Lords Sitting of 10 December 1998

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by The Lord Bishop of Birmingham.): The LORD CHANCELLOR on the Woolsack.
Lord Rollo (Lord Dunning)— Sat first in Parliament after the death of his father.

Young Offenders
Earl Russell Earl Russell asked Her Majesty's Government:
Whether they will take steps to discover what proportion of 16 and 17 year-olds in detention were, at the time of offending, without legal visible means of support.
The Minister of State, Home Office (Lord Williams of Mostyn): My Lords, the circumstances of young offenders are assessed, but these assessments are neither standardised nor co-ordinated. This is symptomatic of much that is wrong with the youth justice system; that is why the Government have embarked upon a far-reaching reform of it. The Youth Justice Board, established by the Crime and Disorder Act, is considering what form of assessment could best establish the circumstances of all young offenders so that the principal aim of the youth justice system, to prevent offending, can be achieved more effectively.
Earl Russell: My Lords, is the Minister familiar with a survey of young offenders in HM Young Offenders Institution Portland, reported in the annual report of the Chief Inspector of Prisons 1996–97, which shows that six out of 10 young offenders had never been employed in any capacity and that 19 per cent. had been disowned by both of their parents before the age of 15? If Sir David Ramsbotham could discover that information, so surely could the Minister. If that is the case, why did he not do so?
Lord Williams of Mostyn: My Lords, the noble Earl entirely misunderstands the point of my answer. I know the figures about Portland; I know the figures about Werrington and other young offender institutions. I am pointing out the lamentable lack of central co-ordination of the figures generally. At present, one can have figures from a particular institution but not across the board. The noble Earl will agree that that is a serious gap that needs to be filled, and filled soon. That is the point of Youth Justice Board activity.
Lord Murray of Epping Forest: My Lords, will my noble friend ensure that not only is the information co-ordinated but that it identifies the causes that take these young people into detention—for example, having been in care, having a record of truancy, being black? Will he also ensure that the policies to be developed are so co-ordinated—or, in the Government's phrase,
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"joined up"—as to ensure that fewer young people present themselves for sentencing into these institutions?
Lord Williams of Mostyn: My Lords, my noble friend is absolutely right. We have the Home Office research document Young People and Crime 1995 which identifies key factors related to juvenile criminality—for example, being brought up in a criminal home, living in a family with multiple problems, having poor parenting. having poor discipline in the family and at school, playing truant, having brothers and sisters who offend, and so forth. Obviously we need to use that material in a systematic way which has been lacking to date. I entirely agree with the concluding remarks of the noble Lord.
Lord Dholakia: My Lords, does the Minister agree that on average it costs £75,000 per person to detain offenders in these institutions, and that a little money spent on welfare at this stage is more likely to result in better rewards later on? Will the Minister explain the release mechanism plans for the people who do not qualify under the tagging or the home curfew systems after 28th January?
Lord Williams of Mostyn: My Lords, the group identified by the noble Lord will not qualify because they will not be serving sentences of the type on which the home detention curfew is intended to focus. To use a phrase used earlier, this has got to be "joined up". That is why it is so important that the Home Office co-ordinates with the insistence of Mr. Blunkett that educational standards are properly delivered in our schools. A significant part of the work started on by the Youth Justice Board is to bring together these disparate themes and to produce common solutions across the board. We should welcome its work.
Lord Ewing of Kirkford: My Lords, does my noble friend accept that there are invisible means of support which are perfectly legal? If so, can my noble friend give a definition of "legal visible means of support"?
Lord Williams of Mostyn: My Lords, I do not want to be indelicate in wondering what "invisible means of support" the noble Lord had in mind. The noble Earl was perhaps referring to a topic that he has raised on earlier occasions; namely, that there is a possible gap in the benefit system for people of the age he describes.
Lord Elton: My Lords, if I give the noble Lord the opportunity, will he respond to the intervention of the noble Lord, Lord Dholakia, about the desirability of prevention rather than cure of crime, and the role of the voluntary movement in that? Are the Government seized of, and will they take every opportunity to publicise, the enormous discrepancy between the cost of prevention and the cost of punishment?
Lord Williams of Mostyn: My Lords, the noble Lord will know that he has put his finger on precisely the underlying theme of the Crime and Disorder Act. For

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the first time in our legislative history the statutory purpose of the youth justice system is identified as including the prevention of crime by young people. It is a terrible waste of money and, much more profoundly the noble Lord will agree, it is a waste of young human life. We have stood away from it for too long and we are determined to attack these problems.
Lord McNally: My Lords, recently a group of young people in Slough were recognised for their help in counteracting inter-communal violence. Is there not a way of involving young people more in programmes for combating youth crime?
Lord Williams of Mostyn: My Lords, that is another theme in the Crime and Disorder Act. People in local communities—of all ages and all ethnic and social backgrounds—are to join together in producing local plans for local conditions, such as those specifically referred to by the noble Lord. I stress the importance of the voluntary organisations and the voluntary sector, which do so much good in this field.
Lord Cope of Berkeley: My Lords, is not the best means of support in most cases the young person's parents? Do I take it from the Minister's earlier answers that the new co-ordination of information will also show the proportion of these young people who before or at the time of their offence were in full-time education? That is obviously an important element in why they came to offend in the first place.
Lord Williams of Mostyn: My Lords, I welcome the noble Lord, Lord Cope of Berkeley, to his first appearance at the Dispatch Box in this best of all portfolios, recognising my regret that the noble Lord, Lord Henley, has departed for possibly an even hotter seat than trying to deal with home affairs Questions. The noble Lord is quite right. The Werrington study, to which I alluded earlier, shows that no fewer than 64 per cent. of the inmates came from unsettled home backgrounds. The noble Lord is absolutely right. I have always thought that we do not do enough about teaching parenting in the school curriculum. A very large number of those in detention had a poor educational background; 33 per cent. had been excluded from school and only 37 per cent. had been regular school attenders.

Nursing Auxiliaries and Health Care Assistants
3.10 p.m.
Lord Clement-Jones Lord Clement-Jones asked Her Majesty's Government:
Whether they are considering the regulation, qualification and recruitment of nursing auxiliaries and health care assistants.
Lord Hunt of Kings Heath: My Lords, concerns have been raised in the past about the need for regulation of support workers, which include, among
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others, nursing auxiliaries and health care assistants. Some concerns were raised during the consultation process for the review of the Nurses, Midwives and Health Visitors Act, completed earlier in the year. The Government are currently considering the report's recommendations.
Lord Clement-Jones: My Lords, I thank the Minister for that reply. Does it mean that the Government really do believe that there are standards of recruitment which are not currently being met in hospital trusts? When the Bill to modernise the NHS comes before the House, will they take the opportunity to introduce regulation of nursing assistants and health care assistants?
Lord Hunt of Kings Heath: My Lords, on the question of legislation, I am afraid that the noble Lord will have to await the outcome of Ministers' current consideration. On the wider issue, we recognise some of the concerns that have been expressed about the non-regulation of such health care assistants. I point out to the noble Lord that health care assistants carry out assigned tasks supervised by registered professionals and for the most part we owe a great debt of gratitude to the thousands of health care assistants working in the health service.
Baroness Gardner of Parkes: My Lords, is it not a fact that many health care assistants are doing exactly the same job as nurses have done in the past? Since everyone has moved up to higher levels of training and junior hospital doctors' hours have been reduced, state-registered nurses have replaced them and "diplomates" or graduate nurses are being replaced by health care assistants. Is it not time that we looked at renaming health care assistants and giving them the status that they deserve? Many people wish to enter nursing but cannot get the A-levels required to take up the Project 2000 training.
Lord Hunt of Kings Heath: My Lords, as I said earlier, Ministers are considering the question of the regulation of health care assistants. However, I do not think that there is evidence to support the point that they are filling the gap left by registered nurses. The ratio of qualified nurses employed in the health service compared with unqualified support staff is the same now as it was 10 years ago.
Baroness Masham of Ilton: My Lords, does the Minister agree that it was a retrograde step to do away with the state-enrolled nurse? He or she had to be qualified for two years and was a practical nurse.
Lord Hunt of Kings Heath: No, my Lords, I do not agree with the noble Baroness. The changes that we made to nursing training through Project 2000 have been very advantageous. Nurses are taking on more and more responsibilities. They must have the right training for that. However, I accept that enrolled nurses still have an important role. We have around 100,000 on the register.

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The Chief Nursing Officer at the Department of Health has encouraged, and continues to encourage, the health service to employ enrolled nurses.
Viscount Bridgeman: My Lords, does the Minister accept the need for the early implementation of a central register for carers which embraces all carers? That will make checking for criminal records much more straightforward and so give further protection to a vulnerable section of the population, the aged, so many of whom live alone.
Lord Hunt of Kings Heath: My Lords, I welcome the noble Viscount to the Dispatch Box for his first appearance. I think I would prefer to write to him on that question. As regards health care assistants, as I have said, Ministers are currently considering the legislative question.
Baroness Castle of Blackburn: Is the Minister aware that auxiliary nurses, who in many cases play a vital role in the running of a ward, receive no training whatever before they appear on the ward?
Lord Hunt of Kings Heath: My Lords, no specified training has been laid down centrally for health care assistants. However, I can tell my noble friend that the Department of Health is encouraging NHS employers to train health care assistants and encouraging them to use NVQs as a training programme.
Lord Meston: My Lords, does the Minister agree that the risks are perhaps greatest in those homes, particularly private homes, where only one qualified nurse is required to be on duty at any time and which otherwise depend on auxiliary staff? Does he further agree that, at the very least, the proprietors of such establishments should be encouraged to require and to take up employment references?
Lord Hunt of Kings Heath: Yes, my Lords, we wish to encourage the proprietors and managers of nursing homes to do just that. Those proprietors have a duty of care to ensure that all employees are suitably qualified and competent.
Lord Rea: My Lords, can my noble friend say what practical steps the Government are taking to encourage back into the National Health Service those many nurses of all grades—nurses and nursing assistants—who have left to look after their families or to take up another occupation?
Lord Hunt of Kings Heath: My Lords, the Government inherited a very difficult situation in relation to nurse shortages, poor morale, the effect of the internal market and the ravages of macho management. The Government are dealing with the problem. We are injecting resources and we are abolishing the internal market. We are developing a new HR strategy, we are encouraging more students, we are encouraging returnees and we are developing better
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working conditions. For nurses and for people coming into nursing, the future is very bright in the health service.

Grammar Schools: Ballots
3.17 p.m.
Baroness Blatch Baroness Blatch asked Her Majesty's Government:
Whether they consider that regular balloting on grammar schools will have unsettling effects on the staff and the pupils, especially those taking public examinations.
The Minister of State, Department for Education and Employment (Baroness Blackstone): My Lords, there will not be regular balloting on grammar schools' admission arrangements. If the result is in favour of change, there will be no further ballot. A ballot will only be held at the request of 20 per cent. of parents at relevant schools. If a ballot supports the existing admission arrangements, no further ballot can be held for at least five years. If there is a ballot in favour of change, there will be at least 20 months for staff preparation before the first non-selective year group arrives. We expect existing pupils, including those taking public examinations, to continue to be educated in grammar school classes while they remain at the school.
Baroness Blatch: My Lords, the noble Baroness is astonishingly sanguine about what is nothing less than guerilla warfare and a war of attrition on these schools. It is not true to say that there will not be a revisiting of the petitions in the ballot. The petitioning system is revisited after four years, not five years—it is the ballot after five years—and will continue to be so. Does the noble Baroness agree that the resources, the time and the energy which are already having to be expended because of the activities of some of the noble Baroness's colleagues, such as the noble Lord, Lord Hattersley, is disruptive to the parents, to the staff and to the children?
Baroness Blackstone: My Lords, I am sure that my noble friend Lord Hattersley will speak for himself. I do not know whether he is in his place this afternoon. I do not agree with the noble Baroness. She seems to have forgotten that this was a manifesto commitment. The Labour Party made it clear in its election manifesto that there would be a system of asking parents whether they wished the admission arrangements in grammar schools to change. Clearly, the electorate think rather differently from the noble Baroness opposite.
Lord Pilkington of Oxenford: My Lords, may I ask the noble Baroness, in her academic mode as a person who ran institutions, whether she would have been happy if those institutions were subject to structural change every five years, subject to the electorate, particularly in view of the fact that grammar schools provide between 20 to 30 per cent. of the pupils from the state sector who go on to the more prestigious

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universities? As an academic, is the noble Baroness happy about that? May I remind her of "education, education, education"?
Baroness Blackstone: My Lords, I am happy to switch to my academic mode, although I am not here to answer questions as an academic but as a Member of the Government. However, I can say from my experience as an academic, that the institution that I ran constantly suffered from the ravages—I can put it no differently—of the previous government's higher education expenditure cuts. The proposed changes are a matter for parents. They will decide whether they think it is right to petition and then to go for a petition again later, if a ballot is lost, after five years.
Baroness Lockwood: My Lords, can my noble friend tell me when balloting of schools first started and the difference between balloting for grammar schools and balloting for other state schools, which I believe happened quite frequently under the previous administration?
Baroness Blackstone: My Lords, I entirely agree with my noble friend. Noble Lords on the other side of the House have a tendency to accept ballots where they think that holding a ballot is desirable, but where they are obsessed with a particular issue—for example, a very small number of, say, 130 schools—they take a totally different position.
Lord Tope: My Lords, can the Minister confirm that the ballot information code, which comprises Schedule 4 of the regulations, applies not only to LEAs and governing bodies but to all groups and individuals wishing to influence the result of a ballot? The information code states, among other things, that written materials,
"should be objective and explanatory, seeking to clarify the issues without omitting important facts or arguments, and without selecting facts or arguments in such a way as to distort or mislead"
It adds that:
"oral information should be accurate and should not mislead the audience".
What effect does the Minister think that such a code might have if it were applied to the next general election campaign?
Baroness Blackstone: My Lords, I do not believe that such a code would be appropriate in a general election campaign.
Lord Carlisle of Bucklow: My Lords, can the noble Baroness explain to the House, either as an academic or a Member of the Government, how she equates the pursuit of excellence in education with the abolition of the assisted places scheme and the continual attack on grammar schools?
Baroness Blackstone: Yes, my Lords. The assisted places scheme involved the expenditure of large amounts of public money on very small numbers of
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pupils who were taken out of the public sector on the assumption that private schools were automatically better than schools in the public sector. I do not for a moment accept that. Moreover, the money that has been saved from the abolition of that scheme will be used to reduce class sizes in our primary schools. I believe that is something that most parents greatly welcome. This is a Government committed to education for everybody, not just the privileged minority.
Lord Davis of Oldham: My Lords, perhaps I may declare an interest as chairman of the Further Education Funding Council, although that is not directly relevant to this Question. During the very large number of transformations of the status of grammar schools in the 1980s under the administration of the noble Baroness, Lady Thatcher, was there any evidence at all that examination results suffered?
Baroness Blackstone: My Lords, I am most grateful to my noble friend for reminding us of the fact that more grammar schools were changed to comprehensive schools when the noble Baroness, Lady Thatcher, was Secretary of State for Education than under any other education Minister since the war. I can also confirm that that had no impact on examination results. Indeed, throughout the 1980s and into the 1990s, examination results in secondary schools improved.
Baroness Platt of Writtle: My Lords, the noble Baroness refers to educational standards and I agree with her on that point. However, does she agree that teachers in grammar schools base their experience on very bright children who are doing very well, and that because of the current insecurity such teachers will take that expertise out of the public sector and into the private sector, which will not be to the advantage of public sector standards?
Baroness Blackstone: My Lords, I do not believe that that is the case. I do not believe that the professionalism of our grammar school teachers is such that they will feel insecure as a result of a change of this kind. I believe that many of them will see this as an important new challenge. My own daughter went to a school that had been a grammar school and became a comprehensive. None of the teachers left. They were all able to make the adjustment extremely well and found it most challenging.

Duty-free Sales
3.25 p.m.
Lord Skelmersdale Lord Skelmersdale asked Her Majesty's Government:
Whether, in view of Commissioner Monti's opposition to their decision to seek a reversal of the agreement to abolish duty-free sales, they will continue to co-operate with Commission attempts to reduce "unfair" tax competition in the European Union.
Lord McIntosh of Haringey: My Lords, decisions on unfair tax competition are a matter for member states,

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not Commissioner Monti. The work on tackling unfair tax practices in the EU is being taken forward under the code of conduct on business taxation. The code was agreed by member states, not the Commission. It is a political commitment, not a legally binding one. The UK supports, and will continue to support, the code and the need to tackle harmful tax practices.
Lord Skelmersdale: My Lords, how schizophrenic can this Government get? On the one hand, they sign up to the new European way and tax harmonisation; on the other, they try to destabilise a long-standing EU policy on the abolition of duty-free sales. Which of those is an example of what the Prime Minister calls "being a leading player in Europe"?
Lord McIntosh of Haringey: My Lords, the Government are consistent on both matters. As the noble Lord well knows, the Prime Minister and Chancellor Schröder yesterday signed a statement of common position in which they confirmed that they regard unfair tax competition as damaging, but that they do not favour a unified system of corporate taxation. As for duty-free sales, a number of noble Lords on the Opposition Benches have been arguing for its continuation for a considerable time. The opportunity to raise the matter will arise in Vienna tomorrow and the day after and it is up to any head of state, including our Prime Minister, to raise it one last time.
Lord Grenfell: My Lords, with reference to the Anglo-German joint statement to which my noble friend has just referred, is he not encouraged by the fact that that statement says, and I paraphrase, that exceptions to initiatives designed to combat unfair tax competition should be granted where a member state can demonstrate that the competitiveness of Europe is in jeopardy? Does he not agree that that could protect our Eurobond market from the proposed withholding tax and render totally unnecessary any use of the British veto against such a tax measure?
Lord McIntosh of Haringey: My Lords, my noble friend's paraphrase is very close to the original, which I have with me. Yes, I can confirm that that is indeed what the common position means. I confirm that we will not sign up to any change which would damage the Eurobond market.
Lord Higgins: My Lords, is it not clear from the Prime Minister's exchange at Question Time yesterday that the Government are weakening as regards tax harmonisation? Is it not also clear from the letter signed with the German Chancellor that that is so? Can the Minister give us an assurance that in the discussions he mentioned a moment ago, the Government will be absolutely categoric in saying that they are opposed to the withholding tax, which would damage the City, and that they will oppose further harmonisation on savings taxes generally?
Lord McIntosh of Haringey: My Lords, I am sorry to say that the noble Lord has followed the interpretation of the distinguished political editor of the Financial Times, which is wrong. We have always said that as a last resort we would veto any unsatisfactory agreement. We now think, as a result of the common position taken up by the British and German Governments, that it will not be necessary; in other words, avoiding damage to British financial institutions, combined with the benefit of action against unfair tax practice, is now possible.
Lord Razzall: My Lords, does the Minister agree that, far from the conclusions we are asked to draw from the remarks of the Conservative Opposition, the remarks of Commissioner Monti refute recent scare-mongering on tax harmonisation? Does he not agree also that tax phobia can now be added to Europhobia as a political and economic illness to be avoided in your Lordships' House?
Lord McIntosh of Haringey: My Lords, in setting out the respective responsibilities of member states and the Commission, I did not intend in any way to criticise Commissioner Monti, who was perfectly entitled to say what he did.
Lord Elton: My Lords, to save the noble Lord great embarrassment when he reads Hansard's account of his reply to the first supplementary question, will he confirm that it was an entirely accidental and not a Freudian slip which led him to refer to the Prime Minister as head of state rather than head of government?
Lord McIntosh of Haringey: My Lords, the noble Lord is strictly correct. I apologise for any unintended mis-statement.
Lord Marlesford: My Lords, does the Minister agree that it is a great deal better to allow market forces to put pressure on governments to harmonise taxes, because that would harmonise them downwards, rather than to allow the Brussels Commission to harmonise them, which would almost certainly harmonise them upwards?
Lord McIntosh of Haringey: My Lords, we do not know the result of the deliberations of the group on the code for business taxation. We do not know what the result will be or in which direction harmonisation will occur. Clearly it has been a proper and a valuable initiative. I think the noble Lord should wait to see what comes out of it.

Business
3.31 p.m.
Lord Carter: My Lords, at a convenient moment after 3.30 p.m. my noble friend Lady Hayman will, with the leave of the House, repeat a Statement that is to be made in another place on tobacco.

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I recently announced that, subject to progress of business, the House would be asked to return from the Christmas Recess on Thursday 7th January. I have to tell your Lordships that there has been a change to these arrangements. Following further negotiations with the usual channels, it will now not be necessary for the House to be asked to return until Monday 11th January. As previously announced, the House will sit on Thursday 17th December at 11 o'clock and rise at the end of that day's Sitting.

Freedom of Information Bill [H.L.]
Lord Lucas: My Lords, I beg to introduce a Bill to extend the right of access to information held by public authorities; and for connected purposes. I beg to move that the Bill be now read a first time.
Moved, That the Bill be now read a first time.—(Lord Lucas.)
On Question, Bill read a first time, and to be printed.

House of Lords Offices: Select Committee
The Chairman of Committees (Lord Boston of Faversham): My Lords, I beg to move the first Motion standing in my name on the Order Paper.
Moved, That the Select Committee on the House of Lords Offices be appointed and that, as proposed by the Committee of Selection, the following Lords together with the Chairman of Committees be named of the Committee:

L. Brabazon of Tara,

L. Brougham and Vaux,

E. Caithness,

L. Carter,

L. Colwyn,

B. Darcy de Knayth,

L. Dean of Beswick,

L. Dholakia,

L. Dixon,

L. Harris of Greenwich,

L. Henley,

B. Hilton of Eggardon,

L. Hunt of Wirral,

L. Irvine of Lairg (Lord Chancellor),

B. Jay of Paddington,

L. Mackay of Ardbrecknish,

L. Marsh,

B. Nicol,

Bp. Oxford,

L. Renfrew of Kaimsthorn,

L. Rodgers of Quarry Bank,

B. Seccombe,

B. Serota,

L. Strathclyde,

B. Thomas of Walliswood,

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L. Tordoff,

V. Ullswater,

L. Weatherill,

L. Williams of Mostyn.—(The Chairman of Committees.)

On Question, Motion agreed to.

Procedure of the House: Select Committee
The Chairman of Committees: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, That the Select Committee on Procedure of the House be appointed and that, as proposed by the Committee of Selection, the following Lords together with the Chairman of Committees be named of the Committee:

B. Anelay of St. Johns,

L. Browne-Wilkinson,

L. Burlison,

L. Burnham,

E. Caithness,

L. Carter,

L. Denham,

E. Ferrers,

L. Gladwin of Clee,

B. Gould of Potternewton,

B. Hamwee,

L. Harris of Greenwich,

L. Henley,

L. Irvine of Lairg (Lord Chancellor),

B. Jay of Paddington,

L. Mackay of Ardbrecknish,

L. Mackay of Clashfern,

B. Rendell of Babergh,

L. Rodgers of Quarry Bank,

E. Shannon,

L. Skelmersdale,

L. Strabolgi,

L. Strathclyde,

L. Tordoff,

L. Weatherill,

L. Williams of Mostyn,

B. Young.—(The Chairman of Committees.)

On Question, Motion agreed to.

Social Security Contributions (Transfer of Functions, etc.) Bill [H.L.]
3.33 p.m.
The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, I beg to move that the Bill be now read a second time.
I am sure that noble Lords listened with great interest to the Chancellor's Budget Statement in another place on 17th March this year. Some of the measures to reform welfare announced in that Statement led to the changes to the structure of national insurance

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contributions that noble Lords debated in the Social Security Act earlier this year. Amidst these more eye-catching measures noble Lords may recall that the Chancellor announced that the Contributions Agency is to transfer from the Department of Social Security to the Inland Revenue in April 1999. That transfer is provided for by the Bill before us today. Noble Lords may recall that we debated in the Social Security Act powers authorising expenditure in preparation for the transfer.
First, I would like to remind noble Lords of the context in which we are working. We have set out the key principle underlying our welfare reforms—work for those who can, security for those who cannot. With the New Deal we are making the biggest ever investment by government in jobs and training. This is changing lives and providing opportunities—by next April 300,000 people will have benefited.
We are introducing the working families' tax credit and the disabled person's tax credit so that every family working full-time will be guaranteed an income of at least £190 a week, and up to 1.5 million hard-working families will be better off as a result.
We are also reforming the structure of national insurance contributions to make work pay. We are removing the NICs "entry fee" and raising the threshold at which employers begin to pay NICs to the level of the single person's tax allowance. These changes will increase the incentives for the low paid to work and for employers to offer them jobs, without adversely affecting their entitlement to contributory benefits.
Many noble Lords will think of the Department of Social Security in terms of paying benefit to groups such as the unemployed, disabled people and pensioners. But the Contributions Agency and the system of national insurance contributions have been an important part of the department's existing work. The focus of this work is very different—principally towards employers, employees and the self-employed. These are much the same groups as the Inland Revenue deals with. Indeed, the Inland Revenue already collects 94 per cent. of NICs alongside PAYE tax.
In our Green Paper on welfare reform we stressed the importance of a modern system of delivering government which is flexible, efficient and easy for people to use. Too often government is designed in ways which best fit our bureaucratic structures, not which best meet the needs of the people who deal with us.
There have already been moves to bring the Inland Revenue and the Contributions Agency closer together. Noble Lords may recall the joint working programme between the two departments that was launched in 1995. This programme has led to a number of benefits such as the joint annual pack for employers and a single leaflet and registration form for the newly self-employed.
But joint working can take us only so far. Employers and individuals still need to deal with two separate departments. There is no single focus for employers to discuss improvements in process across tax and NICs. To bring out the real benefits for business and individuals we need to bring the two organisations together. Bringing the Contributions Agency and the Inland Revenue together is a good example of the way
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this Government are redesigning their services to deliver policies more effectively and to deliver a better service to taxpayers and contributors. That is what this Bill does.
Bringing the Contributions Agency and the Inland Revenue together will have many advantages. It will reduce the burdens on businesses and individuals as they can sort out taxes and contributions through a single organisation. It will help the two departments share experience, knowledge and skills, so making better use of resources, helping fairness in taxation and national insurance contributions and combating avoidance. It will enable the two departments to combine their efforts on customer service. It will give business and other representative bodies one focus for discussion of improved legislation, procedures and guidance, and so, over time, make it easier to achieve a gradual alignment of the tax and national insurance contributions rules.
The major benefits to business will come from aligning over time the tax and NICs rules. But some earlier benefits arise from bringing together delivery of the two systems in one organisation. Information on NICs will be available in Inland Revenue tax inquiry centres—to be renamed Inland Revenue inquiry centres. Tax and NICs leaflets will progressively be brought together from next April. And the process for making a complaint against theh Inland Revenue or Contributions Agency will be unified from next April.
It is estimated that there could be a loss of around 200 jobs countrywide in the combined organisation as a direct result of the transfer. Newcastle will remain an important site for government employment. The recently announced project to redevelop the Longbenton estate will go ahead as planned and the Inland Revenue sees Longbenton as one of its strategic sites for the future in the new combined organisation.
The transfer has been welcomed by representative bodies. In its October 1998 Budget submission the Institute of Directors welcomed,
"the transfer of the Contributions Agency to the Revenue and the planned transfer of national insurance policy to the Revenue".
And the British Chambers of Commerce said that,
"the merging of the Contributions Agency and the Inland Revenue has our full support and we look forward to working with the merged organisation over the forthcoming year to investigate the possibilities for aligning the PAYE and NICs systems".
I am sure that some noble Lords will be looking to this Bill for signals as to the future direction of tax and benefits policy. Let me therefore make clear at the outset what the Bill does not do. It makes no changes to the structure of NICs. It does not affect the tax or NICs yield, nor benefit expenditure. It has no effect on individuals' entitlement to contributory benefits. And it makes no changes in pensions policy.
Instead, the Bill provides for a technical transfer of functions—of the Contributions Agency to the Inland Revenue and of policy responsibility for collecting national insurance contributions to the Inland Revenue and Treasury. Over time these transfers will reduce the burdens on business and take a first step towards removing the technical differences between tax and NICs rules that employers fear will trip them up.

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However, this Bill does not itself provide for any major legislative tax/NICs alignment (subject to one point which I shall come to shortly). We can best work on that with representative bodies once the organisations are brought together. Our priority in the short term is to bring the organisations together to deliver a better service to employers, employees and the self-employed.
The Bill paves the way for long-term improvements. Perhaps I ought first to explain why a Bill is necessary to transfer the Contributions Agency to the Inland Revenue. As I am sure noble Lords are aware, most machinery of government moves between government Ministers are implemented by an Order in Council under the Ministers of the Crown Act 1975. That option was not available in this case. The Inland Revenue is a statutory board, not a department headed directly by a Minister. That means that it is not covered by the Ministers of the Crown Act 1975. So we need a Bill to transfer the operational functions of the Contributions Agency to the Inland Revenue.
We could then have transferred NICs policy functions to the Treasury under an Order in Council. But that would have left a Bill solely concerned with the operational functions. We concluded that that would be unsatisfactory since no single piece of legislation presented to Parliament would make our intentions clear. So the Bill contains the explicit provisions for the policy transfer as well. We need a Bill also because we are proposing some changes as well as the transfer of functions. I shall return to those.
It may help noble Lords if I start with an overview of the Bill before going on to describe what the Bill does. Part I of the Bill provides for the transfer of both operational and policy functions. It also deals with the use of those operational functions by the Inland Revenue. Part II of the Bill deals with the new arrangements for decisions and appeals, which I shall discuss shortly. Part III deals with the supplemental issues around the transfer.
Turning to Part I dealing with the transfer of functions, the first task of the Bill—in Clause 1 and Schedules 1 and 2—is to provide from an appointed day for the transfer of the operational functions of the Contributions agency to the Inland Revenue. The Chancellor has announced that that will be in April 1999. The Contributions Agency is an executive agency of the Department of Social Security and is responsible for the collection and recording of national insurance contributions which are paid into the National Insurance Fund. In addition, the Contributions Agency carries out a number of functions which are related to the collection of national insurance. These include employers' recoveries of statutory maternity pay and statutory sick pay and the administration of contracting-out of the state earnings related pensions scheme. These operational functions are all to be transferred to the Inland Revenue.
The second task of the Bill—in Clause 2 and Schedule 3—is to provide for the transfer of policy responsibility for national insurance contributions and the management of the National Insurance Fund to Treasury Ministers and the Inland Revenue from an
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appointed day. Policy responsibility for other areas administered by the Contributions Agency—statutory sick pay, statutory maternity pay and contracting-out—will remain with social security Ministers.
The next task is to ensure that the Inland Revenue has the necessary powers to collect and run national insurance contributions. Clause 3 therefore brings national insurance contributions within the care and management of the Board of Inland Revenue. I ought to sound a note of warning here. I know that many representative bodies are hoping that bringing national insurance contributions within this concept of care and management will give employers the opportunity to make simplifications in their record-keeping. However, payment of national insurance contributions builds entitlement to certain social security benefits. So, in exercising its duty of care and management over national insurance contributions, the Inland Revenue will bear in mind its duty to the contributor. So the Inland Revenue will expect employers to keep accurate records of individuals' contributions in the same way as the Contributions Agency does now.
Clause 4 and Schedule 4 deal with the powers of inspectors. There is scope for confusion between "tax inspectors" and "Contributions Agency inspectors", appointed under different law and with different roles. Today we are focusing on the latter category.
I know there has been concern among some representative bodies and employers that this Bill will provide for a levelling up of enforcement powers. Here I can reassure noble Lords. The powers of enforcement in the Bill simply provide officers dealing with National Insurance with the same powers as they have now. The one change that I expect noble Lords to welcome is that the offence of delaying or obstructing an officer for contribution purposes will cease to be a criminal offence and will instead attract a civil penalty. This will align with existing tax sanctions.
Clauses 5 and 6 deal with the use of information by the two departments to enable them to continue their business. Clearly the Department of Social Security will still need contributions information in order to pay benefits and to fight benefit fraud. So existing information flows will broadly be maintained.
Noble Lords will rightly want to be reassured that the transfer will maintain and build on work to improve the security of the national insurance system. It may be helpful if I take a few moments to explain what the situation will be after April 1999. The Department of Social Security will retain policy responsibility for the allocation and security of national insurance numbers, including checking identity. In practice this will mean that the Inland Revenue will be responsible for allocating and registering NI numbers and the DSS will specify the standards of security to be maintained. These specifications will ensure that at least the current best practices to verify identity are followed. A new service level agreement on national insurance number security between the DSS and Inland Revenue will be in place prior to the transfer to ensure that the necessary levels of security are met.

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The current procedures aimed at preventing fraud will be followed by the Inland Revenue. Applications for NI numbers will continue to be rigorously checked and activities to validate numbers already in the system will continue to be undertaken. Our Green Paper on fraud, Beating fraud is everyone's business, envisaged more data-matching in future to tackle benefit fraud. This Bill does not provide for that. Those are proposals that we shall bring forward in due course.
I turn now to Part II of the Bill, dealing with new decisions and appeals processes. I mentioned earlier that we were making one significant step towards tax/NICs alignment in the Bill. Noble Lords will recall that in the debates on the Social Security Act 1998 we considered new arrangements for making decisions and handling appeals on national insurance contributions. The Government gave an undertaking to review and revise this in the light of the transfer of the Contributions Agency to the Inland Revenue—I believe under legitimate pressure from the noble Lord, Lord Goodhart.
The first change we are making is a straightforward one reflecting the transfer. Contributions Agency staff will become officers of the Board of Inland Revenue from April 1999 and so the Bill provides for Inland Revenue staff to be responsible for making decisions on national insurance contributions, statutory sick pay and statutory maternity pay. Some decisions currently made by the Contributions Agency—on national insurance credits and home responsibilities protection—will continue to be made by the Secretary of State for Social Security, but the Inland Revenue will undertake the operational functions on behalf of the Secretary of State.
The second change relates to the appeals process. Noble Lords will be pleased to hear that, following the undertaking we gave to the House and to the noble Lord, Lord Goodhart, on the Social Security Act 1998, we have considered the appeals process further and have decided that, in the light of the transfer, it would be more appropriate for appeals on national insurance contributions, statutory sick pay and statutory maternity pay to be heard by the tax appeal commissioners. In many cases the same issue will arise in both a tax and NICs case—for example, a question over whether someone is employed or self-employed.
As for income tax, we envisage that the more, straightforward cases may best be heard by the local general commissioners, with the most important and technically demanding cases being heard by the special commissioners in the first instance. The Bill reproduces tax provisions for elections for appeals to be transferred to the special commissioners.
Most appeals about decisions on entitlement to statutory sick pay and statutory maternity pay raise questions about a person's employment status and their average weekly earnings. There are relatively few such appeals and we believe that the tax appeal commissioners are in the best position to decide those issues. In the very small number of cases where medical issues are raised, the commissioners will be able to hear medical advice.
Bringing the appeals process together will have distinct advantages for contributors and taxpayers, as well as for employers, since they will only need to deal
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with one appeals system. I am sure that this change will be welcomed by tax practitioners, such as the Tax Law Review Committee. I hope that the noble Lord, Lord Goodhart, will be able to welcome this change in principle, although I am sure he will want to look at the detail carefully in Committee.
So Part II contains the necessary detailed changes to bring appeals about national insurance contributions, statutory sick pay and statutory maternity pay within the jurisdiction of the tax appeal commissioners. Appeals against decisions on national insurance credits, home responsibilities protection, contracting-out issues and social security benefits will be to the social security unified appeals tribunals, once the provisions of the Social Security Act 1998 are in place.
I now turn to the miscellaneous and supplemental provisions in Part III, on which I do not need to spend much time. Part III deals with the supporting arrangements for the transfer, such as providing for the transfer of property and liabilities and for the continuity of contracts. But there are three points I should mention.
Clause 19 is a technical accounting provision which puts right a defect in the Pension Schemes Act 1993 as amended by the Pensions Act 1995. It has always been intended that rebates to money purchase pension schemes contracted-out of the state earnings related pension scheme should be paid from the National Insurance Fund. Unfortunately an oversight in the Pensions Act 1995 means that these can only be paid from money provided by Parliament, not from the National Insurance Fund. This is a slip that I and others in your Lordships' House should have picked up at the time. Clause 19 corrects this.
As noble Lords will have seen, we have had to make some judgments about the most appropriate home for some functions around the margins of the Contributions Agency's business. It is quite possible that in the light of operational experience, or your Lordships' warnings in due course, we may need to make some adjustments. Clause 22 provides the flexibility to make these adjustments at the margins by Order in Council, as is normal for machinery of government changes, rather than returning to the House with a Bill.
Clause 23 deals with arrangements in Northern Ireland. Noble Lords will know that Northern Ireland has its own social security scheme and its own National Insurance Fund, which runs in parallel with, and maintains parity with, the Great Britain scheme. National insurance contributions operations in Northern Ireland are managed by the Contributions Unit, part of the Northern Ireland Social Security Agency, although, as in Great Britain, the bulk of NICs are collected by the Inland Revenue alongside tax.
Maintaining the contributions records of Northern Ireland contributors and much of the "back office" work is already done by the Contributions Agency in Great Britain on behalf of the Northern Ireland Social Security Agency. Clearly it would make no sense to leave Northern Ireland out of the new arrangements for NICs envisaged by the Bill, so we intend that the Contributions Unit should transfer to the Inland Revenue at the same time as the Contributions Agency.

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Paragraph 10 of Schedule 2 to the Northern Ireland Act 1998 excepts NICs and related matters from the legislative and executive authority of the new Northern Ireland Assembly. Under the powers in Section 86 of that Act, policy and operational matters in respect of the matters excepted by Paragraph 10 of Schedule 2 are planned to be transferred, by Order in Council, to the Secretary of State for Social Security on the appointed day for the Assembly to take up its powers. Clause 23 of the Bill allows for these functions to be transferred on from the Secretary of State to the Inland Revenue and the Treasury at the same time as the corresponding functions for Great Britain. It does so by an Order in Council. It would have been possible to provide for this second transfer on the face of the Bill. However, since essentially we are talking about replicating line by line the provisions of this Bill but in terms of Northern Ireland legislation, this would have added half as much again to the length of the Bill, and perhaps much to the length of our discussions, while adding little to the clarity of our intentions.
In conclusion, transferring the Contributions Agency to the Inland Revenue is good news for employers. The Bill allows that to take place. But I hope I have explained that the Bill and the transfer from April are only the start of the process. This Bill is not the vehicle for major alignment of tax and national insurance contributions. We want to work through that in consultation with representative bodies. Instead, this Bill is about a safe landing of the Contributions Agency within the Inland Revenue and about making sure that the Contributions Agency can operate within the Inland Revenue from next April. That will provide a platform on which we can build service improvements and gradual alignment of tax and NICs over the forthcoming years. The Bill paves the way for a better delivery of the tax and national insurance systems. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(Baroness Hollis of Heigham.)
3.56 p.m.
Lord Higgins: My Lords, the House will be grateful to the Minister for the explanation she has given of what is clearly a very complicated Bill. Since it is our intention on these Benches to approach the opposition to the Bill in a constructive context, perhaps I may begin by congratulating the Government on the publication of a volume of explanatory notes, itself bigger than the Bill, which will be of help to the House in carrying out that task. That is a relatively new innovation which is to be welcomed. I make only one point on it. The notes on the financial provisions of the Bill appear in the explanatory notes. They are usually printed in the Bill itself, although not formally part of it, and I hope that that practice will continue. It is perhaps a little inconvenient to have them separated from the Bill.
Since some of the measures in the Bill affect ordinary company pensions—though the Minister spent little time on that matter—I should declare an interest in that I am the chairman of a company pension scheme.
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The Minister stressed that the Bill is helpful in terms of combating fraud. That is certainly a matter in which she will have our support. At the same time, I am a little suspicious of any Bill which is described as "technical". One can often find in the details a number of things which may be sinister rather than technical. In that context, I am a little puzzled about the motivation of the Bill. The costs involved are not inconsiderable—£16 million one year, £17 million the next, £4.8 million the next, and so on—and savings are slow to come through. In terms of government efficiency, that does not seem a very good deal. As the Minister pointed out, though with a rather interesting Freudian slip, 200 jobs will be lost. I suppose that one might look at it more from the point of view of the Treasury and the Inland Revenue and say that 200 jobs will be saved.
Baroness Hollis of Heigham: My Lords, it was not a slip. Those jobs will be lost to the people holding them. It will, of course, be a saving to the Exchequer.
Lord Higgins: My Lords, absolutely; I agree on both points. Nonetheless, in terms of efficient allocation of the nation's resources, one might perhaps have described it as a saving since presumably the motivation of the Bill is that the Government should become more efficient, and in that context it is important that one should operate with as great a degree of efficiency and economic savings as is possible. Indeed, it is true that quite a few of the proposals in the Bill merely reflect the existing situation. As the Explanatory Notes point out, 94 per cent. of the revenue to which we refer is already collected through the system which involves the Inland Revenue.
I have looked up the position of the previous government. In June 1995 the Chancellor of the Exchequer was asked a question on integrating the national insurance and Inland Revenue systems. Sir George Young replied:
"The relationship between the Contributions Agency and the Inland Revenue was examined last year. It was concluded that the overlap between the Revenue and the agency did not warrant an amalgamation of the two businesses. In addition, any efficiency gains would be outweighed by transitional costs and disruption to both departments".
We all enjoyed the "Yes, Minister" series. The previous government's Ministers turned the proposals down. But the moment the present Government came to power the same proposals were submitted to them. In terms of efficiency, it is uncertain whether the Bill is as justified as the Minister seeks to argue.
However, the Minister was at pains to say that this is a mechanical measure not related to other policy changes. That is difficult to accept. The whole thrust of the Government's social security policy over the past year or 18 months has been to undermine the contributory principle in a number of respects. That in turn undermines universal benefits. The effect of moving the Contributions Agency from the DSS to the Inland Revenue is to make the contributions more and more like a tax. In moving the purely administrative arrangements from one department to another, the Bill is clearly in line with the Government saying, "We shall now merge the Contributions Agency and the Inland

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Revenue". It will become more and more a tax, and therefore easier to argue that a contribution to a specific national insurance scheme does not have the same force of entitlement to benefits as was previously the case.
Therefore, contrary to what the noble Baroness argued, I believe that the legislation should be viewed in the context of that overall move. The contributory principle has been the bedrock of our national insurance and social security systems since World War II. We are concerned about this issue not least because of the implications of means testing the national insurance basic pension. In general the Government have moved more and more towards means testing. We believe that that is important.
I give some examples of the way in which the contributory principle is being undermined. On the one hand there are people who are not receiving benefits to which they were previously entitled. They believed that they would receive them because they had made their national insurance contribution. A few days ago the Government put forward a proposal with regard to widows benefits. In another context there are changes in incapacity benefits and the offsetting of those payments against pensions. On the other hand, people are receiving benefits for which they have not contributed. The so-called guaranteed minimum pension is a move in that direction.
Although the measure may be in many respects highly technical, we are concerned about the general thrust of the Government towards more and more means testing. We know that more means testing undermines thrift for the reasons spelt out clearly, for example, by Mr. Frank Field. Contrary to the proposals in the Bill, the move towards means testing—the Government have introduced a number of measures recently—are likely to increase rather than reduce fraud.
The front page of the explanatory memorandum states that,
"policy responsibility for NICs would transfer to the Inland Revenue once decisions had been reached on a new benefit entitlement test".
The Minister made no reference to that point. When the noble Baroness winds up, perhaps she will tell us when the new benefit entitlement test is to be specified in detail; and when it is likely that the transfer to which I have referred is likely to take place.
On that issue, perhaps I may add one word of caution as regards timing. The integration of the two systems seems likely to take place during the millennium. We know that there are grave concerns, not least in the pensions industry, as to the effect of the so-called millennium bug on the ability of organisations, in particular large organisations such as the Contributions Agency or Inland Revenue, to cope with those problems. To impose on those two departments the added burden of this transition seems rather unwise. Since many pension companies are looking into the matter in great depth, perhaps the Minister will tell us to what extent, in deciding to make this change now, the Government have taken into account the problems that may arise with regard to computers, and so on.
I turn now to penalties. The Minister sought to reassure the House. However, there is a general feeling that the penalties imposed by the Inland Revenue are
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more severe than those imposed by the Department of Social Security. In order to reassure us further, will the Minster give a clear undertaking that nothing presented in the Bill as a mechanical or technical measure will result in anyone who commits an offence being subject to a heavier penalty than was otherwise the case. There may be an argument for a heavier penalty in a specific instance but it should not be achieved in that way.
The Minister did not refer to this point. I understand that some of the offences previously dealt with in this area of legislation will no longer be criminal offences. I am not clear whether that is so. I see the Minister indicates that that is so. However, in her opening remarks—I may have been distracted for a moment—I do not think that she dealt with that problem.
In Committee we may wish to examine in more detail the investigatory powers of the Government. The Bill is one among other recent Bills which include a disclaimer by the Minister that nothing in the Bill contravenes the European Convention on Human Rights. We had some problems last year on the Social Security Bill in that respect. It will be interesting to see how that operates now that the convention has been incorporated into domestic law. It is an innovation which on the whole is to be welcomed. But we shall need to establish that the undertaking given by the Minister is justified.
She also mentioned the relationship between the Inland Revenue and the Department of Social Security concerning the security of national insurance numbers. I was not entirely clear what she had in mind on that subject but I believe it is the case that there has always been a concern about the exchange of confidential information between one department and another. Certainly, the situation is now a lot better than it was some years ago. Indeed, there are statutory penalties for those in government who transfer information, contrary to statute, between one department and another. But inevitably the integration of the two departments seems to mean that there is a greater exchange of information at a lower level of authority than was previously the case. Indeed, there are references in the Bill to pooling arrangements and so on, particularly as regards Clause 6. Perhaps I may draw your Lordships' attention to that. Information which is held by the board or by a person providing services to the board can be transferred, as I understand it, from one part of the organisation to another. The expression,
"a person providing services to the Board"
would seem to involve people outside government service who might then have access to confidential information. Perhaps the Minister can reassure us, if not now, then at Committee stage, as regards that particular point. It has always been a matter of concern as regards Parliament.
There is a number of other very detailed provisions in the Bill and not least, as the Minister stated, concerning ACT and the rebates issue on which, as she rightly pointed out, there appears to be some problem in the existing legislation. Again, I hope we shall be able to probe that particular point.
Finally, I raise the question of the extent to which, under these new arrangements, there will be any change in the power of officials to carry out investigations at

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particular premises. In my opening remarks I declared an interest. I was rather intrigued to see that under these arrangements it is apparently possible for the Inland Revenue to "raid"—I believe that is the right expression—the particular premises of a trustee of a pension fund. There is an exclusion for a person's home, provided that it is not used for business. But it may be that the business which takes place at the person's home has nothing whatever to do with his function as a trustee of a pension fund. I am sure your Lordships will wish to have that provision, but it seems a little doubtful whether it is as secure as it might be.
As I say, generally speaking, our concerns about the Bill are more as regards the way in which it fits into the Government's overall policy regarding the integration of national insurance and taxation and the strength which that then gives to their policy, which seems to us to involve more and more a move towards means testing and away from universal benefit to which people have contributed and to which, until now, they have been entitled. But as I said at the beginning, it is certainly a complicated Bill. We shall do our best to ensure that when it finally moves from this House to another place it is in a shape which is more appropriate for the statute book than in its present form.
4.13 p.m.
Lord Goodhart: My Lords, on behalf of the Liberal Democrats I give a warm welcome to the Bill. It is extremely technical and, to a large extent, non-controversial. I believe that that may be indicated by the fact that no-one has put down their name to speak in this debate other than the "usual suspects" and not all of them since my noble friend Lord Russell, who is sitting beside me today, has taken a vow of silence on this occasion.
As the Minister pointed out, the Bill contains two distinct parts. Part I deals with the transfer of responsibilities for the administration and collection of NICs from the DSS to the Inland Revenue. Part II deals with the transfer of decisions and appeals on questions of contributions from the DSS and the social security appeal tribunals to the Inland Revenue and to Commissioners for Income Tax. We strongly support both parts of the Bill.
Turning first to Part 1 of the Bill, we certainly agree that, as now proposed, national insurance contributions should be collected by the body responsible for the collection of direct taxes. Why is that? First, because national insurance contributions are not insurance contributions at all, but a hypothecated tax on earned income in the case of employees or a payroll tax as regards employers. The national insurance system has not for many years, if ever, been a genuine system of insurance. For example, retirement pensions make up more or less three-quarters of the total spending under the contributory system. In a proper insurance system retirement pensions would be paid for by retaining and investing the contributions in order to provide pensions for the contributors when they retire. But right from the start of the non-means-tested state pension system, under the Pensions Act 1925 pensions have been paid
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on a pay-as-you-go basis. Therefore, today's contributors are not saving for their own retirement pensions, but paying for the pensions of today's pensioners. In other words, the National Insurance Fund is not, as most people believe, a reservoir but a pipe.
It is true, of course, that people must have made contributions in the past in order to qualify for the right to a pension now. But, frankly, that is not so very different from saying that one has to pay vehicle excise duty before one is entitled to drive one's car on the public highway. Further, of course, there is no link between the amount of benefit payable and the amount paid in contributions. Contributors pay a percentage of their income between the lower and upper earnings limits or, in the case of employers, NICs without limit. But the benefits, with the only serious exception being the state earnings-related pension supplement (SERPS), are flat rate. The fact that the amount paid in contributions has no link to the amount paid in benefits is again a characteristic of tax rather than insurance.
Looking at administration, since we stopped buying stamps to stick on cards, which I believe occurred in 1981, national insurance contributions have been collected through the PAYE system along with income tax. The noble Baroness said that that collection now amounts to 94 per cent. of the total amount received by way of contributions. It is obviously sensible to collect NICs through the PAYE system and no one wants to go back. Furthermore, it is clear that further alignment between NICs and income tax is both possible and desirable. It is absurd that some forms of remuneration have been treated as income for income tax, but not for national insurance contributions. For example, that leads to many ridiculous schemes to avoid national insurance contributions by payment in gold bars or hay or various other tradeable commodities. It is quite clear that the test of income should be the same for both income tax and national insurance contributions. All this emphasises both the logic and convenience of treating NICs as a tax. One might say that if one owns a dog which quacks like a duck, waddles like a duck, flies like a duck and lays eggs, what one has got is not a dog, but a duck. NICs are not a dog, but a duck: they are not an insurance premium, but a tax. The sooner that is made clearer the better. I do not believe in trying to fool the public, which, frankly, is what the national insurance scheme sets out to do. I therefore welcome anything which leads to a closer integration between national insurance contributions and income tax.
Lord Higgins: My Lords, I am grateful to the noble Lord for giving way. What he says is true as regards insurance, but there is a crucial difference between a national insurance contribution and a tax. Paying your taxes does not entitle you to any specific benefit, but paying a national insurance contribution does. Until now, and subject to the erosion of the principle by the present Government that has been the case.
Lord Goodhart: My Lords, that has not been the case. For instance, it occurred not only under the present Government in relation to widows' benefits, but it happened twice under the previous government in

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relation to SERPS. It is clear that there is no guarantee that payment of a contribution buys you a right to any particular amount of benefit.
I welcome the Minister's statement that the process of alignment will continue. I should like that process of alignment to proceed to the point of open recognition that national insurance contributions are indeed a tax. If the Government were to replace SERPS with a compulsory funded second-tier pension—as we believe they should and we will hear soon whether they plan to do so—we can open up the argument as to whether we need to keep contribution records at all. That would lead to a substantial saving in administrative costs. It would provide help to those who do not have a full contribution record; for example, because their earnings are below the lower earnings limit or because they are women who do not qualify for home responsibility protection. It would greatly simplify record-keeping for employers which, as the Minister conceded, the present proposals do not.
However, it must be said that those are issues for another day and for another Bill. They cannot be included in this Bill. Having gone through the argument on Second Reading, it would not be appropriate to bring it back at a later stage in the Bill. For today, I am happy to say that Part I is a sensible and practical step in the direction in which we would wish to go.
I turn to Part II. When the Social Security Act 1998 was going through this House, we welcomed the fact that for the first time there would be an independent tribunal for deciding questions about contribution payments. However, the Social Security Act provided that contribution questions should go to the social security appeal tribunals. Many people, including members of the Tax Law Review Committee, felt that that was the wrong tribunal and that the proper tribunal was the Commissioners for Income Tax. The reason for that view is that contributions questions are very different from most questions decided by the social security appeal tribunals. The vast majority of the questions decided by that tribunal will concern right to benefit or disputes as to the amount of benefit to which somebody is entitled. Those questions are entirely different from questions related to liability to pay contributions.
However, contributions questions and income tax questions are often similar or identical. As the Minister pointed out, the question whether an earner is an employee or self-employed will decide whether he or she pays tax under Schedule D or Schedule E; it will decide whether the PAYE system is applicable; it will decide whether the individual pays contributions as an employee or as someone who is self-employed; and it will decide whether there is an employer who is liable for the employer's contributions. It is obviously right that there should be a single tribunal which decides whether an earner is an employee or self-employed for both tax and national insurance.
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As the Minister mentioned, we raised this issue by amendments in Committee on the Social Security Act. The Government replied encouragingly. They gave an undertaking that the matter would be reviewed in the light of the proposed transfer of functions which is taking place in the Bill. The Government have made good their undertaking and I can therefore give a very warm welcome to Part II.
I have only one doubt about Part II, which is technical. I understand from paragraph 170 of the Explanatory Notes that the effect of Clause 15 is that decisions on the contracting-out of SERPS by occupational pension schemes will be taken by an officer of the Inland Revenue, but appeals from that decision will go to the social security appeal tribunals rather than to the commissioners for income tax. At first sight, that seems rather odd. The Government's explanation is that it will enable pensions experts to sit as members of the social security appeal tribunals. My view is that while contracting-out issues are unsuitable for the general commissioners of income tax they would be entirely suitable for the special commissioners.
The commissioners decide questions relating to pensions; for instance, a question as to whether a scheme satisfies the conditions for approval under Section 590 of the Income and Corporation Taxes Act would go to the commissioners. Special commissioners are used to dealing with questions of great complexity and technicality and are perfectly capable of handling contracting-out cases. I believe that that is the tribunal to which the contracting-out issues should go, together with other contributions questions.
Although I said that that was the only point that I wished to raise, I am not giving an undertaking that at a later time I shall not find other points to raise. Indeed, I have not yet received a proper briefing from the Tax Law Review Committee, which may have other points it wishes me to raise in Committee. But that is all that I wish to raise for the time being.
I conclude with two comments. First, like the noble Lord, Lord Higgins, I found the new Explanatory Notes extremely helpful. They are a most desirable innovation. Secondly, I welcomed the meeting with the Minister and several civil servants from the DSS and the Inland Revenue in the Moses Room last week. It was most helpful and it satisfied me on two or three other issues which I might otherwise have had to raise in the course of debate. In extending a welcome to the Bill, I hope and expect that the remaining stages will not detain us for too long.

Business
Lord Hunt of Kings Heath: My Lords, before we move to the Statement on tobacco, I would like to take this opportunity to remind the House that the Companion indicates that discussion on a Statement should be confined to brief comments and questions for clarification. Peers who speak at length do so at the expense of other noble Lords.

Tobacco
4.28 p.m.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Hayman): My Lords, with the leave of the House, I would like to repeat a Statement made in another place by my right honourable friend the Secretary of State for Health. The Statement is as follows:
"Madam Speaker, today I present to the House our White Paper on tobacco. It is entitled Smoking Kills; and that is a fact. It has been known for years. That is why a lot of adults gave up smoking. But the number of adults who smoke has stopped falling. Worse still, the number of children who smoke is going up, with more girls than boys taking up the deadly habit.
"And it is a deadly habit. Out of 1,000 20 year-olds who smoke regularly, one will be murdered, six will die in road accidents, 250 will die in middle age from smoking and a further 250 will be killed by smoking later in life.
"Smoking causes 84 per cent. of deaths from lung cancer and 83 per cent. of deaths from other lung diseases like bronchitis.
"Smoking does not just cause lung cancer, it causes cancer of the mouth, the larynx, oesophagus, bladder, kidney, stomach and pancreas. Smoking causes one in seven of deaths from heart disease. Smoking is very high among people who are severely mentally ill.
"Smoking is now the principal avoidable cause of premature deaths in Britain. It hits the worst off people hardest of all. Smoking is one of the principal causes of the health gap which leads to poorer people being ill more often and dying sooner. Smoking harms people who do not smoke. Smoking harms babies in the womb.
"These are all good reasons why this Government are so determined to turn things round. We cannot possibly achieve the reductions everyone wants to see in deaths and illness from cancer and heart disease unless we tackle smoking.
"Unless we reduce smoking we cannot reduce the inequalities in health which bear down most on the worst off. We want to help existing smokers quit the habit and help children and young people not to get addicted in the first place.
"We face an uphill struggle because the tobacco companies are committed to doing everything they can to promote the sale of cigarettes. That is because they have to keep recruiting new smokers to make up for the 120,000 of their own loyal customers they kill off every year.
"Most smokers take up the habit when they are children or young people. Few people start smoking once they are grown up. For years, the tobacco industry has poured millions into highly sophisticated advertising campaigns. People of all ages, including children, have been exposed to clever and eye-catching advertising material.
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"All that will now change. Tobacco advertising is going to end and it is going to end soon.
"This White Paper spells out the measures which will be targeted on children to protect them from being exposed to tobacco promotions. It will require a sustained effort over a long period. Some benefits will not show up for decades, but unless we act now they will never show up.
"We will also be trying to help the seven out of every 10 smokers who want to quit the habit. All this calls for a concerted plan of action and that is what the White Paper outlines.
"From 1989 up to the last general election the previous government had helped block all European efforts to ban tobacco advertising and sponsorship. We changed that. We put Britain's full weight into getting a European directive through. We succeeded.
"As a result a Europe-wide anti-smoking framework is in place. We now propose to end tobacco advertising on billboards and the printed media in this Parliamentary session. Most tobacco sponsorship will end by the year 2003. Formula 1 motor racing, as a global event, may qualify for exemption to the year 2006 if, and only if, tobacco sponsorship funding and advertising are already being reduced.
"The European directive is intended to keep to a minimum tobacco advertising in shops and this will be fully applied in Britain through the law.
"The tobacco advertising ban will be backed up by an anti-smoking campaign. Over the next three years we will be putting £50 million into an anti-smoking campaign. We want to make sure that children and young people no longer fall into the trap of seeing smoking as cool and a passport to adulthood.
"We have negotiated with representatives of the hospitality industry a code of conduct for reducing smoking in public places.
"It is illegal to sell cigarettes to children under 16. This law is very frequently broken. We are taking action to increase compliance with this law by shopkeepers and to promote more effective action by trading standards officers.
"Some individual shopkeepers and others knowingly and repeatedly flout this law. To deal with repeated offenders we propose to introduce a new criminal offence and we are looking at the practicalities of such a measure.
"Following discussions with my officials the National Association of Cigarette Machine Operators are issuing new rules on the siting and operation of cigarette vending machines to make them inaccessible to children.
"We have also been encouraging the companies who sell age restricted goods such as alcohol, cigarettes and fireworks to develop an industries-wide `proof of age' card. This package should make a real impact on the illegal sales of tobacco to children: the tobacco advertising ban, the £50 million anti-smoking campaign, the crack down on sales to children, a new

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criminal offence for repeated sales to children, new restrictions on vending machines, and the proof of age card.
"Then there are the people who are smoking already. Every 10 years more than 1 million British people get killed by smoking. Most of the millions who will be killed by tobacco over the next few decades are already adult smokers. Most smokers say they want to stop, and these are the people that we particularly want to help.
"If they keep on smoking there is a 50–50 risk that they will eventually be killed by their habit. Yet if they stop smoking before they get ill then they will avoid most of that extra risk of death. So it is really worthwhile for people to quit smoking.
"As part of our effort to help those seven out of 10 adult smokers who want to quit we are investing up to £60 million in the first ever comprehensive NHS service to help them give up their addiction. This will involve all health professionals—midwives, health visitors, doctors, nurses, pharmacists and dentists, all taking every appropriate opportunity to counsel patients to give up smoking.
"This effort will be particularly targeted on smokers living in those deprived areas which have been chosen as health action zones. We will encourage the use of nicotine replacement therapy (NRT) again especially targeted on health action zones where free NRT products will be available for the worst off. Health improvement programmes in every part of the country will be expected to address the need to reduce smoking in the worst off areas.
"As part of the drive to reduce tobacco consumption, the new Government have raised tobacco duties by just over 5 per cent. in December last year and again this year.
"These and other measures set out in the White Paper amount to a formidable plan of action to stop children from taking up smoking and to help existing smokers to quit. To achieve this we will need to counter the efforts of the tobacco companies. There is evidence to show that for most of the last 20 years they have been planning to counter the loss of sales which might follow an advertising ban.
"That time has now arrived so we can be assured that they will be well prepared. As I speak, I am certain that executives in the tobacco industry will be planning their strategy to keep up tobacco sales. We have got to get ahead of the game. That is all the more reason why everyone who cares about the health of the nation should work together to support this strategy and I am confident that everyone who cares about the health of the nation will do so".
My Lords, that concludes the Statement.
4.36 p.m.
Earl Howe: My Lords, as ever, I am grateful to the Minister for repeating the Statement. I wish to say at the outset that there is much in it that we can welcome. I shall comment on those sections of the Statement which are less palatable to us on this side of the Chamber. The
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overriding thrust of the White Paper, and in particular the emphasis on the need to reduce the prevalence of smoking among the young, is one with which we can readily identify and endorse.
Smoking is the single most important cause of premature death in this country, accounting for, as I believe the Minister said, 120,000 deaths every year. The avoidance of smoking would eliminate one-third of the cancer deaths in Britain and one-sixth of deaths from other causes. However, the recent trends in smoking prevalence are of particular concern. Looking at the graph of the number of adult smokers, one can see that the downward curve, seen since 1972, was reversed in 1996.
Among young people the trend has been upwards for a much longer period. That is extremely worrying. We know that almost all smokers start to smoke as children or young adults. We also know that the health warnings, while they are known about and understood. are simply ignored as irrelevant by most young smokers. At the same time, it is clear that a variety of factors influence the take-up of smoking in younger age groups: for example, parental attitude, peer pressure and, not least, the price of cigarettes. Therefore, we understand the Government's view that only a concerted and sustained government campaign is likely to stand any chance of shifting attitudes and behaviour among smokers, and especially among young people.
Let us look at the ingredients of the campaign and specifically at the proposed ban on tobacco advertising and sponsorship. I have always been sceptical about a compulsory ban. I say that for a number of practical reasons. The first is, paradoxically, that a ban may turn out to be counter-productive. If different brands are prevented from competing with one another through advertising, then they are likely to try to compete in the other obvious way; that is, through price.
We know that cigarette consumption is extremely price-sensitive. It has been shown to decrease by 0.5 per cent. for every 1 per cent. increase in the retail price. That effect, not surprisingly, is greater in the low income groups. There must therefore be a real concern that more intense price competition will start to occur and will actually drive up the number of cigarettes consumed.
The second feature about advertising which will be lost with a ban is that one important way of encouraging smokers to switch from strong brands to less harmful ones—that is to say, the low tar varieties—will disappear. That seems perverse. Aside from saying that they want smokers to give up the habit altogether, what is the Government's answer to that point?
I worry too that it will be all too easy for the tobacco companies to drive a coach and horses through the legislation. I do not know how many of your Lordships have travelled on the London Underground in recent days. There is a prominent advertisement in many stations for a certain brand of cognac. It depicts a glamorous and sophisticated-looking young lady holding a smoking cigarette. If the tobacco companies are looking for a way of glamorising the activity of smoking, they need look no further than that. But it is not as such a cigarette advertisement.

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While I have no evidence to suggest any involvement by the tobacco companies in that poster, how do the Government feel it will be possible to stop tobacco companies taking advantage of that type of opportunity in the future by, as it were, piggy-backing on other products? For all those reasons we strongly question the wisdom of a compulsory ban on tobacco advertising and would have preferred to see an extension of the voluntary approach. However, I have a specific question for the Minister on that aspect of the White Paper and it relates to the withdrawal of tobacco sponsorship. Tobacco sponsorship will need somehow to be replaced if a number of sports are to continue in their present form. What proposals do the Government have to assist those sports in obtaining alternative sponsorship?
We welcome the emphasis placed on encouraging smokers who want to quit the habit. Nicotine patches are an obvious way to do that. However, there is an interesting aspect to the Government's proposals. The Minister said that free NRT (nicotine replacement therapy) products will be available for the worst off. I have no quarrel with the idea of promoting NRT products. But what does the proposal say about the Government's publicly stated and oft repeated policy towards the health service? If they make a nicotine patch prescription available free to those on a low income and do not make it available to anyone else, does not that amount to the introduction, for the first time, of a means test for prescriptions? How much further down that road do the Government intend to travel?
Looking at the issue from a broader perspective, do the Government agree that this is a classic example of how community pharmacists can play a part in preventive help, advice and treatment? Research indicates that a smoker has a one in 100 chance of a successful cessation of smoking using willpower alone. Quitting with informal support increases that to one in 20; using NRT doubles the chances of success but if professional counselling is given as well—for example, from a pharmacist—in conjunction with NRT, that can increase the success rates to better than one in four. To my mind that is a powerful argument for looking to the local pharmacy as an important means of delivering the Government's targets.
Perhaps I can turn briefly to smoking in the workplace. Can the Minister be a little more specific about what the Government intend under the code of practice? If its force under the Health and Safety at Work Act is to be as robust as the White Paper suggests, it would appear that businesses will ignore it at their peril. Will the code require companies to create smoking areas in the workplace if smoking is to be allowed there at all? If there is to be any suggestion of compulsion for employers to alter their workplace premises, can the Minister confirm that that would be the subject of primary legislation to give the opportunity for a full and proper debate on the matter? Will all workplaces be affected by this legislation?
We welcome the voluntary proof-of-age scheme and the plans to enforce the ban on cigarette sales to the under-16s more toughly. We are also glad that the Government have stepped back from imposing an
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outright ban on smoking in public places, including restaurants and pubs. As was argued very effectively in your Lordships' House on 21st October, a voluntary approach is likely to prove fairer to industry and allow more readily informed choice by consumers.
Finally, it would be helpful to understand what targets the Government have in mind to judge the success of these measures. Can the Minister say what percentage drop in cigarette consumption over whatever period of time she chooses to take, is envisaged as a result of the measures announced today?
4.45 p.m.
Lord Clement-Jones: My Lords, I too thank the Minister for making the Statement today and warmly welcome a great many aspects of it. On these Benches we wholly accept the medical evidence which shows that there is an increased risk of disease not only through smoking, but also through passive smoking. That was demonstrated by the report of the Scientific Committee on Tobacco and Health which reported earlier this year and also the recently published WHO multi-centre research into the effects of environmental tobacco smoke which your Lordships may recall was the second largest study ever carried out on the subject. That shows quite clearly that there is a risk equivalent to the death of several hundred lung cancer deaths a year in the UK as a result.
As the Minister pointed out, significantly associated with passive smoking is sudden infant death syndrome, heart disease in adults and respiratory illnesses and asthma in children. We particularly welcome the proactive stance of the Government towards the European directive and of course that is in sharp contrast to that of the previous government.
However, there are some areas of concern in the Statement and in the White Paper. One of the areas your Lordships may recall which the BMA raised in recent weeks is the whole question of regulation of nicotine content. It is clearly vital to reduce the nicotine content of cigarettes. They must be manufactured to be less addictive. On these Benches we support the BMA's call for an overhaul of the regulatory framework in that respect. We must also deal with misleading labels and additives.
We need the Government's commitment in relation to raising the price, in particular the duty, on cigarettes. We are not quite clear from the wording of the White Paper whether it is an unequivocal commitment to raise the price year by year or simply a general statement of intent.
As regards the methods of marketing in the third world, clearly they must be regulated. We note the Government's strong support for an international framework convention by the WHO and welcome that. But we note also that the Statement said that it was likely to be brought forward to the World Health Assembly in 2003. Is there any way in which we can bring that forward earlier? Clearly international action in so many of these areas is the only way forward.
We welcome the commitment completely to phase out sponsorship and advertising. But when is the legislation going to come forward as regards the

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advertising ban? As regards sponsorship, why do we have to wait for the period that the Government stated for that to be phased out? Furthermore, on these Benches we do not accept the Government's case on Formula One motor racing. I have been associated with Formula One motor racing for many years. Indeed, my father-in-law ran a Formula One racing team. I still believe that the arguments put forward by Mr. Bernie Ecclestone earlier this year are totally bogus to justify the postponement of a ban on sponsorship on Formula One. We believe this should be treated in a way which is no different from any other form of sponsorship.
We also note the code of practice proposed for the workplace, to be introduced on a voluntary basis. Although the Government clearly trailed their coats in terms of a ban on smoking in the workplace, no doubt many people have been surprised by the eventual conclusions. We believe, unlike the noble Earl, Lord Howe, that the ban should have real teeth and that if it does not work on a voluntary basis enforced by the Health and Safety Executive then eventually a complete ban on smoking in the workplace may be necessary. For pubs, restaurants and so on, we agree with the voluntary approach and we made that quite clear in the previous debate on the subject in October. We believe that we should effectively outlaw smoke and not the smoker but, as part of that, we insist on the ability to segregate and to have adequate ventilation. We believe that the voluntary code should make that quite clear.
We commend the Government's approach, in public health terms, of setting very clear targets for smoking cessation. This is absolutely vital, as Sir Donald Acheson made quite clear in his recent report, to combat health inequalities. This must be reflected through health improvement programmes, health promotion and so on, but it must he put explicitly in the national priorities guidance. We do wonder whether some of those targets themselves are quite strong enough, in view of the recent take-up rise in smoking by the young. We believe that the target of a decrease from 13 per cent. to 9 per cent. over 12 years is rather too modest. One can argue about those targets over a period of time but they must be reflected in health improvement programmes.
It is particularly vital that pregnant women should be discouraged from smoking because, as we know and as Sir Donald made quite clear, smoking leads to low birth weight in children, a failure to thrive in early childhood and also to glue ear. Clearly we need education through the midwifery health visiting services, as recommended by the Scientific Committee on Tobacco and Health. We welcome the Government's statement of intention in that regard, but again the White Paper is not absolutely specific. What are the specific intentions of the Government as regards making that information available through the midwifery and health visiting services? We need strong campaigns directed at young people, as both the Minister and the noble Earl, Lord Howe, mentioned. It is particularly worrying that one-third of teenagers now smoke, and we know there has been an increase in the numbers of young women who smoke
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We welcome initiatives like the Respect Roadshow which ran in May but we ask what will be done on a continuing basis. It is important that any such campaigns are properly evaluated. For example, how far is the Department of Health exploring the possibilities of peer group education, where young people can communicate with each other about the problems associated with smoking, in a way similar to drug-education campaigns?
We welcome the additional expenditure announced by the Minister today. Currently, only something like £6.5 million is spent on education as regards smoking, compared with the costs of smoking-related diseases for the NHS, which is estimated to be between £1.4 billion and £1.7 billion, so the rise from £6.5 billion to £50 billion is, in our view, a significant increase.
What about the duties of retailers? We welcome the Government's plan to ensure that they are fully aware—
Lord Williams of Elvel: My Lords, perhaps I may draw the noble Lord's attention to the Companion, which says that these Statements should not be the occasion for a mini-debate?
Noble Lords: Hear, hear!
Lord Clement-Jones: My Lords, I fully intend to ask further questions. I thank the noble Lord for his intervention, and I will be concluding very shortly. Do the Government plan to ensure that they are continuously aware of their legal responsibilities? As a member of the Parents Against Tobacco Campaign in the late 1980s and early 1990s, I welcome the local authority enforcement protocol which has been mentioned and I look forward to seeing the proposals for criminal law when they come forward.
As regards the making available of nicotine replacement therapy on prescription, will this be universally available? It is not clear from the Statement. We on these Benches believe that this is a good day for Britain's health and the health service and a bad day for the tobacco companies. We therefore welcome the Statement on that basis.
4.56 p.m.
Baroness Hayman: My Lords, I am grateful for the broad welcome that has been given to the Statement by the noble Earl, Lord Howe, and the noble Lord, Lord Clement-Jones. This is a comprehensive package of measures intended to try to reduce smoking in this country, and it is important to stress the comprehensive nature of the package.
The noble Earl, Lord Howe, asked about the effects of banning advertising in itself on rates of smoking. He asked whether this was not in fact price-sensitive. He also referred to the possibility of unintended consequences. There has been a great deal of evidence on this and an important study was undertaken by the Department of Health, looking at the effect of the banning of advertising in four countries: Norway, Finland, Canada and New Zealand. The conclusion was that in each case the banning of advertising was followed by a fall in smoking on a scale that cannot

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reasonably be attributed to any other factors. Even the small percentage falls which have followed advertising bans, given the large number of people who are affected, are extremely important. That is why we believe that an advertising ban is extremely important.
In answer to the noble Earl, we also believe that the terms of the directive are very wide. They do not deal only with billboard advertising for smoking or newspaper advertisements for smoking. The concept of brand stretching is included in the directive, as are all the promotional activities of the tobacco companies that go on, such as the giving out of free cigarettes at nightclubs, among many other promotional activities. So there is a very broad range of activities which we believe are usefully covered by the ban and that ban will be brought in as soon as possible. Obviously it is important that we consult on the regulations, and that is what is being done within this parliamentary Session, but we want to make progress and we want it to be effective as soon as possible.
As for the targets, the noble Lord, Lord Clement-Jones, suggested that they were not stretching enough. We believe, given the current increase in the numbers of young people who are smoking, that it is extremely challenging to make the kinds of rates of reduction that we hope to see by the year 2005. We are also challenging ourselves to make sure that the rates of reduction lie across all social classes. The evidence of the Acheson Report showed the difficulties involved in achieving those rates, and we do not want to see the health gap increasing in this area.
Turning to the issue of nicotine replacement therapy, perhaps I can clarify the position there. It is not that we are making this available on prescription for some people and not for others. This therapy is not available on prescription at the moment: it is available for sale over-the-counter from pharmacists. For those targeted groups where the problems are greatest, as part of a smoking cessation plan—and the evidence is very clearly that the greatest effect is when nicotine replacement therapy is given as part of an overall supportive plan to help people give up smoking—particularly in health action zones and among the poorer people, we hope it will be possible to give at least a week's supply, a starter supply, of nicotine replacement therapy.
I should point out of course that once you have got over the hump of the first week or two, the costs of the nicotine replacement therapy are in fact less than the average smoker is spending on smoking, and so we start seeing people being able to pay for their own therapy. I agree with the noble Earl, Lord Howe, that pharmacists can be particularly helpful in this area and we welcome the involvement that they have pledged themselves to make in giving advice and support, as well as selling nicotine replacement therapy products.
As regards the workplace, I can tell the House that it is intended that the Health and Safety Commission should consult on a new approved code of practice on smoking in the workplace. It will toughen up existing measures and be designed to improve the protection and welfare of all employees by defining the kind of
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smoking policies that employers need to operate to comply with existing health and safety legislation. Inspectors would then be able to quote the code in court cases alleging breaches of the Health and Safety at Work etc. Act 1974. Both in the areas of workplace smoking and public place smoking, we believe that the best way forward is to build on what is already there. We hope to see results and to monitor them, but we shall be willing to consider further action if we do not see the results that we wish.
I turn now to the international concerns. On the issue of tar content, the European Commission is considering further legislative proposals covering tar, nicotine and carbon monoxide, as well as tobacco labelling and health warnings. We welcome those steps and will work closely with the Commission and other member states to achieve practical improvements on current directives in these subjects. In terms of broader international action, which I believe the noble Lord, Lord Clement-Jones, mentioned, the new director general of WHO has made smoking one of its top priorities. The framework convention proposal will provide an overall structure of objectives, with more detailed action set out in various protocols. The aim would be to commit all signatory states to develop policies along the same broad lines, but not bind them to particular activities until they are ready to commit themselves to the relevant protocol. We have been asked to play a leading role in developing the convention to see how we can help other countries.
Perhaps I may now turn to the question of sports sponsorship. The international experience is that, given enough time to adapt, sports and other tobacco-sponsored activities can find alternative sources of sponsorship. Perhaps I may tell the noble Earl that we certainly want to help sports find exactly those sorts of alternatives because we are anti-tobacco advertising, not anti-sport. Indeed, my honourable friend the Minister for Sport has called together a group of experts to advise and help sports, which are facing difficulties in adapting, to find the new sponsors that they need.
The noble Lord, Lord Clement-Jones, drew attention to the particular needs of pregnant women. He is absolutely right: this is one of the areas where we have set ourselves targets for reductions. We believe that it is an especially important time when parents and parents to be are focused on their health needs. It is also a particularly useful time to intervene and we shall be working with the relevant professionals to ascertain what is the most effective form of activity in certain areas.
I believe that I have covered most of the points raised, but I shall review what has been said when I read the Hansard report tomorrow. I shall write to noble Lords if I have not covered all the matters raised.
5.3 p.m.
The Earl of Lauderdale: My Lords, after the 10 minutes used up by the Liberal spokesman, I have one quick question for the Minister. Can she say whether the Government's anti-smoking campaign includes positive

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encouragement to smoke herbal tobacco? If you smoke herbal once, you never want to smoke again! That is how I gave up the habit more than 50 years ago.
Baroness Hayman: My Lords, the noble Earl has made a fascinating contribution and one which I believe deserves serious attention. I shall ensure that my right honourable friend the Minister for Public Health takes note of his suggestion.
Lord Janner of Braunstone: My Lords, does my noble friend the Minister recognise how important this White Paper is and how greatly it will be welcomed by most people, even the majority of smokers? Having said that, does my noble friend agree that those adults who exercise their freedom to smoke should also respect the wishes of non-smokers not to be adversely affected by it; not to have to work in an environment of smoke; and not to have to eat and drink in places where the air is polluted by smoke? If my noble friend does agree, does she not consider that this House could set an example? To the best of my knowledge, the only place in this House where you can eat smoke free is in the staff dining room. Therefore, should there not be a smoke-free area in all eating places in this House? If not, can my noble friend say why not?
Baroness Hayman: My Lords, I think I made it quite clear that we want to build on the progress which has already been made in many sectors of the hospitality industry to make improvements and give real choice to consumers. As my noble friend rightly points out, there are different sorts of freedoms here. For example, there is the freedom, which no-one is challenging, for individuals to continue smoking if they so wish. There is also the freedom of people who want to eat and drink in a smoke-free area. We want to encourage the industry to make progress in providing separate facilities.
As my noble friend will be well aware, I answer for the Government in this Chamber, not for the Chairman of Committees or for the committees of the House which are in charge of issues relating to smoking within your Lordships' House. I understand that a working group is currently undertaking a review of smoking policy in this House. As a Member of the House rather than a member of the Government, I suspect that I would tend towards my noble friend's views on the matter.
Lord Mackie of Benshie: My Lords, will the Minister tell the House what the Government think of smoking as portrayed on television and, in particular, smoking in televised plays? This must be the most dangerous practice for young people to see on the screen, or in a televised play, where sometimes people smoke continually. I believe that that sort of thing does as much damage to the young as anything else. Has the Minister any idea as to how the Government could control the situation?
Baroness Hayman: My Lords, the noble Lord, Lord Mackie of Benshie, is correct to pin-point the number of different factors that can influence the climate which
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encourages young people to take up smoking. Indeed, it is multifarious. We need to attack the climate in which smoking is considered the norm—certainly the climate in which it is considered in some way attractive, romantic or indeed the "grown up" thing to do. There are responsibilities in the matter for all parts of society. For example, there are some areas in which sports men and women have been particularly helpful in joining in campaigns to provide young people with role models, which are anti-smoking rather than pro-smoking. I believe that other parts of the entertainment industry should rightfully look to their own policies in this area.
Lord Gisborough: My Lords, I fully support the Minister in her efforts to reduce smoking. However, when one compares the 120,000 deaths a year caused by smoking with the billions of pounds, millions of cattle and the destruction of the farming industry for the sake of 10 deaths per year, one wonders whether the £50 million designated will be enough.
I have four questions for the Minister. First, can she tell us what sort of loss she anticipates the Exchequer will suffer if cigarette smoking is reduced? After all, that is a very important part of the tax take. Against that, can she tell us what sort of savings she expects might be made in the National Health Service by fewer people becoming ill through smoking? Secondly, as the Minister knows, the European Commission actually subsidises a number of countries to grow tobacco. Can she say what pressure the Government will put on the Commission to stop subsidising people growing tobacco in Europe?
Thirdly, we have heard about peer pressure. Does the Minister agree that it is important that school teachers should not smoke and that young children should be put in the position where there is reverse peer pressure so that, from an early age, they learn that the pressure is on them not to smoke rather than to smoke? In that way they can follow by example.
Fourthly, I should just like to confirm what the noble Lord, Lord Janner, said. On Tuesday night I went into the Dining Room, which was full of cigarette smoke. I then went down to the Home Room, which was full of cigar smoke, and eventually ended up in the Barry Room. I understood that smoking was not allowed in our dining rooms; indeed, I believe that that is the rule. I feel that we ought to set an example rather than go the wrong way about it.
Baroness Hayman: My Lords, I am sure that the House authorities will look carefully at the comments made today about the difficulties caused for non-smokers by the present arrangements.
I accept very much the point made by the noble Lord, Lord Gisborough, and the noble Lord, Lord Clement-Jones, that some of the most successful educational programmes for young people are undertaken by young people. I suspect that lecturing by government Ministers is not the most potent weapon affecting the behaviour of teenage girls. We need to be very careful and ensure that our advertising campaigns are targeted so that they communicate effectively with young people.

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Some quite novel and radical approaches have been tried in America which focused very much on conventional ways of showing the vested interests of those who persuade people to take up smoking. It has been very effective in reducing smoking among young people.
As to the common agricultural policy, we do not consider that financial support for tobacco production is an effective way of spending Community money. The Government strongly disapprove of the tobacco regime and would like to see its end for reasons of health, costs and control. We would like to see a progressive disengagement from the sector and we will press for an end to tobacco subsidies in the long term. We are actively promoting that policy within the EU.
As to the financial loss to the Exchequer, I should make it absolutely clear that the policies that we are putting forward today are the policies of the Government as a whole—including my right honourable friend, other health Ministers and the Chancellor of the Exchequer. Yes, if we are successful there will be a loss of tobacco revenue—and the sooner the better.
Lord Monson: My Lords, I welcome the decision not to use the criminal law to force pubs and restaurants to provide non-smoking areas, especially as market forces will achieve the same result without compulsion. Non-smoking adults in Britain now out-number those who smoke by more than two to one. It is in their own interests for catering establishments to provide non-smoking areas. If they fail to do so, they will be increasingly boycotted by non-smokers.
I have three questions for the noble Baroness. In the light of her response to the noble Lord, Lord Gisborough, I think she probably agrees that young people throughout history have enjoyed doing whatever is forbidden by the elder generation. As suggested in the Sunday Telegraph a few days ago, the right deterrent is not to tell young people that tobacco is dangerous—because danger has a certain glamorous aspect in the eyes of young people—but to try to convince them that the smell of tobacco makes them repellent to members of the opposite sex.
Does the noble Baroness agree that constant price rises, in real terms, encourage smuggling and are unfair on the elderly poor, who derive comfort from cigarettes? It does not affect most of us, but it affects them particularly badly.
Finally, as everybody has to die sometime, what is the precise definition of "premature death"? Is it one year, two years, three years, or whatever, before someone might otherwise be expected to die?
Baroness Hayman: My Lords, I will certainly write to the noble Lord, Lord Monson, with the precise definition of "premature death". The figures that I gave in the Statement are quite clear: of 1,000 young people who are smoking at age 20, 250 of them will die in middle age of smoking-related diseases. A further 250 will die prematurely in later life. We are not just talking
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of people losing a year of life at the end of their life, we are talking of large numbers of people dying in their middle years because of smoking-related diseases.
I accept in one sense what the noble Lord said about the importance of stressing in the messages why young people should not take up smoking—not only in the health messages but in the messages about the things that matter to them. The insidious message in the past about weight loss and smoking is perhaps one of the reasons that more young women than young men have taken up smoking. We have to target very carefully the advertising and educational campaigns.
It is also possible for us, who have listened to the health messages for more than 20 years, to over-estimate how well they have been translated to the 13, 14 and 15 year-olds of today. They have not been hearing these messages for 20 years in the same way that we have done. We have to make sure that they understand the health-related dangers very clearly. I am not sure that we have done so in the past.
Smuggling is a real and serious issue. We need to ensure that we take action against it. That is why it was announced that we are allocating the considerable sum of £35 million to the Customs and Excise over the next three years to implement the recommendations made in the Government review into alcohol and tobacco fraud. It is important that we ensure that we tackle effectively the smuggling going on at the moment, which for many reasons is dangerous and which is causing a loss of revenue to the Exchequer.
Lord Rea: My Lords, I speak for all members of all the health professions in welcoming this comprehensive White Paper. I notice that my noble friend the Minister has a very nasty cough. I am sure that in her case it has not been caused by the effects of smoking, either personal or environmental. I am sure that there is not much environmental smoke in the Department of Health.
I welcome my noble friend's remarks about how the £50 million to be allocated to an anti-smoking campaign will be spent. We should have learnt by now that big bill-board posters do not work. Certainly that was the case in campaigns to inform young people about drugs. If anything, drug-taking increased during those campaigns.
My first question relates to nicotine replacement therapy. Why not put it on prescription? People with low incomes will then be exempt from the charge and it would surely be far less bother to do that on a nation-wide scale than to allocate it to specified vulnerable groups. My noble friend may not have the figures available<—perhaps she could write to me—but how much would it cost to put nicotine replacement on prescription?
The issue of health warnings on cigarette packets has not been mentioned. The present size of such warnings has been shown to be virtually useless. Have the Government any plans to increase the size of the health warnings so that they actually cover the whole of the side of a packet of cigarettes?

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The noble Lord, Lord Clement-Jones, made the point about nicotine content as well as tar content being properly labelled on cigarettes. At the moment low-tar is a big con. People who smoke low-tar cigarettes are getting enough nicotine to keep their habit going.
Baroness Hayman: My Lords, my noble friend is correct. One of the problems about the supposed advantage of switching to lower tar brands is that it has been shown that people actually inhale more deeply of the lower tar brands. Therefore, the supposed advantage is not there. I shall write to my noble friend with the figures that he asked for.
We are anxious to target nicotine replacement therapy on the areas where it will have most effect. That is why we are starting off with action in smoking cessation services. As I said earlier, there is clear evidence that, while NRT can double the success rate of people trying to give up smoking, it is most effective when it is part of an overall programme to support people. We are trying to do that within the most deprived areas—the areas that have been designated health action zones. We have also made it clear in the national priorities guidance for the NHS and local authorities that smoking cessation had to be a priority from April 1999. We hope to see action plans to tackle that coming through in their health improvement programmes. We will be looking at the success of what we are doing in terms of the NRT given in the health action zones and seeing what further services we want to build on top of that.
I take my noble friend's point about not simply using exhortation and assuming that that will be the most effective motivator for young people not to take up smoking. I can certainly confirm that, as he was my general practitioner for about 20 years, my own cough has nothing to do with a smoking related disease.
The Viscount of Oxfuird: My Lords, does the noble Baroness agree that, ironically, the only effective way of resolving the smuggling issue, which is costing this country £1 billion a year, is to seek European-wide harmonisation of tax; namely, excise duty?
Baroness Hayman: My Lords, the UK was disappointed at the failure of the Commission to make any substantial proposals in its second biannual review of minimum rates of excise duty. The Government advocate upward price convergence through high minimum duty rates across the EU. But just because we failed to get member states to agree on that should not stand in the way of taking UK action when it relates to overriding health objectives in this country.
Lord Williams of Elvel: My Lords, can my noble friend say whether there is any evidence that cigarette smoking is more dangerous than cigar or pipe smoking? There is a good deal of debate about cigarette smoking but none about cigar or pipe smoking.
Baroness Hayman: My Lords, my understanding is that all smoking, with perhaps the exception of herbal cigarettes to which the noble Earl referred earlier, is damaging to health. Obviously, the main bulk of
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smoking is cigarette smoking. That is certainly the area in which most young people are taking up smoking. I shall certainly write to my noble friend with specific details about the relative risks of cigar, pipe and cigarette smoking.
Lord Mackie of Benshie: My Lords, perhaps I may—
Lord Hunt of Kings Heath: My Lords, we have reached 20 minutes. We must move on.
Lord Mackie of Benshie: My Lords, perhaps I may—
Lord Hunt of Kings Heath: My Lords, the Companion is quite clear. We have reached 20 minutes. We must move on.
Lord Mackie of Benshie: My Lords, I wish to talk about a procedural point. The noble Lord, Lord Williams of Elvel, raised a point with my noble friend when he was speaking. I think that the point needs clearing up. My understanding is that the Front Bench speakers may speak for a reasonable time and comment on policy if they so wish. I think that the noble Lord, Lord Williams of Elvel, was wrong on this point and I should like the opinion of the House on it.
Lord Hunt of Kings Heath: My Lords, perhaps I may read from the Companion:
"Ministerial statements are made for the information of the House, and although brief comments and questions for clarification from all quarters of the House are allowed, such statements should not be made the occasion for an immediate debate. Discussion on a statement should not exceed 20 minutes from the end of the Minister's initial reply to the Opposition spokesmen who are themselves expected to be brief.",

Social Security Contributions (Transfer of Functions, etc.) Bill [H.L.]
Second Reading debate resumed.
5.25 p.m.
Baroness Anelay of St. Johns: My Lords, reference was made much earlier this afternoon by the noble Lord, Lord Goodhart, to the usual suspects taking part in this debate. I suspect that I am indeed one such spokesperson.
As other noble Lords explained earlier, the Bill deals principally with the complex and technical process of the administrative transfer of functions from the Secretary of State for Social Security to the Inland Revenue and the Treasury. I have approached my examination of the Bill by asking what it would mean for the individual taxpayer and contributor.
Overall, there are just two issues which I will seek to address now and in later stages of the Bill. The first is a general but practical matter. Can the transfer be carried out effectively? Secondly, what are the proposals for

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appeals systems? That is a subject in which I retain a keen interest having sat for many years locally as a lay member of a social security appeal tribunal.
I add my thanks to the noble Baroness the Minister for setting up the briefing meeting in an effort to obviate the need for having so many probing amendments at the Committee stage. I may ask questions today which the noble Baroness answered at that meeting. I do so in an effort to put answers on the record. Answers which I found most helpful last week I am sure I will find helpful again today.
The noble Baroness will recognise that on occasions it may be necessary in Committee to put down one or two probing amendments on the same basis—that it is important to test out the aims and objectives against likely outcomes. This will not be done in a partisan manner but perhaps in the manner described during the passage of the Social Security Act earlier this year as the "Bassingthwaighte principle"—that is, where there is a lack of partisanship and agreement on the Bill, paradoxically, one sometimes has to be even more careful about analysing the aims and objectives. I notice that the noble Baroness has some misgivings on this point. I do not think that we will be detaining her overlong in Committee despite that principle.
First, can this transfer be carried out effectively? I am something of an IT anorak, but even I can appreciate the potential in the Bill for bureaucratic and IT meltdown. Questions will arise relating to data protection. It is essential that the public can be assured that the transfer will be carried out in such a way that the integrity of the system is maintained throughout the process of change—in other words, it carries on working properly—and that confidential information is not disclosed inadvertently or improperly.
Public confidence in the use of IT in complex DSS operations has been shaken by the current fiasco of the computer glitches at the DSS which has left millions of personal pension holders being owed well over £1 billion by the Government. New computers, which were set up to deal with the NI records of the entire nation, are sadly in a shambles after a summer of turmoil. The new system—NIRS2, the national insurance recording system—cost £171 million and is one of the biggest in Europe. It was an ambitious and proper project to be undertaken. It holds 65 million individual contribution records. It was switched on in July but had to be shut down almost immediately due to technical problems.
Each April the Contributions Agency calculates how much people have paid in contributions and what rebate is due to those with personal pensions. This is usually paid during the summer. But this year, no payments had been made by October. The computer was shut down over the summer and the DSS has been playing catch up ever since. Because the money has not been invested, those affected will also miss out on the autumn rise in the stock market. More than £2¼ billion-worth of payments have been missed already, with more than £1 billion still owed. I understand that insurers think it
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extremely unlikely that the problems will be resolved before March next year. In a briefing note to insurers the Contributions Agency admits that
"more problems have been encountered than were anticipated".
Perhaps that is the understatement of the year.
In the light of that difficulty, how confident are the Government that that will be a one-off problem with large computer systems, and how will they ensure that similar problems cannot plague the transfer of functions which will follow the passage of the Bill?
I note that paragraph 228 of the helpful Explanatory Notes refers to the costs involved in such matters as making the necessary amendments to IT systems. How will the Government make the public confident that the new systems will work during and after the transfer of functions in the light of the problems faced this summer by the Contributions Agency?
A second related problem is data protection, an issue raised earlier by my noble friend Lord Higgins. Clause 5 introduces Schedule 5, which sets out the powers to exchange contributions information following the transfer. The Explanatory Notes state:
"Schedule 5 inserts new gateways and amends existing ones so that the Inland Revenue and DSS can exchange the information necessary to carry out their functions".
I note the attempts at reassurance in paragraphs 129 and 130, but I remain concerned about who controls the "Open Sesame" command to those new gateways and about whether the command could be misused, either intentionally or in error. We shall need to pursue such questions in Committee.
I turn to appeals. The noble Lord, Lord Goodhart, referred to the fact that appeals concerning contracting-out matters, credits and home responsibilities protection, will be heard by the new unified appeals tribunals to be set up under the Social Security Act 1998. I should be grateful if the Minister could explain further why those issues have been left with the unified appeals tribunals systems. At the briefing last week the noble Baroness helpfully gave two reasons for that: first, that she believed that such cases would be rare, and, secondly, that commissioners were lawyers, but that unified appeals tribunals could contain expert members—either actuaries or pensions experts. Can the noble Baroness confirm that those are the two main reasons—perhaps there are others—why those matters have been left with the unified appeals tribunals? How rare is "rare" expected to be? Have the Government felt it necessary to take steps to recruit such pensions experts and actuaries? Can appellants expect prompt hearings? What is the Government's estimate of the likely waiting time for such cases?
Still on the subject of experts, but in a slightly different context, I note that Clause 8(2) states:
"Where it appears to an officer of the Board that a matter before him involves a question of fact requiring special expertise, he may direct that in dealing with that matter he shall have the assistance of one or more experts".
The notes cite the example of medical evidence being relevant to a claim for sick pay.

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What is the intention in the regulations about the occasions on which assistance shall be sought and what is the recommendation about when such assistance ought to be sought? I approach this matter from a practical point of view. I have served on appeals tribunals where a decision has been taken not to seek assistance from experts and subsequently that has proved to be a problem. What if an officer of the board does not seek such assistance when the person who is being investigated, the appellant, believes that that should have been done? What would be the appellant's avenue to seek redress in such circumstances?
We shall also need to ask questions at a later stage about the arrangements for the Inland Revenue procedures for investigation and appeal. I refer, for example, to paragraph 100 of the Explanatory Notes, which refers to the "new section 110ZA … powers". Perhaps the Minister could clear up that minor matter before Committee by writing to me rather than attempting to do so tonight. Paragraph 100 states that, initially, the powers will be exercised by,
"the former staff of the Contributions Agency who will become officers of the Inland Revenue when functions are transferred".
However, paragraph 111 states:
"Initially the officers authorised by the Inland Revenue will largely he the former members of the Contributions Agency who currently use the powers conferred by section 110"
of the Social Security Administration Act. If the powers are to be exercised by those who have not been Contributions Agency officers, presumably there could be issues regarding training to be considered at an early stage. Can the Minister comment now—perhaps in writing would be better—on whether paragraph 100 or 111 is the more accurate?
I have one final question on appeals and it is one where I find myself treading on unfamiliar territory. Clause 12 refers to regulations governing appeals; in particular, to the role of the Lord Advocate. Can the Minister confirm that the reference to the Lord Advocate's role and powers in this Bill is still relevant in the light of the changes wrought by the Scotland Act?
I recall that during the course of our debates on the Social Security Act earlier this year the Lord Advocate at that stage opposed the Question that Clause 7 stand part of the Bill. On 30th March, the noble and learned Lord, Lord Hardie, stated
"Under the terms of the Scotland Bill, the Lord Advocate will remain as head of the Systems of Criminal Prosecution and Deaths Investigation in Scotland. He will also be the Law Officer to the Scottish Executive. Most of his other ministerial policy functions, including those relating to tribunals, will be transferred to the Scottish Ministers … That does not preclude the possibility that the Lord Advocate, as a Minister in the Scottish Executive, might have similar functions to those he exercises at present in relation to tribunals. But it will not be clear who would be the Minister responsible for these functions in Scotland until after Scottish devolution has taken place". [Official Report, 30/3/98; cols. 117–118.]
I should be grateful, therefore, if the noble Baroness could point to the provisions which make it possible for the Lord Advocate to act in the manner prescribed in Clause 12.
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Like other noble Lords, I have struggled to get to grips with the technicalities of the Bill, but perhaps not with the success of some other noble Lords. I tried to approach it from the point of view of what it will mean to the ordinary taxpayer and contributor. I shall continue with that struggle in Committee.
5.37 p.m.
Lord Skelmersdale: My Lords, I regard myself as an erratic these days on social security matters. I might even be described as a "dilettante", and it is noticeable that I am the only Member of your Lordships' House speaking today who is very firmly on the Back Benches. That said, I believe it would have been reasonable for the noble Baroness to have opened by saying that this is a very complicated Bill with two very simple purposes; namely, to pass the operational functions of collecting and recording National Insurance contributions from the Contributions Agency to the Inland Revenue, and to allow the Inland Revenue to deal with SERPS, statutory sick pay, statutory maternity pay and, of course, their appeals, rather than the Secretary of State. My noble friend Lady Anelay has just "zeroed in" on matters concerning appeals and I shall not go any further than that.
This change results in the Inland Revenue holding the National Insurance Fund, from which contributory benefits are paid. In a nutshell, we no longer have NICS but NICIRS. This obviously makes logistical sense. For many years, the Inland Revenue has had the responsibility of being agent for the Department of Social Security for collecting the vast proportion of money going into the fund, both from employers on a monthly basis and employees on a weekly or monthly basis, and the self-employed on an annual basis. These three amount to well over 90 per cent.—I think that the notes say 94 per cent., if memory serves me right—of the total sums going into the fund. The rest is made up of Treasury top-ups, as in most years the Treasury has to subsidise the fund because incomings and outgoings do not match, and of voluntary contributions, which are collected by the Secretary of State.
So far so good, but being a dilettante, as I said at the beginning, I was not invited to the meeting which the noble Baroness so generously held and therefore my questions may be a little more lengthy and detailed than they would otherwise have been. However, I certainly do not expect the noble Baroness to answer them today. I shall be happy to receive a letter before Committee stage.
To my mind the Bill gives rise to a number of questions, but, first, I wish to give half a cheer to the Minister and her department. Between them they have provided a document on the Bill that I have never seen before entitled Explanatory Notes. Other interested parties and I—this is clear from the speeches we have heard—are grateful for that document. I assume, though, that that is all we shall get and that it replaces the more normal Notes on Clauses. If I am right, I am afraid that I shall contribute to a rather longer Committee stage than would otherwise be the case, especially in regard to the schedules.

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I take Schedule 1 as an example. Obviously it is right that the occupational pension schemes (contracting out) regulations 1996 S.I. Number 1996/1172 be transferred. I confess that I have had no time to check up on this, but why, oh why, is not the whole set of regulations transferred? Why does the Secretary of State need to hang on to Regulations 23 and 61? There must be a reason, but is it right when other regulations are transferred lock, stock and barrel? The Minister would be right to criticise me for this Committee stage point and ignore it when she replies to the debate, as I have said. She would be quite wrong, though, to fail to answer my next question.
I join my noble friend Lord Higgins in asking why is there no financial memorandum attached to, rather than separated from, the Bill? Is the noble Baroness—I hope not—trying to disguise the fact that fewer civil servants will be required, and that BG Plc (that is, the British Government Plc, not British Gas) will save money as a result, but, as my noble friend Lord Higgins pointed out, not much and not yet? More generally, will everyone who receives the Bill automatically receive also the accompanying notes? After all, as my noble friend also pointed out, anyone reading the Bill needs the financial memorandum at the very least. That, of course, is not attached to the Bill itself.
My next point is, what price the fund? Government Ministers of all persuasions have defended the separation of national insurance contributions and tax from 1948 onwards as being for two entirely different purposes. One of the lines of defence used was that they were administered by two entirely separate government departments. This defence disappears once this Bill becomes operative. I must confess I always thought that the argument was rather opaque, not to say threadbare, but there you are. To a great extent junior Ministers must do as they are told!
However, is this Bill the thin edge of the wedge? The noble Lord, Lord Goodhart, made the point that the general public and the taxpayer have always believed NICs to be another form of tax. Now that we have NICIRS, as I said, they will be even more convinced of that. Shall we soon see a Bill which seeks to do away with the National Insurance Fund altogether? If so, there is nothing to stop all benefits being means tested rather than only some non-contributory benefits, as is the case at the moment. My noble friend Lord Higgins waxes lyrical on this subject—indeed he is muttering in my ear as I speak—and therefore I shall leave it to him to carry this particular flag as and when he wishes to do so, as I have no doubt that he will.
My interest is current. The Inland Revenue is among the minnows of government departments. I know the noble Baroness said that technically it is not a government department, but to all intents and purposes it is. Indeed I seem to remember that it is an agency looked after by the Treasury. Will future legislation regarding the fund be included in the Finance Acts? If so, this House will be yet again disadvantaged in that we shall be able to discuss it but not to amend it. We shall not be able to spend many happy hours—as I once did at the Dispatch Box opposite—seeking to amend,
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for example, a clause on the Treasury supplement. Will these matters come under the heading of money Bills? Will they be given the Speaker's certificate, and so on? Who will conduct the appeals with regard to Clauses 10 to 13 of the Bill? Will it be the Commissioners for Inland Revenue, or will the existing arrangements continue? Despite the fact that my noble friend mentioned this matter, it is unclear to me at least.
I think I have probably spoken long enough for now. It would be unfair to subject the Minister to any more questions on what is, after all, a Second Reading debate. However, I wish to congratulate the Minister and the Government on Clause 23 which concerns Northern Ireland, as the Minister mentioned in her opening speech. Northern Ireland has always been determined as far as humanly possible to have its own statute book. As far as I can see, that position is maintained by the clause. I finish as I began by giving this Bill half a cheer.
5.45 p.m.
Baroness Hollis of Heigham: My Lords, I am sorry that the noble Lord finished with half a cheer as I was about to thank the House for the three-quarter cheers from the other speakers in the debate. I thought that was extremely begrudging of the noble Lord, Lord Skelmersdale. I can think only that it has something to do with the supplemental section on Northern Ireland not being in Part I but only in Part III. But perhaps I am being unreasonable.
I am delighted that apart from the noble Lord, Lord Skelmersdale, the Bill has been so broadly and warmly welcomed. I am grateful in particular for the response to the Explanatory Notes and to the briefing meetings which I am sorry the noble Lord, Lord Skelmersdale, could not attend as so many of the points he raised today could perhaps have been usefully raised at those meetings. However, as I said, we shall offer another meeting before Committee stage of which I hope the noble Lord will be able to take advantage as I accept that these are difficult and technical issues. It often helps to understand the conceptual thinking behind the measure. The officials may be able to help us all with that, including myself. I look forward to seeing the noble Lord, Lord Skelmersdale, at the meeting.
The discussion has ranged from the contribution principle to the millennium bug. I shall do my best to answer the major points, but your Lordships will understand that as about 30 or 40 points were raised in the course of this short debate, some of them are perhaps better addressed in correspondence.
First, I shall deal with some of the points raised by the noble Lord, Lord Higgins. The first point he made was, I believe, also mentioned by the noble Lord, Lord Skelmersdale, and the noble Baroness, Lady Anelay. I refer to the ratio of the high cost to low savings in this Bill. The noble Lord said that his colleague Sir George Young rejected such a Bill on a previous occasion. That was because Sir George Young was, I think, motivated by what was efficient in the name of government. That clearly was the ratio of costs to savings.

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However, that is not why we proposed this Bill. We accept that, at least to start with, there are primarily more costs than savings—to answer the point made by the noble Baroness, Lady Anelay—because much of the expenditure is investment in staff training which, as she rightly identified, is crucial to the activity. Therefore we may spend £16 million or £17 million for the first couple of years and then subsequent savings may be of the order of £3 million or £4 million. There is a high front end loaded cost in staff training. We think that is right.
The purpose of the Bill, as I have tried to make clear, is to ensure that we produce an integrated service for employers and employees. I do not know why Sir George Young rejected the measure other than on cost grounds. I think we all accept that national insurance is different from taxation. Clearly national insurance is not graduated, whereas taxation is. National insurance is concerned only with earnings whereas taxation is concerned with income. There are no reliefs in national insurance whereas there are reliefs in taxation. One pays at the lower earnings level with regard to national insurance, whereas one pays annually and cumulatively with regard to taxation. I think we accept that those are different structures. We are not at this stage in this Bill proposing integration of those structures.
But nonetheless it remains the case that 94 per cent. of CA money is collected by the Inland Revenue. The situation will become more efficient and easier for employers and employees and the self-employed if we tackle this matter in the way that we propose. It is the quality of service that we seek to drive forward in this Bill rather than immediate savings. Had Sir George Young perhaps had a wider remit at the appropriate time, he too might have decided that it was worth proceeding with this measure. The warmth of welcome that the Bill has received today suggests that perhaps only five years on Sir George Young might have changed his mind.
The second substantive point raised by the noble Lord, Lord Higgins, which also occupied the attention of the noble Lord, Lord Goodhart, regarded the more general debate and is a proper Second Reading debate issue. It related to the contributory principle and NICs, and whether NICs were effectively becoming a tax. There seemed to be a suggestion that the role of the contributory principle was being eaten into by means testing. The idea was that under the contributory principle, there was less and less of a relationship between what was paid into the system and what people got out of it, and therefore effectively this was a hypothecated tax and we should, as it were, say that the emperor is wearing no clothes. I believe that was the argument, if I may bring together the position of both noble Lords.
That is not a fair description. It is true that there has been some growth in means testing at the expense of the contributory principle. Probably the biggest single incursion into means testing was conducted by the previous government when they reduced the contributory basis of unemployment benefit from two years to six months and sent a whole host of people,
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including young single people, onto means-tested benefit. That was one of the biggest incursions into the contributory principle, and with the least justification.
What we are doing in the two areas that the noble Lord identified as regards widows' benefit is extending for the first time the contributory principle to widowers as well, which I should have thought the noble Lord would have recognised as an extension of the contributory principle, and by relating incapacity benefit more clearly to the contributory conditions. At present people can receive IB 20 years after paying in a contributory condition. Those people might have been unemployed for all the intervening time. By relating it more closely, we are defending the integrity of the contribution principle.
The second point I wish to make is that we accept, and always have, that there must be limitations on the contributory principle, simply because it privileges people who have the luxury, as it were, of a 35 or 40-hour a week job extending over 40 years. That means that women, part-time workers, those who are in and out of employment and those who have a disability tend to have a less adequate income under the contributory principle than would otherwise be the case and it must be supplemented regularly by a means-tested benefit.
Therefore there is no single answer as to the right nature of benefit support. The contributory principle is one answer, particularly for pensions; the means testing of benefit is another, also for particular groups who may be in and out of the labour market who have special needs, family needs and so on which cannot be covered by a contributory benefit; but there are also category benefits such as child benefit.
A main reason why contributory benefits have fallen as a proportion of social security expenditure has been partly the growth of means-tested benefits, but means-tested benefits of a particular sort. Since the late 1960s and early 1970s the three major benefits that we have seen growing, all of which are necessarily income-related, have been housing benefit, in-work benefits, and the "citizen's right" benefits of disabled people. The first two are by definition income-related and the third is a category benefit. That is one of the main reasons that the amount of expenditure in the social security system, which is contribution-linked, has fallen. It is not just about the increase in means-tested benefits, although that has also been true. It is that different types of benefit have grown up for which either an income test or alternatively a category test is relevant. I do not believe that anyone in this House thinks that that is an inappropriate way forward. It is clearly not right to have a benefit such as housing benefit on a contributory basis which takes no account of housing cost and housing need.
I therefore hope that noble Lords do not continue to insist that the Government are getting rid of a contributory principle and that as a result we might just as well accept that national insurance is a hypothecated tax. The picture of social security is much wider and more complicated than that. We should accept that different contingencies are rightly entitled to different responses. Some benefits that are attached to the labour

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market should be on a contributory basis; others associated with special needs may be category or income-related. What is important is that we match the right benefit with the right sort of situation. Those are some of the discussions and debates that we shall have over the next year or two.
The third issue raised by the noble Lord, Lord Higgins, related to the lower earnings limit and entitlement. It will be a matter for the Chancellor to determine when we bring forward our proposals. There are many approaches that he could take. He could do it by crediting people in; by deeming that they have paid a contribution; or by modelling it on home responsibility payments. The undertaking has been given that people who move from the 65 to the 81–83 personal tax level will not thereby lose their entitlement to benefit. These discussions are ongoing and the Chancellor will make his determination in due course.
The noble Lord, Lord Higgins, and the noble Baroness, Lady Anelay, were worried about the weight being borne by the IT system in this change, and in particular the question of the millennium bug. Like the noble Baroness, I am an anorak or a windcheater nerd when it comes to IT systems. We are transferring the existing CA business, and with it the existing IT system, over to the Inland Revenue. I am told that the only main change will be the heading on the stationery—it will no longer read "CA" or "DSS", but "IR". In other words, the systems go over as they currently stand. Therefore there will be a very limited impact on the IT systems. I agree with the noble Baroness that if we were to see a repetition of the NIRS experience, it would be extremely worrying. I am assured that NIRS is not relevant to this consideration. As I said, there will be a limited impact; we have well-developed programmes within IR and the amount of IT change that is required is trivial because the system will be taken over as a package in its existing form.
The noble Lord, Lord Higgins, and the noble Baroness, Lady Anelay, raised an interlocking set of questions about penalties, privacy and visiting powers. It is certainly—
Lord Higgins: My Lords, I am mystified by the expression, "visiting powers", which can probably be more correctly described as "carrying out a raid".
Baroness Hollis of Heigham: My Lords, that was obviously a joke by the noble Lord and I receive it in that way. There is no indication of knocking down doors at 4 a.m. I should like to accuse him of seeing too many "cops and robbers" films on TV, but that would be to impugn the work and attention that he gives to this House. No, any such arrangements will be made at a reasonable time and in co-operation with those involved. Certainly the financial penalties could increase. But they will change from being criminal to civil penalties.
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The private staff about whom the noble Lord was worried will be under the same duties of confidentiality as the Civil Service. This is a path well-trodden by the previous government when they originally constructed the EDS contract, and already well-trodden by local authorities, which have arrangements with private companies to handle quite sensitive information on issues such as housing benefit.
As regards privacy of information, we are not creating any new cross-departmental flow of information, merely protecting the right of the current flow of information.
As for the visiting powers, I am told that they go back 50 years, to 1946. It is estimated that there are some half a dozen or so such cases a year, under a warrant. I understand that visits are always arranged to take place at a reasonable time and in a civilised manner. If the noble Lord has any evidence to the contrary, we should like to know. As I understand matters, there is no substantive change in any of those fields.
The noble Lord, Lord Goodhart, gave his support and pressed us particularly on national insurance as a proper scheme. I have tried to answer those points more generally. The noble Lord and the noble Baroness, Lady Anelay, raised questions about appeals and the noble Baroness referred particularly to appeals on pension matters. She asked why they should go before the unified appeals tribunal rather than to the tax appeal commissioners, and how many there might be.
Appeals on pension matters are expected to involve relatively complex, specialised issues which we do not believe are appropriate to send to the general commissioners as a lay tribunal, but which are equally not appropriate to send to the special commissioners, who, while legally qualified, do not necessarily have any pensions expertise. By contrast, the unified appeals tribunals can be constituted, and pensions appeals are intended to be constituted, to include a member with personal experience in pensions. I hope that that provides the explanation sought by the noble Baroness.
The noble Lord, Lord Skelmersdale, raised a number of detailed points. He referred to the delays. He asked why there were no notes on clauses. The explanatory notes replaced those and that was regarded as a welcome improvement. With regard to the financial schedule, which was also referred to by the noble Lord, Lord Higgins, as I understand it, the change came from the Modernisation Committee, possibly from another place, and has already been applied to other Bills. I am receiving a nod from the Table, so I believe my information is correct. However, if noble Lords are concerned about this matter, I am more than willing to consider it to ensure that, if necessary, we have belt-and-braces information. It is a legitimate and reasonable concern to raise.
The questions of the noble Lord, Lord Skelmersdale, were detailed and I should prefer to answer them in writing; and, if he is not happy with that, to raise them at the pre-Committee meeting with officials that we seek to have.
I hope I have addressed the major points raised with regard to policy issues in the Bill. I thank noble Lords for welcoming the Bill. I hope that the next meeting

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with officials to tease out what are inevitably technical issues—but which, I accept, have a real impact on how people live and organise their working lives—will be helpful.
On Question, Bill read a second time and committed to a Committee of the Whole House.

Central America: Hurricane
6.1 p.m.
Viscount Montgomery of Alamein Viscount Montgomery of Alamein rose to ask Her Majesty's Government what progress has been made towards alleviating the devastation caused by the recent hurricane in Central America.
The noble Viscount said: My Lords, it is a great pleasure to welcome the noble Baroness, Lady Amos, who is, I believe, to answer a debate for the first time from the Front Bench as a Minister at the Department for International Development. As this is an Unstarred Question, perhaps I may thank all those who are to speak in the debate on this important subject. We have considered it before, in a small amount of detail, but it is good that we have the opportunity to look at it again at this crucial time.
As your Lordships know, in the 25 years following 1965 this small group of countries suffered a great deal from internal and external conflicts. But over the past 10 years we have seen the restoration of democracy and, as a result, peace has returned to the region, which is so important for the reconstruction of their economies. When all seemed to be going well, they were suddenly struck by this catastrophic natural disaster. It is difficult for us to envisage the degree of the catastrophe. When we last discussed this subject, we heard from the noble Baroness some detail of what had happened. Millions of people were left homeless; thousands of kilometres of road were destroyed; and hundreds of bridges collapsed. The infrastructure of the whole area, particularly of Nicaragua and Honduras, has effectively been destroyed, E1 Salvador and Guatemala having suffered to a lesser extent. Honduras, in particular, has suffered intense devastation.
When the noble Baroness previously spoke on this subject she indicated that Her Majesty's Government had made a rapid response. It is particularly opportune to mention the contribution made by the Royal Navy, which was most effective and clearly much appreciated by all concerned. But, however generous the response of Her Majesty's Government was at the time, clearly it was not enough and probably never could be enough. The situation is one of major devastation from which it may take many years to recover.
It is interesting to hear what has happened subsequently. The Department for International Development has sent a mission to the area and we look forward to hearing about what they find out and what more can be done.
In the short time at my disposal, I should like to refer to two issues. All four countries, particularly Honduras and Nicaragua, depend on agriculture, and specifically
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on certain crops. Agriculture is what creates their export trade. Seventy per cent. of the export earnings of Honduras and Nicaragua is generated from bananas, coffee and sugar. These crops have been completely wiped out.
Bananas from Latin America are currently penalised under EU regulations, which are in total contravention of the regulations and rules laid out by the newly formed World Trade Organisation. I know that there are reasons for this. The European countries wish to protect their former colonial, and subsequently dependent, territories. If we are to reconstruct the economies of these four countries, some initiative will have to be taken to relieve the situation and to create a level playing field so that they can recover their export earnings. Unless there are export earnings, there is no economic activity. These are not countries which will be able to generate vast industrial enterprises. This is an important matter and I believe that Her Majesty's Government should reconsider with regard to the WTO and the position on bananas.
Looking further ahead, another area of concern is the question of debt relief. As I said, if there are no exports, there are no earnings and there is no economic activity. There is at present a moratorium on the debt. While that is in place, it is vital that the international agencies—the World Bank, the Inter-American Development Bank, the IMF and other institutions—should consider some form of exoneration of the debt and a complete reconstruction. It needs to be done on an international level. Unless that happens, these countries can never recover their position and participate in the world to which they were beginning to become accustomed by virtue of their return to democracy and their wish to participate in the economy of the region. There seems to be an opportunity now for Her Majesty's Government to take a lead within the EU in pressing Washington and the international organisations to take positive action on this matter.
We may not be able to consider these two issues fully tonight but I hope that the noble Baroness will be able to say something about them and that we shall be able to return to them at a later stage. Recovery of the area will take a long time.
I had the good fortune many years ago to live in Central America and I know all the countries concerned. They are occupied by hard-working, dynamic people who respond to initiatives. They are immensely friendly people and these are delightful countries. They deserve our support and assistance and I hope that we can give it to them in the way they have come to expect.
6.8 p.m.
Lord Ponsonby of Shulbrede: My Lords, I begin by thanking the noble Viscount, Lord Montgomery of Alamein. This is an important subject and it is right that the House should have the opportunity to debate the Government's response to Hurricane Mitch. I should correct the noble Viscount. The noble Baroness, Lady Amos, is rarely off her feet. She has taken this House by storm in the past few weeks, having responded to a number of debates.

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I wish to give a personal example relating to this matter. On the 13th November my family received an e-mail from a friend who married a Nicaraguan and who farms in Nicaragua. If your Lordships will allow me, I shall read from the e-mail:
"Thursday two weeks ago (it hardly seems like it), the river rose up to the bridge for the third time in two days, in the morning we noticed large cracks appearing in the soil between the reinforced wall of the gully and the house and at midday that whole section, downriver of the bridge, went. At around 1 o'clock, the first of the big trees also went, at which point it was obviously time to evacuate the children. When I got back several large trees had hit the bridge head on and so I decided to get the most valuable things out. I was still trying to get the computer unplugged when I felt the wave hit the house and presume that the tremor I felt was a combination of that and the bridge finally going down. Almost all the damage was done by that one wave. In one fell swoop it took everything loose from the house and from my drying shed outside the workshop. The water on the other side of the gully swept over our nursery and vegetable area taking everything with it, (where the vegetable banks were, we now have deposits of up to 2 feet of alluvial sand).
"We've lost more than 95% of our nursery plants, 100% of our vegetables and herbs and around one third of our total infrastructure—perhaps $8–10,000 worth in all"—
and that is in the context of people who earn only a couple of hundred dollars a year.
"But all that is recoverable—the irreparable damage is what I find most difficult to come to terms with, it is the amount of land which has just been torn away and rendered useless. The geography has completely changed—you wouldn't believe it".
The writer lists the seeds and help that he hopes to receive from charities in England to replant his farm. It is worth making the point that this friend of my family was not in the worst hit area. There were no deaths. However, in certain areas there was even worse devastation than that described in this correspondence.
I echo the congratulations of the noble Viscount, Lord Montgomery of Alamein. The swiftness of the Government's response has been referred to by several of the NGOs to which I have spoken in the past day or so. There has been little or no history of bilateral aid between this country and the countries of Central America. I think that I am right in saying that aid programmes only started with the incoming Labour Government, so they ought to be congratulated in that respect.
I understand that the aid will mainly go through the UN agencies and the Pan-American health organisation. In the past the original idea was that the aid—it was about £6 million over a two-year programme—would go towards institution building. My first question to the Minister is this. Am I right in assuming that the £6 million or so will now all go into post-Hurricane Mitch reconstruction?
The Government gave a full Answer to a Written Question in the Official Report, Commons, on 3rd December. They assessed the disaster and the DfID's own humanitarian assistance and forward strategy. However, I have three further questions arising from the points made by the Government. I think we would all accept that the region needs long term commitment, not simply to bring it back to its previous parlous state but to try to build something better in order directly to help poor people. To do that, help is needed
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for the civil society and not just the working government of the day. While there will never be enough money, will the Minister be ruthless in ensuring that good policies and practices are properly targeted at government and civil society level and at the NGOs? Hard choices need to be made, because there will never be enough money for all the work that is required.
My second point, which relates to cancellation of debt, was also raised by the noble Viscount, Lord Montgomery of Alamein. The Government are to be congratulated on their initiative on a debt moratorium. Can the Minister tell me whether debt relief will be on the agenda of the EU summit in June, when I believe that it is to talk about Latin American issues?
My third point is on transparency. I hesitate to use that word since it tends to be over-used these days. This point was put to me by some of my friends and colleagues in the NGOs. With funds coming from multilateral agencies, frustration is felt by the NGOs and the people receiving the aid that the decision-making processes are not understood. The Government could have considerable influence in opening up that process.
In conclusion, I echo the words of the noble Viscount, Lord Montgomery. Hurricane Mitch has caused devastation which few of us can imagine in countries which were already among the poorest in the world. I wish to join with the noble Viscount in his generous congratulations on the Government's response.
6.15 p.m.
Baroness Hooper: My Lords, as a result of Hurricane Mitch, thousands have died, hundreds of thousands are homeless and have lost everything they owned; crops have been ruined; industry destroyed; communications interrupted; and entire communities laid waste. The example cited by the noble Lord, Lord Ponsonby, brings the matter home to us all.
However, apart from the damage to property and infrastructure in the countries concerned, threats of famine and disease now hang over the whole region. Cholera, typhoid and malaria are endemic to Central America. Moreover, with the breakdown of sanitation and public health, there is a real prospect of starvation and major epidemics. That is very much an ongoing issue.
The depths and extent of the tragedy have been acknowledged in this short debate. I believe that the media have played an important and responsible role. They have given fair coverage to the event. Of the television programmes I have managed to watch, the balance and real effort to raise awareness in terms of general news coverage and specific programmes have been exemplary. But we must move on. The important factor now is to ensure that the ongoing consequences—they will affect the whole region but in particular Honduras, Nicaragua and E1 Salvador—are remembered and that we do not forget those who are suffering, as international events inevitably move on. I am certain that my noble friend Lord Montgomery will ensure that that is so so far as concerns this House and the Government. I know that the Minister and her department intend to keep a close watching brief.

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Some further acknowledgement of efforts are in order. There has been a huge response from the Government, as has been said. I underline the comments already made and thank the Government for their swift response, with emergency aid and support given almost instantaneously. I support also the comments made about ensuring that the Government continue to act to relieve the national debt in the countries concerned. That is essential for their long term future.
As regards the European Union effort, I should like to see the Government taking a firm lead in the action taking place in Central America, in particular in relation to the relief of the national debt. I should also be interested to hear the results of the report of the special United Kingdom mission which went to the region.
As has already been done, I acknowledge the efforts of the non-governmental organisations, including those of some of the small organisations. I am very familiar—as is my noble friend—with the bilateral organisations such as the Central American Society, which is co-ordinating efforts with the Central American British Chamber of Commerce, as well as with the more structured approach of Oxfam, the Red Cross, CAFOD and many others. Their involvement is absolutely essential because of their networks and abilities—subject to all the infrastructure problems that have been mentioned—to get aid to where it is most needed. We all acknowledge the enormous and important role that those organisations have played.
There is another group, which perhaps is not often recognised; that is, the private sector. Its response should also be acknowledged. I did some research via the corporate members of Canning House and the Hispanic and Luso Brazilian Council, of which I am currently the president. The pharmaceutical companies, such as Zeneca, Glaxo Wellcome and SmithKline Beecham, made an immediate response. I shall not go into all the detail and the statistics. There were instant shipments of medicines, vaccines and medical teams to the area. That has been very much welcomed. It is important to acknowledge that effort in the hope that it will be on going.
Finally, I make a very special plea. I was in Honduras at the end of January of this year at the inauguration of the new president. In the course of my few days there I visited a centre called Zamorano. It is a unique centre for agricultural research and training, which covers the whole of Latin America. There are students from that area. It has a very wide international remit with students from all over the world, including from this country.
I communicated with the director of the centre to find out how it had survived the tragedy. He reported that the damage was not as bad as it might have been, but indicated that, nevertheless, in the near future the life-threatening immediate danger will give way to serious, longer-term problems relating to the extensive destruction of food crops that were maturing; the death of hundreds of thousands of farm animals; and the literal washing away of thousands of businesses and jobs involved in the agriculture and agri-business area. As they begin to rebuild their lives, the farmers and businesses will lack the basic inputs which they need to
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be productive again. Therefore, agriculture more than ever is the key to the development and even survival of these societies. Without productivity in rural areas, these countries will be unable to feed themselves when foreign aid organisations move on to the next emergency, as may well happen.
In that context Zamorano is particularly well-prepared in terms of its human resources, experience and infrastructure, to lead significant, sustained and effective actions aimed at restoring rural economies and productivity. So in making this special plea, I hope that the Government—if they are providing aid in relation to agricultural issues and towards the long-term training of agricultural workers—will consider this centre, which is world renowned, and that it will be a recipient of government activity. I look forward to hearing from the noble Baroness as to the progress being made.
6.24 p.m.
Lord Rea: My Lords, practically all the questions that I had thought of have now been asked by the noble Baroness and noble Lords who have already spoken. My reason for speaking in this Unstarred Question is because I have visited Central America and the Caribbean three times, including Nicaragua and Guatemala on one occasion. Therefore, I have an interest in the area quite apart from a general interest in the humanitarian effort that has been put in after the disaster.
I was in Cuba at the end of September at the eastern end of the island in a small town called Baracoa, when hurricane George arrived. We were right in the eye of the hurricane. It was a very mild disturbance by the time it reached Cuba. It ranked number two in a scale of five and it was nothing like as fierce as hurricane Mitch, having spent most of its force on the Dominican Republic and Haiti. It was still quite an experience.
What struck me almost more than the strong wind was the torrential rain, which fell for most of the day at one inch an hour. I gather that that was the main cause of the devastation in Central America; namely, the torrential rain rather than the wind. I was very impressed by the precautions taken. All the hotel windows were criss-crossed with sellotape and so were the windows of public buildings, schools, clinics and hospitals. Villagers living right on the coast moved inland for a day or two while the hurricane blew over. Town dwellers were not allowed to travel. A day or two after the hurricane trees were quickly cut up and removed from roads. Work on re-erecting electric pylons and telephone cables that had fallen was quickly under way, with the aid of the army in some cases. I understand that in Belize anticipatory action was also quite effective in minimising the worst effects of hurricane Mitch. I am sure that the noble Viscount, Lord Waverley, with his connections in Belize, will be telling us about it.
While reconstruction and rehabilitation is now beginning in Nicaragua and Honduras, it would be very good to know whether the next hurricane is being borne in mind. Are bridges going to be built more strongly so they can withstand being hit by tree trunks? Are proper surveys to be done to try to ensure that land for housing

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will not be washed away? That may be impossible because there may not be any land available which is safe for poor people. It will be interesting to know whether there is any information on this subject.
Like the noble Baroness, Lady Hooper, I ask my noble friend to give a progress report as to how far and well reconstruction is taking place. It is early days yet. Is there any hope that the opportunity can be used—as my noble friend Lord Ponsonby asked—to improve on the infrastructure that was there previously? All the countries affected were desperately poor before the hurricane struck. Can the relief funds that are available be used in such a way that not only farmers—and this is the point made by the noble Baroness, Lady Hooper—be given grants and loans to buy seed, tools etc. that they need to begin production again, but can roads, co-operative marketing centres and processing plants be developed or redeveloped on a scale which will help the areas concerned to climb out of poverty?
Obviously, all this will have to be done in conjunction with the governments concerned. As my noble friend said, I hope that local civil society and local communities will be very much involved. Here both local and international NGOs will be able to play an enormous part.
In conclusion, I wish to ask my noble friend for up-to-date figures. Can she give the total amount of our outright aid; low interest rate or interest free loans; the amount of debt which has already been cancelled, both official and commercial; and the amount of the moratoria on debt which have already been agreed? Our contribution needs to be stated in relation to the total provided by the whole world. If it is not possible for her to produce those figures tonight, it would be helpful if she could write to me.
We have read that there have been some outbreaks of cholera. How is the emergency public health rescue operation being carried out? There must have been a great deal of damage to the already poor health infrastructure which existed. Can my noble friend describe how the disaster has affected the health of the people and what has been done to sustain and improve the situation? Yesterday, the Paris Club discussed cancellation of debt, but there is still a long way to go. I am sure that my noble friend will comment on that, so I shall hand over to other noble Lords and then to her.
6.32 p.m.
Viscount Waverley: My Lords, following all the congratulatory messages tonight, I fear that I might be inviting some criticism. However, I shall continue with a view to being realistic and constructive for the future.
Of course, I endorse the broad spirit of all that has been said tonight. But as the question of aid with ensuing issues has been well covered, I wish to go down a different road and ask whether the Government's reaction to this disaster was the right one; what lessons can be learnt; and what must we do to prepare ourselves for the future?
However, perhaps I may make one quick point before doing so. I believe that this House, through the Minister, should show its dissatisfaction with the United States
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for attempting to hijack WTO discussions with the European Union. The United States is attempting to resolve the EU banana regime in advance of settlement procedures.
It is this type of hurricane disaster, which brings us together tonight, that requires sensitive understanding of the dire effects on the majority of banana smallholders in the Caribbean. Bananas are currently the only crop which can produce new fruit for export in reasonably short order. We must keep our markets open at preferential terms for hardship cases. I hope the Minister can give us an undertaking that the Government will not weaken in their resolve to protect those who all too often cannot fend for themselves.
This country's approach to Hurricane Mitch, with regret, was not totally satisfactory. I realise that the Government will wish to defend their position, but the reality is that the DFID's reaction to the disaster was wanting: Whitehall's bureaucratic maze was a severe hindrance; and with no government department wishing to take an immediate lead, the Treasury effectively said that no immediate funding would be forthcoming.
I say that all in the spirit of needing to get it right next time. It was a mercy that we had a training mission at that time in the region and so were able to assist Honduras and Nicaragua with ships, helicopters and soldiers. I believe that without their presence nobody would have been sent. But they were and must be congratulated on being able to implement defence diplomacy at its best.
Lord Ponsonby of Shulbrede: My Lords, I thank the noble Viscount for giving way. He seems to be accusing the Government of being somewhat tardy in their response. It might be appropriate to refer to CAFOD, one of the NGOs to which I spoke recently. It stated that after the first telephone call it received a donation of £95,000 to its work in the region. That was an immediate response. Not only did the Government have their own facilities in the region, but they were quick to fund other NGOs which also had facilities there.
Viscount Waverley: My Lords, this afternoon I attended a round table discussion where the message was somewhat different. At a later time I shall be delighted to discuss the issues with the noble Lord, but we must press on. I believe that there is a concern. We want the best for the future and therefore I shall continue. NGOs have a problem, but I can discuss the issue with the noble Lord at a later time. I thank him for his intervention.
I believe that without the presence of the training mission in the region nobody would have been sent from the military. But they were and they must be congratulated on being able to implement defence diplomacy at its best. The difficulties start arising when one realises that, although our ambassadors were requesting assistance via the Foreign and Commonwealth Office, the DFID, which is the leading Ministry for disaster relief, declined, for example, to request MoD assistance on the grounds that it might have to pay. The MoD, to its eternal credit, decided to take hold of the situation. But because its ships and men

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were not equipped for relief operations, save for the West Indies guard ship, and because no Whitehall department would authorise any expenditure, our servicemen were limited in what help they could provide. An immediate dispatch of essential and specialist stores and personnel might have made a significant difference to the relief operation.
I note that the deployment of the guard ship is to be reduced as a result of the reduction of warships under the recent Strategic Defence Review and so future support for disaster relief in the Caribbean will be less. Will the Minister confirm that?
Finally on this theme, although credit must be given to our regional ambassadors and defence attachés, is the Foreign and Commonwealth Office, through necessity, considering closing posts in both Honduras and Nicaragua? If so, will the Government reconsider that position?
On a different tack, I understand that today Central American Presidents will meet with international donors to discuss a massive injection of aid, with the Presidents also looking for trade benefits and immigration support from the United States. Will the governments contribute to that? If so, will the Minister comment on it? UN agencies estimate that it will cost 5.3 billion dollars just to repair the damage to infrastructure and housing in the region. I also understand that Nicaragua will be seeking fast-track approval to open US markets for its products. Ministers here might wish to keep a watch on that situation, as the United States may be about to contradict its Lomé concerns. On the question of debt, are European governments offering to suspend bilateral debt service payments to help Honduras and Nicaragua?
Briefly, what of the future? I believe that dramatic action is called for. I call on the Government to set up an inquiry to consider the implementation of an effective rapid response mechanism, and to consider such matters as whether disaster relief should be taken out of the hands of the DFID and given to the Foreign and Commonwealth Office, for which I believe there could be a strong case. Central America and, by extension, the Caribbean are susceptible to an annual catalogue of disasters and it is essential that we prepare ourselves for such calamities.
6.39 p.m.
Lord Redesdale: My Lords, I thank the noble Viscount for initiating this timely debate. It is timely as this week the international community will hold two meetings of vital importance to the future of Central America. The Paris Club of creditor nations held their regular monthly meeting in Paris a couple of days ago. On the agenda was an item to discuss debt relief for Central America. Also, the leaders of Nicaragua, Honduras, Guatemala and E1 Salvador will meet in Washington DC with international donors today and tomorrow at an emergency consultative group, hosted by the Inter-American Development Bank.
I have two questions for the Minister. What progress does the noble Baroness expect to come out of those meetings and what will be Britain's contribution? I want to focus on those points because I believe that many
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questions, as the noble Lord, Lord Ponsonby, has said, have been answered in a fabulous Written Answer in Commons Hansard for 3rd December. I fervently wish that that will be the level of answer for all Written Questions in the future.
Prior to Hurricane Mitch, the countries of Central America were already among the poorest nations in the western hemisphere. In 1997, 2.6 million Hondurans and 2.1 million Nicaraguans lived below the poverty line. That represents 50 per cent. and 47 per cent. of the countries' respective populations. In Guatemala, 53 per cent. of the population live on less than 1 dollar per day.
Flooding, high winds and mud slides in Nicaragua, Honduras, E1 Salvador and Guatemala have resulted in an estimated 25,000 dead and missing and over 2 million homeless.
Surveys by Oxfam International staff in the districts of Choluteca and Valle in Honduras reveal a dire situation. Displaced families are living in rudimentary shelters; food shortages prevail; and town and village water systems have been destroyed. Not only have people lost loved ones and homes, but many have lost their only sources of livelihood as well. An estimated 80 per cent, of the region's agricultural production has been lost, including food crops as well as valuable export commodities.
Modesta Ordanne, an Oxfam project partner in Choluteca, said,
"We have lost everything, the school, hospital, police station. The wells are filled with contaminated water and we need a pump to access the clean water that there is. Everything is dead, there's nothing green, it is like the vegetation has been burned".
Outbreaks of cholera, and other water-borne diseases resulting from contamination of food and water, have been reported in all four countries, and the death toll, as may be expected, may exceed the death toll caused by the hurricane itself.
If the reconstruction programme is to be equitable and sustainable, it must make rural development a priority. Reconstruction must not stop at the cities. In Nicaragua, for example, three-quarters of the poor live in rural areas. For those who have been displaced by the storm. the goal must not simply be a return to unsafe, crowded and marginal land, only for them to be swept away by the next storm. For the many farmers at risk of losing their land as a result of loan defaults, debt forgiveness by local banks will be necessary. Efforts are needed to protect those small landowning farmers from displacement and to open access to land and credit to those surviving on unsupportable lands. Environmental degradation, closely related to the poverty of the people—a major contributing factor in the devastation—must be reversed.
Clearly, achieving sustainable development, beyond merely restoring those countries to the pre-Mitch status quo, will take far more resources than any of the countries can provide themselves. The Government of Honduras have made preliminary estimates that recovery efforts may cost more than 2 billion dollars and take more than 20 years to complete. just to reach the development levels in existence prior to Hurricane Mitch.

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The long-term problems of these countries are, I believe, closely associated with their debt levels. Rather than focusing on the immediate problems of aid, which was so necessary after the hurricane, I would like to focus on the issues of debt.
Even before Hurricane Mitch, Honduras and Nicaragua were struggling under the weight of immense debt burdens. Their positions will be far worse now. At the end of April 1998, Nicaragua had a debt of over 6.1 billion dollars, with the highest per capita debt in the world, at 1300 dollars per person. Debt service payments of 254 million dollars in 1997 took over half of government revenue.
Debt service payments in Nicaragua were two-and-a-half times current expenditure in health and education combined, yet over half the population was living below the poverty line and two-fifths of poor children were malnourished. Half of those people are unable even to meet their daily food needs.
A similar situation could be found in Honduras. Honduras had a debt of 4.1 billion dollars at the end of 1997. Debt servicing of 410 million dollars represents a third of government revenue. At the same time, 40 per cent. of children below five years of age are malnourished.
Guatemala and El Salvador, whose debts are not as high as Nicaragua or Honduras when compared to exports, also are under the strain of debt payments. According to the World Bank, El Salvador paid approximately 314 million dollars to service its debt in 1996. Thus, debt relief for those countries would also be an important component of the recovery package.
Both Nicaragua and Honduras are among the 41 countries classified as heavily indebted poor countries (HIPC). The HIPC initiative is a World Bank/IMF framework, covering all categories of debt owed by poor country borrowers. It is intended to reduce debt to sustainable levels.
The HIPC framework was inadequate for Nicaragua and Honduras even before the hurricane. Under the best assumptions, neither Nicaragua nor Honduras would have received multilateral relief through HIPC until some time past the millennium. Nicaragua is not due to receive debt relief until the end of 2002 and Honduras is not set to receive assistance until at least 2004, if it qualifies at all.
One reason for delay is that countries have to comply with up to six years of IMF adjustment programmes before becoming eligible for HIPC relief. Nicaragua will have completed half of those programmes by the end of 1999. Honduras has yet to sign a new agreement with the IMF, which would allow it to enter the framework at all. Such programmes are unlikely to survive the economic shock of this catastrophe, and would need to be adapted to include human development concerns. Prior to Mitch, the IMF argued that Honduras might not be eligible for debt relief because its export revenues were high enough to cover debt service. That point was disputed by the Honduran Government, although it is clearly irrelevant now.
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Rather than read out too many more statistics—I believe they have been covered—I would ask the Minister to give a brief oversight of how the meetings have progressed and to press the Government to make sure, in their membership of the IMF/World Bank and in their representations to the Inter-American Development Bank, that they push as hard as possible in the area of debt relief.
The levels of devastation from hurricane Mitch could consign these countries to years of poverty and misery, with massive reversals in human development. An unprecedented disaster deserves unprecedented support, not just in the months ahead, but in the years ahead. The emergency consultative group and the Paris Club meetings present the international community with an opportunity to marshal the political will to deliver a package that matches the significant human needs.
I want to add just one point, which is quite frightening and should be borne in mind in relation to disaster relief. It came from the newspapers recently. Dr. Willoughby, an expert of the National Hurricane Centre in Miami, discussed what had made Hurricane Mitch so devastating. It was not the wind-speed factor, but the amount of rain that fell. That point was raised by the noble Lord, Lord Rea. The frightening factor is that he also predicts that those storms are not that unusual; indeed, the conditions that brought about Hurricane Mitch this year could prevail next year.
Before I sit down I should like to say that the work of the NGOs on the ground and the military personnel who were so quick to respond deserve the congratulations of this House.
Baroness Rawlings: My Lords, I too thank my noble friend Lord Montgomery, for initiating this debate today. It is most timely, with the Paris Club meeting having taken place yesterday and the Red Cross transition announcement also being made this week. It has been an interesting and constructive short debate on a subject which is vitally important as thousands of people's lives are still at risk. This evening I shall concentrate on only one of the countries that was devastated by Hurricane Mitch. Other noble Lords have already vividly covered the others.
The horror that struck Honduras with Hurricane Mitch is now nearly two months old. But it was not until 9th November that we eventually had a Statement from the Secretary of State. Britain's aid package was but the paltry sum of £750,000 to a country that is burdened with debt repayments of over £1 million a day. In 1996 it still had a debt of £3 billion, more even than its annual GDP. That is clearly unsustainable even in normal circumstances, which we are not discussing today.
I should like to cover just three points in the short time we have available today: first, humanitarian relief; secondly, the horrific statistics, many of which have been mentioned by my noble friend Lady Hooper; and, thirdly, debt relief, which was also mentioned by most noble Lords today. In relation to humanitarian relief the British Red Cross, in whose gallant activities I have worked for over 30 years, sent three emergency flights in November with water containers, purification tablets,

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cooksets, disinfectant, and backpack sprayers. That is but a start. So far the emergency aid has been remarkable considering the relatively small funds available.
The Red Cross has also had assessment teams in place in the area. They reported back to Geneva only this week. They have already been debriefed and we are about to receive details of what is now most urgently needed for energy relief and reconstruction. The directors will lay out the plans and budgetary needs. It is important that there is worldwide co-ordination with only one appeal document. The federation has a website on the Internet which we all hope will help the appeal.
I wish to ask the noble Baroness, Lady Amos, three questions. First, did the DfID team of assessors co-ordinate its activities with those of the Red Cross? Secondly, what allocation of the £3 million pledged by the Secretary of State during this transitional period for further humanitarian assistance has gone to the Red Cross? Thirdly, will there be additional funds?
The people of Honduras are so weary with disasters that they would set their lives on any chance to mend it or be rid of it. The Minister for the Interior said:
"The catastrophe set them back 40 years".
It was only 10 years ago in 1988 that Hurricane Gilbert swept throughout the area leaving devastation in its path. There were many promises in its wake but none materialised. It is a mountainous country, three-quarters covered by pine forest. Ambitious zoning and development plans were supposed to give the country order, conserving crucial green areas in its hilly country traversed by rivers and strictly limiting precarious hillside development. Sadly, the plan was never implemented. Today, both we and they have an Augean task—seemingly impossible—to get it right this time. Unfortunately, those rivers were destructive rather than constructive.
My second point concerns the horrific toll of over 6,000 deaths, over 8,000 missing and over 2 million homeless and destitute in a population of only 5.7 million people. The real problems we face today are the epidemics that have sprung up because many cities were under water and mud for so long. Most of the epidemics are being spread by contaminated water. The doctors say that health conditions will probably get worse before they get better. According to health officials 20,000 people have cholera, 31,000 have malaria and 208,000 have diarrhoea. Surely we can do more to help this modern hazard.
That leads me to my third point which concerns debt relief and which has been mentioned by nearly all of your Lordships today. This debate is timely because the Paris Club of western creditors met only yesterday, as the noble Lord, Lord Redesdale, said. It concluded by granting a three-year moratorium on bilateral debt repayments for Honduras and Nicaragua, but Honduras is to go through the Paris Club rescheduling of debt. That means it will have to comply with a structural adjustment programme and that will not be easy. The people of Honduras had no Balshazzar's feast before and were probably one of the poorest nations in the western hemisphere, as was mentioned by the noble
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Lord, Lord Rea. In 1997, 2.6 million Hondurans lived below the poverty line. The country had a trade deficit of 91 million dollars and a current deficit of 309 million dollars.
Despite the UK's support for the World Bank Trust Fund, whereby one creditor merely helps another, the UK still fails to agree to cancel our unilateral debt. It is a minimal amount but the cancellation would send a huge signal to G7 and G8 leaders and multilateral institutions. France cancelled its unilateral debt, which is far larger than ours at £42 million. It is taking the lead on this issue. Why do the UK Government still fail to lead in our response?
The leaders of Nicaragua, Honduras, Guatemala and El Salvador are attending an emergency meeting in Washington with international donors today and tomorrow to discuss debt. I am afraid that Hurricane Mitch was not foreseen and was far worse than anyone could have envisaged. As Shakespeare's Antony said:
"We cannot call her winds and waters sighs and tears: they are greater storms and tempests than almanacs can report".
I fully support my noble friend Lord Montgomery, and look forward to the reply of the noble Baroness. I trust that she will press our views to the Secretary of State.
7 p.m.
Baroness Amos: My Lords, first, I thank the noble Viscount, Lord Montgomery of Alamein, for his kind words of welcome. I should like to assure your Lordships that it is correct to say that this is the first debate to which I have responded on the subject of international development, although your Lordships have been keeping me on my toes and very busy with Questions and a Statement. I should like to join with other noble Lords in thanking the noble Viscount, Lord Montgomery of Alamein, for initiating this very important debate. His commitment to Central America is well known in this House. I should like also to thank other noble Lords for participating in what has been a high level and expert debate. I should also like to thank your Lordships for having recognised the efforts made by the Government. In the time available, I may not be able to answer all the questions that have been raised this evening, but if I fail to do so, I undertake to write to noble Lords and give the detailed answers which are required.
Hurricane Mitch has been devastating for the poor countries of Central America, particularly Honduras and Nicaragua, but also Guatemala and E1 Salvador. Many of your Lordships have referred to the scale of the devastation, and I shall not go into the details again. However, I am sure that your Lordships will agree that despite frequently hearing these figures, it is extremely difficult to grasp the impact in terms of personal tragedy and the effect on the people in those countries.
The long-term effect on their economies is being carefully assessed, but those fragile economies have been severely knocked back. Before this latest disaster, the United Kingdom had decided, following the publication of the development assistance White Paper a year ago, that we should increase our modest assistance

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programme to Central American countries because they are so poor. That point was raised by my noble friend Lord Ponsonby. Recent events underscore the vulnerability of those countries and their need for international assistance. We shall be re-focusing our own plans for the region to take account of their post-hurricane needs.
I take issue with the noble Viscount, Lord Waverley, in that the DfID response was immediate; it was focused; and it was effective. In my Statement to your Lordships in early November, I made it clear that DfID immediately contacted NGOs who were already working in the countries concerned to offer support. We made money available to the Red Cross regional appeal. We contributed to the Pan-American Health Organisation for basic health care needs; we gave money to CAFOD and to Christian Aid and to NGO care.
In addition, we greatly valued the eye-witness reporting from our very small HMG posts in the countries concerned. They also helped us to facilitate elements of the emergency response; for example, by giving advice and help to NGOs and others. However, I must say to the noble Viscount that it is my view that the FCO does not have the right kind of expertise, experience or resources to take on the job of co-ordinating United Kingdom emergency aid. I think that the DfID did an excellent job in relation to these issues.
Our first priority after the hurricane was to provide emergency aid to save lives and to offer some immediate relief. Four Royal Navy ships in the region made a magnificent contribution, both in delivering emergency supplies and in search and rescue operations. They saved many lives, and governments in the region have expressed appreciation of their efforts. The noble Baroness, Lady Hooper, referred to the importance of partnership, and the Government welcome the partnership approach to immediate relief and, in particular, the work between NGOs, the private sector and Government.
Once the immediate life-saving phase of the operation ended, we began to focus on reconstruction. The United Kingdom plans to operate within the framework of a "transitional appeal" launched and co-ordinated by the United Nations. We will provide, in addition to the £1 million already spent on emergency relief in the region, over £3 million in further humanitarian assistance over the next six months to enable people, especially those who have been left completely destitute, to survive and cope. I hope that my noble friends Lord Ponsonby and Lord Rea will be reassured about that.
We are also working on plans to respond to longer-term needs. We have already planned to spend £6 million on Central America over the next two years. We are now re-focusing this to take account of reconstruction needs, and we are also taking forward the proposals on debt relief which the Chancellor announced on the 7th and 10th of November. I will come back to that later in my response. The £3 Million which we have allocated for the next six months will
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be spent on repairing and rehabilitating roads and small bridges in Honduras and also on a public works programme to benefit poor families by creating short-term local employment.
In Nicaragua we plan to work through UNICEF to repair the water and sanitation infrastructure and to restore primary health and education services for some of the communities affected by the hurricane. My noble friend Lord Rea and the noble Baroness, Lady Rawlings, also referred to health. We shall be supporting a regional health programme in this transitional humanitarian phase. There has been 60 per cent. damage to the health sector. Good research is already in place and that has given us a great deal of information about the spread of diseases and so on.
Early detection and targeted control interventions have already proved their value in the region through aborting potential epidemics. Continuing support for this will remain essential in the coming months. The diseases outlined are all endemic to the region. We recognise that the best work is being done by agencies which are already established in the region and are working on the ground. They are able to mobilise existing structures and systems and to draw on their local knowledge and on the trust which they have built up in the countries concerned.
The noble Baroness, Lady Hooper, talked about the next phase, and indeed this was also referred to by several speakers. The United Kingdom's contribution to the next phase has been put together on the recommendations of an expert mission from the DfID, which visited Honduras and Nicaragua at the end of November. In his opening remarks the noble Viscount, Lord Montgomery of Alamein, welcomed the mission and asked for particular information on its outcome.
It has reported that during the next few months, survivors of the hurricane will remain vulnerable in several ways because the lack of safe water and the disruption of health services increase the risk of disease. Food security will be threatened if seeds and other materials are not provided in time for the current planting season. If primary schooling is not restored, there is a risk that children may drop out permanently from education. The best way of delivering our assistance is by working within an overall international framework in order to target local communities, which are often very effective in mobilising self-help and reconstruction programmes.
In Honduras, however, there is a particular problem as regards access to poor communities because of disrupted roads and communications. This is why we shall be focusing on the rehabilitation of rural roads and bridges as part of our package of assistance. A consultant based in the region has started work today in consultation with the Ministry of Works in assessing priorities for assistance.
The noble Lord, Lord Redesdale, talked in particular about the need to rebuild the economies of the region. As has already been mentioned, the international donor community is meeting today and tomorrow in Washington, under the chairmanship of the Inter-American Development Bank to consider the

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medium and longer-term reconstruction needs of the region. The United Kingdom will be pressing for the reconstruction effort to be as well-co-ordinated and coherent as possible. We shall also be pressing for assistance to be delivered in a variety of ways which reflect needs: some assistance, for example, is best delivered through NGOs and organisations of civil society. The multilateral institutions, particularly the World Bank and the Inter-American Bank, are also likely to have a key role to play in pulling together the elements of the international reconstruction effort. As I have already mentioned, the UK's own bilateral contribution to longer-term reconstruction will be some £6 million over the next two years.
I said earlier that there are a number of statistics which have been mentioned by noble Lords in relation to the devastation. Honduras has lost 80 per cent. of its banana crop. The noble Viscount, Lord Montgomery, asked in particular about bananas and the noble Viscount, Lord Waverley, was also robust in his approach to the issue. The economic effect of Honduras losing 80 per cent. of its banana crop is that, in terms of replanting and the medium and long-term recovery of the economy, we need to look in particular at the agricultural sector. Those issues are being considered by the governments of the region as part of discussions on the planned international assistance effort.
On bananas in particular, our experience with Caribbean banana producers—and, indeed, with other developing countries whose economies depend on single crops—indicates the need for countries like Honduras, in the context of planned replanting of its banana crop, to consider the need to restructure the industry and also the scope for diversification into other crops.
On a separate matter, we are supporting the European Commission in seeking to resolve through established WTO dispute settlement procedures the current dispute between the European Union and the United States on EU support for ACP banana producers. We are also in the process of renegotiating the Lomé Convention in the context of a new round of WTO negotiations. Indeed, the two things are coming together.
The noble Baroness, Lady Hooper, mentioned the expertise of the agricultural centre which she recently visited. We shall, of course, bear that in mind when looking at the reconstruction effort.
We are also discussing with the European Community how its own assistance to the region may most effectively be spent. It has already made available about 15 million ecu through its Humanitarian Office for immediate relief needs. The Commission is now considering the establishment of a regional reconstruction fund, for which a preliminary figure of 150 million to 200 million ecus (over several years) has been suggested. We shall be keeping in close touch with the European Commission about the delivery of this assistance. We shall also be pressing the EC to ensure that its own regional reconstruction fund is consistent with the wider international reconstruction effort. The EC is taking part in the Washington meeting today.
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I believe that all noble Lords who participated in the debate mentioned debt relief. Debt relief will also be an important element in the economic reconstruction of these countries. It is quite clear that neither Honduras nor Nicaragua will be in a position to service their external debts for some time; a point made by the noble Baroness, Lady Rawlings. Funds are needed urgently for reconstruction. So we have been working with like-minded creditors in the Paris Club to ensure that there is support for the cancellation of bilateral debt repayments. Yesterday, as has already been mentioned, the Paris Club met and agreed to defer bilateral debt service payments for the next two to three years, with no late interest charges.
However, most of these countries' debts are owed to international financial institutions such as the Inter-American Development Bank, the Central American Bank for Economic Integration, the World Bank and the IMF. These funds could not simply be written off without causing enormous damage to the institutions themselves; and, of course, jeopardising the likely future needs of Central American Governments to borrow from the development banks.
Therefore, we have proposed two courses of action. I have to point out to noble Lords that we are taking the lead in these discussions. First, we propose that the international financial institutions look at ways of meeting some of the costs themselves; for example, by financing existing loans on more concessional terms. Secondly, we propose the establishment of a multilateral trust fund to help service those debts. The UK proposed that such a trust fund be set up shortly after the hurricane, and the World Bank board has now approved the establishment of such a fund. The UK is contributing £10 million and I am pleased to tell noble Lords that total pledges already stand at over 100 million dollars. When the German presidency of the European Union begins in January, I can confirm that Germany will be putting together its own debt initiative for the G8 summit in Cologne next year.
I hope that noble Lords will bear with me while I say a few words in conclusion. The UK has also proposed to the international financial institutions that the timetable for relief under the heavily indebted poor countries (HIPC) debt initiative be shortened to help countries affected by the hurricane. The HIPC initiative aims to reduce the external debt of heavily indebted poor countries to a sustainable level. I shall not go into the detail of how that impacts upon Nicaragua and Honduras, bearing in mind the time factor.
However, I should remind noble Lords that 1998 has been a particularly bad year in terms of there being a large number of natural disasters, which some experts link to climate change. We believe that there is a stark lesson about being better prepared for disasters which emerge from events such as those which took place in Central America. Therefore, it would be critical to include in the international recovery programme for Central America specific elements to improve the ability of these vulnerable countries to withstand future

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disasters. We have worked hard to strengthen the capacity of the international system to respond in a co-ordinated way to emergencies of this kind. We shall be pursuing those aims in the context of a UN-led
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"lessons-learnt exercise" early next year. What we are seeking to establish is the basis of sustainable long-term recovery.
House adjourned at eighteen minutes past seven o'clock.