to proceed. In the next round, we believe that a comprehensive rather than a sectoral approach allowing members to identify trade-offs and make concessions in a range of areas, thus reaching agreement on a package of measures covering both market access and further WTO rule-making, are essential.
Next month, we shall see the second WTO ministerial conference in Geneva. That will review implementation of Uruguay Round commitments, giving a strong push to further work in the WTO, thereby initiating wide-ranging preparatory work to provide a strong foundation for comprehensive negotiations from the year 2000.
I turn now to a slightly more controversial issue; namely, the strength of sterling. I am reminded a little of my long period as a solicitor. I must not say too much about what the noble Lord, Lord Hunt, said, although I rather liked it on the whole. When one is involved in litigation, as the noble Lord and I have been over a long period of time, one is used to hearing experts on both sides speaking with commendable integrity about their views which are in total opposition. It is a little like the situation this afternoon.
On one side of the argument we had my noble friend Lord Shore, with whom I had the great pleasure of serving in government for two years. It was a privilege and I learnt a great deal from him during that time. There were also the noble Lords, Lord Sanderson and Lord Trefgarne, my noble friend Lord Paul and the noble Earl, Lord Home, all of whom put serious question marks on the Government's policy concerning the strength of sterling. They all wanted to see ways and means of reducing the value of sterling at the earliest opportunity. On the other side of the argument there were people like the noble Lord, Lord Ezra, my noble friend Lord Montague, and the noble Lords, Lord Howell and Lord Selsdon, who reflected a rather different point of view. The difficulty for any government is the same as it is for a judge; namely, to try to achieve a true balance. The only way to do so is to have a chip on both shoulders, is it not? It is a difficult matter.
I was invited by the noble Lord, Lord Razzall, to distance myself from my right honourable friend the Chancellor of the Exchequer. But I believe that that would he a little dangerous for me to do; indeed, I do not propose to do it because I think that he is right. He gave evidence yesterday, and although I have not read

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the entirety of it and have only read reports, it seems to me that he stated quite clearly what his position was, and not for the first time. He also expatiated on the matter in his Budget speech. There is a difference of view. I appreciate that many exporters are facing difficulties, but I am not convinced that those difficulties are exclusively due to the value of sterling.
We are determined to use our best endeavours to keep inflation down. Inflation in this country is still higher than in many EU member states and, indeed, elsewhere. We are determined to maintain sound public finances because we believe that stability in the long run, with a stable and competitive pound, has to be the goal. A boom and bust economy does not lead to long-term, sustainable growth. I am not aiming to be highly controversial, although perhaps I was rather tempted to be so by the noble Earl, Lord Home; but we believe that mistakes were made by the previous administration in that respect. I believe that it was right to ensure that interest rates were removed from political manipulation. Indeed, that led to essential decisions being deferred and it played a part in accelerating the rate of sterling. Those decisions are now reposed with the Bank of England, where the Government believe they should have been before.
In his excellent maiden speech, my noble friend Lord Simpson commented upon the right and wrong mindset. He put it very well. Although the noble Earl thought that my right honourable friend the President of the Board of Trade was speaking down to industry, I have to say that I do not believe that she was doing so; indeed, it is important to emphasise the quality of British products.
The noble Earl then went on to say that this had been done many times before, but he did not comment adversely on that fact. It is important also to emphasise productivity and competitiveness as did my noble friend Lord Simpson. It is also important to exploit new opportunities and to widen markets, and we were given an example of that by the noble Lord, Lord Ezra, who knows a great deal about environmental expertise.
We must ask ourselves—and I put this question again despite the qualifications that were inserted by the noble Earl—how was it that Japan and Germany were able to have such a successful export policy in the 1980s? Would we prefer a weak currency? That is another question which has to be asked in connection with the issues that were traversed today. Despite what has been happening and despite the recession in south-east Asia, British companies are continuing to develop export markets. A number of winners of 1997 export awards for smaller businesses were recently asked how they were dealing with the strength of sterling. They spoke of continuing success being the result of a number of factors: for example, adapting their product to local demands; thorough market research; spotting new opportunities; learning about the culture of the countries into which they were seeking to export; regular training of their overseas sales teams; developing long-term relationships; foreign currency quotations; establishing new markets to compensate for ones which might not be so buoyant; good marketing; and good customer
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service. Not one of those essential elements of exporting actually relates to the strength of sterling. That is the evidence we were recently given.
I turn now to deal with some of the more specific comments made during the debate. The noble Viscount, Lord Oxfuird, asked about licensing procedures and the time that these take to process. My right honourable friend the Foreign Secretary made it very clear when he made an announcement last July, on the new criteria for the assessment of export licence applications, that the criteria would not be applied mechanistically and that individual applications would be considered case by case. I should point out here that we are talking about export licences for military equipment. In the months following that announcement, this led to an increase in the time taken to assess some applications. Ministers are now very much more involved in this sensitive area than they ever were before. There is some inconvenience and uncertainty attached to the matter as far as concerns delay; but I believe that it is absolutely right that we should continue to proceed along those lines. It involves a number of departments. We hope—in fact, I believe that we are already achieving this—that there is some reduction in the time-scales generally for processing such matters.
My noble friend Lord Paul spoke about the Ambassadors for British Business scheme. I welcome that. Indeed, my noble friend has had a great deal of practical experience in that respect derived from his work in India, Nepal and the USA. Other ambassadors for British business have undertaken work while in Peru, the United States, Hong Kong and Belgium, among other places. Further projects are planned for China, Germany and Mexico. That is an extremely good example of the way in which the DTI and the Foreign and Commonwealth Office work together on such projects.
I turn now to the remarks made by the noble Lord, Lord Palmer, whose family biscuits I have indulged in liberally over the years; indeed, they have been a favourite of mine from childhood to second childhood. I was interested to hear him speak about the expanding area of malt exports. Through our Export Challenge Award, we are supporting British cereal exports to the tune of £30,000 in developing a malting barley strategy for China, South America and eastern Europe. I also welcome the noble Lord's remarks about the importance of tourism and about the work of the British Tourist Authority. That is of vital importance to our trade generally.
The noble Viscount, Lord Montgomery, spoke about an area in which he has vast expertise—Latin America. We see opportunities there for considerable expansion in our export trade. That is one of the recommendations of the Export Forum. I was interested to hear that the noble Viscount was involved at one time in the perfumery business. That reminds me of an opinion poll carried out by the Sun newspaper which asked its readers who or what was Jacques Delors. Some 30 per cent. replied that it was a French perfume!
As regards the ECGD, short-term business was privatised during the early 1990s. However, I assure my noble friend Lord Shore that it is not being unduly

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constrained by any activity on the part of the European Union. I believe that the ECGD's premium rates are on the whole competitive. I think I have covered most of the points that were raised. I apologise if, due to the extensive area we are discussing, I have not covered them all. This has been an invaluable debate. I end where I began by thanking the noble Viscount for introducing it. It has been a commendable initiative on his part. I believe that the Government will have learnt a great deal from it.
6.10 p.m.
The Viscount of Oxfuird: My Lords, it must be as a result of sixth sense that this Motion appears on the Order Paper. I was under some pressure to tighten the format of the Motion. I am glad that I did not because that broad format has produced some wonderful speeches. I have learnt so much and I have had the privilege of listening to two of the best maiden speeches that I have ever heard in this House. I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Social Security and the Disabled
6.11 p.m.
Lord Campbell of Croyrose to call attention to the case for rationalising the present structure of social security benefits and allowances while protecting the incomes of severely disabled people and the standards of services available to them; and to move for Papers.
The noble Lord said: My Lords, the Motion is deliberately limited to disablement and, within that, my emphasis is on severely disabled people. The Green Paper of last Thursday restates many principles which have been widely accepted and adopted by the main political parties.
Chapter six on disabled people repeats some of the long-term proposals already announced while the Labour Party was in opposition and later, looking ahead eventually to the year 2020. It is understood that the right honourable gentleman, Mr. Frank Field, was asked to think the unthinkable, not just to spin the spinnable! That was good. No possible options were to be ignored. That should be normal procedure. It was, before leaks became commonplace. I make the passing comment that I hope Ministers and officials will always be able to consider every course of action, in confidence, before conclusions are reached and announced.
There is general agreement in Parliament that the social security system needs reform and rationalisation. The Conservative government had already started replacing and combining some benefits. My Motion endorses that process. The principle underlying the Green Paper is welfare to work. On that, too, there can be little disagreement. The questions that arise, however, are, first, to what extent can this be carried out in practice, especially with severely disabled people? Secondly, will there be enough jobs available, bearing in mind the continuing uncertainty about the size of the minimum wage? It must also be remembered that more
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than two-thirds of disabled people are over working age, according to the 1991 census. Where disabled people are concerned, the scope for moving into work is limited.
In December I was part of a small deputation from the parliamentary disablement group that had a meeting with the Secretary of State for Social Security, the right honourable Harriet Harman. We have had two further meetings. The last was held on Monday. We were led by the noble Lord, Lord Ashley, one of our joint chairmen. He has asked me to explain that he would have spoken in this debate if it had not clashed with a longstanding engagement at the University of Staffordshire, of which he is chancellor.
The main reasons for our first visit to the Secretary of State were the serious worries being expressed by some disabled people on reports that their benefits would be reduced through reviews to be carried out by the Government. Ms Harman was not then able to reassure us on particulars while the wide review preceding the Green Paper was still in progress. Now the published Green Paper tells us more. In all this I urge that the situation for severely disabled people should not be made worse and should be considered with care and sensitivity.
Some disabled people have been worried about the Disability Living Allowance Advisory Board's suggestion that in two-thirds of DLA cases there was insufficient evidence to support the claims for benefit. The board's suggestion is recorded on page 55 of the Green Paper, where it is also proposed that a review be undertaken into the gateways to both DLA and attendance allowance (AA).
I fear apprehension will remain among some of the most handicapped people in the country, for example about possible reduction or means testing of DLA, because they would not be able to meet costs of transport, including to places of work. DLA is not an imaginary example. It featured in the letter from the right honourable gentleman Mr. David Blunkett, objecting to that option, which appeared in the press in December after a leak.
The social security system has developed and expanded into a complex web of benefits and allowances over the past 35 years. Reform and rationalisation are now necessary, and "consolidation" is the right word as regards severely disabled people, so that their income and services are not reduced.
When I entered Parliament in the other place 39 years ago, there were only two categories of disability eligible for special payments: industrial injury and war disability. That was 10 years after the NHS and the National Insurance scheme had started. I declare again an interest, having been severely wounded and partially disabled in World War II.
Since that time various benefits and allowances have been introduced to meet particular circumstances. They have been generally welcomed. Examples are attendance allowance in 1971 and mobility allowance in 1976, introduced by Conservative and Labour governments respectively. There are now so many kinds

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of benefit, with disability benefits overlapping general benefits such as housing or unemployment benefit, that it is a confusing maze for members of the public.
Even by 1981 the miscellaneous benefits were already creating problems for disabled people and their helpers in discovering who was eligible for what. I mention that year because it was the United Nations international year of disabled people and I was chairman of the year for Scotland, and was commissioned by the Nuffield Trust to write a small book on disablement in the UK. In one of the appendices I recorded a list of the benefits and allowances then available to disabled people, showing which were contributory and which were not. Now there are considerably more, and it is not easy to deduce the contributory factor or whether they are tax free, means tested, reduced when combined with a general benefit, or how to apply for them and be examined.
Both the previous government and this one have recognised that action to simplify the system is needed. I welcome those intentions but they will not be easy to carry out. Today I concentrate on one section of the Department of Social Security's clients—an important one—the disabled, as distinct from unemployed young people, or parents tied to their homes by young children, or other able-bodied or mentally able people who are at present dependent on social security benefits. Of course I include the mentally disabled with the physically disabled. I am glad that the noble Lord, Lord Rix, is taking part in this debate as he will no doubt enable me to shorten my speech by addressing that subject himself.
How many people are involved? Numbers must be of special interest to the Chancellor of the Exchequer. The answer is millions of people, and millions of pounds. Since 1992 the figure of 6.5 million disabled persons has been tossed around. It arose from the 1991 census, which was the first time the census recorded disabled people as a separate category. The definition used included people with minor as well as severe disabilities. Perhaps the most important point is that more than two-thirds of the 6.5 million were over retiring age. That is about 5 million. Of the 1.5 million of working age, 59 per cent. of men and 12 per cent. of women were in full-time employment. Others, men and women, were described as economically active including part-time jobs.
I have two questions to put to the noble Baroness, Lady Hollis, who I am delighted will reply to the debate. Of the approximately 1.5 million disabled people of working age, a large number were in employment or described as economically active. Therefore fewer than 1 million of working age were left. Page 52 of the Green Paper states that up to 1 million disabled people would like to return to work. That must mean that some of those are over working age and have been included in that figure. Is that the explanation? I say straight away that I am in favour of old age pensioners having jobs where appropriate. But should they be competing for jobs with the younger, able bodied, unemployed from workless households, also discussed in the Green Paper?
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My other question relates to incapacity benefit. In Mr. Field's Statement last Thursday, there was the assertion that the all work test, "writes off all too many people". A few sentences later he said that a different test and changes would reduce significantly the numbers who come on to that benefit. There appears to be an inconsistency there.
The Green Paper asserts the firm intention to eliminate fraud, which one can only applaud. Will the noble Baroness confirm that little fraud has been discovered in the disabled sector, in contrast to other parts of the social security system—for example, housing benefit?
Some of the small but apparently definite changes foreshadowed in the Budget and the Green Paper have already been welcomed by members of the disabled group, including me. I refer, for example, to abolishing the time limit on voluntary work by disabled people, and the disabled working allowance becoming a tax credit towards the end of next year, although the details are not clear.
The last government put through Parliament the Disability Discrimination Act, ably handled by the then Minister for the Disabled, my right honourable friend Mr. William Hague. It was the first Act on disablement to appear as a government Bill. The previous landmark was the Private Member's Bill of the noble Lord, Lord Morris of Manchester, which became the 1970 Act. Later he was the eminent first Minister for Disabled People and he has related that the Secretary of State for Social Security in 1969–70. Mr. Richard Crossman, was opposed to his Bill and tried to strangle it. However, we must thank Mr. Crossman for inventing Green Papers when he was Leader in another place. In those days the paper was green, and I have an example here. It cost only 29p in 1972. It contained proposals for a tax credit system. Subjects do not change much. The present Green Paper is bright red, glossy and costs £11.50 for the public and outside organisations to buy. Nonetheless I, and I am sure my noble friends, will follow closely how the proposals in it are pursued. I beg to move for Papers.
6.25 p.m.
Baroness Pitkeathley: My Lords, I thank the noble Lord, Lord Campbell of Croy, for giving us the opportunity to debate this important issue and for giving me the opportunity to put the case for protecting the incomes of carers as well as those of severely disabled people.
The Carers National Association welcomes the publication of the Green Paper on welfare reforms. Particularly welcome is the intention to keep the disability living allowance national and universal. We also welcome the emphasis on ensuring that people who are severely disabled receive a better deal from social security as this may, in turn, extend the access of carers to the benefits they need.
The Government's view is welcome. It looks at welfare holistically in that health and social services provide vital services to people in need, such as carers. It opens up debate and offers new ideas about how

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vulnerable groups might be supported in the future. The system of tax credits for disabled people and families on low incomes with children, for example, sets out a new framework on which support for working carers could be built in the future. Of course we were delighted with the important concessions that the Chancellor made in the Budget to remove an anomaly which disadvantaged women carers; and indeed with recent announcements on the benefits integrity project.
Disability benefits are important to carers for two main reasons. Eligibility for carers' benefits is based on disability benefits. Disability benefits help the carer and the disabled person together to manage the disability and illness, and the costs associated with that process. Any change in disability benefits can have a profound effect on disabled people's and their carers' lives.
Caring also has a detrimental effect on both present and future income. For example, people give up paid work—caring is often heavy work—because of caring responsibilities. People in paid work have their employment prospects, promotion and earning power limited because caring reduces their flexibility. It often means they cannot work late or cannot work far from home. Carers who take periodic breaks from employment in order to care lose out on income and training, and find it increasingly difficult to return to the workforce once the caring process has finished by reason of the disabled person going finally to residential care, or through death.
Carers shoulder additional costs associated with caring—higher transport and heating costs, clothing and food. That means that they are less able to pay into a second tier pension. Carers who are retired have only their pensions and decreasing capital to pay for the extra costs of care. That causes considerable concern among carers.
Carers' present and future income is affected by having breaks in their employment record, low or no earnings, and low disposable income after additional disability-related expenditure. The tax and benefits system therefore needs to be reformed for carers to give support to those who might be able to work and to help them meet some of the additional costs associated with caring.
Given the short time available to me, I shall not embark on making for the Minister the excellent case I could make for a radical review of the carers benefit, invalid care allowance, with which she is very familiar, as I would dearly wish to do and as carers certainly deserve. Instead, I shall ask the Minister to consider some simple amendments to the rules surrounding invalid care allowance which I believe are very much in keeping with the Government's welfare-to-work strategies and which would help carers do what many want to do—be helped to remain in paid work.
I wish to make some specific proposals to the Minister. The first concerns the invalid care allowance (ICA) earnings limit. Carers who receive invalid care allowance can earn up to £50 a week after allowable expenses. However, earnings of over £50 a week will disentitle the carer. As a result, earnings of just a few pence over the limit will result in a loss of not only
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£38.70 a week—that is the latest rate—in invalid care allowance but also the loss of a valuable national insurance credit. If the carer earns more than £50 a week, but less than £62 a week, then he or she will lose the credit, but will not earn enough to pay national insurance. That leaves them in an invidious position regarding their future pension and without access to benefits such as incapacity benefit or jobseeker's allowance, should they need them in the future. There is therefore a strong case for raising the ICA earnings limit to £64 a week, in order that no carer is left without adequate national insurance protection. I also suggest that the earnings limit should continue to rise year on year in line with the rise in earnings.
My second proposal concerns a taper on ICA because a further problem arises with regard to the earnings limit. At present, there is no incentive for a carer to increase his or her earnings. The advent of a pay-rise, or the possibility of extra hours may mean that earnings will be taken just over the £50 limit. That will result in the immediate loss of full invalid care allowance worth £38.70 a week. A pay-rise or an extra shift can therefore mean that the carer is much worse off. Frequently, the only option when faced with a small wage rise is to reduce one's hours in order to comply with the earnings rules. Surely that situation cannot sit happily with the Government's welfare-to-work strategy.
I therefore suggest that ICA is tapered off, rather than ending abruptly. There are two options for consideration. In order to promote increasing a carer's income, I suggest that the Government give consideration to a percentage taper. For example, for every extra pound earned, only 50p is lost from ICA. In that way, carers could increase their incomes and ultimately we are certain that there would be savings, as there would no longer be the perverse incentive for carers to alter their hours to keep within the earnings limit and claim full invalid care allowance.
The Government's other option would be that ICA could be lost pound for pound. So, for example, with the current earnings limit of £50, if earnings rose to £64, ICA would still be payable, but at a reduced rate. That would be simple and would at least ensure that people were not worse off by working extra hours, or having a pay-rise. However, it is a less favoured option as it would not provide much in the way of active encouragement to seek out extra work opportunities, or to take promotion, as many carers wish to do.
I firmly believe that the first option I set out is very much in keeping with the Government's welfare-to-work strategy—in combating social exclusion and targeting support where it is most needed. This policy would effectively allow the nation to benefit twice—from the individual's skills being maximised in the employment market and from the support that carers continue to give—and wish to continue to give—to sick, ill and disabled relatives.
6.32 p.m.
Lord Swinfen: My Lords, I strongly agree with the noble Baroness's remarks about tapering off the loss of benefits with the increase in income. It is a point that

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I made frequently from that side of the Chamber when this party was in power. I suspect that the Government will have just as much trouble with the Treasury trying to work that one out as the previous government had.
In their attempt to rationalise the present structure of the social security system, the Government have made a number of announcements of particular relevance to disabled people, and it is important to offer both support and criticism where appropriate. While many of the broad assertions of the Green Paper on welfare reform are difficult to disagree with, I wish to take this opportunity of looking at a number of specific proposals affecting disabled people and to offer one or two suggestions which will help those who can work, and which will better target help for those who cannot.
I am encouraged that disabled people wanting to experiment with work will be able to do so with greater ease because of the extension of the linking rule from eight to 52 weeks. That will allow someone currently on incapacity benefit to accept an offer of employment and will give them one year to decide whether they can manage a job without jeopardising their benefit.
Further, the abolition of the 16-hour rule for voluntary work means that disabled people should no longer fear loss of benefit through working longer hours as a volunteer—very often a process which leads to a full-time or part-time paid job in the long run, since potential employers are encouraged to see that the disabled person can in fact hold down a job.
The Budget announcement that disability working allowance is to become a tax credit from October 1999 recognises that it has not been terribly successful as an incentive to work. The new disabled persons tax credit has the potential to reach thousands more low-paid workers, whose job opportunities are currently restricted by disability.
However, it will be insufficient simply to transfer disability working allowance as it exists into the taxation system, and a number of issues must be addressed: the qualifying benefits rules, which restrict entry; the treatment of partner's earnings; and the disability test itself. The Government must keep their promise to ensure that the disabled person's tax credit will be more generous than disability working allowance in relation to the taper (55 per cent. instead of 70 per cent.) and high earnings thresholds to allow disabled people to keep more of their earnings as they increase.
The Disablement Income Group, of which I am a patron, has been arguing for some years for the need to adopt a different approach to incapacity and has recently proposed a number of measures including the replacement of the all-work test with an assessment of employability. In this context, I welcome the Government's commitment to review the all-work test, which, as it stands, fails to make an adequate distinction between those who are capable of work, and those who are not.
To help the Government—and sometimes from this side of the House we do try to help them—I suggest that they might like to look at the Disablement Income Group's discussion papers and consider, for example, its
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proposal to assess the impact of an individual's impairment in a work setting, using experts in vocational rehabilitation instead of doctors. General practitioners have expressed varying levels of confidence in their judgments over a person's capacity for work as their clinical training focuses on diagnosis, treatment and prognosis, not necessarily the impact of an impairment. So, while doctors may legitimate as "genuine" those claimants who pass the all-work test, in practice, that role does little to promote the abilities of, or work opportunities for, disabled people. The results of an individual's assessment by experts would then be used to formulate an individual action plan so that the disabled person receives individual attention from a personal advisor, to put the plan into operation.
Further, I would ask that consideration is given to providing an employment service that is more pro-active and which focuses on the broader employment environment locally to ensure that sufficient rehabilitation and employment opportunities are available, as well as adequate advice and assistance, especially to small firms. Such proposals offer a radical change in the nature of the benefits system, by replacing pre-determined rules with individual income security for those who need it, so that benefits support the needs of the individual and avoid the old solutions which have tended to tinker with the benefits system and increase its complexity.
I also welcome the Government's recognition in the Green Paper that there needs to be a universal benefit to help with the costs of disability. In a debate in this House on 26th February I detailed research by the Disablement Income Group which outlined the seemingly endless extra costs of disability, and I am surprised and delighted that Ministers have been able to respond so quickly—if not fully—to my concerns.
But while I have welcomed a number of the Government's proposals, I remind Ministers of the importance of getting additional help to the most severely disabled people, particularly those with the greatest needs and the least prospect of being able to work their way off welfare.
6.40 p.m.
Lord Rix: My Lords, I welcome this opportunity for a debate about incapacity and disability benefits initiated by the noble Lord, Lord Campbell of Croy. In doing so, I note, as he has done, that we have moved quickly from a period of suspicion, rumours and accusations of lack of consultation to a period of published proposals and assurances, a plethora of information and the beginning of formal consultation. Against that background, I want to pay tribute to the Minister, on behalf of Mencap, the Disability Benefits Consortium and all those who have benefited, for her willingness to listen at a time when there were no proposals to consult about, and when, if rumour is to be believed, there were some differences within government as to what direction we should take. Those familiar with the tendency for one part of Whitehall—and on this occasion I refer to the government end of Whitehall—to have as little as possible to do with other parts of Whitehall have also been impressed by the effective partnership that the

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Minister has helped to establish with the Department for Education and Employment and its disability role. Furthermore, the combination of collective and individual responsibility, of public and of independent sector activity, and of encouraging self-help through work but respecting the dignity and meeting the needs of those without work, well displayed in A New Contract for Welfare, seem to me a combination that in principle most of us could happily support.
Those of us with memories of the 1970s are pleased to see that the Green Paper acknowledges the radical nature and huge importance of earlier benefit changes. If I may use a theatrical image, we are right to complain that disabled people are still denied a place in the dress circle, but in 1969 they were still outside the theatre queuing for a place in the gallery. There was no recognition of long-term incapacity for work: there was no recognition of the extra costs of disability; and there was no recognition of the role of carers. How pleased I was to hear the noble Baroness, Lady Pitkeathley, deal with that role this evening. Both Labour and Conservative governments have had a hand in changing those benefits, with the noble Lord, Lord Morris of Manchester,—who is unhappily not in his place tonight—having a significant role.
Since we are now embarking on a period of consultation about change, I want to take the opportunity to set out my stall and to emphasise the theme of realism. I choose that theme because it seems to me that some of the campaigners for major improvement have, in their wilder moments, threatened as much damage as those at the opposite end of the spectrum who find the welfare state an unwarranted intrusion on the right of disabled people to go hungry. As I understand the Green Paper on the issue, it confirms recognition of long-term incapacity for work as a contingency which justifies special provision for sick and disabled people and it confirms singling out care and mobility needs as the prime examples of the extra costs of disability. In other words, it confirms that we have got it broadly right. I agree, and I do so because I think this is a realistic assessment both of what those facing the more severe financial implications of disability need and what the traveller on the new Croydon tramcar service is likely to see as a justifiable way of using his or her taxes.
The courts, and to some extent the war pensions and industrial injuries schemes, recognise a much wider range of effects of disability and a much wider range of severity of disability. Personally, I think it is unrealistic to expect to write all that into our universal public welfare provision. If the reality is that we have got it broadly right we need not waste time seeking something radically different, either for those who are already beneficiaries or for those who are not. We can concentrate on how we can improve on what we have got, how we can improve the take-up of what is available and how can reduce still further the already quite modest scale of people getting that to which they are not entitled. I hope that we can also set aside the notion that was trailed recently of handing disability benefits over to the cash-limited mercies of local
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authorities or putting everything on a means-tested basis or taxing benefits which are intended to meet extra costs irrespective of taxable capacity.
If I may begin with the abuse issue, we have all been aware recently of the polarisation of newspaper headlines between loss of benefits by people with severe and multiple disabilities and the acquisition of benefits by people with apparently minimal disabilities. Whether or not the details are as reported, those with no personal experience of the system must conclude that we have benefit gateways designed to keep out those who should be getting help and to let in those who should not be getting help—and that despite the fact that the gateway systems have been changed on a number of occasions. All this must have a deterrent effect, not just on those who have to pay for the system but on those who could benefit from it or who do benefit but feel uncomfortable about it.
It seems to me that we need at the point of entry both self and independent assessment, a clear statement on the basis of entitlement and a clear onus to report relevant changes with an appropriate review system, taking account of the possibility of change. The so-called benefits integrity project seems to reveal more about the competence or otherwise of the assessors than any shortcomings among the beneficiaries. We need to replace it with something more routine and more effective. On that theme, may I make a plea that when statistics are published it should be in a form which lends itself a little less readily to misrepresentation. If the reality—I use my theme word again—is that perhaps 10 to 15 per cent. may not be entitled to as much as they are now getting and a rather higher percentage should be getting more or getting something, whereas now they are getting nothing, please let us say so in a fashion that not even newspaper X can present the disability benefit order book as a badge of shame.
As regards improving on what we have, I welcome very much the range of easements proposed to help bridge the transition between incapacity benefits to work, including the pilot experiments announced in the Green Paper. I am not among those who believe that if you modify the benefit system thousands of disabled people who have been away from paid employment for years or those who have never had it will suddenly rush for jobs and find them. But I am among those who believe that existing rigidities make it unnecessarily difficult for those who could work to get into work without losing money or risking losing money. I would add only two items to the list of what has already been taken in hand. It is time after 10 years to restore the original value of the income support earnings disregard. That would mean increasing £15 a week to £25 a week. It is also time to return to the original concept of therapeutic earnings, namely, that doing a little work helps to keep you sane and in touch with the world of work. For many disabled people "therapeutic" in the sense of making you better is nonsense. They are not going to get better, work or no work.
On the eve of the annual uprating of benefits, I will not venture to say much about benefit levels, except that if incapacity benefit costs nearly £8 billion a year it is worth recalling that if those on incapacity benefit were

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on average earnings instead, their annual income would be about £40 billion a year. My point is that benefits are modest in relation to earnings. I am not suggesting that most of those receiving incapacity benefit are capable of work. As is now being admitted, though, the ages and disability/health problems of that group make it inherently unlikely that most of them will find paid employment, whatever carrots are offered or sticks are threatened.
My benefit levels point is a different one. One newspaper seemed to be suggesting that SDA, paid to those who have never been able to work, might be raised to the level of incapacity benefit, paid to those who have managed at least a few weeks' paid employment. The present difference seems hard to justify and if the Minister has good news I hope that she will share it. I realise that no one should believe everything that appears in the newspapers. As that man of words, if not of wisdom, Oscar Wilde, noted:
"The truth is rarely pure and never simple"—
and might have added that, if it were, the papers would probably not report it.
I turn now to take-up. I warmly welcome the Government's declared intention of doing as much to promote take-up as to reduce wrongful payments. Why not present the investment in the welfare of disabled people as an achievement rather than a burden? I have kept silent on services and dealt only with benefits and I have not specifically concentrated on people with learning disabilities. I hope that that has not disappointed the noble Lord, Lord Campbell of Croy. I am aware that your Lordships are tolerant, but not infinitely tolerant. I believe that rationalising benefits requires the delicacy of springtime gardening and not the flame-gun approach. There is too much that disabled people have and value to risk wholesale change. We have come too far in the past 30 years to turn back the clock.
6.50 p.m.
Lord Rowallan: My Lords, I too thank my noble friend Lord Campbell of Croy for introducing this debate as it gives me the opportunity to raise the subject of the limbless, who are manifestly severely disabled, and the poor standard of care that is unfortunately currently available to them.
I have a friend who lives in Kent with a daughter, Lisa, who was born a Thalidomide child, with half of one leg missing and a deformed hand. She is a lovely girl who has never had a whole body as I have and yet she has coped with the life she has been allotted in the bravest and most natural way. For years, as she grew up, she suffered from poor-quality false limbs that were ill-fitting and uncomfortable and that were very often, when she was younger, similar to the peg-leg made famous by Long John Silver.
Later, Lisa took up showjumping and was so determined to succeed and to compete with able-bodied people that she has represented her country as a junior rider, a young rider and an adult. She has fallen off on many occasions, sometimes comfortably, sometimes in
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pain; but the worst time for her was when, after a particularly spectacular fall, her leg went off with the horse while her body was left lying on the ground as a result of a poorly-fitted false leg. It caused huge concern to the many watchers at the show as they were convinced that a terrible tragedy had occurred. It was also, of course, a source of great embarrassment for herself.
Now, as a result of her parents spending a great deal of money, she has found through the Dorset Orthopaedic Company Limited, a firm of limb providers based in Ringwood in Hampshire, a leg that she did not know she could get and which her local health authority never advised her she could get. She says that it is comfortable and looks like the real thing, even having freckles and hair follicles on it, and now for the first time she can go on holiday and wear a swimsuit or simply wear shorts in the summer. It has given her confidence, and she trusts her prosthetist, Bob Watts, completely. In short, she can finally do with confidence what I do, and have always been able to do, as an able-bodied person. For the first time since I have known her, she does not have a limp and, if I did not know her circumstances, I would not know that her leg was false. It looks so real and, importantly for Lisa, feels like skin, too.
I believe that in this so-called caring society of ours the limbless should be looked after in a much more adult, sensitive and helpful way. The prosthetist is the most valuable person for an amputee. A Helen Nash has told me that without the expertise of her prosthetist she could not hold down her full-time job as an auditor. She has developed over 10 years a relationship with him and feels that to change would cause her to lose confidence and the faith necessary to cope with her able-bodied colleagues.
My father, who was always a fit man, although a heavy smoker and latterly a diabetic, had both his legs amputated near the end of his life as a result of gangrene. Despite having wonderful treatment from hospitals and homes, he could not find any limbs or a prosthetist with whom he could get on and trust. He therefore decided to cope without any legs at all and eventually found the whole process so difficult and painful that he gave up the will to live.
Why is the artificial limb service so unequal as between one region of this country and another? The whole system is controlled by bureaucrats at the National Health Service supplies centre in Reading. It is administered by centre managers in each rehabilitation centre. These so-called experts do not give enough information to their clients, the amputees and the limbless. The "we are the experts and we know best" syndrome is evident everywhere.
In 1988 there were only three companies supplying prosthetic services. In 1989 that was increased to 13, largely thanks to a report by my noble friend Lord McColl of Dulwich, who I am delighted to see is in his place. Now, in 1998, there are only six, and it is virtually impossible for any new ones to enter the market. The McColl Report said that in 1983–84 the budget for the artificial limb service was £38; million. In 1997 that was reduced to £30 million, a reduction of

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£8 million. From these figures it can be seen that there has been a dramatic reduction in the amount spent on artificial limbs. Is the noble Baroness, Lady Hollis of Heigham, aware of this reduction in costs and services for the limbless, and is she happy with it?
Component hardware costs have risen dramatically in the same period, so it is obvious that the savings have come from the service side. Cutting the service side means cutting the number of staff, and thus the quality of service is being lessened. The prosthetists do not have the time to do their job properly and can only stop waiting times rising by reducing the amount of time they spend with patients. The consequence of that is ill-fitting limbs without comfortable sockets as they are not designed properly. Thus government money, the taxpayers' money, my money, your Lordships' money, is being wasted.
The only chink of light in this autocratic system—what a sorry state of affairs that we should have such a thing—is the extra-contractual referral, known unsurprisingly as ECR, and run by Kevin Shinkwin of the Limbless Association. He helps people choose a specific prosthetist. But some health authorities will not send amputees across their borders in order to obtain a comfortable limb. ECR referrals are also an expensive way to get a false limb, with prices being raised by 20 per cent. to 40 per cent. on top of the normal price to cover overhead costs. But most people do not know of ECR and, more importantly, are not informed of its existence and just accept what is on offer. That is great if your option is at a good centre, but it is very bad luck if it is not. It makes me angry to think what my father had to go through and what he might have had if I been told of the alternatives.
The competitive tendering system that exists in the service can result in a change of prosthetist, which, as I have said, is unnerving for the amputee and the limbless person and results in a poorer service for them. As any prosthetist will tell you, it takes at least two years to gain the full confidence of a client and fully to understand his or her individual needs.
I finish by asking the noble Baroness, Lady Hollis of Heigham, to give an assurance that the Government accept that the way forward must be a voucher system for the limbless whereby they can go to the prosthetist of their choice and either take the NHS limb on offer or upgrade it to one of a higher specification, if they have the finances and the inclination so to do. It would not cost any more and indeed could actually save money as there would be no waste from ill-fitting limbs. I could not help but notice that in a Written Answer on this subject to my noble friend Lord Howe on 12th March the noble Baroness, Lady Jay of Paddington, stated that the Government did not think this was a good idea. Why? It is already working with Motability, where it is allowable to upgrade the size of your motorcar, if you wish. It is also working with wheelchairs, where you may upgrade your wheelchair if you wish.
Surely it must be possible to give these unfortunate limbless people a chance to improve the quality of their lives by introducing such a system? After all, it is not their fault that they are limbless. It would also have the
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effect of creating centres of excellence, because companies would invest long term to produce the best product. Surely a voucher or prescription system would be a more accurate way of giving the limbless the same service countrywide instead of the take-it-or-leave-it attitude that prevails at the moment?
The best reason of all for introducing such a system is that it is what the industry itself wants. It is wanted by the patients, who want freedom to choose a limb; it is wanted by the prosthetists, who want to give their clients the best possible limb; and it is wanted by the manufacturers of the limbs, as it would allow them to invest in the future. At no cost, and possibly with great savings to the National Health Service budget, this must be the way forward. I earnestly ask the Government to think again about this very important subject.
6.57 p.m.
Lord McNair: My Lords, I ask for the patience of the House in making this brief intervention; I believe that we are running a little ahead of time. I do not expect the Minister to respond to what I say. I should like to put on record the contribution to the matters that we are discussing today that a unified national indirect taxation based on a once-only tax on primary energy could make to easing these difficulties. That is a very simple, if radical, change to our tax system which would give the Government a great deal more flexibility and make it easier to fund all the things that we want. It would enable the payment of a basic income, which I believe would make life much easier for those whose plight is being discussed today and for many other people in this country. I mentioned this matter in a debate on sustainability. I do not expect the Government to respond to this point; it is something which I shall bring to the attention of many Members of your Lordships' House.
6.59 p.m.
Lord Addington: My Lords, I thank the noble Lord, Lord Campbell of Croy, for initiating the debate. However, it really does have the feel of a rearguard action after a major campaign. We have gone through a period in which many groups representing the disabled and disabled people themselves have been unnecessarily frightened about what was going to happen. I suspect that this was by accident—I am very much in favour of the cock-up school of history as opposed to the conspiracy one. Many people have been frightened by expressions such as "only those who are severely disabled" or "only those in real need" should receive benefit. A series of subjective judgments have been shouted around.
Indeed, certain leaked documents have come to public knowledge. I quote from a document of December last year:
"The Government has made clear its aim to release resources from social security in order to spend more on health and education. It is likely that a high proportion of the necessary savings will have to come from benefits paid to sick and disabled people".
Those words come from the discussion paper, Thinking the Unthinkable. While those things may have to be thought, I do not think they have to be said. There

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should have been more guidance in that document stating what the Government were aiming to do in their reforms. That would have helped.
The final document is not terribly frightening. Most of us gave a huge sigh of relief when it came out. Indeed, some groups who take a more aggressive stance said, "Oh dear, we were looking forward to that fight. We thought that we might win it". There is a great clanging noise receding behind this whole area of discussion. Terrible anxiety has been generated by the way the Government have handled it. I hope that the Government will in future handle this area with considerably more sensitivity. When all is said and done, what happened was totally unnecessary.
Today we are discussing the case for rationalising the current structure of social security benefits while protecting the interests of severely disabled people. I have always felt that any system which deals with the variety of individual needs in a series of regulations that say, "Thou shalt fit X regulation" will immediately become complicated because it will have to have 56 caveats attached to it. When we talk about the disabled we cover a vast number of groups—those who have a learning disability and those who lack limbs. Both have different needs and both in certain circumstances are severely disabled.
In their Green Paper the Government have taken steps to address this point. They talk about individual rights and individual needs. Anyone who works within this field knows that that is the only effective way of dealing with the subject. A restructuring of the system must take into account the individuals in the system. More freedom must be given to those implementing the reforms to allow them to take into account individual needs. There is a great mass of regulations on this matter and different types of allowances. I shall not even try to go through them. In my speech today I have already displayed my capacity for mixing up words when dealing with them. I would not like suddenly to give the wrong figure for the wrong type of allowance. All I will say is that this subject is immensely complicated. If we could change to a system where the first statement is "Let us look at the individual", we could then move forward.
There has been one important step already. The all-work test for incapacity benefit is to be reviewed and, it is to be hoped, made more appropriate for the jobs that people can do. This will take into account their skills, training and aptitude. If that happens, a huge area of inexactitude will be removed. To help people through an individually-based system greater investment in staff and expertise will be needed. That will have to happen.
What we have discovered from a series of tests is that at least as much money is not claimed within the benefits system as is inappropriately claimed, either through dishonesty or mistakes. The second category has been fairly conclusively proven by the Government's own testing to be the higher one. We have to look at what people need. We have to make sure that the social security system gives disabled people the benefits they are entitled to. If this happens, we will suddenly find that more people are brought into work.
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We will then be able to achieve the savings the Government are talking about. If, however, we carry on groping our way forward with voluntary groups with a few over-stretched workers helping out, on a case-by-case basis we will probably end up giving most time to those who can handle the forms best themselves. Benefit offices will be struggling desperately to try to get through to the people they should be helping while people who have read every form will come through and get assistance. We can cut down on this—let us be honest, we will never get rid of it—if we have more people supporting those who are making the claims.
There is a great danger here of going into specific cases. We do not have the time—and I do not have the patience—to give these matters the attention they deserve. However, unless we have at the back of our minds what we are trying to achieve in any change to the social security system, and also the fact that we are dealing with individuals, we are bound to repeat the mistakes of the past. Any new system that merely puts out new categories and new bands and is not flexible enough to change in regard to individual cases will ultimately re-create a new set of problems which are almost identical to the old ones.
7.6 p.m.
Lord Higgins: My Lords, the whole House will be grateful to my noble friend Lord Campbell of Croy for initiating this debate. In many ways it is a follow up to the debate we had on 26th February. But between those two events we have had, if I may put it this way, the meat in the sandwich of the Government's Green Paper, which deals with many of the points that were raised in the earlier debate and which again are relevant today.
As on the previous occasion, I speak with great modesty because all those who have taken part in the debate have spoken with very considerable expertise. I was particularly interested in the points made about invalidity care allowance by the noble Baroness, Lady Pitkeathley. I noted with interest the need of the Government Front Bench to take immediate advice on those points. We shall listen with interest to the answers, although I am absolutely sure that the noble Baroness, Lady Hollis, knows the answers in any case.
All of us were greatly moved by the speech of my noble friend Lord Rowallan with regard to the limbless. At a constituency level I remember very well an individual who manufactured appliances for the limbless coming in one day and saying how difficult it was for him to remain in business because of the way in which all the time the department tried to drive down profit levels to a level which would not enable him to develop new products. On the other hand, I can also recall going to an exhibition by the Royal Society a couple of years ago and being immensely impressed by the high technology involved in helping those who have had their legs amputated.
I think it is worth stressing that in the general policy of the Government, of cutting back social security and transferring money to education and the health service, the distinction between the health service and social security is a confused one. Indeed, as far as concerns

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the limbless, it may well be that what happens on the social security side can have an impact on health and vice versa. All those are important points that need to be considered.
In an earlier exchange in this House on 4th December the noble Baroness, Lady Hollis, referred to the way in which the system has grown up piecemeal. She said,
"It is a tangle. There are different benefits, with different rates, at different ages and with different linking rules — Most disabled people do not understand their entitlements".—[Official Report. 4/12/97; col. 1479.]
Since the Green Paper is a long-term document, it is reasonable to ask to what extent the noble Baroness is satisfied that the system has been simplified because even now, and in the light of the Green Paper, it is a very complicated system bedevilled by jargon. As the noble Lord, Lord Addington, said it is very difficult to understand all the different allowances at any one time. But simplification in this context is important.
I turn next to the budget. Taken overall, I believe that the disability budget is about 25 per cent. of the social security budget. So if there are to be changes and cuts in the social security budget in order to achieve the redistribution to which I referred a moment or two ago, it is very unlikely indeed that the disability budget as a whole will survive uncut. Although getting the disabled into work is not likely to result in massive savings, it is a desirable objective which we on this side would wish to support.
In that context, can the noble Baroness state the exact intentions of the Government as regards the expansion in disability benefits? The previous government, under the chancellorship of Mr. Clarke, said that it would be 5 per cent., then 7 per cent. in the present year and the year after. When I looked at the Government's famous "focus files" I was rather worried to find that the one for benefits for sick and disabled people showed a diagram—they are always generalised—which made it absolutely clear that after 1999 the budget would flatten out and become absolutely horizontal. Perhaps the Minister could confirm whether that is the case. If so, it is rather worrying.
The next matter is the benefits integrity project which has been mentioned. It is very interesting that the Green Paper on this issue is very explicit indeed. At page 55 it says,
"The Benefits Integrity Project—which is designed to check the validity of DLA claims—is not working well. It has a series of structural flaws which we are dealing with one by one in consultation with disability organisations".
Given the importance of that programme, the way in which it has been presented and the fact that it is a massive programme, as I understand it, over a period of two years from July 1997 onwards, that seems to be a serious admission on the part of the Government. Perhaps the noble Baroness could give some indication exactly what step-by-step measures she has in mind to improve it. One step, which has already been taken, is that there must be corroborating evidence and reliance should not just be placed on the individual making a claim. We have already welcomed that and we shall continue to do so.
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As the Green Paper specifically says that there are going to be step-by-step improvements, it is not unreasonable to ask what they will be. One of the allegations is that the people carrying out these checks on the disabled receive only four days training. I understand that it is five days training, which is a 25 per cent. increase. It is not a very significant one. For the benefit of Hansard I should indicate that the noble Baroness corrected me by means of a gesture. At all events as regards the disabled, the benefits integrity project has caused very considerable concern. That needs to be taken into account.
As regards the all-work test being a stop-go or a black and white test, that could not be defended completely. If improvements can be made, they will certainly be welcomed. The Statement on the Green Paper referred to legislation at the earliest possible moment on a disability rights commission,
"to protect. enforce and promote the rights of disabled people".
The noble Baroness will recall that the other day she repeated the Statement made in another place on this point. As the Statement referred to legislation at the earliest possible moment, can the Minister say whether there is any possibility of including that in the Social Security Bill? If so, that would seem to be the earliest possible moment.
The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, was the noble Lord asking whether the disability rights commission will be included in the Social Security Bill which is now on its way through this House?
Lord Higgins: My Lords, I said that the Statement, made in another place, which the noble Baroness repeated here the other day, stated,
"Better rights for disabled people. We will bring forward legislation, at the earliest possible time, to establish a Disability Rights Commission".
I was asking the noble Baroness whether it might be possible to include that in the Social Security Bill. I listened to her reply with interest. I merely make the point because it seems that that may be an opportunity which would achieve the Government's objective of doing it as rapidly as possible.
I make only one further point, which was also raised by the noble Lord, Lord Addington. It is a classic Treasury tactic—and I speak with some experience—ahead of a Budget to spread all kinds of rumours about what awful things will happen which ultimately do not appear in the Budget. As a result, everyone says what a splendid Budget it is. Some of the rumours about disability, with the disability allowance being means tested, taxed or even handed over to local authorities, caused a great deal of concern. As we have now had the Green Paper it would be helpful if the noble Baroness could say—I understand that it is now fashionable to rule out matters for a particular Session of Parliament, ranging from Europe to national insurance and pensions—that there is no question in this Parliament of

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the disability allowance being in any way affected in the manner in which concerns were expressed before the Budget.
I, and I am sure the House, are grateful to my noble friend for promoting this debate. We look forward very much to the Minister's reply.
7.17 p.m.
Baroness Hollis of Heigham: My Lords, I would like, first, to thank the noble Lord, Lord Campbell of Croy, for initiating the debate today on this important subject. I very much regret that my noble friend Lord Ashley is unable to be here, as the noble Lord, Lord Campbell said, because he raised an Unstarred Question on 26th February. He is committed to a long-standing engagement as chancellor of the University of Staffordshire. I also regret that my noble friend Lord Morris is unable to be here. However, I would like to take back from this debate to my ministerial friends and colleagues the warm, although sometimes cautious, welcome that both the Budget proposals and the Green Paper proposals, in so far as they affect disabled people, have received tonight. There is a universal feeling around the House that very many of the concerns of disabled people have been met and that both the Budget and the Green Paper, in an imaginative way, are seeking to help disabled people to come more fully into the mainstream of life.
In that context I welcome particularly the most generous remarks of the noble Lord, Lord Rix, who has fought so hard and so well for disabled people, not only through his organisation of the Disability Benefits Consortium, but also as a member of the All-Parliamentary Disability Group where so many of your Lordships, including the noble Lord, Lord Campbell of Croy, have been so effective in advocating the rights and benefits of disabled people.
As your Lordships mentioned, the debate comes at a very interesting time. We have heard a variety of views. A week or so ago I was able to read the Green Paper which your Lordships have not been slow to quote at me tonight. Perhaps I may re-emphasise our aims in the Green Paper. We made it clear that reform will be on the basis of a new contract, keeping the welfare state from which we all benefit and on terms which are fair and clear. The principles of reform will be driven by the need for a better benefits system and not by any desire simply to cut benefits expenditure.
We made it clear in particular that we are determined to ensure that disabled people get the support they need to live a full and dignified life free from discrimination. We set out the success measures against which the Government's performance can be judged over the next 10 to 20 years, including those on reducing discrimination against disabled people and those relating to increasing the number of disabled people moving into work.
We also made it clear that we are determined to retain disability living allowance and attendance allowance as universal—that is, not means-tested—and as national—that is, not localised—benefits for those who are entitled
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to help. Those issues are being discussed and reviewed, but it is clear, with our reaffirmation of these principles, that we can now take the agenda forward.
We shall reform incapacity benefit for new claimants, enhancing the test of entitlement to provide constructive information about a person's capacities so that those who want to work can be helped to do so. I have used this example before but at the moment the test shows whether or not people can lift a sack of potatoes. What we actually need to know is whether they can, possibly with training, use a word processor. The test, as it stands, does not allow us to make that distinction. We believe that as more people are enabled to move into work rather than remain on benefits, savings should be released which could be used to provide greater help for those severely disabled people with the greatest need.
The final principle in our Green Paper is that we are intending to introduce a package of measures for those disabled people who want to work. Those measures include some of the proposals outlined in the Budget, such as the provision of extra help through the New Deal, and the transformation of disability working allowance into a more generous disabled person's tax credit which will, as noble Lords have identified, mean not only a higher income before the taper comes into effect, but also a slower withdrawal (through the taper) off the benefit—a lower taper of 55 per cent., down from 70 per cent. taper in DWA. It will allow us to extend the existing eight-week linking rule for incapacity benefit to 52 weeks, thus taking away so much of the risk that disabled people face if they seek to enter the labour market at the moment because if they return to benefit they move to a lower rate. We are removing that risk, thus encouraging them to make such a move.
Another change we are making, which has been welcomed by the noble Lord, Lord Swinfen, in particular, is the abolition of the rule limiting people on incapacity benefit to a maximum 16 hours of voluntary work a week. This is a cause close to my heart. The change will enable disabled people to make a greater contribution to society through routes other than waged work, safe in the knowledge that they will not be penalised and lose benefit. In return, society will be enriched by the contribution they can make and the very real experience they can bring to those organisations. This is appropriate because the health of many disabled people fluctuates and their ability to work is unpredictable. Voluntary organisations can give them an opportunity to make the commitment they want to offer, and from which we stand to benefit, without the rigours of tied hours of waged work to which disability does not always lend itself.
Still on the proposals and the changes announced in the past month, there has been a review of the benefit integrity project. Several noble Lords referred to that and I have discussed the matter on various occasions with my noble friend Lord Ashley. I emphasise that, as the noble Lord, Lord Higgins, said, it is right that any government must check that benefits go correctly to those who need them, but equally we must ensure that all those who are entitled to them actually receive them.

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However, we do not believe that the benefit integrity project is working as well as it should. We are tackling the problems one by one in consultation with disability organisations. The noble Lord, Lord Higgins, mentioned that, as at 9th February, we are seeking collaborative evidence. Since then, and in discussion with disability organisations, I have been able to negotiate and agree a series of other—and, I hope, helpful—moves forward which I believe have been welcomed by the disability organisations and the All-Party Disablement Group alike.
We have agreed, for example, as part of the exercise, that those over 65 in receipt of disability living allowance and attendance allowance will no longer be contacted because it is clear from our monitoring that there is very little change of award. Therefore, we simply do not need to check. It is not a question of integrity in the sense of the person concerned being accurate in statements. If it is clear that a person's situation and needs have not changed, we do not need to monitor the benefit. Other groups may also be affected. I refer, for example, to people who come on to benefit because of one condition, such as a kidney or heart problem, but subsequently develop a terminal condition such as cancer, motor neurone disease or multiple sclerosis. We are working with disability organisations to try to find ways of identifying such people so that we do not have to trouble them because they have a terminal illness although the original condition under which they became in receipt of DLA may not have been that illness. We are trying to work with disability organisations to try to respond to such problems as sensitively and as unthreateningly as we can.
We are also looking at improvements to the project literature on the basis of suggestions made by disability organisations. Clearly, we need to improve the training for staff. We are looking at how best we can do that, accepting a fact, which is perhaps not always obvious, that training should not be something that is carried out at the beginning and then forgotten about. Training needs to be an ongoing activity for both visiting staff and adjudication officers so that we can have a loop in the learning experience. What we learn from visiting we want to be able to loop back into the training of staff so that they can address those issues. Disability organisations have rightly made us aware that we need to do that.
We are also aiming to speed up the processing time for reviews and appeals following a benefit integrity programme decision. At the moment, on average it takes 11 weeks to get to the first stage of the review. We hope to more than halve that by reducing it to four or five weeks. That will allow a person who, for example, currently has a Motability car to retain the car until the review is completed. That will mean that such a person does not lose the car only to find that it is subsequently reinstated, as has happened on occasion. We hope that that and many other smaller changes will make a difference.
I refer to considering whether we can extend the concept of exempt groups to other groups, including, for example, those who become terminally ill. We may be able to help other groups also. As I have said, other
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changes include improving our literature and training and reducing the time taken before we reach review. We have discussed all of those matters with disability organisations and we hope that, in consequence, the benefit integrity project will do what it was meant to do, which is ensure that the right money goes to the right people and that BIP does not become the threatening exercise which so many disabled people perceive it to be. I hope that we can learn from this.
The changes have to be incremental because some of the steps have different timescales. That is why a "big bang" approach is not appropriate. As a result of the changes, I hope that we can "normalise" this situation so that the programme is regarded as an appropriate and natural step which ensures that the right money goes to the right people—no more and no less, as happens with all other benefits. Clearly, it is more difficult—it is much more sensitive—with regard to disability benefits precisely because disability conditions can fluctuate. Whereas people are in an "either/or" situation with other benefits—one is either in work or one is not—the issue is much more sensitive with regard to disabled people and it needs much more careful and considerate handling. That is what we are hoping to achieve.
I turn now to some of the particular questions raised by noble Lords. The noble Lords, Lord Campbell of Croy and Lord Rix, asked me to make it clear that DLA would not be subject to means-testing. That was made very clear in the Green Paper and I am happy to reiterate that assurance today. I cannot, of course, give the same assurance about taxation—not because there is a hidden agenda, but simply because this matter must properly be reserved to the Chancellor of the Exchequer—but there are no such proposals currently.
The noble Lords, Lord Campbell of Croy and Lord Higgins, asked about savings on incapacity benefit and where they would come from. We hope to achieve savings from incapacity benefit by retaining in work disabled people who are currently leaving work and by enabling disabled people who are currently not in work and who wish to go back to work to be able to do so.
The noble Lord, Lord Campbell, asked about numbers. The latest figures to emerge from the disabilities survey suggest that between 3.25 to 3.5 million people of working age are disabled. Of those, research suggests that upwards of 1 million would like to return to work if they could. We also know that about one in five adults in their fifties leave the labour market and very often go on to disability benefit. If we could help them to remain in work they would not join the forces (if I may put it that way) of those on incapacity benefit. It is all about working with employers to ensure that they get the support and adaptations that they need to keep in work people who have become partially incapacitated. That is what employers, disabled people and, I am sure, all of us want.
For those employers who are recalcitrant in their obligations in that regard, I am sure that the whole House will want to ensure that the Disability Discriminaton Act as well as any subsequent changes that we make to it enforce those responsibilities on employers. But the reduction in the number of people on incapacity benefit and any concomitant savings will

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be a sign of success in the Government's project to help people from welfare to work and is not a cuts-led agenda.
A number of noble Lords, including the noble Lords, Lord Campbell of Croy and Lord Rix, asked how much fraud had been detected. There are no confirmed cases of fraud. I have provided this Answer to a couple of Questions but I am happy to repeat it tonight. However, some 50 cases have been referred for further investigation to the fraud unit. None or all of them may be confirmed but at the moment none has been confirmed. However, one area of concern—it was the reason why the benefit integrity project was invented by the previous administration and carried over into the next—is the worrying level of error. Between one in eight and one in five payments are in error; some are overpayments and some are underpayments. This is not surprising given that people's conditions deteriorate or improve. The process can be gradual. People may not necessarily know when their condition has so altered that it triggers a change in entitlement. But I am sure that all noble Lords agree that there is a level of error and that it needs to be corrected.
As the noble Lord, Lord Rix, identified, this is a matter of providing gateways to benefit and full and proper information to disabled people so that they are aware of the routes to benefit. We have given full assurances that all changes in the gateways or the literature will be done in full consultation with disabled people and the organisations that represent them. We do not want a climate of fear; we want all of us to own the fact that there are problems associated with gateways and ensure that together we address those problems, just as we expect the statistics associated with those problems to be owned by disabled people and their organisations. They can have that information presented in any way they wish so long as the statistics at the end of the day are not misleading.
My noble friend Lady Pitkeathley dealt with carers. On behalf of all noble Lords I pay tribute to the work of both carers and the Carers National Association that has so gallantly represented them. Carers not only care but do so at considerable cost to themselves and their health, work, pensions and finances. Carers can themselves, through the act of caring, become isolated. That is the ultimate price they pay. By caring there is no one left to care for them in turn. It is for that reason that we are determined to help carers to retain access to the labour market wherever possible.
My noble friend raised the question of earnings cut-offs and tapers and a possible rise in the threshold to national insurance levels so that carers do not lose entitlement to benefit. We are looking at all of these questions. They are complicated matters and are not just financial in character, although clearly financial considerations arise. But the complexity of the interworking of tapers produces very real problems that we must address. I assure my noble friend—as she probably already knows—that we are considering in what ways, if any, we can help to ensure that carers do
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what we all value, which is to support disabled people in the community while they themselves retain access to the labour market.
The noble Lord, Lord Swinfen, who is a patron of DIG, welcomed the Budget proposals. As an association at the forefront of the campaign for disabled people's incomes—I pay tribute to it—DIG has raised issues about qualifying benefits under the new proposed disabled persons tax credit. We expect to move over to that benefit in October 1999 and only from the following April will it be formally integrated into the Inland Revenue proposals. As a result, we expect to be working up the detail of that benefit—if I have made any errors in the dates I shall write to the noble Lord—over the next few months in consultation with disabled people, but some of the issues, for example, the qualifying benefits, still remain to be resolved. We need to discuss them.
The noble Lord, Lord Rowallan, asked about amputees. As he anticipated, this is a matter for the Department of Health. I shall take up his concerns with my colleagues in that department. The noble Lord, Lord Addington, said that disabled people needed a case-by-case response. He is absolutely right, and that is exactly why we are piloting personal advisers in 12 areas, six this autumn and a further six next spring, to offer disabled people, on an individual basis, counselling, advice and support as they move towards work. I hope that we can do that in ways to which disabled organisations can respond.
The noble Lord, Lord Higgins, asked about the disability rights commission and whether we were thinking of introducing it. I realise that some surprises have been sprung on the noble Lord in the Social Security Bill in terms of Phoenix directors and the like. He may be asking whether we propose to do something on the lines of the disability rights commission in the Social Security Bill. That is not our intention, or certainly it has not been transmitted to me. I doubt that it would be possible to do that within the Long Title of the Bill. However, the Government are actively considering bringing forward legislation to that effect at the earliest possible opportunity. My understanding is that we are looking at the next Queen's Speech. That is not a commitment, but it is hoped that from the next Queen's Speech we may be able to bring forth legislation to that effect. That will depend upon judgments yet to be made in terms of competing priorities for the next Queen's Speech.
Lord Higgins: My Lords, I am grateful to the noble Baroness for allowing me to intervene. The Green Paper states that it will be done as soon as possible, which surely does not mean the next Queen's Speech.
Baroness Hollis of Heigham: My Lords, yes, but I do not believe that it can be brought within the proposed legislation now before the House, which was the question raised by the noble Lord. I hope that I have dealt with the queries that have been raised by noble Lords.
Finally, we are continuing the process of reform and moving to consultation on the proposals put forward in the Green Paper and the Budget. That consultation with

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the disability organisations will be full and honest. We hope that the debate in your Lordships' House tonight marks the first of many such debates as that consultation proceeds.
7.38 p.m.
Lord Campbell of Croy: My Lords, I am grateful to all those speakers who have taken part in the debate. I have a short time in which to comment. My noble friend Lord Swinfen raised suggestions made by DIG. I hope that the Government will consider those suggestions. I am reminded that I helped in the creation of DIG. Its founder was the late Mrs. Megan du Boisson. She was the first person to go into the Public Gallery in the other place in a wheelchair, arrangements having been made by the then Serjeant-at-Arms for a debate of mine in 1968.
My noble friend Lord Higgins asked about the Disability Rights Commission and when it was to be set up. The proposal has been a Labour Party one for at least three years. As I understand it, the task force is the first stage. The task force has been established. I presume that the Minister will agree that it is expected to report and make recommendations before legislation can be prepared. I am grateful to the Minister for her replies to my points.
I should like to comment upon one of those points. She said that there would be 3 million or more disabled people of working age. The 1991 census recorded 6.5 million disabled people, by its definition, and that only 1.5 million of them were of working age. I realise that the degree of disability comes into that. No doubt if one has 8 million or 9 million as the figure for all the disabled people in the country, reducing the degree of disability, then one produces more of working age. The census of 1991 was the first to record the disabled in the population. It produced only 1.5 million disabled people of working age. Of course, more than half of them were in employment.
As a piece of modern history, I have in my hand a Green Paper in the original form. It is green and very different from the modern versions. As I said in my original speech, we are indebted to the late Richard Crossman for having invented the concept of Green Papers. I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

D'Oyly Carte Opera Company
7.41 p.m.
Lord Denhamrose to ask Her Majesty's Government what measures, if any, they can take to help to save the D'Oyly Carte Opera Company.
The noble Lord said: My Lords, on 23rd March 1875, 123 years ago last Monday, "Trial by Jury", the first successful collaboration between William Gilbert, the librettist, and Arthur Sullivan, the composer, opened at the Royalty Theatre in London. Both were brilliant but neither could achieve anything like his best except in partnership with the other. The only trouble was that
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they quarrelled so much that they were unable to work together without the mediation of the equally brilliant impresario, Richard D'Oyly Carte.
"Trial by Jury" was followed over the next 21 years by "The Sorcerer" and 11 other light operas. The Savoy Theatre was completed by Richard D'Oyly Carte in 1881, principally for the presentation of the works of Gilbert and Sullivan. Richard himself died in 1901 and the company was taken over, first, by his widow, Helen, and on her death by Rupert, his son.
Between them, Gilbert and Sullivan and the D'Oyly Carte family established an art form, unique and essentially English, which has given pleasure and instruction to successive generations. They were masters of the "patter song". They devised the "Gilbertian ending" in which, after two acts in which the principal protagonists contrive to get themselves into a more and more convoluted state of utter hopelessness, a final twist—whimsical but wholly logical and even believable—makes everything come out all right again, and everyone lives happily ever after.
In "Ruddigore", for instance, a witch's curse causes a whole line of baronets to commit a crime every day of their lives until, sickened as each inevitably becomes, they refuse to do so and die in horrible agony as a consequence. The solution is found by the last of the line, who manages to persuade the ghosts of his ancestors that for a baronet of Ruddigore to omit his daily crime is tantamount to committing suicide and, suicide itself being a crime, they should none of them have died at all.
Their satire, both in Gilbert's words and Sullivan's music, of the foibles of various groups of their contemporaries is as fresh today as it was when it was written. And it still works best, not by substituting the modern equivalent but by keeping the text as it is and viewing our own idiosyncrasies in the light of those of our late Victorian forebears. And, perhaps that even applies to "Iolanthe.
It is a strange thing, but, in my experience, few people are indifferent to Gilbert and Sullivan; you either love it or you loathe it—and unfortunately those who have the responsibility for distributing public money seem to fall into the latter category.
The copyright for Sullivan's music expired in 1950 and, more important, that for Gilbert's libretti in 1961 because with this latter ended the monopoly of the D'Oyly Carte Opera Company. The major opera companies were now able to introduce splendid innovative productions of the Gilbert and Sullivan operas, but they did so with massive injections of public money with which the self-financed D'Oyly Carte found it hard to compete. Even so, it struggled on for a number of years until it too had to go cap in hand to the Arts Council of England. To be fair, an offer was then made to it, but the conditions imposed were such that, rightly or wrongly, the trustees of the day did not feel able to accept. The last performance therefore took place in February 1982.
In 1985, however, Dame Bridget, the last surviving member of the D'Oyly Carte family, died and left a bequest of £1.2 million for the regeneration of the

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company. A new general manager was appointed, highly generous sponsors appeared in the form of Sir Michael Bishop and his British Midland Airways and, after a launch party in the Leader's room of your Lordships' House, the company went into production again in 1988.
In 1993 the D'Oyly Carte received its first ever grant from the Arts Council of £30,000, and this was followed by one of £18,000 in 1994 and another of £20,000 in 1995, but these were only given for three specified works, by composers other than Sullivan and librettists other than Gilbert.
By 1997 the end had been reached. The D'Oyly Carte bequest had run out. After 10 years of carrying the company, British Midland and other sponsors felt that they could not carry on without at least a matching contribution from public funds—and who can blame them? Under extreme all-party pressure, the Arts Council made a one-off grant to the D'Oyly Carte of £250,000, £150,000 for a national tour and £100,000 to prevent the company from having to disband. This was as against over £20 million for the Royal Opera House, £16 million for English National Opera, £5 million for Opera North, £4 million for the Welsh National Opera and a considerable sum for the company's neighbours in the West Midlands, the Birmingham Repertory Company. Yet the D'Oyly Carte's national tour received rave reviews all over the country.
The Arts Council ordained that no more money would be forthcoming to the company from it unless a favourable report on its future prospects was obtained from one of three consultants on a list approved by it. The report from The Arts Business Ltd. was received by the company in February this year. Effectively, its recommendations were that it should re-write Gilbert; re-vamp Sullivan; drop all but a fraction of their works, replacing them with other light operas and musical comedy; sack the senior executives; and move the home base from the Midlands up to the north of England—oh, yes and change the name of the company from D'Oyly Carte.
The D'Oyly Carte company has already diversified from Gilbert and Sullivan to include other light operas, as indeed did its founder, Richard, when he built the Savoy Theatre all those years ago. And you cannot modernise Gilbert and Sullivan too much, without losing something of their essential quality. Indeed, some of the most successful non-D'Oyly Carte productions have done exactly the opposite and gone back to their 19th century roots.
And in any case, the report is already flawed in that its plan for the first year, 1998, relies on a large contribution from the Stabilisation Fund; the Arts Council has ordained that no further applications to this fund will be considered before 1999; and, as far as saving the company is concerned, 1999 will be too late.
The D'Oyly Carte's own productions are only a part of it. Its library is the custodian of all the original prompt books as well as Sullivan's orchestral scores of which a new edition has been embarked on, using modern computer technology to eliminate copying errors accrued over time. The information from these is
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made available to well over a thousand amateur societies in this country alone, which between them put on an average of 300 productions a year.
Just as the mediation of Richard D'Oyly Carte was fundamental in saving the partnership in its early days, only the company that bears his name has the capability, two years after the centenary of "The Grand Duke", the last of the Savoy operas, to preserve the Gilbert and Sullivan canon into the next millennium.
I find it ironic that other recipients of public money find difficulty in raising matching contributions from the private sector, while for the D'Oyly Carte this presents no problem and all it is seeking is a fair contribution from the Arts Council. Considerably less than £1 million of lottery money a year together with what they can raise elsewhere would save the company and prevent 10 years of unequalled private generosity being thrown away.
So, what am I asking for? Nothing less, I am afraid, than a Gilbertian ending so that the D'Oyly Carte Opera Company, and its devotees throughout the country, can live happily ever after. And how can Her Majesty's Government, who have no direct responsibility for the distribution of lottery money, help? Well, a kindly glance, perhaps; the right word spoken at the right time in the right direction. The noble Lord, Lord McIntosh of Haringey, could make a start on that this evening.
The D'Oyly Carte Opera Company now finds itself in much the same terminal position as did Sir Ruthven Murgatroyd, the last baronet, at the end of "Ruddigore".
"Now I do not want to perish by the sword or by the dagger,
But a martyr may indulge a little pardonable swagger,
And a word or two of compliment my vanity would flatter,
But I've got to die tomorrow, so it really doesn't matter!
So it really doesn't matter, matter, matter, matter, matter!"
My Lords, it really does matter.
7.52 p.m.
Lord Hunt of Kings Heath: My Lords, I thank the noble Lord, Lord Denham, for initiating the debate. I hope that it will be an important contribution to saving D'Oyly Carte. On that hope rests the hopes of many thousands of people in this country and around the world.
I love Gilbert and Sullivan; but surely even those who do not would acknowledge its contribution to our cultural heritage, not as a Victorian museum piece to be dusted down from time to time, but, as the noble Lord said, as a vibrant art form whose language, satire and music are as lively today as a century ago; and which has served as a passport by which so many people—young people at that—have come to the glories of opera in this country.
If Gilbert and Sullivan have so much to offer, why then the consistent and continuing indifference towards Gilbert and Sullivan by the powers that be in the arts world? Why has the Arts Council given only occasional one-off grants? Why does the arts elite of this country continuously shun Gilbert and Sullivan? Is it because it is not what they consider to be high art? Does Gilbert's satire still strike home at the pretensions of our art

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establishment? Is it because Gilbert and Sullivan appeals to a much wider audience than many art forms in receipt of considerable public subsidy?
Nowhere is this official indifference more reflected than in the approach of the Arts Council over recent years to Gilbert and Sullivan. I feel that very keenly as a resident of Birmingham. We have in the city council a local authority which contributes most to the arts. Its support for D'Oyly Carte was significant. In 1991, when the company moved to Birmingham, the council gave it almost a quarter of a million pounds. It increased the grant year by year until 1995 when it contributed £335,000.
Yet, despite the city council's attempts to encourage the Arts Council also to make a contribution, no support was forthcoming. Of course, the one substantial grant made by the Arts Council was £250,000 last year. As the noble Lord, Lord Denham, pointed out, a condition of that grant was to employ a consultant to consider the company's funding and management arrangement. I suspect that all noble Lords are aware that the consultant and the company did not perhaps "hit it off'. I am also aware that the relationship between Birmingham City Council and the company was not all it might have been. However, surely the penalty for failures in relationships should not be visited upon the thousands of people who queue up to see D'Oyly Carte productions year on year.
Despite my criticism of the Arts Council, I would not pretend that it has an easy task. I am delighted by the reforms which are taking place. I wish the new chairman and chief executive well. But I would urge it, as almost its first decision, to wipe the slate clean in its historic relationship with D'Oyly Carte and to see its way to ensuring that a regular and substantial grant is given to the company.
A key issue in this debate is artistic standards. One has read of criticisms of the company's artistic standards. I would be the first to acknowledge that in the final years of the original company, productions have become a little stale. But, equally, we should acknowledge that the reformed company has produced some outstanding productions which have been recognised up and down the country.
If no permanent grant is forthcoming, what then? What if the company closes? The works of Gilbert and Sullivan will not die. The strong amateur tradition will continue. From time to time, other companies will put on Gilbert and Sullivan productions. Who could forget the marvellous "Mikado" produced by Jonathan Miller for the ENO? But we would lose—and it would be a great loss—the year-on-year sustainability of Gilbert and Sullivan by D'Oyly Carte. It has toured so many parts of the country which do not receive visits from other opera companies. It has helped to grow an audience not just for Gilbert and Sullivan but for opera generally. It has given so much encouragement to amateur productions, as the noble Lord said.
Funding the arts is never easy and we all attempt to second-guess the decisions of those who are in a position to fund the arts. But, surely, out of all the money that is given to opera in this country, we could
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find one or two million pounds a year for the D'Oyly Carte company. I make a plea to my noble friend for the Government to use their best endeavours to encourage that not only for D'Oyly Carte but for all those—and there are many in this country—who love Gilbert and Sullivan.
7.56 p.m.
Lord Rix: My Lords, in taking part in this debate, I must declare an interest in the works of Gilbert and Sullivan—works which are closely associated with the D'Oyly Carte Opera Company—for at the age of 12 I played the part of Hercules, a page, with all of one line to speak, in my local amateur operatic society's production of "The Sorcerer" at the Star Cinema in Hornsea, East Yorkshire. I stress "Hornsea, East Yorkshire", because on Monday, during the debate on drama, Hansard moved me from the windy east coast to the suburbs of London. Furthermore, I draw attention to the fact that D'Oyly is misspelt on the list of speakers.
I believe that the only reason I had the part was because my mother was the leading soprano in the company, while my father was the chairman. Nevertheless, the playing of that tiny part, and my seeing many other productions of G&S over the years, gave me a love of, first, the theatre and, secondly, the D'Oyly Carte and other productions of light opera. And yet, once again, we are faced with the demise of the D'Oyly Carte Opera Company, founded in 1875 and going strong or battling on ever since, with a major hiccup in 1981, when the company closed until its relaunch some seven years later. Since then the company has performed regularly at over 40 venues nationwide and to an audience of over one million.
Despite this impressive phoenix-like revival, the company continues to be treated with short shrift by the arts funding bodies. The old cry was that the standards of the company had slipped; that the principals were encouraged to continue long past their sell-by dates; that the performances were but pale imitations of those in the great days of yore; and—perhaps most heinous of all—that the productions appealed to the provincial audiences and to the coach parties, thus bringing out the cultural snobbery which seems to pervade the opera establishment.
It certainly pervaded the Arts Council when I served on that august body and very little good was said about the company by those in charge of touring and music. As the then chairman of Drama and the Advisory and Monitoring Committee on Disability and the Arts, I had enough worries of my own and must confess that I took little interest in the works or benefaction of other committees. Thus I played little part in the discussion—and, it seems, condemnation—of the production values of the D'Oyly Carte, although I was aware that something was going on.
Last year, however, the Arts Council seemed to have a change of heart. As we have heard from the noble Lord, Lord Denham, a one-off grant of £250,000 was made to the D'Oyly Carte in order to prevent the company from going to the wall and to support a limited autumn tour. This is a derisory sum in operatic terms—

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other national opera companies receive over £40 million annually from the Arts Council—nevertheless with further income generated through the box office, together with corporate and private sponsorship, two excellent productions were mounted by the D'Oyly Carte, "Iolanthe" by Gilbert and Sullivan and the "Count of Luxembourg" by Franz Lehar. Both productions received much critical praise; indeed, Hugh Canning, a highly-respected opera critic writing in the Sunday Times, found the D'Oyly Carte's offering to be "infinitely superior" to the then production on offer by the Royal Opera at the Shaftesbury Theatre.
But that was last year. This year, from the Arts Council, apparently nothing—other than a convoluted recommendation for the D'Oyly Carte to receive £150,000 of so-called stabilisation funding from the lottery when, as far as I can gather, there is no stabilisation funding available. A Gilbertian solution indeed!
"I dreamt that somehow I had come
To dwell in Topsy-Turveydom!"
And unless this absurd situation is righted, the light opera audience and those who enjoy Gilbert and Sullivan in this country will see their share of the operatic subsidy being spent on the Royal Opera, the English National Opera, Opera North, the Welsh National Opera and Scottish Opera—companies which have harvested many a talented young artiste from the D'Oyly Carte for, again according to the Sunday Times,
"the company is young and enthusiastic…singing and dancing its collective heart out."
Alas, though, that fount of talent will be no more.
Of course, the Government will pray the arm's-length principle as absolution in this matter. I served on the Arts Council for nearly eight years and one of my reasons for resigning was my belief that the arm's-length principle was a very short-arm indeed. Of course, that was under the ancien régime—things may be very different now. All the same, I cannot believe that a discreet telephone call from 1 Cockspur Street (the Department of Culture, Media and Sport) to 14 Great Peter Street (the Arts Council of England) might not work wonders. The noble Lord, Lord McIntosh, may not be John Wellington Wells—but he could deal in magic and spells—and for the noble Lord, Lord Denham and other noble Lords bringing it to his attention and possibly saving the D'Oyly Carte:
"No Englishman unmoved that statement hears,
Because, with all our faults, we love our House of Peers".
8.2 p.m.
Lord Renton: My Lords, it is a great delight to follow the noble Lord, Lord Rix, who has spoken with such wide experience of matters which are relevant to this debate. I must confess that when I used to enjoy seeing him in Whitehall farces, even occasionally taking down his trousers, I used to think how brilliantly he
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would have done in many parts in the Gilbert and Sullivan operas.
We owe a lot to my noble friend Lord Denham. He talked about loving Gilbert and Sullivan. I am one of those who do love it, as does everyone, I believe, except a few high brow prigs, music prigs largely.
My noble friend has revealed a sorry state of affairs. As Yum Yum said in "The Mikado",
"Here's a pretty state of things".
"Here's a pretty how-de-doo".
Something must be done. Having heard my noble friend and other noble Lords who have spoken, perhaps to lean on the National Lottery might be a good idea. To threaten to discontinue one's patronage of the National Lottery might not take the matter anywhere. However, I really believe that the National Lottery must take this seriously.
Gilbert and Sullivan operas not only have a wide variety of gorgeous light music and contain a lot of fun and wit; they also portray in a light-hearted way the lighter side of the heart of our nation, not only as it was 100 years ago but in many ways as it still is today. For example, in "Utopia Limited", which is not produced often enough, we learn:
"There's no such girl and no such pearl
As a bright and beautiful English girl".
Of course, in "Iolanthe" as has been mentioned, we learn a lot about your Lordships' House as it was and as, I am glad to say, it still largely is. Long may it remain so. For example, what about the Lord Chancellor's song in "Iolanthe"?
"The Law is the true embodiment
Of everything that's excellent.
It has no kind of fault or flaw,
And I. my Lords, embody the Law".
I hope that the Lord Chancellor will try to keep that up. I hope that he will not be replaced by a Minister of Justice in another place; that he will continue to follow the example of his predecessor in "Iolanthe".
I could not help thinking, during our debates on the Crime and Disorder Bill of the "Mikado". I am sure that the noble Lord, Lord McIntosh, who did such wonderful service in replying to some of the debates on that Bill, must have been tempted to sing:
"My object all sublime
I shall achieve in time
To make the punishment fit the crime
The punishment fit the crime".
It is all so relevant.
The Home Secretary should remember the words of Ko Ko in "The Mikado":
"I've got a little list—I've got a little list
Of society offenders who might well be underground
And who never would be missed—who never would be missed!"
If I may dare to say so, that would be particularly true in time of war.
It would be a tragedy for our people if the Gilbert and Sullivan tours by the D'Oyly Carte Company were to

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come to an end. The Arts Council and the National Lottery people must do all they can to keep the D'Oyly Carte Company pleasing, amusing and inspiring our people.
Of course, I am glad to say that there are some splendid amateur operatic societies which perform Gilbert and Sullivan very well. In particular, there is one in Peterborough which I visit regularly, not far from where I live near Huntingdon. Every year the members of that company put on a week of performances on a grand scale. Really, although they are all amateurs, it is done with such excellence that there is not much difference between them and the professions. Also, at St. Ives, near Huntingdon, there is an amateur music and drama society which gives splendid performances.
But we must not leave it merely to enthusiastic amateurs, however much we may enjoy them. We must make sure that the D'Oyly Carte Company continues its splendid work, especially in its tours of our country.
8.8 p.m.
Lord Chalfont: My Lords, with others, I should like to thank the noble Lord, Lord Denham, for tabling this Question, although I regret that a situation has arisen which makes it necessary for him to do so.
As other noble Lords have said, D'Oyly Carte is an evocative symbol in our national culture and it seems to me extraordinary that we should be here this evening contemplating the possibility that government action may be necessary to save it from extinction.
My own reason for taking part in this debate is the same as that of many other noble Lords; namely, a long-standing and lasting affection for the words and music of Gilbert and Sullivan. My memories of my early days in Wales are, predictably, much associated with the sound of music; and, although our staple diet was largely, Calon Lân, Dafydd y Garreg Wen and sometimes Handel's "Messiah", we were never far away from "Pinafore", "Patience" or the "Pirates of Penzance". I think that this House is an appropriate place in which to debate the future of D'Oyly Carte as Gilbert, as has been said, seemed to have a special affection for the peerage. In "The Pirates of Penzance", as noble Lords will recall, the intricacies of plot were resolved at the end by the revelation that the pirates were all, in fact, Members of the Upper House. The Duke of Dunstable is one of the leading characters in "Patience" and, of course, no one will easily forget the Duke of Plaza-Toro in "The Gondoliers" or Pish-Tush, the Gilbertianly-named nobleman in "The Mikado".
However, I suppose that the prime example of all this, as the noble Lord, Lord Denham and the noble Lord Renton said, is "Iolanthe", which, although it was first produced, as we heard, in the Savoy Theatre over one hundred years ago, still has some quite interesting relevance for your Lordships' House. I am sure that noble Lords will recall that one of the principal characters to whom the noble Lord, Lord Renton, referred in "Iolanthe" is half man and half fairy. For those who are curious about these matters, his top half
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was fairy and his bottom half was man. Although that may seem a curious qualification for a peerage, he was in fact magically introduced into the House of Lords and, if the Lord Privy Seal were here, he might have been interested to note that the ceremony of introduction was arranged by the "Fairy Queen".
As the action developed, it transpired that the new Peer was in fact, as we have heard, the long-lost son of the Lord Chancellor and his bride Iolanthe, who had been banished from the fairy world a quarter of a century earlier for marrying an ordinary human being—that is, if one can describe a Lord Chancellor in those terms. There was then a great deal of mysterious influence on the proceedings of the House of Lords. At the end, in one of those endings to which the noble Lord, Lord Denham, referred, the Fairy Queen exercised her prerogative by transforming all the hereditary Peers into fairies, so removing their right to sit and vote in the House of Lords. The Government may wish to bear that device in mind.
I mention these aristocratic preoccupations only to suggest that, in the long term, not much changes in people's fascination with the mystique of your Lordships' House. Speaking personally, I would be happy if not much changed in the world of Gilbert and Sullivan and D'Oyly Carte. But that is perhaps too much to ask. Social mores and cultures change and perhaps the familiar and much-loved D'Oyly Carte conventions have become to some extent a specialised taste. Certainly this seems, to some extent, to be the general tenor of the report prepared by Mr. Richard Crossland of Arts Business Limited, mentioned by the noble Lord, Lord Denham. The summary of conclusions of the report, when referring to D'Oyly Carte, contains the following comment:
"The company's artistic values are confused, falling between authenticity on the one hand, and bringing an external, independent artistic mind to the presentation on the other. On the whole artistic values are set by a team who are or soon become insiders to a tradition and therefore fail to connect the work with the operatic and theatrical mainstream".
Not surprisingly, as we have heard, the D'Oyly Carte Company dissents strongly from that view, describing the report as flawed.
I do not wish to become involved in the crossfire between the Arts Council, the report of the ABL, and the D'Oyly Carte Company. Rather than take sides in the matter, I should prefer to quote a key passage from the section on funding in Mr. Crossland's report, because it seems to me to go to the very heart of the problem and, indeed, may lead the Government to take some action:
"The funding position of the Company is a Catch-22 situation. The funding system believes that the Company does not have the strengths, the artistic standards and the range of activity that would justify funding as a national touring Company, let alone a fully fledged national Company. The Company asserts, with some justification, that it cannot do what it cannot afford. The Company believes that lack of subsidy is the obstacle to artistic success, whilst the funding system believes that lack of artistic success is the obstacle to funding".
Therein lies the significance of the Question tabled by the noble Lord, Lord Denham:
"What can the Government do to help save the D'Oyly Carte Company".

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I conclude by saying that this is our national light opera company, which presents not only Gilbert and Sullivan but, as we have heard, other European light opera. It is a part of our national heritage and it seems to me to be quite bizarre that the D'Oyly Carte Opera is excluded from the list of organisations receiving regular funding by the Arts Council. Like the noble Lord, Lord Denham, in no spirit of challenge or confrontation but by way of genuine and anxious inquiry—and, indeed, in the hope and perhaps even in the expectation that the noble Lord, Lord McIntosh, will be able to give us an encouraging reply—I ask: what can the Government do about it?
8.15 p.m.
Lord Renton of Mount Harry: It gives me great pleasure to follow the noble Lord, Lord Chalfont, in this debate. I remember well another operatic evening organised by the noble Lord and Lady Chalfont which was not actually Gilbert and Sullivan; indeed, it was a marvellous performance of "La Traviata", perhaps in celebration of a wedding anniversary or a birthday. It took place at the Garrick Club. I was sitting in the front row and was fortunate enough actually to have Violetta die in my arms. I do not believe that I have ever had such an exciting operatic evening.
But we are gathered here tonight at the instigation of my noble friend Lord Denham not to talk about Italian tragic opera but rather to talk about something which is extremely important: English, comic opera. Both my noble friend and the noble Lord, Lord Hunt, referred to the fact that in some way—and perhaps this has influenced the Arts Council's judgment, upon which the noble Lord, Lord Rix also commented—Gilbert and Sullivan works have for some time been thought of as being, in a sense, slightly low brow.
In this debate, it is worth countering that image by remembering, for example, that Lytton Strachey the important historian and essayist, commented that, in his judgment, the most permanent and enduring achievement of the Victorian age would be the operas of Gilbert and Sullivan. Some people may say that that is an overstatement, but it is a remarkable fact that, for many generations, under the aegis of the D'Oyly Carte Opera Company Gilbert and Sullivan was not in any sense thought of as low brow; indeed, they made a very important contribution to the development of light-hearted comic opera of the sort that would be put on at the Volksoper in Vienna, the works of Kalman, Offenbach, and so on. It is that aspect which makes the difficulty for D'Oyly Carte in getting money from the Arts Council seem even more strange and wrong. In fact, in putting on Gilbert and Sullivan operas the D'Oyly Carte Opera Company has been an upholder of an extremely important tradition of English creativity in music that should be continued.
I was actually present at the first performance of the D'Oyly Carte company in Birmingham to which the noble Lord, Lord Hunt, referred; indeed, I remember it well. It was a performance of "The
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Gondoliers" and I went there as Arts Minister. I have to say that the Birmingham councillor whom I was sitting next to did not like it. He thought that it was all a great waste of money. However, it was a marvellous attempt to save an important tradition. I believe that D'Oyly Carte in Birmingham got better and better. I recently saw the touring production of "Iolanthe" to which the noble Lord, Lord Rix referred. I saw it at the Theatre Royal in Brighton and I thought that it was extremely successful. The music was well played, the songs were well sung and it had been brought up to date, but in a pleasant, not grating manner. There were certainly references to New Labour in the script. I think there was even a reference to Peter Mandelson. The audience loved it and the theatre was packed.
I am a founding patron or trustee of New Sussex Opera. That company put on a performance of "Trial by Jury" in Lewes Crown Court the other day. That, too, was a sellout.
One has to ask oneself whether the D'Oyly Carte will be a casualty of "Cool Britannia". I certainly do not think that it should be. I very much agree with my eponymous friend, the noble Lord, Lord Renton, when he said that this is an obvious child to receive money from the lottery.
It is a coincidence that we are having this debate today as a new chairman, Eric Anderson, is taking over the Heritage Fund. I pay tribute to the good work done by his predecessor, my noble friend Lord Rothschild. I think the National Heritage Fund has been a huge success. It has allocated more than £1 billion over the past three years, and it has more than £1 billion worth of applications in front of it at the moment. However, I cannot say the same about the Arts Council's handling of lottery money. It is a great pity that the arts part of the lottery budget should be handled by the Arts Council. It would have been much better if the Arts Council had only handled Treasury money for revenue funding, and the lottery money for capital funding had passed through a different route.
That said, it is surely ridiculous, at a time when the total amount of money available for the arts has been effectively doubled thanks to the lottery, that we should question tonight whether this important part of British musical heritage should survive. I hope that as a result of this debate the Minister will decide that an appropriate telephone call may be a good thing. I refer to that marvellous principle, the arm's length principle, which I remember so well and with such pain from when I was Arts Minister.
I am quite certain that revenue funding should be available to D'Oyly Carte. If D'Oyly Carte is allowed to die, an important part of British musical history and comedy will die with it. And it is an internationally famous part of British musical history that has been enjoyed and performed by amateur and professional dramatic companies all over the world.
I am glad that no one has yet stolen the quotation that I want to throw at the Minister in my final words. I agree with my noble friend Lord Denham that

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hideous punishments will await the Minister if he does not convey a favourable message to his colleagues following this debate. He will perhaps remember the words from "The Mikado", which should make him suitably nervous,
"Oh, never shall I
forget the cry
Or the shriek that shrieked he,
As I gnashed my teeth
When from its sheath
I drew my snickersnee".
I do not suggest public decapitation for the Minister if he does not respond favourably, but I certainly suggest that "something lingering with boiling oil in it" would be an appropriate fate! I hope that he will avoid that fate by giving us an encouraging reply tonight.
8.22 p.m.
The Earl of Kinnoull: My Lords, the debate initiated by my noble friend Lord Denham has provided both humour and a great deal of wisdom. I congratulate him on introducing the debate to seek to rescue the D'Oyly Carte company. It is a rare moment when my noble friend comes here as if on a white charger and summons and attracts 12 eloquent speeches to his cause. I congratulate him on his eloquence and on his powerful and persuasive appeal.
It seems that only Gilbert and Sullivan with their unique humour could be the centre of debates in both Houses on the same day and on April 1st. I start with the premise—as the noble Lord, Lord Chalfont, said—that the D'Oyly Carte is our national light opera company. It has over many years produced beautiful and varied productions of light opera—not just, of course, Gilbert and Sullivan—and, as a touring company, it has brought more joy to more people, both young and old, than any of the more prestigious and hugely expensive opera houses. D'Oyly Carte has a great tradition. It is proud and professional and often wins the most excellent reviews, or it has done so up to now. As has already been said, it is undoubtedly part of our musical heritage and culture. However, as others have said, its future is black. As we know, it has a large overdraft. It has no funding for 1998 and it cannot even contemplate a programme. Unless some funds are found soon, its demise is possible.
The debate in another place this morning was judged to be supportive on all sides. I have not seen the transcript but I am told that the Minister made some encouraging noises and implied that the Arts Council would clearly pay attention to the debate. But what does that mean in reality? The Arts Council has already announced its allocation of funds for the performing arts for 1998. But D'Oyly Carte needs funds now, or in the very short term.
On 28th February of this year, the outgoing chairman of the Arts Council, my noble friend Lord Gowrie, wrote that there were no funds available and the council had to rule out an emergency package. What can the Government do? I am told there is an avenue—not the stabilisation fund—via the lottery fund of some £200 million to £250 million which could be drawn, subject to Treasury consent. I am sure that the
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Government have other contingency funds which are hidden away and could be drawn upon if the will were there.
My final comments concern the past relationship of D'Oyly Carte and the Arts Council. Like other noble Lords, I find this story deeply disturbing. It is as if civil servants within the council have no sympathy for what is to them a minnow, but with a loud voice. It was said this morning in another place that D'Oyly Carte felt badly let down when in 1996 it was encouraged to apply for the new stabilisation grant, which would have suited it admirably, but the application—which was supported by independent consultants—was turned down flat. As we have heard, it received a one-off £250,000 grant last January.
I am sure a fresh look at this matter will he given under the new chairman of the Arts Council. But I think the Government need to do more if part of our musical heritage and culture is not to perish. I hope that the noble Lord, Lord McIntosh, will be able to provide the answer tonight.
8.27 p.m.
Viscount Mountgarret: My Lords, I, too, thank the noble Lord, Lord Denham, for giving us the chance to debate this matter. He has given the Government an opportunity to hear of the difficulties which face the D'Oyly Carte Opera Company.
Until about 1965 D'Oyly Carte had the monopoly of performing the works of Gilbert and Sullivan. Due to the popularity of those operettas they were even more in demand then than perhaps they are today. Certainly the company was not as short of cash then as it is now. Since then these works have been performed by other companies. While that is to be welcomed, the fact is that Gilbert was a stickler for perfection, and D'Oyly Carte are accepted specialists in the finer art of Gilbert and Sullivan. If the company were to have to bring down the curtain in 1998, this country would lose what has already been referred to as a national institution.
The noble Lord, Lord Renton, referred to many of the sayings, the wit and satire expressed in the operas as having the same importance today as they did when they were written. He quoted mostly from "Iolanthe". "Iolanthe" may relate to your Lordships' House, but there are many things that we should bear in mind. I refer, for instance to the call to the Bar, to ensure that they do not take fees with a grin on their face when they have not been there to attend to the case. Alternatively, when the Fairy Queen in some trouble needs to get married immediately, she turns to the guardsman outside Buckingham Palace and asks him, "Would he mind being a fairy?" to which he replies that it would be a pretty poor day if the British soldier did not carry out the request of a damsel in distress. That is not a bad thing for the military to remember today.
It all comes back to funding. The Arts Council is funded differently from some years ago. Nonetheless the monies available generally for the arts have been on the small side, to say the least. Twenty or 30 years ago I was told that more money was given to aid the Hamburg State Opera than the whole of the Arts

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Council for this country. It was a staggering thought. Whether it is the same today, I cannot say. The arts suffer from a parsimonious attitude at times.
I have a suggestion. The operettas were in full swing, going full blast at the turn of the century. It would be marvellous if this company were on a sound and sure financial footing at the end of this century and the start of the next. The enormous sums earmarked for the millennium festivities and the dome at Greenwich are mind-boggling. One wonders whether a little pruned from that might assist this company, which is a national institution and might well outlive the Millennium Dome and the numbers of people who go to see it. But let us not go down that route tonight. From time to time, performances of D'Oyly Carte might be given in the Millennium Dome, representing our national heritage, as will other events. These are thoughts that one puts forward.
What will the Government do? Can the Government do anything? Unless such companies are properly funded, they will fall by the wayside. I think, as do other noble Lords, that that would be very sad indeed.
8.33 p.m.
Baroness Wilcox: My Lords, I thank the noble Lord, Lord Denham, for asking the Question, and for making me stop to think how easy it is to stand by and bewail afterwards when something very precious has gone. 1, too, have a song to sing, thanks to the D'Oyly Carte Opera Touring Company.
Where I come from, the thought of making a long journey to the grand opera at Covent Garden would have been a terrifying prospect. The rough fighting city from which I come, Plymouth by the sea, in Devon, had a rather cavernous, tatty theatre, post-war. It was in Union Street, more famous with sailors for other more intimate treats than theatre, but there it was. It was there that pantomime and the odd travelling show turned up. It had the occasional circuit star—those who were brave enough to come to a service town—Frankie Vaughan, the Beverley Sisters and Max Bygraves. But for a full house, with most of the spectators spilling out from the cheap seats at the top, the theatrical groups, and amateur groups came from all over the west country. Gilbert and Sullivan societies would come from miles around. They wanted to see the real thing, brought all the way to us in Devon. There was D'Oyly Carte's "Pirates of Penzance", the "Mikado", "The Gondoliers". They were the tops.
Why? I think it was the fact that the performances came to us in Devon, so far away, colourful and clever, with tunes and lyrics that were so accessible, such fun, so poignant, that on leaving the theatre, voices as off-key as mine could be heard confidently singing,
"to the knell of a church-yard hell and a doleful dirge ding-dung"
—our song tonight.
To lose a peripatetic company that is custodian of so much history and knowledge of the original works of such unique talents as Gilbert and Sullivan is sad; and, with a bit of encouragement, needless. Nostalgia aside,
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my noble friend Lord Denham has already given us a wonderful history of Gilbert and Sullivan and of D'Oyly Carte and its funding. He spoke most eloquently, as did my noble friend Lord Kinnoull and many other noble Lords, of the money that is needed. I shall therefore not waste your Lordships' time by trying to improve upon that.
However, I shall speak tonight as a consumer champion. I shall assume that the Government continue to support the Arts Council with money albeit reduced, to support the arts. I shall address myself to the subjects raised by the Arts Council's new chairman, Gerry Robinson, who, I was heartened to read, had so alarmed some sensitive souls that they alluded sniffily to his love of "opera highlights" and his book-free home. It sounds very much like mine, I may tell noble Lords. So I have great hopes of him in our cause tonight. Gerry Robinson is a brilliantly successful businessman who knows all about consumer choice, consumer information and consumer access.
Therefore I would ask him to look across the range and imbalance of the present provision and give greater choice to the British public—a greater access to our English language, clearly articulated, set to musical scores, and accessible to so many of all ages.
If the D'Oyly Carte Opera Company can prove itself to be a unique centre of excellence from which amateur societies around the world can learn, and from which generations in a new century will he able to enjoy and share a very special English form of Edwardian music and lyric, then I, too, would like to add my voice to the voices of noble Lords who have spoken before me, to press the Minister, in the words of a very different man who also wrote clever music, to go, "and pick a pocket or two", for us, for a very special treat.
8.38 p.m.
Lord Harris of High Cross: I, too, am grateful to the noble Lord, Lord Denham, not so much for the opportunity to speak this evening but for the chance to enjoy hearing other "Savoyards", expressing their enthusiasm. I have enjoyed the debate so far, despite the absence of music. I hesitated a long time before adding my name to the list of speakers. I took part at the last minute. I think that there is no greater enthusiast in the House for Gilbert and Sullivan. It was a sheaf of tickets for the D'Oyly Carte at Sadler's Wells in 1949 that persuaded my more musically inclined wife to plight her troth to an economist and somewhat of a philistine. There is the dilemma—an economist! Should an honest market man get mixed up with what looks suspiciously like an appeal for subsidies, even for so good a cause? To me, public money has always been tainted money. Public money? It is not; it is private money. It is other people's earnings. That is what we are talking about.
I have struggled with that dilemma. Your Lordships see someone emerging from great anguish and torment. Indeed, last night I was, "lying awake with a shocking headache, and repose was tabooed by anxiety". Was I to break the habit of a lifetime? In 19 years in this House I have never spoken, much less voted, in favour of a penny increase in government expenditure.

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Of course, if I were Pooh-Bah, I could now assume a variety of offices. I could have squared the doubts of the Treasury by getting the Secretary of State to declare opera an educational treasure trove—as indeed, it is—and on such an educational enterprise public funds should be lavished. Then, as Pooh-Bah, I could get the Lord High Auditor to turn a blind eye to any over-spending.
In my anguish, I recalled Bunthorne—and suddenly I had it. Noble Lords will remember that, in "Patience", he puts himself up "to be raffled for". I then thought: Ah, the lottery! Then we come to the Arts Council.
The Arts Council has always been a touch too highbrow for my plebeian tastes. But it is a splendid opportunity—the people's money for people's light opera. It seems that, after all, we can square the circle. Here is a chance for the Arts Council to demonstrate to the great British public that it is not the creature of the luvvies, the loftier and the lefties. Give Gilbert and Sullivan a decent slug of cash, so that they can have the best talent and show what they can do. It would be a good investment, because at some stage in the future they will manage under their own steam.
To put myself back in standing as an economist, I heard the fag-end of the previous debate on exports and unemployment. It struck me that a flourishing, unique, English comic opera must be a good investment as regards tourism—invisible earnings—and employment.
8.42 p.m.
The Viscount of Falkland: My Lords, this has been a delightful and important debate. We thank the noble Lord, Lord Denham, for allowing us to discuss this subject this evening. By some happy coincidence (and possibly other noble Lords were also there) at the memorial service held this morning for Lord Wyatt of Weeford (luckily I arrived early), the introductory organ music was a medley of songs from Gilbert and Sullivan. I thought to myself: in the past he has dealt harshly with me on betting issues; what a pleasure it would have been to see him tonight, sitting impishly on the Cross-Benches. As a great lover of Gilbert and Sullivan, I am sure that he would have added much to the debate.
This morning, I took the trouble of telephoning an opera singer whom I know only indirectly, Valerie Masterson, who has had a long career in opera. She began her career singing Gilbert and Sullivan. She is one of the great aficionados, one of the great sopranos, and great practitioners of singing roles in the operettas. She gave me a few minutes of her time. First, she echoed some of the comments made by noble Lords in the debate. She said that the operas are truly Victorian gems. She is alarmed by the hand-to-mouth funding and the possible demise of, as she termed it, this Victorian institution—indeed like this House, but one that will perhaps live longer. She asked me whether I would particularly stress the importance of the operas in education. She entered music and opera through Gilbert and Sullivan. She said that, especially in the North where she comes from, there is an
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enormous interest on the part of young people. To them, the music is still as bright and fresh, as other noble Lords have said, as it originally was at the end of the last century. It gives young people with an interest in music and song the confidence to go further, and sometimes to take up professional careers—in a country which is well-known for professional musicians coming through the education system.
Valerie Masterson also stressed that there is an enormous interest in Gilbert and Sullivan outside this country, particularly in America and Australia. My wife, who very seldom takes any interest in what I say in this House, rang me this afternoon just before the start of business. She had been working on her computer—something which I do not understand. She said she had discovered that there were 22,000 pages on the world-wide web relating to Gilbert and Sullivan. So nobody can think that Gilbert and Sullivan creates no interest outside the British Isles.
As noble Lords may know, I have an interest in film. The great British director—he is a cult figure in some countries, though not in this country—Mike Leigh, who has made enormously important films such as "Life is Sweet", "High Hopes" and "Secrets and Lies", which have won awards, is now preparing a film about the late Victorian period based on Gilbert and Sullivan at the time that they were preparing "The Mikado". The film is in preparation now, in the unique and rather unorthodox way in which he prepares film; shooting is expected to start in June.
I suggest to the Government—who have a wish to appear cool and hip—that, as a betting man, based on the success of Mr. Leigh's films, I should not be at all surprised if, when the film comes out, there is an enormous resurgence of interest in Gilbert and Sullivan, which may even wake up the Arts Council. Money may even come from sponsorship or other sources. So I say to the Government: for Heaven's sake, do not let the D'Oyly Carte die before the film comes out!
This has been an important debate. There is not much more to add to the points made by other noble Lords. Perhaps I may pick out one point, since I happen to agree with it. The noble Lord, Lord Renton of Mount Harry, said how much better it would have been had the Arts Council been restricted to Treasury funding. It would then no doubt have been possible to find some other way of raising funds, from the lottery and elsewhere. I could not agree more. I hope that the reconstructed Arts Council will take a better view. The noble Lord read out the catalogue of conditions. It is deplorable that a body of such importance in our cultural life should have made a judgment that has led to such conditions.
This has been a wonderful debate in which to take part. I hope that the Government will take note of what has been said. I am sure that the noble Lord's reply will be well up to the standard of those speeches that have preceded his (not mine, of course, but others). We look forward to some encouraging news. And, I would remind him, we look forward to the film.
8.48 p.m.
Lord Luke: My Lords, I knew that this debate would be one of the most delightful in which to take part. We are most grateful to my noble friend Lord Denham for introducing it so elegantly. He gave a most polished speech.
As some noble Lords have mentioned, the same subject was discussed this morning in another place. Incidentally, I understand that it is the first time that this kind of matter has been discussed in both Houses on the same day since there was great disquiet at the attitude of the Church of England to the 1662 Prayer Book. Within 36 hours of those two debates, the Church of England had done a U-turn and changed its mind. Is it too optimistic of me to suggest that the new chairman of the Arts Council might do likewise?
The real problem here, as I think most noble Lords would agree, is that we in Britain—incidentally, one of the richest countries in the world—are remarkably contrary in our approach to funding the arts. It is all right if the arts concerned are foreign, highbrow or indeed avant garde, untried or unknown: then they are acceptable. If they are "easy" or popular, they are somehow considered to be hackneyed and therefore not to be supported. I cannot help wondering, if it was a question of the work of my noble friend Lord Lloyd-Webber, who, sadly, is not with us this evening, what would happen. I am quite sure that his works would not have achieved much under the Arts Council.
This is a kind of cultural snobbery, as the noble Lord, Lord Rix, so amusingly said, and he was absolutely right. Gilbert and Sullivan operas, albeit light opera, are quintessentially English and patriotic, as we were patriotic in the 19th century—and therefore somehow unfashionable in some peculiar way. To me they are part of our national treasure, but, although I like them, I do not love them as so many noble Lords have said they do.
D'Oyly Carte should become, and should be treated as, the national light opera company, as the noble Lord, Lord Chalfont, suggested. Richard D'Oyly Carte wanted this and, as has been said by several of your Lordships, the company has given several successful productions by Lehar, Offenbach and Strauss. Skills acquired in Gilbert and Sullivan productions—in other words, comic ability and verbal dexterity as well as the ability to sing—mean that performers trained by D'Oyly Carte are very much in demand in other opera companies. If this company went to the wall it would mean there would not be this pool of very well—trained singers and performers.
So what would happen? Apart from the national disgrace of such a disaster if D'Oyly Carte went to the wall, as has also been said before, there will continue be performances on an amateur basis, as happens now all over the country. But if there is no base for D'Oyly Carte to produce the operas as they were originally supposed to be produced, the standard of production will slowly drop away. It would be inconceivable for the Opéra Comique in Paris or the Volksoper in Vienna, as mentioned by my noble friend
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Lord Renton of Mount Harry, to be allowed to collapse. Incidentally, I am told that the Volksoper gets a state subsidy of approximately £7 million per annum.
For us and for the D'Oyly Carte, occasional and grudging sops will not do. A proper operating subsidy is essential. This is all about immensely popular music. It really ought to be the business of government—particularly this Government—to recognise this. The argument about arm's length will not do. That arm really needs to be twisted and twisted hard. I fear that a telling look, as so eloquently described by my noble friend, is unlikely to be sufficient.
Arts Business Limited suggested that D'Oyly Carte should accept the proffered arrangement in Newcastle. However, the D'Oyly Carte management are extremely concerned, I know, because the theatre in Newcastle which it is suggested could become their base is not owned by a charitable foundation. This means that it cannot qualify for a lottery grant and that D'Oyly Carte would not be absolutely sure of security of tenure. They have had experience of losing a great deal of money when they had to abort a season of productions as a result of a theatre being closed.
As I said, I think this has been an absolutely first-class debate, following on what happened this morning. Please can the noble Lord the Minister tell his right honourable friend about our very deep concerns, and that the deadline is June?
8.55 p.m.
Lord McIntosh of Haringey: My Lords—those two words, even after 15 years still stand Gilbertian to me—
"When all night long a chap remains on sentry-go, to chase monotony
he exercises of his brains, that is, assuming that he's got any".
Noble Lords: Hear, hear!
Lord McIntosh of Haringey: My Lords, I leave on one side the question of whether I have any brains: I did not play Private Willis in "lolanthe", but I did play Strephon and your Lordships will remember that Strephon was put into Parliament by the Queen of the Fairies and given amazing powers. Your Lordships will also remember that, as the Queen of the Fairies said—and I do not have to sing this because she did not—
"Every Bill and every measure that may gratify his pleasure, though your fury it arouses, shall he passed by both your Houses!"
Their Lordships did not care for that, but they did not care even more for the next one
"You shall sit, if he sees reason, through the grouse and salmon season".
I have no such powers, and I shall be a sore disappointment to your Lordships. It is clear, I hope, from what I have said or sung so far that I and my colleagues in government are very well aware of the seriousness of the problems facing the D'Oyly Carte Opera and the unanimous view of your Lordships, and indeed of those in another place who expressed their views this morning about the future of D'Oyly Carte.

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What all of you have been saying—and I can say "you" because I am referring to Members of Parliament as well—is that government should do more.
Well, I have to say that the Government are of course keen to see that the Gilbert and Sullivan tradition and the D'Oyly Carte tradition continue. They are keen to see that there should be viable ways of funding the company to ensure that it does continue. However, your Lordships will know, as my right honourable friend Tom Clarke had to say this morning, that the arts funding system in this country does not work that way. The D'Oyly Carte Opera Company has responsibility itself: it is not responsible to the Arts Council or anyone else for the management of its operations and for the artistic quality of its productions. It is responsible to its board and to its hackers, not to the outside world.
The Government have a duty of providing a framework in which the arts will flourish, and they delegate the responsibility for individual spending decisions to the Arts Council for England. Of course the Government have the ability and a duty to listen and to pass on the views of your Lordships and of Members of another place, and they have opportunities from time to time to improve the conditions under which the Arts Council and other funding bodies make the decisions that they do. The National Lottery Bill which was passed in this House does shift the emphasis for lottery money on to the arts and other good causes between capital and revenue. We give greater recognition now to the need for finding funding for lottery money for funding as well as assets. That is essential, because you can have artistic centres, but unless you have artists who can afford to work in them nothing will happen as a result.
I hope that when that Bill becomes law later this year there will be greater flexibility for the Arts Council and others to look at the way in which they allocate public money. But, of course, as the noble Lord, Lord Harris of High Cross, in particular will know, we were elected on the undertaking not to change the previous government's spending plans for two years. That means that the £184.6 million which the Arts Council has been allocated for 1998–99 is a planning total which it has known for 18 months. It would not be good enough for it to say that extra cuts have been imposed on it. Nothing has been cut: it has been told a figure it already knew.
I think it is right that we should stick to what we said before the election. I am sorry that the noble Lord, Lord Harris of High Cross, has so far departed from his lifelong principles as to be finding excuses for additional public expenditure. I can assure him that the Chancellor and the Chief Secretary are more firm in their principles as regards public expenditure than he is. I hope that he will go away and reflect again in his Lord Chancellor's nightmares tonight about what he has said this evening.
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There are other points which the Government have to make which are relevant to the funding of the arts and relevant in particular to the debate tonight. We have taken the view, whenever we have had to take a policy decision about the arts, that we should he concerned with wider access. That applies to the Royal Opera House, to museums and galleries and to all aspects of the arts. It applies to D'Oyly Carte as well, of course, because it has been well said by many speakers this evening that D'Oyly Carte is itself a popular art form.
We have set up a new audiences fund of £5 million, announced in the Budget two weeks ago, which will encourage wider access to all forms of artistic activity, including music and the opera. We are very pleased that, although it is not the responsibility of the Government, in the three years leading up to March 1997 the Arts Council of England has found funding of over £4 million for accessible touring operetta. There is not any prejudice against operetta or Gilbert and Sullivan there.
Having said that, despite what noble Lords say, we must maintain the arm's length principle. What is the message which I think noble Lords will wish to be carried back to the Government and the Arts Council? First, we have heard this evening, as the House of Commons heard this morning, strong support for Gilbert and Sullivan and in particular for the D'Oyly Carte Company. Secondly, we draw the conclusion from that that the funding decisions of the Arts Council—and I know that they would agree with this—should be based on quality, not on any distinction between high and low culture. As was clear from our lengthy debate on the arts in this House only two weeks ago, many of us feel that the distinction between high and low culture is artificial and many of us are aware that views about what constitutes high and low culture vary from time to time. My noble friend Lord Puttnam was very eloquent on that point. It is quality of whatever kind of artistic endeavour with which the Arts Council should be concerned. It follows from that that we believe that the Arts Council should support a wide range of artistic activities.
I think we can draw our own conclusions from that, can we not? We shall not intervene in the Arts Council; we shall not tell them how the money should be spent. Despite all the powers that Strephon might have, we have no powers to find pots of money, at the foot of the rainbow or anywhere else. But the views that your Lordships have expressed will certainly be conveyed back to the Arts Council and all those responsible. It was, however, Gilbert and Sullivan who referred to the need for the House of Peers to restrain its legislative hand and,
"noble statesmen do not itch to interfere with matters which they do not understand".
I think your Lordships well understand the issues. We are grateful to the noble Lord, Lord Denham, for asking his Question.
House adjourned at four minutes past nine o'clock.