Lords Sitting of 19 April 1999

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Ely.

The Lord Chancellor: Leave of Absence
The Lord Chancellor (Lord Irvine of Lairg): My Lords, before business begins, I take the opportunity to inform the House that I am to represent the Government at the European Ambassadors' lunch on Thursday 22nd April, when the House will sit. Accordingly, I trust that the House will grant me leave of absence.

Overseas Travel: Advice from FCO
Lord Hurd of Westwell Lord Hurd of Westwell asked Her Majesty's Government:
Whether they have yet completed the review announced on 11th January by the Foreign Secretary of the system by which his department gives advice on safety to British citizens living or travelling abroad.
The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, the review of Foreign and Commonwealth Office travel advice should be completed by the end of June. Travel advice is under constant review and the FCO aims at all times to provide accurate and timely information to enable British nationals to make informed decisions. But we also look to travellers and to the travel industry to take responsibility for their personal safety when overseas.
Lord Hurd of Westwell: My Lords, I thank the noble Baroness for her Answer on a subject which is not the most important but one of the trickiest with which she and her colleagues in the Foreign Office have to deal. Is there not a strong distinction between the tourist and the British resident who works, perhaps is married, has settled down and put down roots in a foreign country and who may he just as competent as the Foreign Office to assess whether they should stay or leave?
As for the tourists, is there not some danger of drifting, under pressure from the travel companies, into a position where the Foreign Office—not the travel companies nor the individuals—takes responsibility which does not belong to it for the decisions of individuals? Can the noble Baroness make a little more clear the distinction which emerged somewhat opaquely from her Answer between the giving of facts and information and the giving of advice to individuals whose circumstances vary greatly?
Baroness Symons of Vernham Dean: Yes, my Lords, I can agree with much of what the noble Lord
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said. Foreign Office advice is exactly that: it is advice. It is not intended to indemnify either tour operators or individuals against eventualities of their travel. Individuals and tour operators must take responsibility for their personal safety. But the advice is intended to allow travellers to make informed decisions. There is no such thing as risk-free travel in any part of the world, as sadly we have seen.
I also appreciate the distinction that the noble Lord makes about tourists on the one hand and residents on the other. Many residents in foreign countries will generally be more familiar with local circumstances. But on occasions they will still look to the Foreign Office for the political advice which may inform decisions that they need to take about their own safety.
Lord Moynihan: My Lords, what lessons does the Minister believe have been learnt so far by the Foreign Office as a result of the tragic kidnappings and murders of British tourists and workers in Chechnya, the Yemen and Uganda? In what way have those lessons been incorporated into the Foreign Office system of travel advice?
Baroness Symons of Vernham Dean: My Lords, in considering the travel advice in relation to the tragic events to which the noble Lord referred, I personally looked at it searchingly. At the time one could not have known the circumstances which would have led individuals to take different decisions from those that they took. It is all very well being wise after events, but we must act on the basis of what is known at the time. We review all travel advice every month as a matter of routine and some travel advice in particularly difficult parts of the world is reviewed more often than that.
We do not have all the answers, otherwise we would not be having the current review. I welcome any suggestions which any noble Lords wish to make to the Foreign Office. They should be sent to the office for the purposes of that review. We have already had a very useful seminar with members of the travel industry and they have put forward a number of suggestions which we shall now review and take into account.
Lord Swinfen: My Lords, does the Foreign Office give its advice to travel firms without being asked, or does it rely on the travel firms to seek that advice from the Foreign and Commonwealth Office? When it gives advice to the travel firms does it recommend that that advice be passed on to customers?
Baroness Symons of Vernham Dean: My Lords, travel notices are distributed throughout the travel industry as a matter of course, via electronic information systems. The Federation of Tour Operators, the Association of British Travel Agents and the Association of Independent Tour Operators then forward the advice to their respective members. In that way, more than 90 per cent of the travel industry are able to access the information. So it goes out, as a matter of course, but on occasions, particularly when trouble is apparent in different parts of the world, tour operators

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will want to telephone the Foreign Office to find out about certain parts of the world or particular regions of a country where they have fears or worries.
It was suggested that the Foreign Office should have a dedicated line just for tour operators rather than for the general public. That was one suggestion which came out of the seminar to which I referred. We hope to introduce such a dedicated line for tour operators by the end of this week.
Lord Taylor of Blackburn: My Lords, is the Minister aware that many of us who travel abroad but who do not go through travel agencies are grateful to the Foreign Office for the intelligence that it gives us? In the light of that information we then make up our own minds.
Baroness Symons of Vernham Dean: My Lords, I am very grateful to my noble friend for making that point. A good number of people who want to access Foreign Office travel advice do so as individuals and not through tour companies. It is worth remembering that a number of countries throughout the world seek to emulate the travel advice of the Foreign Office. Canada is one example. Very recently a number of French colleagues visited the Foreign Office to look at the way in which we give travel advice. They were favourably impressed and used it as a model for their own travel advice.

Passenger Train Services
2.43 p.m.
Lord Berkeley Lord Berkeley asked Her Majesty's Government:
Whether they intend to comply with Section 4 of the Railways Act 1993 in considering proposed new passenger train services from train operators; for example, from East Anglia to the south-west and north-west of London.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty): My Lords, decisions on approving access rights for new passenger services are a matter for the rail regulator. In deciding whether to approve rights the regulator will have regard to his duties under Section 4 of the Railways Act 1993, including the promotion of competition and the carriage of both passengers and freight by rail. In all cases other operators affected by a proposal will be consulted.
Lord Berkeley: My Lords, in thanking my noble friend for his helpful reply, I declare an interest as adviser to Adtranz. Is the Minister aware of proposals by GB Railways to run passenger services between Chelmsford and Basingstoke to create a kind of east-west Thameslink? Will my noble friend put
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pressure on the regulator and Railtrack, who I believe have the duty to provide capacity, to ensure that these services start as soon as possible?
Lord Whitty: My Lords, this is primarily a matter for the rail regulator. I understand he has indicated his belief, based on the evidence presented to him so far, that the proposed Ipswich to Basingstoke service would provide a range of new services and satisfy local and national transport needs. He has encouraged Anglia together with Railtrack to develop this service and other aspects of Anglia's proposals to a stage where they are capable of detailed examination. At the same time, he has urged full consultation with other affected operators.
Lord Cadman: My Lords, does the Minister agree that the Government's procrastination with regard to the introduction of north of London Eurostar services to the regions is a contravention of this section of the Act?
Lord Whitty: My Lords, I do not agree. The term "procrastination" should not be applied to a proper assessment of the facts. The Government have sought a further consultancy as to the viability of those potential regional Eurostar services north of London.
Lord Stoddart of Swindon: My Lords, does my noble friend agree that the major reason for privatisation of railway services was that British Rail was inefficient and that privatisation would provide a much better, cheaper and more reliable service? I understand that latest reports show that the services provided by the private organisations are worse than they were under British Rail. Is not the corollary of that the bringing back of railway services into full public ownership?
Lord Whitty: My Lords, the reasons for what I have previously described in this House as a rushed and botched privatisation by the previous administration are not really matters for me. Certainly they claimed that privatisation would lead to greater efficiency. It is quite clear that while there is variable performance among rail operators efficiency as a whole has not significantly improved. My noble friend is probably referring specifically to the report which appeared in the media in the past few days related to Railtrack's performance in terms of the delay to trains and its policies on maintenance and renewal. That is primarily a matter for the regulator. But we have asked the regulator to look at the way in which Railtrack receives public subsidy. Once the regulator has reported we shall decide on the way ahead to deliver the rail system that passengers and operators deserve. Clearly we would prefer not to be starting from here. Nevertheless, we are determined to make this system work. The establishment of a strategic rail authority as foreseen by my right honourable friend the Deputy Prime Minister will lead to a more strategic approach to the railway system even under private ownership.
Lord Brabazon of Tara: My Lords, does the Minister agree that whatever one may say about privatisation—it has its defenders and critics—the

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number of rail passenger users has risen, almost for the first time since privatisation, and fares have risen by statute by no more than the rate of inflation, whereas in the days of British Rail they went up remorselessly by more than inflation every year?
Lord Whitty: My Lords, I am interested to hear that privatisation has its supporters, although they are not very vocal at the moment, in commenting generally on the system. There has been some improvement in services. The aim of the Government's strategic approach to railways is to bring the whole of the railway network up to and beyond the performance of the best. That is why we need a strategic approach, which is so sadly lacking, even if one accepts privatisation as a principle for running a railway.
Lord Cledwyn of Penrhos: My Lords, will my noble friend take steps to improve the rail services from North to South Wales; otherwise, there will be nobody in the new Assembly?
Lord Whitty: My Lords, I believe that greater attention to the Welsh transport infrastructure as a result of the creation of the Assembly will benefit railway transport as well as the transport system in Wales in general.
Baroness Thomas of Walliswood: My Lords, to return to the original Question, does the noble Lord agree that the development of cross-country services is a very good step in reducing the amount of unnecessary travel by car? Can the Minister say whether the advent of a strategic rail authority will enable the regulatory functions in relation to Railtrack's role in the development of the rail system to be performed more enthusiastically? If so, when can we expect the strategic rail authority to begin to carry out those functions?
Lord Whitty: My Lords, I believe that the establishment of the strategic rail authority, even in its pre-legislative form, will increase the pressure on all operators within the industry to perform and will give greater strength to the regulator.
Putting the strategic rail authority on a statutory basis will depend to some extent on progress on other legislation. The Bill to do so will be produced by the department shortly and will indicate the direction in which our policy is going.
Cross-country services will not only benefit the rail network but they will also reduce pressures on the roads. That is also a serious strategic objective of our policy.
Lord Islwyn: My Lords, following the supplementary question from the official spokesman from the Opposition, is it possible for the Minister to give noble Lords some details of the subsidies that go to rail at present?
Lord Whitty: My Lords, I shall write to the noble Lord in overall detail, adding up all forms of subsidy. Subsidies go to Railtrack via the rail operators, to freight rail and to particular services. It may be of benefit to
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my noble friend and the spokesperson for the Opposition if we spell out the degree to which the public finances still effectively support the railway system in this country.
Lord Mackay of Ardbrecknish: My Lords, I invite the Minister to answer the question posed by his noble friend Lord Stoddart of Swindon; namely, if the railways are now that bad, and were that good when they were nationalised, why do not the Government re-nationalise them?
Lord Whitty: My Lords, we inherited the state of the railways.
Noble Lords: Oh!
Lord Whitty: My Lords, the railway franchises were given out for a period of seven or 14 years. It is the intention of this Government to make those franchises work if possible. If it is not possible to do so under the current franchising system, clearly other solutions have to be sought. However, our immediate intent is to make those franchises work to the benefit of passengers.

Meat Hygiene Service
2.52 p.m.
The Countess of Mar The Countess of Mar asked Her Majesty's Government:
Whether, given that functions under meat hygiene legislation are primarily those of law enforcement, such enforcement in the United Kingdom should be assigned to untrained officials from other European Union countries.
The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Lord Donoughue): My Lords, enforcement of meat hygiene legislation in licensed fresh meat premises in Great Britain is carried out by the Meat Hygiene Service, an executive agency of the Ministry of Agriculture, Fisheries and Food. All officers of the Meat Hygiene Service are fully trained to standards required by European Union directives which are enshrined in United Kingdom law.
The Countess of Mar: My Lords, does the Minister agree that the essential difference between an ordinary veterinary surgeon and an officer of the Official Veterinary Service is that he or she has law enforcement powers? On that basis, does he find it acceptable that young female Spanish vets with a poor understanding of our language, who have little understanding of British law and British law enforcement methods, should be placed in a position where they are enforcing the law for a group of British citizens after only one week's training? Would he find it comparatively acceptable if 300 young Spanish people were dressed in Metropolitan Police uniforms, given one week's training and put out on the streets to enforce the law in this country?
Lord Donoughue: My Lords, all vets working for the Meat Hygiene Service have training in enforcement and other matters. The hierarchy of enforcement is set out in the manual of their training.

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I should point out that no junior vet, as described, would be able to pursue the law against an abattoir owner. Senior veterinary officers are involved at an early stage, and no reference to the law can be made other than by the director of operations in the Meat Hygiene Service and then the legal side of the service will consider it. It is not the case that a junior and inexperienced vet will bring down the full force of the law on a British meat operator.
Lord Pearson of Rannoch: My Lords, is it not true that the latest diktat from Brussels means that we shall require another 400 of these OVSs, that costs will have to rise by a further 128 per cent, and that many more small firms will therefore go out of business? Given the plenteous supply of foreign OVSs, can the Minister tell the House what other EU countries are doing about meat hygiene?
Lord Donoughue: My Lords, from our investigations other countries are pursuing meat hygiene under the European Union directive broadly in the way that we are.
The costs are increased because of the need for increased supervision and inspection. That is following infraction procedures taken against us because the previous administration under-implemented the rules. We are suffering because of that. Costs are higher in this country. One reason is that the costs of British vets are significantly higher than the costs of vets trained in other European countries—sometimes 300 per cent higher.
Lord Bruce of Donington: My Lords, can the Minister inform the House as to the nature and reference number of the European legislation which amended ordinary British law prior to its coming into existence in this matter? If it is dependent upon European legislation, will the noble Lord inform the House of the exact nature of that, preferably by referring to the number by which it can become identified?
Lord Donoughue: My Lords, I have learned not to tangle with my noble friend on details of European legislation. However, I shall arrange for the noble Lord to be written to. I hope that there will be an appropriate number in it to satisfy him.
Lord Beaumont of Whitley: My Lords, is it true that no deaths have been traced through negligence in red meat abattoirs in this country over the past 30 years? If that is so—and I believe that it is—what is the purpose of this bureaucracy?
Lord Donoughue: My Lords, the purpose of inspection and supervision of our abattoirs and other meat plants is to protect the public health in every way.
Lord Mackay of Ardbrecknish: My Lords, on the costs of the meat hygiene inspectors, is the noble Lord aware that in many rural parts of this country abattoirs will cease to exist? On a recent visit to Stornoway it
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was brought home to me that the abattoir there could easily cease to exist and the crofters return to the old-fashioned method of slaughtering at home. Does the Minister think that this will be an improvement in meat hygiene?
Lord Donoughue: My Lords, I entirely agree with the noble Lord that small abattoirs have an important function, especially in the more remote parts of the United Kingdom. That is why we are looking at whatever ways we can to protect and preserve them. However, as I am sure he is aware, this is against a background in which there is an oversupply of abattoirs and in which profit margins are extremely tight. We cannot wholly prevent the workings of the free market.
Lord Mackie of Benshie: My Lords, can the Minister tell us who or which body he thinks should pay for this increased enforcement? Does the noble Lord think that the beef farmers are so rich that they can pay for it; or does he think that the distributors and the retailers are better able to do so?
Lord Donoughue: My Lords, under European Union law we are required to recover from the industry the full costs of the supervision. We are in the process of doing that.
Lord Stoddart of Swindon: My Lords, is my noble friend aware that the closing of small abattoirs up and down the country is not only bad for them and their owners but for the animals, which will have to travel greater distances to slaughter? Will my noble friend give that matter a good deal of consideration, because if he does not many animal lovers in the country will not be happy with his performance?
Lord Donoughue: My Lords, I agree with my noble friend that as regards animal welfare it is helpful if there is an abattoir, small or otherwise, in close access. Small abattoirs often perform a service for the small producer who needs access to a nearby abattoir which will take only a few animals. I wholly agree that small abattoirs perform a very importance service.
Baroness Byford: My Lords, the Minister said that other countries will establish broadly the same service. Is there an indication that the EU will apply the same standards to Portugal, which has only five inspectors to cover its 200 abattoirs?
Lord Donoughue: My Lords, that matter has given us considerable concern. The department has made inquiries into practices on the Continent of Europe and the Meat Livestock Commission is in the process of doing so. The bulk of the information does not meet the anecdotal belief that on the Continent they do not apply these rules. I do not have information with me on Portugal, but if we have it I shall write to the noble Baroness.

Prohibition of Female Circumcision Act: Prosecutions
3.2 p.m
Baroness Rendell of Babergh Baroness Rendell of Babergh asked Her Majesty's Government:
Whether there have been any prosecutions under the Prohibition of Female Circumcision Act 1985, and whether they plan to introduce a programme of educating Somali immigrant parents to persuade them to stop this practice.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Hayman): My Lords, there have been no prosecutions to date under the Prohibition of Female Circumcision Act 1985. The difficulties in obtaining enough evidence to support a conviction are considerable. The Government fund a range of educational projects in Britain, where strong links have been formed with Forward, the leading voluntary organisation in the field, and abroad working alongside and within these communities. We believe that that is the best way to ensure that this most harmful practice is stamped out.
Baroness Rendell of Babergh: My Lords, I thank my noble friend the Minister for that most helpful reply. Does she agree that a policy of encouraging young Somali graduates to become social workers and health professionals might be a wise course as people more readily accept advice from members of their own ethnic group?
Baroness Hayman: My Lords, my noble friend is right. We need to have educational and social services which reflect the communities they serve. They would be effective in this area if we gained the trust of those communities and worked within them. For that reason, we have funded a range of projects to help professionals both from those communities and those who work within them to develop sensitive educational materials to take forward the work. We have also funded a project specifically to investigate the dynamics of the continuation of female genital mutilation among young Somalis living in London.
Lord McColl of Dulwich: My Lords, is the Minister aware that a successful and popular programme of education in this field is PLA, participatory learning in action? How much support are the Government giving to that?
Baroness Hayman: My Lords, I am afraid that I was not aware of that programme, but I shall certainly look into it to see whether it can be applied. Undoubtedly, we need to use whatever avenues are effective because the problem is difficult to tackle.
Lord Kennet: My Lords, do the Government accept that there are two ways to eliminate or diminish this horrible practice? One is by education, as proposed in the Question; the other is by prosecution
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under the 1985 Act. Does the Minister remember that both Houses of Parliament were well aware of the existence of those two ways when the Act was passed and decided that the practice was so horrible that it ought to be made a criminal offence? Does she agree that when considering the mother in such cases. one's mind turns to education, but that when considering the child who is mutilated while the parents are being educated, one's mind may turn to prosecution as being the quicker answer?
Baroness Hayman: My Lords, I believe that where there is evidence that the practice takes place and where we could successfully prosecute, we ought to do so. It is right that we made the practice a criminal offence. However, there is no evidence that the police or the Crown Prosecution Service are holding back on such prosecutions. For reasons which my noble friend will understand, it is very difficult to obtain appropriate evidence. That is why the education effort is particularly worth while. When offences are committed, we should prosecute in order to protect children. However, we can take other measures through the Children Act in order to safeguard children who are at risk.
Lord Monkswell: My Lords, is there a requirement under the Act for medical doctors to report to the police when they have evidence that such mutilations have taken place?
Baroness Hayman: My Lords, as regards medical practitioners, the prosecution requirements for this criminal offence are the same as for other criminal offences.
Lord Walton of Detchant: My Lords, does the Minister accept that any doctor on the UK register found to have performed the operation would, under law, be referred to the General Medical Council with an issue of serious professional misconduct arising? However, there is no law in this country which prevents anyone, however unqualified, carrying out surgery. Under the law, people are not allowed to be called "registered medical practitioners" if they are not. Is it not right that those unqualified individuals, few in number, who are carrying out this operation. resulting in great mutilation, should be pursued as vigorously as possible?
Baroness Hayman: My Lords, I agree with the noble Lord, Lord Walton of Detchant. The General Medical Council has acted in an exemplary fashion in cases where there has been evidence of people willing to undertake the work. All professional groups in this country have done what they can to educate their own members about the importance of being on the lookout for the practice. Perhaps I may reiterate that where there is evidence, the possibility of prosecution will be looked at most seriously by the police and the Crown Prosecution Service.

Water Industry Bill
3.8 p.m.
Lord Whitty: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That it be an instruction to the Committee of the Whole House to whom the Bill has been committed that they consider the Bill in the following order:
Clause 1,
Schedule 1,
Clauses 2 to 12,
Schedule 2,
Clauses 13 to 15,
Schedules 3 and 4,
Clauses 16 and 17.—(Lord Whitty.)
On Question, Motion agreed to.

Pollution Prevention and Control Bill [H.L.]
Lord Whitty: My Lords, I beg to move that the House do now resolve itself into Committee (on Recommitment) on this Bill.
Moved, That the House do now resolve itself into Committee (on Recommitment).—(Lord Whitty.)
On Question, Motion agreed to.
House in Committee (on Recommitment) accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Lord Dixon-Smith Lord Dixon-Smith moved Amendment No. 1:
Before Clause 1, insert the following new clause

Pollution Prevention and Control Bill [H.L.]

  PURPOSE OF ACT
  (" . The purpose of this Act is to create a single Integrated Pollution Prevention and Control system which strengthens the system introduced under sections 1 to 28 of the Environmental Protection Act 1990 and includes the system of Integrated Pollution Prevention and Control in accordance with European Community Directive 96/61.")
  Lord Renton: Before my noble friend goes further, it is important for me to point out that the grouping of the amendments is not acceptable. The Government have grouped Amendments Nos. 1, 3, 4, 5, 12, 19 and 20. Amendments Nos. 1, 19 and 20 deal with separate important issues, whereas Amendments Nos. 3, 4, 5 and 12 are minor government amendments dealing in detail with the regulation-making power of the Secretary of State. Amendment No. 1 is an important new purpose clause and Amendment No. 19 prevents the Government repealing Part I of the Environmental Protection Act 1990, which consists of 28 clauses, by secondary legislation that cannot be amended by either House and virtually turns both Houses into rubber stamps.
  Amendment No. 20 amends the Long Title to reveal what the Bill is about, but we cannot do that until we have considered all the amendments. The Government are not entitled to require the Committee to accept the grouping. It is for your Lordships to say whether or not
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  the grouping should be accepted. In those circumstances, I suggest that the grouping is not reasonable.
  Lord Whitty: I understand the noble Lord's substantive point. I understood that the grouping had been agreed through the normal channels but, as always, the grouping remains informal and non-binding. The noble Lord has an agreement from the Government that we should recommit the Bill. We were open to a more flexible approach. If the noble Lord wishes to press for the removal of his amendments from the group, no doubt he can. All the amendments in the group seem to address the central issue raised in the Delegated Powers and Deregulation Committee and in the previous commitment stage, in terms of what is on the face of the Bill and in regulations. Therefore, it would seem logical to take all those amendments together. The noble Lord may not regard the government amendments as adequate. Nevertheless, they address the same subject and have the same origin as the other amendments in the group. At the end of the day, I am in the hands of the Committee.
  Lord Renton: With respect, the Minister has not got that right. The Delegated Powers and Deregulation Committee did not deal with the purpose clause. Neither did it deal with amendment of the Long Title. Those are quite separate and important matters.
  Lord Dixon-Smith: I wonder if I may say a word—as, in a sense, the responsibility is mine? I would normally have been asked to agree the groupings. Unfortunately, for whatever reason, nobody contacted me about them at the end of last week. I was not aware of the potential list until I arrived here this morning at about a quarter-past 12, which was too late for the groupings to be amended in any way. The noble Lord, Lord Carter, indicates his disagreement, but that is as I understood it. I accepted what I understood to be a de facto situation. We can surely deal with this matter quite easily by taking Amendments Nos. 19 and 20 off the list and speaking to them at the end of the Committee stage. Perhaps that will go a long way towards meeting my noble friend's problem.
  Lord Carter: In the usual way, the groupings list is circulated and there was plenty of time to dispute it this morning if the noble Lord wished to do so. As the grouping is voluntary, the easiest way to deal with the matter now is in the way that the Committee wishes. If it wants to degroup Amendment No. 19, it can. The amendment is in the name of the noble Lord, Lord Renton. He can speak to it in its place on the list of amendments, rather than in the first group.
  Lord Renton: I am grateful to the noble Lord. Amendment No. 19 raises an important separate issue—perhaps the most important that will be considered today.
  Lord Dixon-Smith: In speaking to Amendment No. 11 want to thank the Government for agreeing to

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  the recommital of the Bill. In a very busy parliamentary programme that is a generous concession. The more restricted rules of debate on Report would not have allowed proper examination of the government amendments. If those amendments are approved they will alter and improve the Bill a great deal and they also deserve our recognition as a necessary but nonetheless generous concession. Again, I express my gratitude to the Government.
  We have never objected to the purposes of the Bill. We are as anxious as the Government to see a proper Bill on the statute book. Our objection was to the form of the original draft. I hope that after our debate today the Bill will make more rapid progress. The original draft was nothing more than an open framework to make regulations, which generally receive less scrutiny than primary legislation.
  I asked in the Library how many Bills there have been that are similar in form to this one. The Library found only one that commences with the power to make regulations and it concerns employment tribunals—a rather more specific subject than the one we are debating. Moreover, that statute did not set out to replace a whole part of an Act of Parliament by orders, which is a subject to which we shall be returning. The Library found only two other Bills that contain order-making powers in their first section. Bills in the form of the original draft are rare.
  The Select Committee on delegated powers was very critical of the original draft in its third report for this Session—stating, inter alia, that it would not wish the drafting to be used as a precedent. The Select Committee has looked again at the Bill in light of the Government's proposed amendments, which greatly modify the Bill. Once again they say that the Bill should not be regarded as a precedent. The ninth report, dated 10th March, stated:
  "We therefore wish to reiterate the following general remarks which we made in our 3rd report. 'Even if the House accepts the bill with any such amendments as being justified for the reasons which the DETR give for proceeding by such wide ranging enabling legislation, the Committee would not wish this Bill to be regarded as a precedent for the future'".
  However, my interpretation of that conclusion this time is that it is the same as my own. The Bill, even though far from perfect when amended, must now make progress if the United Kingdom is to have appropriate legislation on the statute book in time to meet the time limit proposed by European Community Directive 96/61.
  That point returns me to the amendment. It is our view that there should be, on the face of the Bill, a purpose other than that of making regulations at the commencement, so that the Bill conforms more closely with the general way that legislation is normally drafted. The amendment does just that. The Government may argue that it is tautological. That may be so, but if the Government had tackled the Bill's drafting in a more thorough and conventional way from the start we would not be having this debate.
  The amendment changes the opening lines of the Bill so that its purpose is made clear in its commencement lines. As presently drafted, the Bill's purpose might
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  appear to be the making of regulations. Amendment No. 1 states that the Bill's purpose is to meet the requirements of the European directive on integrated pollution prevention and control. The power to regulate then follows. I beg to move.
  Lord Renton: I support my noble friend's amendment. Purpose clauses are always desirable and sometimes necessary. I suggest that in this case, it is necessary to have a purpose clause because, quite frankly, as my noble friend pointed out—and as is well known—this is a Bill which merely enables the Secretary of State, by subordinate legislation, to do things which are of national and international importance and which have so far been covered by the primary legislation of this country.
  For this Bill to go forward without revealing its; purposes is utterly wrong. With those deplorable factors in mind, perhaps I may elaborate a little on the way in which my noble friend and others who have worked with him have drafted this purpose clause.
  The Explanatory Notes, which are of great help and value in understanding the Bill but which are not pan: of the law, which the Government issued when the Bill was first published make the position quite clear in paragraphs 4 to 7. Paragraph 6 states:
  "The purpose of the Bill is to enable a single, coherent pollution control system to be set up",
  and it then sets out how that is to be done; namely, by regulation, which is most extraordinary. So that purpose has been expressed in the new clause.
  However, the Explanatory Notes also make it clear that the Government, quite rightly, intend to strengthen our existing system which is expressed in Part I of the 1990 Act, all 28 clauses of which are to be repealed. The Government have made clear also that they intend to implement the EC Directive on Integrated Pollution Prevention and Control which must be done by 30th October this year.
  Therefore, we have made clear in our purpose clause that that is a principal aim of the Bill. It is something which cannot be derived, even by careful reading, from the Bill itself. If the Government do not believe that the purpose clause goes far enough—I suppose they may think that—they can agree to this amendment now and extend the purpose clause, if they think necessary, on Report. I hope that my noble friend will receive full support from the Government in relation to this purpose clause.
  Lord Whitty: At this stage, it may he helpful if I indicate generally the Government's approach to this matter. It may be helpful also for me to spread my remarks rather wider than merely speaking to my amendments in the group because I believe that the Government have responded both to the feelings expressed originally in Committee and to the report of the Delegated Powers Committee. There have also been various informal discussions in the interim with which noble Lords will be familiar.
  Clearly there was a problem with the Bill. In all humility, the Government accepted that and we have done quite a bit to meet those problems. The noble Lord,

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  Lord Dixon-Smith, was generous in his remarks, but it took quite a lot of persuasion on his part to convince me that a recommitment stage would be sensible because, in many ways, we have changed the nature of the Bill in the amendments we have tabled. Therefore, it may be helpful to the Committee to know our overall approach.
  The Delegated Powers Committee gave its opinion on the Bill, which was fairly robust. It concluded that the powers which were being delegated were too wide; were not clearly enough defined; and were not subject to an appropriate level of parliamentary scrutiny. We debated those points with some vigour and we have considered them.
  The first of the Delegated Powers Committee's suggestions was:
  "whether the legislation should be limited to matters provided in Schedule 1".
  The government amendments which have now been tabled do just that. They limit the scope of the Bill to set up a permit regime to regulate environmental pollution from installations and plant and to establish standards and objectives or to make plans relating to emissions. In other words, the purposes of the Bill are now confined to those items which are spelt out in Schedule 1.
  The committee then asked whether there should be a clear indication of the ambit of powers which may be delegated and whether the categories of person to whom powers can be delegated should be specified. Amendment No. 10 in particular removes the general power to sub-delegate and allows it only for those functions necessary to maintain the flexibility of the regulator. I have also tabled a later amendment which meets the committee's recommendation that no regulation should be made without proper consultation Further, there is an amendment which meets all the Select Committee's recommendations about the use of the affirmative procedure. Therefore, we have restored substantially the area of parliamentary control about which the noble Lord, Lord Renton, and others were deeply concerned, as was the Delegated Powers Committee.
  We have gone further than the Select Committee's recommendations. Later today I shall move amendments to meet some of the other points raised in the debate in February. They will provide greater clarification of the definition of "environmental pollution"; modify the provision relating to the regulator's powers; and include a provision for the protection of commercially confidential information. That is a substantial move and one which has been acknowledged by the Select Committee.
  I asked the Delegated Powers Committee to comment on the proposed government amendments, should it so wish. It has done so. Its conclusion is:
  "We are, therefore, satisfied with the Government's response to our 3rd Report … Taken together, these amendments would circumscribe and provide criteria for what were previously excessively wide powers".
  Therefore, the amendments meet the points made by the Delegated Powers Committee and those raised previously in Committee.
  946
  That approval goes wider than the Select Committee. The noble Lord, Lord Dixon-Smith, referred to the CBI. In a letter dated 22nd March, the CBI expressed its approval of the way in which the Government are proposing to handle those issues. The CBI is keen to ensure that we maintain coherence. Its letter states:
  "Our preference is for a specific Bill to put the IPPC Directive into effect rather than implementation through the 1972 European Communities Act".
  That would have permitted much less parliamentary scrutiny of the regulations. The CBI went on to recognise the value of delegating regulations by saying:
  "We recognise that the Bill must allow for powers to change the law by regulations in certain areas to retain flexibility … We believe the amendments you have put down … create safeguards for business in providing for consultation and allowing for the scrutiny of Regulations in key areas by the affirmative resolution procedure".
  Government Amendments Nos. 3, 4 and 5 probably provide the most important safeguards. That has been recognised by the Delegated Powers Committee and those amendments are supported by the CBI and the Environment Agency. I have received a letter from the chairman, the noble Lord, Lord De Ramsey, who unfortunately cannot be with us today. Other noble Lords may have received a copy of that letter.
  Indeed, the amendments go much further than the recommendations of the Delegated Powers Committee. Therefore, I believe that the Government have met the anxieties which were expressed previously in Committee and by the Delegated Powers Committee. In doing so, I acknowledge that there have been drafting difficulties with the Bill. However, we have now addressed them and I hope that the Committee will accept that.
  In view of the fact that I have agreed to a recommitment stage, I hope that the Committee will not object if I take advantage of the flexibility provided by that to come back on the specific amendment tabled by the noble Lord, Lord Dixon-Smith, so that I may deal also with other points which noble Lords are anxious to raise. However, I ask Members of the Committee to understand the wide-ranging scope of the government amendments. I thought it helpful to explain the position at this stage.
  Lord Peyton of Yeovil: The Minister should be congratulated on his miracle of understatement when he said that there have been drafting difficulties in relation to the Bill. We can all go along with that without any difficulty.
  I wondered why the Minister rose to his feet so early in what is likely to be a brief discussion. I was impressed by what my noble friend on the Front Bench said about the need for a purpose clause and by what my noble friend Lord Renton said. In rising to his feet so early, I thought that the Minister wished to add to the welcome, friendly atmosphere which has prevailed so far by saying that, of course, he will accept the amendment. However, he did not. He plunged into the deeper waters of the later stages of the Bill. I should have thought that his immediate acceptance of this reasonable amendment would be a further gesture of good intentions.

  947
  I do not want to underrate the importance of my noble friend's amendment but, as I understand it, he is giving the Government free, gratis, for nothing and without any charge a decent quantity of face powder which the Government can use to cover their obvious embarrassment about the way in which they have handled the Bill up to now. I hope that nothing that the Minister has said so far indicates his intention to advise the House to reject the amendment.
  3.30 p.m.
  Lord Jenkin of Roding: As my name stands to this amendment, perhaps I may speak now. If at any stage I am inaudible or incoherent that will be because this morning I had a wisdom tooth extracted and I am still suffering the effects.
  Lord Renton: Your wisdom is still there!
  Lord Jenkin of Boding: I am not sure about that. My noble friend is very kind.
  I want to make one or two points arising out of the earlier discussion. First, this is the first Bill of which I have had experience where we have operated a new procedure; namely, the Marshalled List is produced not on the day of consideration, but on the previous Sitting day. That happened to be last Thursday. However, we did not receive the groupings until this morning when, as I have said, I was otherwise engaged.
  Although it is helpful to have the amendments relisted in the order in which they will be taken and doubly helpful to have numbers allocated to them—the primary purpose—we should like to have even a tentative list of groupings at the same time, particularly when a weekend intervenes. I attempted to get hold of a draft groupings list over the weekend and I was told by the Printed Paper Office that that would be impossible. However, we received one this morning.
  My second point is that the noble Lord, Lord Whitty, is right. He has moved a long way towards meeting the complaints of the Delegated Powers and Deregulation Committee and the points made in an earlier Committee stage from all parts of the House. I am grateful to see noble Lords who took part in those debates in their places. I hope that I am not out of order in saying that if anybody imagines that that would have happened in another place, in the present circumstances, they have a bigger imagination than I have. This is the House of Lords at its best. I refer both to the Delegated Powers and Deregulation Committee and to our earlier debates in Committee.
  I believe that my noble friend Lord Dixon-Smith, whom I support, made a strong case for wanting at the outset of the Bill a clear statement of its purpose. I share the disappointment of my noble friend Lord Peyton of Yeovil that so far the Government have not indicated any readiness to agree. Legislation has to be interpreted by the courts. One cannot imagine a more useful way of indicating to the courts the purpose of the Bill, so that when they interpret the clauses and the regulations under the clauses, they will have the purpose on the face of the Bill.
  948
  I understand that it is open to the courts to look at what was said in the course of the debates, particularly from the Government Front Bench. However, I would rather see that on the face of the Bill in the form of Amendment No. 1. If the amendment is not worded correctly, perhaps there may be another opportunity to correct that.
  I too have read the letter from the chairman of the Environment Agency, although I did not receive my copy until after five o'clock on Thursday when it was no longer possible to table fresh amendments. I am afraid that the agency did not understand the new procedure. I have replied to the chairman, stating that we shall have to return to his points at a later stage because it was too late to take account of what he had said, notwithstanding the fact that my noble friend's amendment had been tabled for some time.
  Perhaps that is not right, but, in the meantime, it embodies an enormously important principle that, when legislating for substantial delegated powers, in pursuance of a directive from the European Union, it is very important to have a clear purpose clause at the front of a Bill. I hope that, on reflection and having heard the debate, the Minister will feel able to accept that—if not now, perhaps at a later stage. I regard this amendment as extremely important and I hope that it will be pressed.
  Baroness Hamwee: On the new arrangements, as a member of the Procedure Committee which made recommendations to the House as to the publication of the Marshalled List and the publication of the groupings, I am sure that if noble Lords feel that the arrangements are not working well that committee, when and if it is appropriate, will look at them again. I am probably entirely out of place in saying that as a mere member of the committee, but I know that that has been the approach of both the working group appointed by the Leader of the House and the committee. I was very glad to receive the Marshalled List early.
  On the late delivery of the letter from the chairman of the Environment Agency, I simply say to the noble Lord, Lord Jenkin of Roding, that perhaps he was lucky to have received a letter about this afternoon' s proceedings at least before the proceedings took place. Frequently, I receive correspondence after a debate has taken place.
  Perhaps I can, not too obsequiously—I hope it will not be held against me on future occasions—congratulate the Minister on what he personally has achieved in ensuring that this afternoon we have before us amendments which do so much to rectify the position which we all acknowledge was unsatisfactory. One can only imagine what may have gone on behind the scenes. I suspect that the Minister had a substantial hand in what we have before us. I am sure that the House is very grateful to him for that.
  On Amendment No. 1, I have often been on the side of those who have proposed a purpose clause when that purpose clause has been at odds with the real purpose of the Bill. So often it is a device for debating, early in the proceedings, the policy to be incorporated in the Bill. This afternoon we are in a

  949
  different position. The Committee is generally agreed that the purposes of the Bill are good purposes and ones that we want to see enacted. There is, however, the possible technical problem that the clause refers to Sections 1 to 28 of the Environmental Protection Act 1990 which, subject to later amendments, would be repealed in any event, but I have no doubt that the Minister will deal with that.
  Perhaps the Minister could answer one question. I am a little ashamed to ask it, given, as I say, that I have taken part in other debates on purpose clauses. Technically, will a purpose clause restrict subsequent provisions of the Bill? In other words, will it be a guide to the enforcers of the system, or will it prevent orders which are outside the narrow confines of the purpose clause so that the purpose clause will override the later provisions dealing with the order-making powers or, at any rate, constrain their application?
  Lord Skelmersdale: As a newcomer to this Bill, but I hope a fairly objective one, I observed from listening to the debate over the past half-hour that we are in effect presented with two purpose clauses. One is that moved by my noble friend Lord Dixon-Smith and spoken to by my noble friends Lord Renton, Lord Jenkin of Roding and others and the other is the Government's Amendment No. 3 which seeks to make the Bill read:
  "The Secretary of State may by regulations make provision",
  for any of the purposes listed in Part I, Schedule 1. Although it is not spelt out in the same sort of detail as in my noble friend's amendment, it is in effect starting with a purpose reference. But—a very big "but"—we have to delve into Part I, Schedule 1, to find out what the purpose really is, whereas my noble friends made it crystal clear that, were their amendment to be accepted, it would stare us straight in the face the moment we opened the statute book.
  My only question to the Minister is this: are the words in the purpose clause, which all sides are agreed is necessary, accurate? If they are, it is a far better purpose clause than that of the Government.
  Lord Renton: Before my noble friend replies, perhaps I can add a few words to the debate.
  I hope the Government realise that we are trying to help them and to protect the sovereignty of both Houses of Parliament—at any rate that of another place. The Minister relies upon amendments that he tabled after our original Committee stage and claims that they declare the purpose of the Bill. They do not. All that they do is slightly elaborate the regulation-making power upon which the Government rely to give the Secretary of State the power to turn primary legislation into subordinate legislation, as to which Parliament can only say yes or no.
  The noble Lord relied upon the work of the Delegated Powers and Deregulation Committee, which has done great service to this House. But I feel bound to point out that on this occasion its conclusions are a trifle
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  inconsistent. They are stated in two paragraphs. In paragraph 8 of its last report the committee says:
  "It remains important that the purposes"—
  I stress the word "purposes"—
  "and ambit of legislation, together with any important governing criteria, should be clearly specified within the primary legislation and not simply left to the exercise of delegated powers".
  In the last paragraph, having said that it was not to be regarded as a precedent, the committee tried to help the Government in the clarification of the power to make subordinate legislation which they have so far put forward.
  The Delegated Powers Committee, splendid though it is—I know it and have great respect for it—is merely advisory to us; we are not bound by its conclusions. It is important that we should regard its paragraph 8 as of overriding importance compared with the compromise in paragraph 9.
  It is reassuring to hear the support from a number of my noble friends and from the noble Baroness. I hope that the Government will acknowledge our desire to help them by improving the Bill.
  3.45 p.m.
  Lord Simon of Glaisdale: Behind all the arguments crystallised in this amendment is a general consideration; that is, that there is no question but that delegated legislation is far more convenient to the Executive and particularly to the officials. It is an appalling bore for Parliament that your Lordships and the other place insist on going through a Bill line by line. In our House we repeat that three times and in the other place it is again twice. We can amend Bills freely. The great advantage to the Executive of subordinate legislation is that it cannot be amended. That is probably the sticking point.
  There have been repeated efforts to argue that Parliament—in particular your Lordships—may not reject secondary legislation. Happily, that was rejected. On 20th October 1994, your Lordships specifically asserted that our power to reject subordinate legislation was quite untrammelled by any convention. It is true that your Lordships will not be inclined to exercise that power frequently, but that power exists. One of the circumstances where it will be exercised is where a Bill is a skeleton Bill and it is only in the subordinate legislation that we get the enacting provisions. In those circumstances, your Lordships would be fully entitled to reject any of the regulations which you feel are inappropriate.
  We are singularly fortunate in having the Select Committee. From the outset it has been a strong committee. It was originally presided over by the late Lord Rippon of Hexham, and we now owe a great debt to the noble Lord, Lord Alexander of Weedon. I see the noble Lord, Lord Shepherd, in his place. He was an original member of that committee, and my noble friend Lord Ampthill, who is also doing duty here, has been a member throughout. We are very much in its debt.
  One other should be mentioned; that is, the legal adviser. We owe his appointment to the noble Viscount, Lord Cranborne, as Leader of the House. We were

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  singularly fortunate, as was the committee, in having a government lawyer of exceptional ability and experience able to take his place on that committee. Once again, it placed us in its debt.
  I echo what has been said; that is, that we owe a debt also to the Minister, who has gone quite a long way to meet the fully justified criticism, even though only implied, of the Select Committee. That should not go unrecognised.
  One comes to the purpose clause. As I understand it, a purpose clause is an aid to interpretation. The noble Baroness asked the Minister what was the effect of a purpose clause. He will correct me if I have it wrong, but in any case the Lord Advocate has recklessly put himself in the line of fire and is available to give an authoritative legal opinion. It undoubtedly has some subsidiary effect in limiting, particularly in the other place, the scope of amendments that might be made.
  I have no objection to this purpose clause as it seems to me to be useful;
  but there is another way of doing it in this Bill and in every Bill; that is, to use the Long Title. The great advantage is that otherwise the Long Title serves no purpose whatever. In this case it is a Bill to,
  "Make provision for a new system of pollution prevention and control; and for connected purposes".
  I hope that the noble Lord, Lord Dixon-Smith, will forgive me for saying that, even with his proposed addition, it really is very unilluminating. It is possible, however., to frame a Long Title so that it gives a guide to the purpose of a statute. The leading textbooks on the subject, Craies and Maxwell, give a number of examples where that has been done. It seems to me to be generally advantageous to declare the purpose of a statute in the Long Title, otherwise the Long Title is purely suprarogatory.
  We are still at a Committee stage. Perhaps I may suggest that the noble Lords, Lord Dixon-Smith, Lord Renton and Lord Jenkin, consider withdrawing their amendment and that the Minister will consider withdrawing his to see whether a common purpose may not more advantageously be declared by re-framing the Long Title.
  If the Long Title is left as it is, it is quite useless. No doubt it can be said that it provides employment for draftsmen, secretaries, typists, printers and bookbinders, but otherwise it serves no useful purpose at all. I hope that the suggestion might be considered of declaring a purpose in the Long Title. That bears on the question asked by the noble Baroness, because it is undoubtedly the law, whatever the answer is to her question, that the Long Title is merely an aid to interpretation and available only to resolve an ambiguity. I doubt very much whether a purpose clause does anything more, but I see that the Lord Advocate is in his place.
  Lord Shepherd: The truth is that over the years the Select Committee has progressively broadened its parameters. I doubt whether, when we first met under Lord Rippon, we would have dared to put the proposal which is in this report. We would have thought it well beyond our competence; but that is the nature of this House and the strength of our committees.
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  I cannot help but be reminded of our discussing the purpose clause many years ago. There has always been a wish for that, even though delegated legislation was infinitely less in those days than it is today. The Lord Chancellor of the day, Lord Gardiner, came forward with a proposal that there should be a preface to the Bill; in other words, there would be in the preface an indication as to the purpose of the legislation. If it were in the preface it would therefore not be subject to that part of the Bill, or Act when passed, of which the judges would take cognisance. My understanding is that the judges take a view not on what Parliament has intended but on what Parliament has in fact passed. Your Lordships found the proposal interesting but in the end rejected it. It was too revolutionary.
  If there is a wish to find a means of overcoming the matter of a purpose clause—I understand that there could be difficulties in limitations being placed not so much on this House but perhaps on another place if there were such clauses—one of the solutions might be to look at the proposals which were made by Lord Gardiner.
  Lord Whitty: The noble Lord, Lord Peyton, chided me for not replying directly to the noble Lord, Lord Dixon-Smith. That may have been appropriate at that point, but it is probably better that I reply to all the points that have been raised in this debate.
  I thank the noble and learned Lord, Lord Simon, and other noble Lords for their kind words regarding the Government's flexibility. I also recognise the role that the Delegated Powers Committee has played not only in this context but in others, which I believe will be appreciated particularly by this House and by this Committee. I appreciate the indication by the noble Lord, Lord Renton, that noble Lords are only trying to be helpful. But there is a degree to which helpfulness goes a little too far as far as the Government are concerned. The desire to accept not only the letter but also the spirit of the Delegated Powers Committee's comments seems to us to have been met, and more than met.
  The Delegated Powers Committee referred to the transfer from the face of the Bill to regulations. It noted it and did not comment or make a recommendation. Where it has made a recommendation, we are meeting all of the points and more.
  On the purpose of the Bill as such, the noble Lord, Lord Skelmersdale, is right that if we were to accept the noble Lord's amendment and my amendment we would in effect have two purpose clauses. I ask noble Lords to look at the effect of my amendment, which changes subsection (2) of Clause 1 to define the general purpose of the Bill as regulating activities which cause environmental pollution and controlling or preventing pollution emissions. Subsection (1) would restrict the purpose yet further to making regulations for the matters listed under Schedule 1, as I indicated.
  The result is that the Secretary of State cannot act outside the scope set out in Schedule 1. Anything he does within the scope of that schedule must be done for the general purpose set out in subsection (2). In other words, my amendments create a purpose clause. The

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  noble Lord, Lord Skelmersdale, may think it is not an adequate purpose clause; nevertheless, it is a clear purpose clause and the Government consider that it meets points which were made earlier, as indeed does the Delegated Powers Committee.
  The noble and learned Lord, Lord Simon, raises the alternative approach which relates to changing the Long Title. I am advised by the Lord Advocate—who is no longer in his seat—plus taking other expert advice, that once the Bill has been introduced the Long Title can only be amended once an amendment has been passed which alters the nature of the Bill and makes amendment of the Long Title appropriate—
  4 p.m.
  Lord Simon of Glaisdale: Can the Minister say where he gets the proposition that a Long Title can only be amended once?
  Lord Whitty: I believe that the noble and learned Lord misheard what I said. I did not say that it could only be amended once; I said that it can only be amended once—whatever form of speech that is—after the Bill itself has been amended so that an amendment to the Long Title became appropriate. It is therefore premature to consider amendment of the Long Title. That is my advice and Members of the Committee may wish to consider the matter later. However, at present we are dealing with the amendments now before us.
  It is not only the case that I naturally prefer my new purpose clause to that tabled by the noble Lord, Lord Dixon-Smith, it is also the fact that, were we to adopt the noble Lord's amendments, certain consequences would flow. The noble Baroness, Lady Hamwee, asked whether the purpose clause would restrict the subsequent clauses of the Bill. The answer is, yes, it would. The answer to the noble Lord, Lord Skelmersdale, is that if we had two purpose clauses clearly some ambiguity would arise if both were adopted. I give way to the noble Lord.
  Lord Skelmersdale: I am grateful to the Minister. I said that I saw these clauses as alternatives. Therefore, I could not possibly have pre-supposed, as he has twice suggested, that I saw both of them as being able to be written on the face of the Bill.
  Lord Whitty: I accept the noble Lord's clarification. However, perhaps I may address the substance of the amendment of the noble Lord, Lord Dixon-Smith. The Government's proposals and the Bill as it stands are not adequately described in the purpose clause he proposes. As the noble Lord, Lord Renton, knows only too well, we are not seeking to strengthen the pollution control regime established under the 1990 Act; we are seeking to replace and improve it with something based on the IPPC directive. In doing so, we are making a number of relatively minor changes, not all of which would be regarded as strengthening; in fact, a number of our changes are deregulatory. Therefore, in its current form, the noble Lord's amendment would not allow us to follow that course.
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  I refer again to the letter received by myself and some other noble Lords from the noble Lord, Lord De Ramsey, the Chairman of the Environment Agency. That letter refers to the amendment of the noble Lord, Lord Dixon-Smith. The noble Lord says:
  "I assume that their intention in moving this amendment is to provide a check on the extent of the Bill's powers … If this is to be done via a statement of purpose, then it is essential that it is defined correctly… We are concerned that the amendment as worded might create confusion between the powers that can be applied under Schedule 1 and the purpose of the Bill. Given that the separate amendments that you—
  that is to say, the Government—
  "have tabled would effectively limit the scope of the Regulation-making powers … I wonder whether the purpose clause is necessary or desirable".
  We are taking the opportunity to do more than simply implement the IPPC directive. We also intend to improve the offshore environmental regime, for example, by implementing coherently the requirements of the OSPAR agreement on the use and discharge of chemicals offshore and the recommendations of the noble and learned Lord, Lord Donaldson, on pollution incidents involving offshore installations. Those matters were not dealt with in the 1990 Act regime nor indeed in the IPPC directive, and so would not be permissible under the noble Lord's new clause as drafted. I am sure that that was not the noble Lord's intention but, nevertheless, that would be the effect.
  The question is whether those powers are better delimited in the manner proposed by the Government, which the Delegated Powers and Deregulation Committee has expressed to be satisfactory, or through the proposed new clause of the noble Lord. As it stands, I do not believe that the clause would be an improvement. While I might have accepted that a purpose clause was lacking in the original draft, I believe that the amendment I propose will meet the objection to the original Bill as drafted. I therefore ask the noble Lord to withdraw his amendment.
  While I am on my feet, perhaps I may respond to the noble Lord, Lord Jenkin, as regards the tabling of groupings. We are moving into a new procedure. Frankly, it would of course be most convenient for the Government if we were to have Marshalled Lists and groupings issued a lot earlier than is currently the case. Nevertheless, that is a matter for the authorities of the House rather than for me.
  Lord Dixon-Smith: Before the Minister sits down, will he perhaps consider, as I do, that the difference between us is probably not much more than the thickness of a cigarette paper—that is, if anyone knows what a cigarette paper is in this modern age. I always accepted that our amendment might not be sufficiently well drafted. However, the issue is whether or not the purposes of the Bill should be set out at the beginning or should in fact appear somewhat further on within it.
  My problem is purely psychological. Every time I read the Bill, the first words I come across are the following:
  "The Secretary of State may by regulations make provision".

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  I am sorry—indeed, I really am sorry—but I find myself wondering whether in fact it would be possible for the Minister to consider how he might shuffle the pack with the amendments he has proposed so that we get some of the words that he has put in his amendments placed at the beginning of the Bill before the first line that I have just quoted. If we could do that, I believe we would make most speedy progress.
  Lord Ampthill: Before the Minister responds, perhaps I may intervene briefly. I should like to begin by expressing my apologies to him because it was I who first suggested that the Bill should be recommitted on the Floor of the House. I deeply regret the inconvenience to which the noble Lord has been put. I have sympathy with what the noble Lord's amendment proposes, but I feel that what the Minister has in Clause 1 is perfectly capable of amendment at a later stage. Therefore, if the noble Lord, Lord Dixon-Smith, is dissatisfied with it as it is presently placed, there is no reason why he could not rectify that at the next stage of the Bill.
  Lord Whitty: I am grateful for the noble Lord's intervention. As I hope I have indicated, I do not believe that the wording of the noble Lord's new clause represents a difference between us which can be expressed as being merely the thickness of a cigarette paper. Indeed, my noble friend Lady Farrington, has explained to me what a cigarette paper is. I believe that the difference is slightly wider.
  Our clause, as amended, gives an adequate description of the Bill and refers to the Bill's purpose. At the appropriate point, I shall be pressing my amendments. Therefore, I ask the noble Lord not to pursue his amendment for the reasons that I have outlined. If amendments were to evolve at a later stage, I would be happy to consider a purpose clause which might meet my points. However, in the meantime, I ask the noble Lord to withdraw his amendment. As I said, I shall be pressing my amendments at a later stage
  Lord Dixon-Smith: I am sorry that the Minister feels that he cannot "shuffle the pack" at this stage in order to meet what I believe to be a highly desirable situation. Nevertheless, I understand that that might be technically difficult because one is re-drafting a re-draft of a re-draft, so to speak. Therefore, it is not exactly a straightforward matter. I am most grateful to all noble Lords who have contributed to the debate because there are important issues of principle involved. Indeed, they are not matters which we can let go or treat in any light way.
  In fact, I am grateful to the Minister for the approach which the Government have taken, in so far as it goes a very long way to meeting the objections which were raised regarding the original draft. In the light of what the noble Lord said, I wonder whether he might afford me the same facility and think about what I have said. At this stage I am prepared to withdraw the amendment, and beg leave to do so.
  Amendment, by leave, withdrawn.
  Lord Jenkin of Roding Lord Jenkin of Roding moved Amendment No. 2:
  Before Clause 1, insert the following new clause—

  CONTROLS ON OFFSHORE POWER GENERATION PLANT
  (" . Regulations under this Act may provide for emission controls on offshore power generation plant with a total thermally rated input above 50MWs.")
  The noble Lord said: By way of introduction to the amendment, I must say that I was surprised to see that this proposed new clause is still starred on the Marshalled List despite the fact that it was tabled last Wednesday. Therefore, it was bound to be starred when the first Marshalled List was issued the next day. However, for the life of me I cannot see why it should still be starred three days later in the current Marshalled List which is available in the Printed Paper Office. There is always the suggestion that a starred amendment is, somehow, late and therefore a less-deserving afterthought. This was not; indeed, it was tabled in the middle of last week. Although I appreciate that this is not a matter primarily for Ministers but rather for the House authorities, I hope that in taking up the point that was made by the noble Baroness, Lady Hamwee, that can be looked at because I find it slightly infra dig that one of my amendments is starred, which suggests that I did not table it soon enough.
  I do not think this debate will take an hour. It was recognised by the offshore oil and gas industry that the wording of the new clause which we have just debated—and which my noble friend Lord Dixon-Smith has withdrawn—may not have been sufficient to take into account certain aspects in relation to that industry. The noble Lord, Lord Whitty, has indicated that that is one of the purposes of the whole Bill.
  The point that is sought to be made here is that under the European large combustion plants directive which applied to power generation plant with a total thermally rated input above 50 megawatts, that plant was expressly excluded from the large combustion plants directive. The offshore installations were expressly excluded.
  As the noble Lord, Lord Whitty, pointed out, that is not the case under this directive. Indeed, it is one of the first items in the appropriate schedule to the directive. I think all I need say at this stage is that when we look again at the question of a purpose clause—because that is what this amendment is intended to reflect—we need to take account of the points which the noble Lord, Lord Whitty, made about the offshore oil and gas industry. This is almost certainly not the right form of words, but there needs to be something to indicate that here we have a significant extension of the existing controls, which hitherto have not applied to that industry.
  Perhaps I may use this as a peg on which to hang a question to which I have not yet received an effective answer. If other countries in the European Union do not propose to apply this directive to offshore installations, what are the Government going to do about it? The whole purpose of having a European directive is that it shall apply throughout the European Union. I have been told—no one has suggested this is wrong—that, for instance, when the Danish Government perform the

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  same process as we are going through now and embody the directive in domestic legislation, they do not intend to extend it to the offshore oil and gas industry. That seems to me to make a nonsense of the whole thing. I wonder whether the noble Lord, Lord Whitty, is in a position to tell us anything more about that. I say to him with respect that merely to refer to taking infraction proceedings is not a satisfactory answer.
  We are still producing legislation throughout the Union in order to implement the directive. That is the moment at which these things need to be made clear. We should not wait until it is all on the statute book and then say, "Hoi, you have not done what you should have done. We shall now haul you before the European Court". That is a longstop process, as it were; the position should be made clear now. I do not see why this Parliament in this country should enact this legislation, when we are told that others do not propose to enact it in the same form or with the same substance. That would simply hamstring our own industry and put it at a competitive disadvantage vis-à-vis those of other European Union countries.
  I recognise that those questions perhaps go a little wider than the new clause which I propose. Nevertheless, I hope that the noble Lord, Lord Whitty, will be able to give us a more satisfactory answer than we received at the previous Committee stage. I beg to move.
  Lord Whitty: I believe that the noble Lord, Lord Jenkin, indicated that it might not be appropriate to press this amendment at this stage in its present form because of other discussions that are taking place. I refer not just to the discussions which are taking place in relation to this Committee; the regulations for implementing the directive are subject to a consultation process, of which the noble Lord is well aware, which will close on 26th May. That process is carried out by my colleagues in the DTI and a task force involving the industry which is chaired by my colleague John Battle. Indeed, my noble friend Lord Macdonald, who was present a moment ago, is the deputy chair of that body. There is quite a long way to go before the threshold issue as regards regulations is resolved in those discussions. The noble Lord is aware that the threshold to which he refers is contained in the draft regulations.
  As regards the application of the measure in other European countries, our understanding is that in the case of large combustion installations—one must recognise that it is the process that is relevant here, not the location—the measure applies to installations outside territorial waters. It is also our understanding that other EU countries have understood—in some cases belatedly—that that process applies to their equivalent installations as well as to ours, and that they would therefore be subject to possible infraction proceedings if they did not introduce legislation to cover those installations. I believe that the other parliaments to which the noble Lord referred are at an even earlier stage of introducing this legislation than we are. However, all of us here are attempting to pass the legislation to comply with the directive by 30th October.
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  I believe that by that stage the other member states—Norway through its membership of EFTA is bound by the same provisions—will have met those requirements in their legislation. I hope that in the light of those comments the noble Lord will feel able to withdraw his amendment, at least at this stage.
  Lord Jenkin of Roding: I am extremely grateful to the Minister for that clarification which takes us rather further forward than was the case in February. I shall obviously want to take advice on this matter, but at this moment I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  4.15 p.m.
  Clause 1 [Regulation of polluting activities]:
  Lord Whitty Lord Whitty moved Amendments Nos. 3, 4 and 5:
  Page 1, line 5, leave out from ("make") to ("provision") in line 11
  Page 1, line 12, at end insert—
  ("(2A) The powers of the Secretary of State under subsection (1) shall be exercisable—

  (a) for or in connection with regulating activities which are capable of causing any environmental pollution; or

  (b) otherwise for or in connection with the prevention or control of emissions capable of causing any such pollution.")

  Page 1, line 13, leave out ("(1)") and insert ("(2A)")
  The noble Lord said: I have already spoken to these amendments. I beg to move Amendments Nos. 3, 4 and 5 en bloc.
  On Question, amendments agreed to.
  Lord Whitty Lord Whitty moved Amendment No. 6:
  Page 1, line 19. after ("land") insert ("which may give rise to any harm")
  The noble Lord said: In moving Amendment No. 6, I should like to speak also to Amendment No. 7 which also stands in my name. When we debated this Bill in February, noble Lords considered that the definition of "environmental pollution" in that draft was inadequate and as such added inappropriately to the width of the regulation-making powers. I promised to reflect on that debate. These amendments address that issue. With my amendment, Clause 1(3) of the Bill will include a definition of pollution which goes no wider than the definition in the directive and in Section 1 of the Environmental Protection Act 1990. This is as far as the concept can be defined while still allowing for the effective operation of the regulatory regime. To go narrower than the directive definition would mean that we could not properly implement the directive, leaving the UK open to possible infraction proceedings. To go narrower than the 1990 Act definition would mean a weakening of our existing controls, which is not intended.
  Amendment No. 8, in the name of the noble Lord, Lord Dixon-Smith, would remove from the definition the concept of harm to human health or to the health of other living organisms. I do not think that that is appropriate. This is part of the definition of "pollution". It forms part of the definition in the directive and it appears in current UK legislation. In some ways it is perhaps the most

  959
  important consideration which the regulator takes into account when setting conditions on the operator of an installation. Without it, the regulator would be left to control those emissions which damaged buildings or offended the senses but not those which caused illness or disease. I referred earlier to the letter received from the noble Lord, Lord De Ramsey, who was also alarmed by the implications of this amendment and who said that it would be contrary to long-standing elements of UK environmental policy.
  The health implications of pollution are fundamental to the regime we are trying to put into place by the legislation. I therefore hope that the noble Lord will not proceed with his amendment. I believe that my amendments meet the concerns expressed in the earlier February debate. I beg to move.
  The Earl of Mar and Kellie: I like the definition in Amendment No. 7. However, there are one or two questions I should like to ask about it. While I have been campaigning for the Scottish Parliament—perhaps in the future we will refer to that as "yet another place"—it has been drawn to my attention that in Clackmannanshire, Kinross and West Fife there is a problem with public health because of the spreading of partially treated sewage sludge, which has concerned many people in that area. Will the Bill regulate the spreading and/or ejection of partially treated sewage sludge on agricultural land? The main concern is public health, particularly when the spreading occurs on more than one occasion per year. The risks of air pollution affecting health and of leachates reaching the water supply are substantial and need to be controlled. Will Amendment No. 7 deal with the issue of the use of agricultural land for the disposal of partially treated sewage sludge?
  Lord Dixon-Smith: I am sorry if I appear to be a little confused. I am not sure whether we are talking to the Minister's Amendment No. 7 or to my Amendment No. 8, which I have not yet moved and to which the Minister has apparently already replied. However, in this relaxed and progressive mood, perhaps I should say why I tabled the amendment. It was for partly philosophical and partly practical reasons—and mainly because I wanted to hear what the Minister had to say on the matter.
  My philosophical reason relates to the question of harm to "other living organisms". Harm to other living organisms can mean many things. It implies that in the state of nature other living organisms are not trying to harm themselves. I am afraid that that is patent nonsense. My experience of nature is very clear: it is feast or famine. In the state of nature, everything struggles for domination. The fact that domination may be self-defeating is neither here nor there. It is the state of affairs. Plants do it against plants; animals against animals; animals against plants, and so on. In the state of nature, "harm" is a natural condition. That is the philosophical objection.
  My practical objection is slightly different. We are talking about the possibility of making regulations about industrial processes. My practical concern is that this could conceivably be used against specific agricultural operations in general practice which always involve harm to something, be they only weeds, insects or
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  whatever. It could conceivably be used in such a way as to make the United Kingdom's agriculture uncompetitive in Europe arid elsewhere. I may be reassured that that would never happen in the light of the Minister's reply—I do not know—but I hope that he will accept that the point I am raising is a serious one. I hope that he might expand slightly on what he said. I accept that these words have been used in the past, but that does not necessarily mean that they are either wholly appropriate or wholly correct.
  The Duke of Montrose: In a similar vein to the point raised by the noble Lord, Lord Dixon-Smith, I am concerned about the proposed paragraph (c) in Amendment No. 7 regarding "offence to the senses". The Minister may be able to tell me where the phrase has been used before, but an "offence to the senses" might include an offence to sight, sound, smell or touch. One can think of various things which would offend people. It seems to me that one could draw up a law to deal with matters which damage such organs in human beings, but such matters are already covered in legislation. I have read the European directive but I can find nothing relating to this context. It seems to me that the amendment exceeds the purposes of the European directive. I am worried, as is the noble Lord, Lord Dixon-Smith, that this might put our production processes, both industrial and farming, at a disadvantage.
  Baroness Hamwee: Surely other members of the European Union will be in the same position as we are if this definition faithfully replicates the provisions of the directive. I had understood it to mean that, if the definition is included, the Secretary of State will be able to make regulations to deal with "harm" as defined. No doubt we will have to go through a process of working out whether that "harm" is one which requires regulation.
  Lord Dixon-Smith: Does the noble Baroness accept that up until now this country has been somewhat resistant to the idea of harmonisation of matters European? We have not yet pulled it into this specific area, but I suspect that this nation of ours will be as resistant to harmonisation in this area as we would be in others where the matter has generally been raised.
  Baroness Hamwee: I thought that the noble Lord was concerned that we might be ahead of the game on this issue rather than trying to pull the other member states onside.
  Lord Whitty: The noble Baroness, Lady Hamwee, is correct in saying that much has been made of the Bill. it is essentially an enabling Bill. It does not prescribe what the interventions would be; it defines what falls under both activities and under "environmental pollution". I understand the concerns of agriculture and other industries, hence the implications in sub-paragraph (iii) and paragraph (c) of my Amendment No. 7. Both wordings were in the 1990 Act and, as far as I am aware, there have been no problems of interpretation in the regulations brought forward under that Act. No doubt the

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  interests of the agricultural industry and others will be taken into account in the drafting of the various regulations.
  As to the point made by the noble Earl, Lord Mar and Kellie, the regulations will again enable the Secretary of State to bring forward regulations to deal with the problem of sludge. They will not necessarily prescribe that he should so do. It may be that "yet another place" will address the matter in a Scottish context at some future date. There are already some water-related regulations which apply to that area. The amendment would allow further such regulations to be made. With that clarification, I hope that the noble Lord, Lord Dixon-Smith, will not move his amendment and that the Committee will accept my amendments.
  On Question, amendment agreed to.
  Lord Whitty Lord Whitty moved Amendment No. 7:
  Page 1, line 25, at end insert —
  ("() In the definition of "environmental pollution" in subsection (3), "harm" means—

  (a) harm to the health of human beings or other living organisms;

  (b) harm to the quality of the environment, including—

  (i) harm to the quality of the environment taken as a whole,

  (ii) harm to the quality of the air, water or land, and

  (iii) other impairment of, or interference with, the ecological systems of which any living organisms form part;

  (c) offence to the senses of human beings;

  (d) damage to property; or

  (e) impairment of, or interference with, amenities or other legitimate uses of the environment (expressions used in this paragraph having the same meaning as in Council Directive 96/61/EC).")

  Lord Dixon-Smith Lord Dixon-Smith had given notice of his intention to move, as an amendment to Amendment No. 7, Amendment No. 8:
  Leave out line 4
  The noble Lord said: In the light of the Minister's remarks, which I shall study with great care, I shall not move the amendment.
  [Amendment No. 8, as an amendment to Amendment No. 7, not moved.]
  On Question, amendment agreed to.
  4.30 p.m.
  Lord Jenkin of Roding Lord Jenkin of Roding moved Amendment No. 9:
  Page I. line 25, at end insert—
  ("() Regulations under this section shall require individuals or bodies responsible for carrying out such activities as are referred to in the regulations to employ the best available techniques not entailing excessive cost (in this clause referred to as "BATNEEC") to be used for minimising the pollution which may be caused to the environment as a whole by those activities:
  Provided that—

  (a) regulations under this section may specify circumstances where a more or less restrictive regime than BATNEEC
  962
  may be required either to comply with European or other international obligations, or on account of other circumstances;

  (b) where regulations are made pursuant to paragraph (a) above, they shall be accompanied by a statement explaining why such a more or less restrictive regime should be applied; and

  (c) if the regime to be employed is more restrictive than BATNEEC, the regulations embodying that regime shall not be made unless a draft of the statutory instrument containing the regulations has been laid before, and approved by a resolution of, each House of Parliament.")

  The noble Lord said: We return to the subject of BATNEEC: best available techniques not entailing excessive cost. We debated this matter fully at the earlier Committee stage. Of all the original recommendations made by the Delegated Powers and Deregulation Committee, the one that the committee acknowledged the Government had not met was its original proposal that BATNEEC should be written into the Bill. In response both to the third report of the Delegated Powers and Deregulation Committee and to the Select Committee at a later stage, the Minister has argued that he is justified in not accepting this proposal, that the well understood, well tried and well applied British test of BATNEEC should be included in the new Bill and the regulations, because there may well be circumstances in which it would be necessary to legislate for what might be described as a more stringent requirement. I believe I am right in saying that the Select Committee recognised the weight of that argument, but also thought it right to clarify whether or not there would be any circumstances in which a less stringent test should be applied. Its indication was that there would not, and should not, be.
  This new clause takes up both those points. It attempts to meet the Government's argument that there may well be circumstances where a more stringent test than BATNEEC should be applied. But it also raises the possibility that there may be circumstances where it would not be right to apply the full rigour of BATNEEC where a less rigorous regime would be appropriate. One can imagine circumstances where the balance of cost and advantage, between the cost to the operators and the advantage to the environment (I use the word in its widest sense) might well justify such a circumstance.
  My amendment therefore recognises that BATNEEC should be the central test. I argue for that because the principle is well known and well understood. Also, the Minister has said, in various different formulations—that it is very similar to; or not dissimilar from; or that BATNEEC lies at the heart of the environmental legislation—that this is what firms, professionals and regulators in this country are all familiar with. If it is the same as the test in the directive, why should we not continue to use it?
  The amendment recognises that there may be either a more stringent regime or a less stringent one. It therefore meets the Government's case on a more stringent regime but provides a new procedure. If, in their wisdom, the Government decide to make regulations which would impose a more severe duty on operators than BATNEEC, or if they were to decide, perhaps in the face of opposition from environmental groups, that there

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  should be a less stringent regime, they would have to accompany the regulations with a statement justifying their decision. Further, those regulations must be subject to the affirmative, not merely the negative, procedure in both Houses of Parliament.
  I ask the Government to consider this amendment seriously. It is intended to meet the case pressed by industry, and by the Select Committee, to write BATNEEC—best available techniques not entailing excessive cost—into the Bill. It meets the Government's case as regards giving them power to impose a more rigorous regime. It would also allow the Government in certain circumstances to introduce a less rigorous scheme, subject to the procedural proposals that I have just described. I beg to move.
  Lord Dixon-Smith: In rising to support my noble friend, I congratulate him on his ingenuity in drafting an amendment which literally allows the Government to go both ways—to be more, or less, severe—and then requires them, whichever way they may choose, to provide a public explanation of the reasons for so doing.
  The BATNEEC principle is well understood and is measurable. It has worked successfully for a very long time. The difficulty with moving to a more open and potentially more severe regime is the possibility that no limitations would thereby be created. Theoretically, an industry could quickly be closed down. My noble friend's amendment at the very least merits serious study.
  Lord Whitty: This matter is slightly complex. There are two separate issues involved. The first is whether we should retain as part of our new regime the concept of BATNEEC, or whether we should adopt the BAT regime specified in the directive. The second concerns the freedom of manoeuvre of the Secretary of State in either direction.
  On the first issue, I appreciate the point made by both noble Lords that BATNEEC is a concept with which industry in general is already familiar. It is not originally a British concept. It arose from an EC directive issued in 1984 and was reflected in the 1990 Act. The EU has moved on and has now replaced BATNEEC by specifying the concept of BAT, which we must now apply.
  I see that BATNEEC appears to provide a more explicit reference. However, the two techniques are similar. To my knowledge, neither industry nor regulator has expressed any great concern about having to substitute one for another. BAT is clearly defined in the European legislation—far more clearly than BATNEEC was defined in the 1990 legislation. Paragraph 11 of Article 2 of the directive makes it absolutely clear that cost is a key consideration. It states that,
  "available techniques shall mean those developed on a scale which allows implementation in the relevant industrial sector, under economically and technically viable conditions, taking into consideration the costs and advantages".
  We are therefore not losing the reference to costs which may be behind some of the concerns expressed.
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  I should point out that the UK Government cannot now alter the concept of BAT as it is set firmly within the framework of European legislation. Only by changing the European legislation could it be altered. That would require us to go back to square one in Europe, let alone on this particular base of legislation. Although BATNEEC and BAT are similar, they are not identical. We are obliged to transpose the directive in terms of BAT. Since BATNEEC is not identical, and does not have a definition which would allow us to argue that it is identical, we do not have that option.
  Perhaps more fundamentally, if we tried to legislate for BATNEEC here while the directive prescribed BAT, we would all have a headache, working with two different potential definitions and a constant argument about which one applied. That would cause the kind of legal muddle which I know the noble Lord desires to avoid.
  On the second issue, under Section 7 of the existing Environmental Protection Act 1990, an authorisation has to include such conditions as the regulator considers appropriate to achieve a number of objectives, including BATNEEC, and such conditions as are specified in directions given by the Secretary of State. Thus, there is some flexibility in the existing system.
  The circumstances in which more stringent conditions than those dictated by BATNEEC may be imposed are not specified in the 1990 Act. Likewise, the conditions in which more stringent criteria than BAT could be specified in the current proposals are not specified either in the directive or in our proposed Bill. Nevertheless, we have recognised that there could be directives or consequences arising from the discussions on the report of the noble and learned Lord, Lord Donaldson, or others which were not covered by the technique of BAT. We would wish to impose more stringent regulations on them. As the noble Lord, Lord Jenkin, indicated, the Delegated Powers and Deregulation Committee recognised that. If we wished to make more stringent regulations they would need to be subject to affirmative procedure.
  The flexibility to operate in the opposite direction, to dilute the effect of BAT or BATNEEC under the existing situation, arises in the sense that the Secretary of State and the regulator have both the ability to grant a transitional period, for example, and to take rote of the particular technical and locational characteristics of the installation concerned. If an operator feels that a rigid application of the technique to his case is wrong, there are grounds for appeal.
  Therefore, under the current regime—and it will continue under this regime—we allow some degree of flexibility. I would not say it is less stringent; it would allow a case-by-case assessment of the situation. If that degree of discretion were to be prescribed in regulations, the flexibility would be removed. That would probably be a retrograde step in the way in which the regulator co-operates with industry in applying the regulations.
  Therefore, on both grounds but particularly on the first ground, I do not think it would be sensible to specify BATNEEC in the way proposed in the noble Lord's amendment. We might be in some difficulty were we to

  965
  attempt to do so. I appreciate his desire to give the Government and the regulator some degree of flexibility, but we do not believe that laying down that it should be prescribed in regulations would be the appropriate way to achieve that. It might make matters more rigid than they would otherwise be.
  Lord Jenkin of Roding: Before I respond, I wonder whether I have correctly understood what the Minister said about the circumstances that would arise if there were to be a more stringent test than BATNEEC. Did he say that the regulations that embodied the test would be subject to the affirmative procedure as the Bill now stands? Perhaps I misunderstood him.
  Lord Whitty: I am trying to remember which amendments we have already passed and which we have not. If all my amendments are accepted, then the first set of regulations under the Bill which would deal with such matters would be subject to the affirmative procedure.
  Lord Jenkin of Roding: What about the circumstances where a subsequent set of regulations was introduced which might, in particular defined circumstances, impose a stiffer test? We have not yet come to Amendment No. 12 in the noble Lord's name, but as he said, under that amendment there is the first regulation, and then, under subsection (5C)(d), regulations,
  "which create an offence or increase a penalty for an existing offence".
  As I understand it, the Minister says that such a regulation would not necessarily be subject to the affirmative procedure. We may need to come back to it.
  Generally, I accept much of what the Minister said about the possible conflict between the two concepts, similar though they may be. I wonder whether this is yet another example of what one has seen so often in the British Government's interpretation of European directives. It has been summed up in the phrase "gold-plating"; that is, always being determined to ensure that we are holier than anyone else. We do it more thoroughly. We will never be at risk of being taken to the European Court for having fallen down. That has been a long-standing culture of government departments in this country, sometimes to the disadvantage of the subject here, when other countries do not act in quite the same way.
  However, I shall look carefully at what the Minister said. Having fulfilled the Select Committee's remit to come back and check, the Minister said he would want the flexibility downwards as well as upwards, using shorthand terms, so that, in the words of the Select Committee report, the Minister is not saying that in no circumstances would criteria less strict than BAT be used. The report then said that the House may wish to see formal confirmation of this from the Minister. The Minister has not given that formal confirmation. Instead, he wanted flexibility. I do not quarrel with that. I shall study what he said. In the meantime, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  4.45 p.m.
  Lord Whitty Lord Whitty moved Amendment No. 10:
  Page 1, line 27, leave out from beginning to end of line 4 on page 2.
  The noble Lord said: Amendment No. 10 and the related Amendments Nos. 13, 16, 17 and 18 meet another of the key recommendations of the Select Committee on Delegated Powers and Deregulation. Amendment No. 10 specifies which powers the Secretary of State may sub-delegate and to whom.
  The power to sub-delegate certain aspects of the regulations is an essential part of the regime. It will enable, for example, an operator's permit conditions to be determined on a case-by-case basis by the regulator—aspects of which have just been touched on—rather than across the board in the regulations. Amendment No. 10, together with Amendments Nos. 13 and 18, limit the scope of the Bill to those areas mentioned in Schedule 1 to the Bill where it is necessary to sub-delegate.
  To be more specific, sub-delegation would apply to the granting of permits, the imposition of permit conditions and the reviewing, varying or revoking of permits. The amendments also provide that powers may only be sub-delegated to those persons whom the Secretary of State specifies as "regulators". That would mean public or local authorities; in other words, the Environment Agency, the Scottish Environmental Protection Agency and, in certain situations, the Planning Inspectorate and the local authorities. Amendment No. 12 would make it clear on the face of the Bill that the regulations can provide for regulators to appoint suitable persons to take samples for enforcement purposes and to exercise powers of entry. That is the same power as they have under current regimes. Amendment No. 13 would also enable the Secretary of State to delegate his appellate functions. That principally applies to the planning inspectorate, as is the situation in most cases at present.
  The group of amendments go all the way—if not further—to meeting the Delegated Powers and Deregulation Committee's requirements under its original critique of our Bill as originally drafted. I beg to move.
  On Question, amendment agreed to.
  Baroness Farrington of Ribbleton Baroness Farrington of Ribbleton moved Amendment No. 11:
  Page 2, line 11, at end insert—
  ("(4A) Before making any regulations under this section, the Secretary of State shall consult—

  (a) the Environment Agency if the regulations are to apply in relation to England or Wales;

  (b) the Scottish Environment Protection Agency if the regulations are to apply in relation to Scotland;

  (c) such bodies or persons appearing to him to be representative of the interests of local government, industry and small businesses respectively as he may consider appropriate; and

  (d) such other bodies or persons as he may consider appropriate.

  (4B) Consultation undertaken before the passing of this Act shall constitute as effective compliance with subsection (4A) as if undertaken after that passing.")
  The noble Baroness said: This amendment would place on the face of the Bill a requirement for appropriate consultation before making any regulations. We tabled a

  967
  similar amendment at the previous Committee stage in response to one of the recommendations of the Delegated Powers and Deregulation Committee. We withdrew that amendment, however, in order to reflect upon the points made during debate and as a consequence have now included in this amendment a requirement to consult representatives of small businesses.
  Throughout the development of the new pollution control system we have been consulting extensively on its implementation. We published a set of draft regulations before Christmas and in June the department will issue the fourth and final in the series of consultation papers. The DTI recently published a paper on its proposals to use the Bill to improve the offshore environmental regime. The consultation process has enabled us to maintain a broad consensus in support of the proposals under this Bill. I am happy to confirm our commitment to appropriate written consultation by moving this amendment. I beg to move.
  On Question, amendment agreed.
  Lord Whitty Lord Whitty moved Amendment No. 12:
  Page 2, line 12, leave out subsection (5) and insert—
  ("(5) The power to make regulations under this section shall be exercised by statutory instrument.
  (5A) A statutory instrument containing regulations under this section, if made without a draft having been laid before, and approved by a resolution of, each House of Parliament, shall be subject to annulment in pursuance of a resolution of either House.
  (5B) No regulations to which this subsection applies shall be made (whether alone or with other regulations) unless a draft of the statutory instrument containing the regulations has been laid before, and approved by a resolution of, each House of Parliament.
  (5C)Subsection (5B) applies to—

  (a) the first regulations to be made under this section which apply in relation to England;

  (b) the first regulations to be made under this section which apply in relation to Wales;

  (c) the first regulations to be made under this section which apply in relation to Scotland;

  (d) regulations under this section which create an offence or increase a penalty for an existing offence;

  (e) regulations under this section which amend or repeal any provision of an Act.")

  On Question, amendment agreed to.
  Clause 1, as amended, agreed to.
  Schedule 1 [Particular purposes for which provision may be made under section 1]:
  Lord Whitty Lord Whitty moved Amendment No. 13:
  Page 4, line 43, leave out ("and, in particular, securing") and insert—
  ("() Authorising permits to be granted subject to conditions imposed by regulators.
  () Securing")
  On Question, amendment agreed to.
  Baroness Farrington of Ribbleton Baroness Farrington of Ribbleton moved Amendment No. 14:
  Page 5, line 6, leave out ("Restricting") and insert ("Regulating")
  The noble Baroness said: It was the noble Lord, Lord Jenkin, who moved an amendment similar to this at our earlier Committee stage. I understand that the CBI had drawn his attention to the wording in paragraph 7 of Schedule 1 which stated that the regulators could restrict the making of changes in the operation of installations. By its very nature regulation implies a degree of restriction. However, we took the point that this was a particularly negative phrase. In reality it will be very rare for a regulator to have to restrict changes by an operator. It might arise only where the operator refused outright to apply best available techniques in mitigating pollution as a result of the change. We therefore propose to replace "restricting" with "regulating". The CBI in its letter of 22nd March commented that this amendment improved on the previous one tabled by the noble Lord, Lord Jenkin. I believe that he proposed the word "controlling". I beg to move.
  Lord Jenkin of Roding: I believe that the Government have (if I may use the words of the noble Lord, Lord Whitty) more than met the point that I made at the earlier Committee stage. I agree with the CBI that "regulating" is better than "controlling", and I am grateful to the Government.
  On Question, amendment agreed to.
  Baroness Farrington of Ribbleton Baroness Farrington of Ribbleton moved Amendment No. 15:
  Page 5, line 39, leave out ("(subject to any") and insert ("(but excepting information which under the regulations is, or is determined to be, commercially confidential and subject to any other")
  The noble Baroness said: One of the concerns expressed during the debate in February was the Lick of provision on the face of the Bill for the protection of commercially sensitive information from disclosure in public registers. This amendment now provides that safeguard. In ensuring that the public has access to information which affects the wellbeing of all the presumption must be that details about emissions are included as fully as possible in public registers. On rare occasions, however, it might be necessary to exclude information which the operator deemed, and the regulator agreed, was commercially confidential. The operator would have a right of appeal to the Secretary of State in cases where the regulator took a contrary view.
  The provisions in our draft regulations and those published for consultation recently by the DTI for offshore installations are, to all intents and purposes, the same as those which currently apply under Section 22 of the Environmental Protection Act 1990. That provision has operated successfully in relation to the current systems and our regulations (with the safeguard provided by this amendment) will ensure that it continues to do so. I beg to move.
  Lord Renton: I do not oppose this amendment, but I believe that in this context the word "commercially"

  969
  requires some explanation. There may be a precedent for it; if so, I am not familiar with it. What does "commercially confidential" mean in these particular circumstances? The word "commercially" has a very broad meaning. Presumably, it would be something that affected the profits or losses of a company, but in the context of this amendment and Bill I should not have thought that that was an appropriate test to apply. Can the noble Baroness explain the meaning and effect of "commercially" in these circumstances?
  Baroness Farrington of Ribbleton: The noble Lord asks a specific question to which I shall try to reply. I may find it necessary to write to him in order to answer the point more fully. I expect the word to mean that disclosure of information would have an adverse impact, usually in the context of competitors. However, should that explanation prove to be wrong, I shall write to the noble Lord.
  On Question, amendment agreed to.
  Lord Whitty Lord Whitty moved Amendments Nos. 16 to 18:
  Page 6, line 6, at end insert—
  ("() Authorising regulators to appoint suitable persons to exercise any such functions and conferring powers (such as those specified in section 108(4) of the Environment Act 1995) on persons so appointed.")
  Page 6, line 32, after ("for") insert ("(or for the determination of)")
  Page 7, line 5, at end insert—
  ("Determination of matters by regulators
  . The regulations may make provision for anything which, by virtue of paragraphs 5 to 8, could be provided for by the regulations to be determined under the regulations by regulators.")
  On Question, amendments agreed to.
  On Question, Whether Schedule 1, as amended, shall be agreed to?
  Lord Jenkin of Roding: Perhaps I may raise a question which I have not sought to signal by way of amendment. It will be within the recollection of the Committee that one of the group of amendments discussed last time concerned charges. The noble Baroness in response gave a pretty clear answer but acknowledged that the charging structure and what was supposed to be within the costs of the regulator that had to be met by charges were not as clear as they might be. The noble Baroness said that she was in discussion with the CBI (and no doubt other interest groups outside) with a view to making more explicit what was intended to be covered by the charges and what was not. At this stage all I ask is whether the noble Baroness can give a progress report on that matter. Have there been discussions; if so, have they reached a conclusion? This may be a matter to which we may wish to return on Report if the situation is as unsatisfactory as it was represented to me a couple of months ago.
  Lord Renton: I should like to make a general comment on the schedule. Normally, when legislating we state the powers and principles in the clauses and leave detail to be dealt with in the schedule.
  970
  Here, however, we have a schedule setting out the list of the purposes. Some of the schedule goes into the detail that one would expect. But we have this strange Bill in which the Secretary of State will impose secondary, subordinate legislation upon Parliament. It is stated briefly that it has power to make regulations, but the substance of the matter is for a change appearing in a schedule. I think that that is wrong.
  5 p.m.
  Lord Whitty: I note the concerns of the noble Lord. They are part of his general concerns about the Bill. No doubt he will move on to them when moving Amendment No. 19 which stands in his name.
  Providing precisely the list of purposes and procedures that can be adopted under the Bill gives a clear, definitive idea of what the Bill covers. The noble Lord seeks clarity. I should have thought that the form of the schedule provides exactly that clarity.
  In response to the noble Lord, Lord Jenkin, it is true that we indicated during an earlier stage, and have done so more publicly, that the present regime of charging, in particular in relation to the Environment Agency, requires some modification and clarification. That is not necessarily a matter for primary or secondary legislation. It will be covered by the regulations. There will be a meeting, I believe on 29th April, between my colleague Michael Meacher and the CBI on this matter. I shall therefore be in a position to update the noble Lord before we reach the next stage of the Bill.
  Schedule 1, as amended, agreed to.
  Clauses 2 and 3 agreed to.
  Schedule 2 agreed to.
  Schedule 3 [Repeals]:
  Lord Renton Lord Renton moved Amendment No. 19:
  Page 10. line 11, column 3, leave out ("Sections 1 to 28")
  The noble Lord said: The purpose of the amendment—I understand that it has the support of many noble Lords in different parts of the Chamber—is to get the Government to amend and replace those vitally important sections of the 1990 Act by primary legislation, which Parliament can amend, instead of doing so merely by regulation, which we have to accept or reject and cannot amend.
  I shall not trouble the Committee with all the 28 clauses of the 1990 Bill. We are at Committee stage. We have plenty of time to consider the matter further. However, in passing I should mention that Section 23 of the 1990 Act sets out a list of criminal offences. It is most unusual to create criminal offences by regulation. They nearly always go, and rightly so, into primary legislation. However, there are many other reasons why we should not, in a sweeping way, repeal primary legislation which is of national importance. It affects the health and well being of our people; and has to be dovetailed with the European directive.
  I have been in Parliament for 53 years, in the other House and then this place. This is the most far reaching example of legislation by reference replacing primary legislation. There is no precedent for doing so on this scale of which I know except in time of war; and that

  971
  did not happen in the past 53 years. In wartime of course emergencies have to be dealt with in a ruthless way. But we are not dealing with that situation. Why are the Government making provision in this unconstitutional and unusual way instead of in a way that preserves the sovereignty of Parliament?
  If we amend the Bill now by striking out the repeal of those 28 sections, the Government can either table the necessary amendments at Report stage or before the Bill reaches another place; or completely rewrite them if they think that that would make clearer law which users of the statute—millions of people will be affected by it—would understand more clearly.
  The Bill is a piece of complicated legislation by reference which has no finality because even then we have to go by the regulations that we shall not be able to amend. It is really bad.
  I hope that the Committee will agree that we should strike out the repeal of those 28 sections of the 1990 Act. I hope that the Government will show themselves willing to replace them by primary legislation at a later stage of the Bill. I beg to move.
  Lord Jenkin of Roding: I support my noble friend on this far reaching amendment. I hope that the Committee will mark its displeasure at the way in which the Government have handled the Bill from the outset. They have made stout efforts to amend the earlier errors, but, as we said earlier, they should never have embarked down this unconstitutional road.
  The Select Committee, in a phrase which has been referred to in the debates, said that it would not wish this Bill to be regarded as a precedent for the future. One knows that those words have frequently been uttered on previous occasions in all kinds of contexts. It is a pious hope. Whitehall will recognise that the noble Lord, Lord Whitty, has had a fairly uncomfortable time. He has done well to have achieved as much as he has. Nevertheless, once Whitehall sees that it can legislate in this way it will not pay too much attention to that.
  If we were to send the Bill to another place having removed the repeal of the first 28 clauses of the 1990 Act, it would bring it home to Ministers, and perhaps even more to their advisers, that this was an inadvisable way to proceed. We shall listen to what the Minister says, but I hope that at the end of the debate my noble friend will feel that it might be right to press the amendment to a Division.
  Lord Dixon-Smith: The amendment goes to the heart of our earlier debates on the way in which the Bill has been drafted. That gives me no satisfaction. However, it must be said that there will be less likelihood of the other place correcting a fundamental matter in the Bill. For that reason, I support my noble friend's amendment. Legislation should be clear, readable and supervisable by Parliament.
  The problem with going down the regulatory route is that we can either approve or reject a regulation, but we cannot amend it. That may appear to be satisfactory; by convention we have operated in that way. However, when one sees this kind of primary legislation being
  972
  taken off the statute book and brought back in the form of regulations, the convention is placed under the most severe strain. The time may come when that convention will need to be examined. That is not a happy situation and I wish that it were not so. I support my noble friend's amendment.
  Lord Whitty: I understand the strength of feeling expressed by the noble Lord, Lord Renton, both in Committee and privately about this aspect of the Bill. However, words such as "unconstitutional" and "unprecedented" are not historically appropriate. I see that the noble Lord, Lord Alexander of Weedon, if not in his place is at least present in our proceedings here. Perhaps I may remind your Lordships that although the Delegated Powers and Deregulation Committee noted that we were replacing primary legislation by regulations it did not comment on that aspect of the Bill.
  I also note that the provisions introduced within the amendment I have made today go a long way not only to meeting the objections of the Delegated Powers and Deregulation Committee, but also in making it absolutely clear that there is parliamentary sovereignty over proceedings under the Bill.
  Lord Pearson of Rannoch: I thank the Minister for giving way. He may have implied to anyone reading Hansard that the noble Lord, Lord Alexander of Weedon, was present in the Chamber and therefore perhaps lending strength to his comments. I do not see the noble Lord.
  5.15 p.m.
  Lord Whitty: If noble Lords read Hansard carefully they will note that I was not indicating that. I made no such contention. I rely entirely on the wording of the Select Committee report in this respect.
  As regards breaking a principle by replacing primary legislation with regulations, that is not unprecedented. I agree that it is unusual, but: it is not unprecedented. My department examined what its predecessors had done in this respect. I admit that I could not find an example when the noble Lord, Lord Renton, was in government, but I did the next best thing and found an example when the noble Lord, Lord Jenkin, was in government. It occurred in respect of the Local Government Act 1972, which removed whole swathes of legislation and replaced them by regulation. And quite rightly, too, because, similarly the area needed to respond to differing circumstances and to technical and other changes.
  We are not debating the principle of regulation, therefore; we are debating regulation in an area of rapidly changing technology. That is an important aspect of government activity. It gives a more flexible instrument than a piece of primary legislation. It deals with evolving issues.
  In this case, it also deals with a situation in which we are trying to produce a coherent regime which incorporates European legislation and makes it compatible with legislation already on the statute book which received multi-party support. The objective of the

  973
  whole legislation is to achieve a coherent and understandable regime. The Government, the CBI and all other interested parties want to create a coherent regime. The best way of achieving that is not to legislate under the European Communities Act, but to provide clear, one-stop-shop regulations for the whole of the industry covering all aspects of pollution control. That is why the CBI recognises that the changes we have made in the Bill deal with the issues of parliamentary sovereignty and principle and yet provide a flexible and clear instrument under which industry will work.
  The noble Lord, Lord Renton, says that potentially we are creating new offences under the regulations. Clearly, as in my Amendment No. 12, to which we have agreed, any new offences would be subject to affirmative resolution, as in many other areas of offence-creating law. I believe that grouping together the various regimes and the regime we are now required to apply under European legislation so as to provide flexibility and clarity is a better way of proceeding than having a rigid piece of legislation on the statute book. That will put everything in one place rather than creating a piece of legislation which might subsequently need amendment in the light of changing circumstances, either technologically or as a result of scientific knowledge or changes at European level.
  If the amendment were to be adopted, we would pass on to another place a piece of incoherent legislation. The only choice which the other place would then have would be either to reject it or to create legislation which was utterly rigid and which in subsequent years would require parliamentary time to change it. I believe that all parties in this House, all noble Lords who have spoken and all the interested groups which have presented their opinions, require some degree of flexibility. That flexibility, under existing pressures on parliamentary and other time, requires these issues to be dealt with under regulations and not on the face of the Bill.
  That is why we have taken this step. I accept that it is unusual. It is also unusual to try to apply European legislation alongside and make it compatible with existing regimes with which British industry is already familiar. It is not usual but it is desirable. It has been recognised as desirable throughout this House, throughout this debate and throughout British industry as a whole.
  If we were to do anything else, we would create a costly muddle of possibly contradictory regulations. We therefore accept the concerns. In making substantial changes to subsequent regulations subject to the affirmative procedure—and I accept the comment of the noble and learned Lord, Lord Simon of Glaisdale, that the House has powers in relation to the affirmative procedure, although I am not encouraging it to use those powers—parliamentary sovereignty is safeguarded, which meets the fears expressed by the noble Lord, Lord Renton.
  I ask the Committee to recognise that the objectives of putting this part of the Bill and what was pre-existing legislation into regulations are not sinister and in no way challenge the authority of the House or Parliament. They are intended to provide coherence, clarity and the ability of Parliament, the legal system and industry to comply with what we all recognise as an important step forward
  974
  in pollution control and therefore the control of dangers to our environment. Most people out there would accept that. I ask noble Lords to recognise that and the noble Lord, Lord Renton—albeit that I acknowledge his sincerity and concern—to accept that we have met most of his concerns by the amendments already adopted this afternoon. I ask the noble Lord to withdraw his amendment.
  Lord Renton: The Minister has done his best in reply to the arguments but I am sorry to say that his replies are not valid. Of course, there are precedents but there is no precedent for a Bill of national and international importance on this scale to be replaced by regulation. As to incorporating European Union directives, we have incorporated some of a minor kind by regulation but those of a major kind have been incorporated in our statute law—as on this occasion. One could go on to answer every point that the Minister made but I shall not weary your Lordships. I seek the opinion of the Committee.
  5.21 p.m.
  On Question, Whether the said amendment (No. 19) shall be agreed to?
  Their Lordships divided: Contents, 104; Not-Contents, 136.

  Division No. 1

  CONTENTS

  Addison, V.

  Fookes, B.

  Ailesbury, M.

  Gardner of Parkes, B.

  Ailsa, M.

  Garel-Jones, L.

  Alexander of Tunis, E.

  Geddes, L.

  Anelay of St Johns, B.

  Gray of Contin, L.

  Astor of Hever, L.

  Halsbury, E.

  Attlee, E.

  Hamilton of Dalzell, L

  Belhaven and Stenton, L.

  Harding of Petherton, L.

  Biddulph, L.

  Harrowby, E.

  Blatch, B.

  Henley, L. [Teller.]

  Bowness, L.

  HolmPatrick, L.

  Brabazon of Tara, L.

  Hooper, B.

  Bridgeman, V.

  Hylton-Foster, B.

  Brougham and Vaux, L.

  Jenkin of Roding, L.

  Burnham, L. [Teller.]

  Kingsdown, L.

  Butterworth, L.

  Kinnoull, E.

  Byford, B.

  Knight of Collingtree, B.

  Cadman, L.

  Lamont of Lerwick, L.

  Caithness, E.

  Lang of Monkton, L.

  Campbell of Alloway, L.

  Lauderdale, E.

  Carnegy of Lour, B.

  Lawson of Blaby, L.

  Chalker of Wallasey, B.

  Leigh, L.

  Charteris of Amisfield, L.

  Liverpool, E.

  Chesham, L.

  Lucas of Chilworth, L.

  Clanwilliam, E.

  Luke, L.

  Coleridge, L.

  Lyell, L.

  Courtown, E.

  McColl of Dulwich, L.

  Cox, B.

  Mackay of Ardbrecknish, L.

  Crickhowell, L.

  Marlesford, L.

  Davidson, V.

  Middleton, L.

  Dean of Hatptree, L.

  Miller of Hendon, B.

  Denton of Wakefield, B.

  Molyneaux of Killead, L.

  Dixon-Smith, L.

  Monro of Langholm, L.

  Dundonald, E.

  Montgomery of Alamein, V

  Dunrossil, V.

  Montrose, D.

  Effingham, E.

  Morris, L.

  Elliott of Morpeth, L.

  Moyne, L.

  Elton, L.

  Munster, E.

  Ferrers, E.

  Naseby, L.

  975

  Nathan, L.

  Seccombe, B.

  Norrie, L.

  Sharples, B.

  Nunburnholme, L.

  Shaw of Northstead, L.

  Oxfuird, V.

  Skelmersdale, L.

  Park of Monmouth, B.

  Skidelsky, L.

  Pearson of Rannoch, L.

  Soulsby of Swaffham Prior, L

  Pender, L.

  Strathcarron, L.

  Peyton of Yeovil, L.

  Strathclyde, L.

  Plummer of St. Marylebone, L.

  Teynham, L.

  Quinton, L

  Thurlow, L.

  Renton, L.

  Vivian, L.

  Rotherwick, L.

  Wade of Chorlton, L.

  St. Davids, V.

  Wilcox, B.

  NOT-CONTENTS

  Acton, L.

  Hughes of Woodside, L.

  Ahmed, L.

  Hunt of Kings Heath, L.

  Allenby of Megiddo, V.

  Irvine of Lairg, L. [Lord Chancellor.]

  Alli, L.

  Amos, B.

  Islwyn, L.

  Archer of Sandwell, L.

  Janner of Braunstone, L.

  Bach, L.

  Jay of Paddington, B. [Lord Privy Seal.]

  Barnett, L.

  Bassam of Brighton, L.

  Jenkins of Hillhead, L.

  Beaumont of Whitley, L.

  Jenkins of Putney, L.

  Berkeley, L.

  Kirkhill, L.

  Blackstone, B.

  Leathers, V.

  Blease, L.

  Lockwood, B.

  Borrie, L.

  Lofthouse of Pontefract, L.

  Bragg, L.

  Longford, E.

  Brooke of Alverthorpe, L.

  Lovell-Davis, L.

  Brookeborough, V.

  Macdonald of Tradeston, L.

  Brookman, L.

  McIntosh of Haringey, L. [Teller.]

  Burlison, L.

  Mackenzie of Framwellgate, L.

  Carlisle, E.

  Mackie of Benshie, L.

  Carter, L. [Teller.]

  Maddock, B.

  Christopher, L.

  Mar and Kellie, E.

  Clarke of Hampstead, L.

  Marsh, L.

  Clement-Jones, L.

  Mason of Barnsley, L.

  Clinton-Davis, L.

  Merlyn-Rees, L.

  Cocks of Hartcliffe, L.

  Milner of Leeds, L.

  Currie of Marylebone, L.

  Mishcon, L.

  David, B.

  Molloy, L.

  Davies of Oldham, L.

  Monkswell, L.

  Dean of Thornton-le-Fylde, B.

  Montague of Oxford, L.

  Desai, L.

  Morris of Castle Morris, L.

  Dholakia, L.

  Morris of Manchester, L.

  Dixon, L.

  Newby, L.

  Donoughue, L.

  Nicholson of Winterbourne, B.

  Dormand of Easington, L.

  Nicol, B.

  Evans of Parkside, L.

  Northfield, L.

  Evans of Watford, L.

  Orme, L.

  Falconer of Thoroton, L.

  Oxford, Bp.

  Farrington of Ribbleton, B.

  Patel, L.

  Geraint, L.

  Paul, L.

  Gilbert, L.

  Perry of Walton, L.

  Goodhart, L.

  Peston, L.

  Gordon of Strathblane, L.

  Pitkeathley, B.

  Gould of Potternewton, B.

  Plant of Highfield, L.

  Gregson, L.

  Ponsonby of Shulbrede, L.

  Grenfell, L.

  Prys-Davies, L.

  Hacking, L.

  Puttnam, L.

  Hamwee, B.

  Ramsay of Cartvale, B.

  Hanworth, V.

  Rea, L.

  Hardie, L.

  Redesdale, L.

  Hardy of Wath, L.

  Rendell of Babergh, B.

  Harris of Greenwich, L.

  Richard, L.

  Harris of Haringey, L.

  Rodgers of Quarry Bank, L.

  Haskel, L.

  Roll of Ipsden, L.

  Hayman, B.

  St. John of Bletso, L.

  Hilton of Eggardon, B.

  Sawyer, L.

  Hollis of Heigham, B.

  Sefton of Garston, L.

  Hooson, L.

  Shepherd, L.

  Hoyle, L.

  Shore of Stepney, L.

  Hughes, L.

  Simon, V.

  976

  Simon of Highbury, L.

  Thornton, B.

  Stair, E.

  Turner of Camden, B.

  Stoddart of Swindon, L.

  Uddin, B.

  Strabolgi, L.

  Walker of Doncaster, L.

  Symons of Vernham Dean, B.

  Weatherill, L.

  Taverne, L.

  Whitty, L.

  Taylor of Blackburn, L.

  Williams of Crosby, B.

  Tenby, V.

  Williams of Mostyn, L.

  Thomas of Walliswood, B.

  Winchilsea and Nottingham, E.

  Resolved in the negative, and amendment disagreed to accordingly.
  5.29 p.m.
  Schedule 3 agreed to.
  Clause 4 agreed to.
  In the Title:
  Lord Dixon-Smith Lord Dixon-Smith moved Amendment No. 20:
  Line 1, leave out from ("make) to ("; and") in line 2 and insert ("further provision for the prevention and control of pollution arid to implement European Community Directive 96/61 on Integrated Pollution Prevention and Control")
  The noble Lord said: I begin to feel that I have a certain masochistic tendency about bringing forward this amendment. Again, it sets out to try to improve the wording of the Bill, on this occasion in its Long Title.
  The existing wording states that it is to:
  "Make provision for a new system of pollution prevention and control; and for connected purposes".
  That is inadequate. It is not entirely a new system and "further provision" is a better description of what the Bill is about. The description that it is,
  "to implement European Community Directive 96/61 on Integrated Pollution Prevention and Control",
  is a matter of fact. If had not been for that particular European Community directive, I suspect that we should not be seeing this Bill. I beg to move.
  Lord Renton: As it stands, this Bill is a mass of detailed, regulating powers and this is an attempt to inform the public—all those people, here and abroad, who must comply with it. Its purpose really should be made clear.
  The purpose clause which we discussed earlier would have achieved that purpose. But the noble and learned Lord, Lord Simon of Glaisdale, who is not in his place just at this moment, suggested that we should amend the Long Title. There is a lot to be said for that. As it stands, the Long Title tells us very little. It states that it is a Bill to:
  "Make provision for a new system of pollution prevention and control; and for connected purposes".
  That tells us practically nothing whereas the amendment states the fact on which the Bill is founded. The amendment states that the Bill seeks to make,
  "further provision for the prevention and control of pollution and to implement European Community Directive 96/61",
  which is not mentioned in the Bill,
  "on Integrated Pollution Prevention and Control".

  977
  The words "and for connected purposes" would remain in the Long Title. Therefore, I suggest that we are helping the Government and trying to do them a service by putting forward this amendment. I hope that they will have the good sense to accept it.
  Lord Whitty: I understand both the reason for raising the point and the tone with which it has been pressed. In response to the earlier intervention of the noble and learned Lord, Lord Simon of Glaisdale, I said that my current advice is that once the Bill is produced, we cannot change its Long Title unless other amendments require us to do so. I am not sure that any such amendment has been passed in the course of the afternoon to require that. I need to take advice on that issue before I can support any such move.
  I have, earlier this afternoon, already given a commitment to the Committee that I shall consider whether a better definition of the purpose clause would be a beneficial improvement to the Bill. Perhaps I may tell the noble Lord, Lord Dixon-Smith, that I shall consider the Long Title in that same context, bearing in mind the strong legal and procedural advice that I have received on what we can change in terms of the Long Title at this stage.
  It may be that we shall be able to discuss that commitment between now and Report and, in view of that, I ask the noble Lord to withdraw his amendment, at this stage at least.
  Baroness Hamwee: I hope that the Minister will be successful in obtaining advice that the Long Title should reflect what is in the Bill. I understand that it would be wrong to amend it, anticipating amendments which have not been accepted. However, we do not want to have a situation in which, to the casual reader—should there be a casual reader of such legislation—the Long Title does not indicate the thrust of the Bill. If that is the case, we, as legislators, are not doing a service to those who need to refer to the legislation. In some senses, the Long Title is a sort of index as to the overall thrust of what is in the Bill. Without changing the way in which the regulations are to be dealt with, I hope that it will be possible to provide in the Long Title a reference-point to the way in which the directive is being approached.
  Lord Renton: I should amplify what I said earlier about the lack of reference in the Bill to the European Community directive. I should have added that there is an obscure reference in one of the schedules.
  Lord Jenkin of Roding: Throughout the afternoon, the noble Lord, Lord Whitty, has been at pains to tell the Committee just how much change has been made to the Bill compared with the Bill introduced to the House last December. Indeed, it is not unfair to say—he is entitled to some credit for this—that large parts of the Bill have been rewritten.
  It seems to me that in those circumstances one is obliged to look again at the Long Title to see whether it reflects what is in the Bill. It may have reflected the
  978
  provisions of the Bill as first introduced. However, many amendments have been accepted. both previously in Committee and much more so today. In those circumstances, it is right to look again at the Long Title.
  In a sense, the noble Lord, Lord Whitty, is hoist by his own petard. Either he has changed the Bill to meet a large number of requirements, in which case he should change the Long Title, or it is all cosmetic, in which case he leaves it as it is. But he cannot have it both ways.
  Lord Whitty: Whether or not I am hoist by my own petard, which is not a totally unfamiliar position for me, at present I am constrained by the legal advice which I have received. Therefore, I cannot move at present in relation to the Long Title. But, as I have said to the noble Lord, Lord Dixon-Smith, both as regards an amended purpose clause and an amendment to the Long Title, I shall consider the matter further and consult the noble Lord and other noble Lords who are interested before Report stage. On that basis, I hope that the Committee will feel that it is not necessary to press it at this stage. I hope that we shall reach an accommodation at a later stage of the Bill.
  Lord Dixon-Smith: I am grateful to those who have spoken in support of the amendment. As the noble Lord, Lord Jenkin of Roding, said, this is now a very different Bill from the original draft. I am most grateful to the Minister for his reply, which gives some cause for hope. I am also grateful for his earlier reply. If we cannot handle the matter one way, perhaps we can handle it in another. There are supposed to be more ways than one of killing a cat. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  House resumed: Bill reported with amendments.

EMU
5.40 p.m.
The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): rose to move, That this House takes note of the Government's outline proposals for a national changeover plan for EMU.
The noble Lord said: My Lords, I am delighted to be able to respond to the request by the noble Lord, Lord Strathclyde, for a debate on the national changeover plan. I welcome this opportunity to explain the thorough preparations that we are making to give the UK a real option of joining a successful single currency. I thank all those individuals and organisations who have been involved in taking this project to the stage where we could publish the plan. It has been a major consultation process, with a wide range of representative groups of business interests.
I hope your Lordships will support what we have achieved so far and our plans for taking forward preparations. I look forward to hearing your Lordships' views on this important issue.

979
I hope to cover three main areas: the Government's policy on membership of EMU; the preparations made to deal with the arrival of the euro from January of this year—what we have done to make sure that the UK is ready for the euro, whether in or out of EMU—and, finally, the work being done in both the public and private sectors to give the UK a real option of joining.
The question of British participation in the single currency is certainly one of the most important issues this country is likely to face for a generation. So, on coming to office, the Government made a number of important decisions. First, we announced our commitment in principle to economic and monetary union and our decision to make clear and unambiguous economic benefit to this country the decisive test for UK membership. Secondly, we spelled out our firm intention to take the lead in a period of preparation in order to ensure a genuine option to decide to join a successful single currency early in the next Parliament. Thirdly, because of the magnitude of the issue, we said that the final decision on joining should be taken by the British people at a time when it is possible to judge more accurately that the economic benefits are clear.
I have said that the essential decision is economic. The Government's central economic objective is to achieve high and stable levels of growth and employment. Britain's interests in the single currency need to be judged against this objective and to do that we have set out our five economic tests. We stand by the tests as the basis for a rounded and pragmatic assessment of the economic case for membership.
Our tests are challenging and we are making progress towards meeting them. Monetary and fiscal policy have been put on a stable, long-term footing which, we are convinced, will help to put an end to the particular instabilities and volatilities which have plagued the UK economy in the past. Greater economic stability will minimise differences between our economic cycle and that of the eurozone. We have also taken numerous steps to improve the degree of flexibility in our economy through new deals for the young and long-term unemployed and reforms to the tax and benefit system. However, we cannot say that our economic tests are met yet. We need to be able to judge that that convergence is capable of being sustained.
Ensuring this country has a real option of deciding to join a successful euro is the best way of promoting our national interest. The Government are committed to delivering a genuine choice to the British people. That means we need to start making preparations now. It is only through a period of intensive preparation that government, Parliament and the British people will be in a position to make an informed decision about where our economic interests lie.
Our policy on entry is, therefore, clear. It is important that we should prepare for the reality of the euro whether the UK is in or out. In autumn 1997, the Chancellor of the Exchequer set up, under my leadership, the Business Advisory Group with representatives from nearly 20 key business and trade organisations, the Trades Union Congress and the
980
Consumers' Association. The Business Advisory Group's remit was to consider the practical implications of EMU.
In January 1998, the Business Advisory Group reported on a range of preparations, issues arid arrangements for possible UK entry. Throughout 1998, the Treasury's Euro Preparations Unit was the focus for taking forward the Business Advisory Group's recommendations and stimulating preparations in both the public and private sectors.
Here are just some of the steps that the Government have taken to help business prepare. The Government have produced a range of publications on economic and monetary union and core information for business, especially small and medium-sized enterprises (SMEs), in the form of 20 clear, concise factsheets on "business preparations for the euro". Over 375,000 sets of fact sheets have now been requested by industries and companies.
We have set up a euro preparations website and opened a 24-hour telephone line for ordering the factsheets and carried out a high level national communications campaign aimed at business including TV advertising and direct mailing. The Government have provided speakers for numerous euro preparations events and trained over 500 staff of business intermediary organisations across the UK.
The Government have published six-monthly progress reports on overall and sectoral preparations. The Government have also been responsive in their approach. The public sector is ready to facilitate business use of the euro. Firms can now pay taxes, file accounts, issue and redenominate shares, receive certain agricultural grants and grants under regional selective assistance (RSA) in euros. Customs and Excise has trained 10,000 staff to respond to business needs. All that means that the public sector and business is getting ready for the euro whether the UK is in or out.
Lord Lamont of Lerwick: My Lords, perhaps the noble Lord, Lord Simon of Highbury, could enlighten me on one point. Will taxes paid in euros be calculated at the point of assessment or at the point of payment? If there is an exchange rate loss, will that be borne by the Treasury or by the taxpayer? If it is not borne by the Treasury, is not the whole idea of paying taxes in euros simply a gimmick?
Lord Simon of Highbury: My Lords, I do not think it is a gimmick because there is a choice. The exchange risk will be borne by the taxpayer.
The UK must be in a position to make a quick and smooth transition should Parliament and the people decide to join the single currency. What the Prime Minister announced on 23rd February was not a change of policy but a change of gear. The sheer nature, scale and complexity of the arrangements require considerable time for such preparation. If we do not start to face this reality now, we shall simply not have the practical means necessary to make a choice.
The Government have been working with a great many organisations such as the banks, Chambers of Commerce, Business Links, CBI, and others, on

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preparations that would be needed for UK entry if that is what Parliament and the people decide. This has been a consultative approach. The changeover plan is very much a consultative document. It seeks to stimulate debate and help people think seriously about what might be involved if we decide to join the euro and it sets out a possible timetable for adopting the euro if the country decides that that is what it wants to do.
Once the Government have announced their decision to recommend joining a single currency to the people, we could hold a referendum of the people within four months. Following a positive referendum result, we would be in a position to introduce euro notes and coins 24 to 30 months later. And six months after that we could see the withdrawal of sterling. So, in total, we estimate it could take three years from a yes vote by the people to the withdrawal of notes and coins.
This is only a provisional timetable and we must do a great deal more work with business and the wider public sector before producing a further plan next year. As I said earlier, this is a consultative process and so we are keen to hear what British business thinks. We can also learn more from the experience of the 11 countries who joined in the first wave and adopt their best practice. There is a wealth of IT experience of euro conversion and real experience of the growth of euro use during the period of changeover which is already developing in continental Europe.
It is essential that as part of this process the public sector shows a lead, making clear the Government's commitment to prepare. Each department now has a Minister responsible for euro preparations and each will now report regularly on preparations they are making. Where computer systems are being upgraded, all departments will build in euro compatibility where that represents value for money. In the case of the Department of Social Security, the Inland Revenue and Customs and Excise, the scale and complexity of their computer systems makes advance preparations critical. Together those departments are the main interface between central Government and the business community, and deal with almost every individual in the UK. They will need to spend some money prior to a referendum to make their information technology systems euro-compatible so that we can maintain the flexibility for Britain to make the changeover as quickly and cost-effectively as possible in the event of a positive referendum result. We are taking the necessary steps in the public sector.
The Outline National Changeover Plan looked at the key sectors across the whole economy to produce the practical steps that would need to be taken if the UK was to join the single currency. One among those key sectors is retail banking which provides essential services for the rest of the economy. Both through the British Bankers' Association and through direct representation, the banks have been working closely with government in developing an understanding of changeover issues. Many are already offering euro services but they need to think about how demand for those services will build up over time and how they will
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meet that demand. They need to decide how they will make the process of conversion as simple for their customers as possible.
Retail banks have specialised computer systems which would require thorough planning and significant investment to adapt. This is a complex area. It involves looking at different technical approaches and seeing what lessons we might be able to learn from banks participating in the first wave. The changeover plan states the issue. We now need to continue our work on it.
The retailers are another key sector who would be in the front line in any changeover to the euro; again, we consulted closely with representatives of the sector such as the British Retail Consortium, and all that has gone on behind the development of the national changeover plan. We will continue to do so as planning progresses. Many of the eurozone countries are still developing their approaches in areas such as consumer information and dual pricing, so lessons will only emerge over time and particularly with the introduction of the first euro notes and coins.
Maintaining the confidence of consumers during a changeover would be vital for all retailers; and those that managed to do so most effectively would obviously be at an advantage over their competitors. It is an issue that the retail sector as a whole is keen to address through the development of a draft code of practice, covering such matters as consumer information and dual pricing. The Government welcome that initiative.
Preparations work is not confined to the public sector, the banks and the retailers. The plan also looks at the wholesale financial markets so successfully launched in the first stage on 1st January this year by the City of London with, of course, expert guidance from the Bank of England. We are also studying the production of notes and coins and, separately, the legislative issues which still remain. We will continue to work to refine our understanding of all the issues involved and continue to make practical preparations. My message for noble Lords is that we are making significant progress in preparing the UK for the possibility of joining. The country will have a real choice.
It is government policy that, in principle, Britain should join a successful single currency. That principle is real. The practical preparations that we have set out are also real. The conditions necessary so that we proceed with caution, common sense and in our own interests, are real. If it be the nation's wish that we join, we have an outline programme to facilitate entry into the euro system which will enhance Britain's future in Europe and which has this nation's economic interest at its heart. I beg to move.
Moved, That this House takes note of the Government's outline proposals for a national changeover plan for EMU.—(Lord Simon of Highbury.)
5.56 p.m.
Lord Skidelsky: My Lords, the Outline National Changeover Plan published on 23rd February this year sets out what it calls a "critical path" from the decision of the Government to join the euro to the end of the

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changeover period when sterling would cease to exist—a period expected to last three years and four months. It then outlines what the various economic sectors should start doing now to adapt their systems to membership. There is a lot of material about preparing computers, information technology, cash machines, pricing systems and so forth for what the Minister called "euro-compatibility"; the general idea being that the economy should be geared up to a state of readiness to join the eurozone quickly if and when the Government and people decide to join.
Much of what is contained in the national changeover plan is perfectly sensible. We criticise it not for what it puts in, but for the intellectual and political vacuum which surrounds it. The preparations assume that it is in Britain's urgent interest to join the euro; that the economic conditions for our membership laid down by the Chancellor in October 1997 will be met sooner rather than later and, in short, that life outside Euroland is simply unthinkable. Yet astonishingly the Government have never set out the case for any of those propositions. It is as though they were urging us to prepare for a war without explaining why we need to fight that particular war.
I should like to draw attention to what was surely an extraordinary statement by the noble Lord, Lord McIntosh, in your Lordships' House on Wednesday 14th April. My noble friend Lord Peyton of Yeovil had asked,
"Whether [the Government] will issue a White Paper setting out the political and economic reasons for and against the United Kingdom joining the European single currency".
In his reply to a further question from my noble friend Lord Bridgeman, the noble Lord, Lord McIntosh, said,
"A White Paper of the kind asked for … is appropriate only when a decision … is imminent".—[Official Report, 14/4/99; col. 769.]
Do not the Government believe that they have a duty to put all the facts, all the pros and cons, to the public before they exhort or require businesses to make costly preparations for the changeover? The national changeover plan is not simply an outline of what the Government expect businesses to do; it is a set of propositions which will be extremely costly to implement. Businesses are being asked to spend tens, possibly hundreds, of millions of pounds preparing for an event which may never happen, without even being told why it should happen and certainly why it should happen so quickly.
The Government have argued—the Minister has made this point again today—that the case for joining EMU is fully set out in the Treasury paper, UK Membership of the Single Currency, issued in October 1997. It stated five economic tests which had to be met before Britain could expect to prosper in the single currency zone:
"Sustainable and durable convergence is the touchstone and without it we cannot reap the benefits of a successful EMU".
That has been the only official government pronouncement on this matter, but it does not add up to an argument for joining.
The Treasury itself is too cautious, rightly so, to say whether or when convergence will be achieved. Even if we leave that aside, to say that under certain economic
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conditions we can prosper inside the eurozone is not an argument for going in, unless it can be plausibly shown that we would be economically worse off if we stayed out or that joining would confer additional political advantages which could not be matched by equivalent gains elsewhere. But the Government have not actually made these arguments.
Our contention, therefore, is that we should have this discussion, this wider debate, before we make any further preparations for joining. The time to Kart the changeover is when the British people have decided that they want to join the single currency. To start it now, before the debate has taken place, before the decision has been reached, on the ground that unless we prepare now we shall not have a real option to join early in the next Parliament, seems to me to be simply an attempt to bounce us into accepting that our joining is inevitable. Do the Government really believe that three and a half years would be insufficient to prepare for a changeover once the decision has been taken?
Perhaps I may take up one or two particular points. In his October 1997 statement, the Chancellor said that there is,
"no constitutional bar to British membership of EMU".
Ministers flourish that statement as though it were a great discovery. Of course, there is no constitutional bar to our membership, because Parliament is sovereign and it can do what it likes.
But joining has quite profound constitutional and political implications. At each step in our deepening involvement with the European Union, there have been political and constitutional implications which have been deliberately hidden from the British public by successive governments' insistence that the EU is purely an economic arrangement.
The Prime Minister reinforced this in a recent statement. He said:
"just as the euro cannot be conceived of except politically, it cannot be made to work except economically".—[Official Report, Commons, 23/2/99; col. 181.]
I will try to translate, because its meaning is not obviously apparent. To say that the euro is "conceived of politically" surely means that it has political consequences. If we join the euro, Parliament loses control over monetary policy; but do the Government really believe that the European Central Bank will be allowed to remain a kind of Vatican City in the middle of Europe, a 21st century version of the Papacy, answerable only to the god of monetary theory? Is it not much more likely that a successful attempt will be made sooner or later to impose ultimate political control over the European Central Bank at the European level? And does that not mean a European government or a move towards it? That is not just a hypothesis. It is the avowed aim of most leading continental politicians when they talk on this matter.
Politicians in this country need to be as honest as those on the Continent about the political implications of UK entry into a single currency. If the Government said, "We do not believe that monetary union will lead to political union" or, alternatively, "We believe that political union is such a valuable prize that we are

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willing to take economic risks to get it", we could at least have a proper debate on the matter. But to pretend that there is no connection between political union and monetary union, that the issue of our membership should be decided solely by economic criteria, is intellectually feeble-minded and politically dishonest.
The changeover plan talks a lot about how businesses and departments should prepare for life in Euroland, but says nothing about how the economy as a whole should be prepared for membership of a single currency. The Government refuse to tell us whether they think that the British economy is becoming more or less like that of continental Europe and they do not tell us how our economy can be made to converge, if it is not doing so of its own accord.
Perhaps I may give one example. Article 3 of the protocol on convergence criteria in the Maastricht Treaty states that a member state should have,
"respected the normal fluctuations provided for in the Exchange Rate Mechanism … without severe tensions for at least two years",
before being allowed to lock its currency "irrevocably"— a word I never like—into the euro. At the time, the normal fluctuation was 2½ per cent on either side of a central parity. Under present conditions, with all that has happened since 1992, the Government should be preparing, if they want us to enter the euro early, for sterling to shadow the euro as part of their preparations for joining. Yet the Government deny that they have any intention of sterling shadowing the euro and imply that convergence of domestic prices leads automatically to convergence of exchange rates. Do they really believe that? If they do not, how do they square alaissez-faire attitude to the value of sterling with their critical path to joining the euro from early in the next Parliament? I do not find any satisfactory explanation of what seems to me to be a clear inconsistency.
There are many other indicators of divergence between Britain and the Continent which I could go into: the fact that we are the European Union's only oil exporter; that we have far more mortgage debt than the rest of the EU; that UK households hold a higher proportion of their wealth in equities; that we have no pensions "time bomb"; that our labour markets are more flexible, and so on. I would single out just one divergence. I refer to that between our trading patterns and those of our EU partners.
According to Business for Sterling, British industry and commerce do more business in dollars than in all the European currencies combined. We export 19 per cent. of our GDP to the eurozone and 25 per cent of our GDP elsewhere. We do more trade outside the EU than any other EU member, and invest more outside the EU and attract more investment from outside the EU than any other member. That means that any savings for firms as a result of our membership of the single currency would be deployed over only 19 per cent of the national economy. There would also be greater exchange rate instability for the rest of our foreign trade, unless the euro-dollar exchange rate were fixed.
The national changeover plan is costly and premature. Unless we are given a much greater insight than we now have into the Government's reasons for wanting to join
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EMU, we cannot have a proper debate; and unless we have a proper debate on the merits of the project—and I stress, on the political merits just as much as the economic merits—we shall be in danger of drifting into irrevocable commitments which we may well live to regret.
We are asked to take note of the national changeover plan. We, on these Benches, do so with regret.
6.10 p.m.
Lord Williamson of Horton: My Lords, the subject of our debate this evening is the Outline National Changeover Plan, which is a fairly substantial document of 64 pages targeted at different sectors and, rather appropriately, printed in red, white and blue for the most part. I should like to make a number of specific comments about the changeover plan during the course of my intervention.
In order to set this in context, which I believe a number of other noble Lords will wish to do and because all questions relating to economic and monetary union and the single currency risk becoming contentious in this country, I should like to make two preliminary comments based on my own experience. I attended all the meetings of the heads of state and government which discussed economic and monetary union and the related issues over a 10-year period from 1987 to 1997. Although some of it was rather boring, I have not forgotten all of it.
I should like, first, to recall that we have had quite a lot of time to think about EMU and the single currency. It is not a new issue; it has been with us quite a long time. Of course, it stems directly from the Maastricht Treaty. Indeed, on reflection, we might say that many of the provisions in that treaty are not very important at all. But three elements of it were extremely important: economic and monetary union, the single currency and the United Kingdom opt-out; the increase in the legislative role of the European Parliament, because there were important changes which increased its powers; and the attempt to create a sort of intergovernmental common foreign and security policy.
At that time, and subsequently, I was very much impressed by two great misunderstandings, going in opposite directions, which applied to the Maastricht Treaty and the subsequent discussion. I believe that those misunderstandings still leave their traces in the discussion on economic and monetary union today and in this debate. On the one hand, the governments of the member states did not generally understand the doubts of the public in a number of member states about the content of the Maastricht Treaty; indeed, the central element of that treaty was economic and monetary union. When the treaty was agreed—I was there myself—the Ministers were as happy as sandboys and did not foresee the difficulties which would arise in some member states. That was one of the problems.
However, on the other hand, the public and the media, particularly in the United Kingdom, did not fully understand the force of the powerful political and economic impulse which drove the heads of state and government of most member states of the European

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Union to launch economic and monetary union and to participate in the single currency. The conclusions, in my view, are still relevant today: do not underrate the doubts of the British public today, and do not believe that, in some way or other, the euro is going to fail.
For too long many who commented here on economic and monetary union and the move to a single currency thought that it was not going to happen, that few countries would meet the criteria or that, because it was not an optimum currency area, there would be difficulties which would generate economic shocks. Of course, there was an element of truth in the last point because both the press and economic commentators do often get things partially right, but the situation today is different and very clear. The move to economic and monetary union by 11 member states with the locking of their currencies has been smoothly made, and the preparation for the introduction of the euro notes and coins is going forward according to the timetable.
We can conclude that for the foreseeable future, whether or not the UK decides to participate in the single currency, our businesses and our citizens travelling on the Continent will be dealing with the euro. On balance, the existence of the euro in the 11 countries will be positive for British businesses and British travellers, not only because it reduces the complications of the currencies but also because it will make pricing more transparent and thus improve the operation of the single market.
Secondly, we are in a special position not just because of the opt-out but because any decision to participate in the single currency will be taken by the British people in a referendum. Although there will not be any immediate decision by the British Government and people on the question, in my view it is right that, like the Boy Scouts, we should be prepared. This means that, in the event of a negative decision, we must be able to maximise our capacity to benefit from the existence of the single currency elsewhere and to protect and promote the interest in particular of our position in financial services. In the event of a positive decision, it means that the complicated and difficult changes, to which the Outline National Changeover Plan refers, should be prepared and completed as quickly as practicable in order to minimise the disruption and uncertainties on the practical changes necessary.
I therefore support the decision of the Government to present an outline plan and, in particular, their invitation for comments and informed debate on the many practical issues raised in the plan. I am sure that the Minister will be glad that I have now arrived at Westminster from Maastricht and that I am supporting the Government's position on that point. I know that there are different views, but I think that it would be insulting to the British people if, after they had been invited to make a decision in a referendum in the next Parliament and if they decided to join a single currency, we were then to say that no preparations had been made and that much time would be needed. The Government are right to point out that the Outline National Changeover Plan states that,
"without preparation, it is not a practical option".
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On the substance of the Outline National Changeover Plan, I also have two points to make. First, it is certainly helpful to have the various case studies and an estimate of the timetable for the changeover, which, as the noble Lord, Lord Skidelsky, pointed out, the plan estimates 40 months or less from a government decision to join to the sole use of the euro. However, if we look in particular at the timing for the adaptation of complex IT and other systems—especially in retail banking where most of those systems which were installed a long time ago have been adapted over the years but are not necessarily capable of continuous adaptation—we can say that this is a rather ambitious timetable both for business and for the public sector. It is unusual for a government to be ambitious, but not forbidden. But I believe that this time it is in fact rather ambitious.
Secondly, the plan asks quite specifically whether there is a role for regulation—by which is meant legislative action—of the practical steps of any changeover. I very much hope that the Government will stay with their support for a voluntary approach and the development of a UK code of practice to help consumers, retailers and suppliers. The first priority should be the consumers. But, to ensure the best deal for them, we need adequate information, very adequate information and perhaps very very adequate information. We also need a certain flexibility within the framework of a code of practice.
To sum up, the people will decide but it is right to prepare information and to examine the practical problems now, using a voluntary approach as far as possible. The Government are also right to invite comments on the outline plan and to be ready to present a further public changeover plan after that consultation.
6.18 p.m.
Lord Barnett: My Lords, I agree with much that the noble Lord, Lord Williamson, has just said. I should like to deal with the three basic attitudes which exist in relation to both the plan and. indeed, economic and monetary union, although there are many strong variations on those basic attitudes. First, there are those who oppose the latter with different intensity. I include the noble Lord, Lord Skidelsy, among them and, indeed, the Official Opposition. In fact, judging from what they say, if they were honest they would admit that they would be opposed not just to EMU but probably even to membership of the European Union. They certainly do not leave many options open.
Secondly, I agree with the Government's White Paper for reasons that were well spelt out by the previous speaker. However, I take a different view, a third view, which I should like to outline.
I begin with those who oppose the changeover plan—the noble Lord, Lord Skidelsky, and the Official Opposition—although that attitude is not held by every Member of the Official Opposition, as we all know. However, the argument was put by the Leader of the Opposition in the other place when the Statement was made on 23rd February. He said that there were fundamental risks. Of course, there are risks. No one

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would doubt that; certainly not myself. However, I assume that "fundamental risks" means something fundamental.
Indeed, on 23rd February the right honourable gentleman the Leader of the Opposition asked whether there was not an attempt to lull people into thinking that,
"a nation that has decided its own destiny for 1,000 years is no longer fit to do so".—[Official Report, Commons, 23/2/99; col. 186.]
The Prime Minister challenged Mr. Hague on that occasion. He said, also at col. 186,
"At least the right hon. Gentleman has made it clear that he is opposed to a single currency for good, for ever".
Mr. Hague replied,
"No, I have not".
I quote Mr. Hague directly, which I assume will upset some noble Lords opposite. I see that one of them is laughing now. Certainly that does not appear to upset the noble Lord, Lord Skidelsky. I believe he would strongly agree with those sentiments. However, he said that he does not like the word "irrevocable". What the noble Lord, Lord Skidelsky, has said, and what the Leader of the Opposition said in another place in this context, means "never". I do not think there can be any doubt about that in anyone's mind. On the other hand, one is bound to say that even if it is in the national interest to join in the next Parliament, the noble Lord, Lord Skidelsky, his colleagues and the Leader of the Opposition in another place would not go along with that; they are opposed to it. As I say, those are the people who oppose the changeover plan and economic and monetary union.
I shall now discuss the plan itself. For the same reasons that were given by the noble Lord, Lord Williamson, I strongly agree with the need to make plans and to prepare for the possibility, as the Government put it, of joining. The document emphasises areas of vital national interest. I refer to the timetable which my noble friend Lord Simon mentioned, and which is referred to in some detail in the document, which states that the process would take about four months from the taking of the decision to finishing the referendum, and then up to four years for larger public sector departments, but overall it would be something like 40 months. That means that even if a decision was taken on this matter after a general election—which one assumes, in the light of all that is happening to the Opposition, the Government would win—we are talking about the end of the year 2001. The process would then take up to 40 months, if not a little longer.
Therefore, we would not assume membership of economic and monetary union and a single currency until 2004 or 2005. My personal view is that is far too long for us to be outside such an important currency area. I disagree with the Government on that point. However, that does not mean that I disagree with the need to plan and to prepare for our joining. Indeed, the Government have expressed the view that in principle they are in favour of joining, although they could not help including in the document and in the Prime Minister's Statement the words "conditional", "not
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inevitable", and "a change of gear". If that is the position, the noble Lord, Lord Skidelsky, is probably right that we should not have issued the document at all. I hope that our joining is not conditional; that it is inevitable that we shall join; and that it is not just a matter of a change of gear.
Although I recognise the political reality that all governments, and particularly this one—if I may put it that way—do not like to commit themselves too strongly until they have certain newspapers, or even the British public, on their side (leaving aside the noble Lord, Lord Lamont), I find it incomprehensible that they are unwilling to say that it is now a matter of "when" we shall join rather than "if. When we debated this matter previously, my noble friend Lord Simon did his best when he said that the matter means effectively what is in the eye of the beholder. He did not exactly use those words, but that is what he meant. I see that he nods his head. When he replies to this debate, I hope that he will do a little better than that because this should not just be a matter of what is in the eye of the beholder. If we agree to the measure in principle, we should say so as that would be beneficial to the whole future of Britain inside Europe.
The third of the basic attitudes that I have mentioned—I include myself in this—is that the UK is now more convergent, and sustainably so, than many of the 11 which are already in the system. The Government still continue to insist that we must meet the five economic tests that the Chancellor spelt out in October 1997. They should not talk about that because we all know that the five economic tests were not terribly relevant then and are much less so today. I recognise the problems that my noble friend Lord Simon faces in agreeing with me, but I hope that he will agree with me on this—to some extent at least. We refer to the economic cycle here as being different, but my noble friend must know that there will always be differences in economic cycles within 15 countries. If we were to insist on that point, then, like the Opposition, we really would mean that we would never join. There will always be some differences in the economic cycles. As regards interest rates, although clearly there is a difference between our interest rate, those in other European Union countries and that of the 11 member states which have joined, the margin is much narrower now. If we were to announce today that we would now join as a matter of fact, I believe we would close that margin considerably and without too much difficulty. That would considerably help the British economy.
It is constantly said that one of the five economic tests is the need for sustained economic strength, as the Prime Minister said in the Statement of 23rd February. I hope that the Prime Minister believes what the Chancellor has been saying. Although I have had my doubts from time to time, I believe what the Chancellor said. I believe that most people in the country have now stopped talking about recession, crises and all the rest of it. What the Chancellor has said both in his Budget and in other statements about the economic strength of the

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United Kingdom signifies that we have more sustained economic strength than many of the 11 which have already joined.
I believe that the Government's position is absolutely right as regards the plan. It is sensible to prepare, whatever may be said by the Opposition. But it must be wrong not to give a clear lead today. Let us forget the five so-called "tests". Matters are never likely to be better than they are now, or in the next year or so when I hope we shall join. I hope that the Government will declare their intention to proceed rapidly with the changeover plan so that we can become a real leader in the European Union—and much sooner than now appears to be the case.
6.28 p.m.
Lord Cockfield:My Lords, it is always a great pleasure to follow the noble Lord, Lord Barnett, not least because, although we sit on different sides of the House, on major issues confronting the European Union we stand on very much the same side.
Although this will be well known to most of your Lordships, I support, and always have supported, the concept of a single currency. Indeed, I regard it as the crowning achievement of the single market. It is in fact the keystone which holds a whole edifice together and complete. My only regret is that we did not join at the outset. In the case of the Major government, riven as they were by dissent, that is understandable. But the Labour Government have no such excuse. Having said that, I now propose sticking strictly to the subject matter of the debate, which is the outline changeover plan that has just been published by the Government.
It is a step forward that the Government should have published such a plan, but nevertheless it is deeply unsatisfactory. It sets out various steps in the changeover. There is nothing novel about that. Indeed, virtually all of this information appeared in the Financial Times a couple of days before we last debated this subject on 20th January. The changeover plan adds very little to that. While it is good as far as it goes, it contains neither a starting date nor a date of conclusion. It is as though you invited somebody to take a journey by train and you told them it would take four hours, but you were not prepared to disclose when the train would leave, still less when it was expected to arrive. You did, however, warn the traveller that he might meet delays en route and you even said the train might arrive early. That, of course, is very reminiscent of the way the railways are run at present—except for the possibility of arriving early—but for the Government, that is not good enough.
Having said that, I wish to draw specific attention to two perils which might he encountered on the mystery tour to which the Government are now inviting us and which might have an important bearing on the time the train arrives at its destination. I tried to explain the first of the perils in some detail in the debate on 20th January, but I failed to put over my point. I propose having another go now. I am sorry that the noble Lord, Lord McIntosh of Haringey, has left us because he replied to the debate on 20th January and I would not
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like him to think that I was in any way dissatisfied with the reply that he gave. It is simply that it was not an answer to my question. I am hoping for rather better luck with the noble Lord, Lord Simon of Highbury.
From the political point of view, what really matters about the changeover is the retail stage. That is when euro notes and coins will be substituted for our existing currency. That is when the general public—the man in the street, the shopper—will come face to face with the reality of the changeover. Anyone whose memory goes back to 1972—and the memory of some noble Lords will do so—when decimalisation was introduced will recall the public outcry that occurred on that occasion. They will recall that people claimed they (lid not understand and that there was profiteering on the part of retailers and other people. The reaction to the introduction of the euro at the retail stage is likely to be far worse than anything that occurred in 1972.
By an irony of fate, the retail stage under the timetable for the introduction of the euro, which has now just started to run, coincides with the date when the next general election might be held. That is likely to be in 2002. In our debate on 20th January I asked the Government how they proposed to deal with that singularly unfortunate coincidence of two major events. As I said, I received no reply, so I am now trying once again. To some extent, the answer is given in the changeover plan. I shall give two quotations, but I have left out what I regard as unnecessary words. The changeover plan states that,
"making a decision, during this Parliament, to join is not realistic".
The second quotation follows almost immediately afterwards:
"a decision to join … can be made early in the next Parliament".
Leaving aside the question that "can" can always be interpreted as "might" if it is expedient so to do, it would seem at first sight to meet my concern as it places the whole operation beyond the next general election which, incidentally, need not take place until May 2002. But it raises all kinds of other problems. In particular, it could create real problems in relation to the following general election, especially if the election in 2002 were late and there was then pressure to wait until the reaction on the Continent to the retail stage was known. That might well take many months to assess. That might have repercussions in relation to the timing of the following general election.
I realise that all this can be dismissed as idle speculation, but unless the Government have a very clear idea of how they will address these problems, industry and the private sector generally will be left in a state of uncertainty. Fortunately, there is an answer—I offer the Government this advice—in terms of having an early general election this time round. Instead of letting the present Parliament run its full term until May 2002, a general election could be called a year early; namely, in May 2001. There is nothing unusual in a four-year Parliament instead of a five-year Parliament. Indeed, a five-year Parliament carries certain risks for the incumbent government, as the noble Lord, Lord Callaghan of Cardiff, and my right honourable friend John Major, will testify, both of whom thought that they would run to a five-year Parliament.

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In offering the Government the option of a four-year Parliament I am trying to assist them. The decision to join could then be announced in the Queen's Speech; the changeover programme could begin to roll and would be completed well before the following general election. It would require real courage, but unless the Government are absolutely clear and categoric about this and, therefore, about the timetable as a whole, many people will simply sit on their hands, wasting time arguing the toss, and the end result will be disaster—not just for the Government, which arguably does not matter, but for the country, which certainly does matter.
We have before us now the lesson of the millennium bug. People have not been prepared to take it seriously and we have reached the stage where, if people have failed to take the necessary measures, it is almost too late to do so.
There is a second peril which must at all costs be avoided; namely, going in at what proves to be the wrong rate of exchange. To understand this point we need to return to the disaster that occurred when we joined the ERM. It is commonly said that we went in at the wrong exchange rate. That is not the real explanation. The real reason is that we went in at the wrong time—just at the time when the Lawson boom was reaching its climax and the economy was poised to slip downhill. When a country moves into recession, normally its rate of exchange weakens. That is a benign development because the weakening of the rate of exchange encourages exports, and that in turn can often start the recovery under way.
When we entered the ERM the exchange rate was entirely correct as of that day. But as we moved into recession the exchange rate ought to have fallen, but it could not do so because of the constraints imposed by the ERM. In short, after proclaiming year in, year out that we would enter the ERM when the time was right, we went in exactly when the time was wrong. I hope that that error will not be repeated. I shall deal with the point in greater detail. In the end, we broke out of the bind, which was a self-inflicted injury—no one else was to blame—by leaving the ERM. That drastic remedy is not available in relation to the single currency. It is a case of once in, effectively always in. So once we join, we have to get this one right. Ideally, that means entering the ERM when we are at the bottom of the economic downturn, when our currency is at its weakest and when, it is to be hoped, the other countries are at the top of their economic cycle. That is precisely the opposite of what Mr. Brown has advocated in wanting our economy to be "in sync" with the other economies of the economic union.
It is no good thinking that this problem can be solved by negotiation. The other member states will never for a moment accept a rate of exchange for the pound when we enter which is different from the current rate of exchange. We must ensure that, when we enter the single currency, the facts meet our expectations. There is, of course, a problem with the Maastricht criteria—if anyone really knows what those criteria amount to. I know that my remarks may sound pretty Machiavellian, and I would never accuse the Government of being
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as clever as that, but the European Union is no gentlemen's club. You have to be pretty ruthless if you are going to survive.
6.43 p.m.
Lord Peston: My Lords, I congratulate my noble friend both on the plan that we are debating and on his presentation of it. I begin from the position that, no matter what the theoretical pros and cons of monetary union per se, now that EMU exists the United Kingdom should be a member. I appreciate the difficulties of a new government, after 18 years in opposition, taking an early decision to join. But, like my noble friend Lord Barnett, I am sorry that the earliest Britain could now be a member would be the third, fourth or even fifth year of the new century.
The present document refers to whether the economic case for the United Kingdom joining is clear and unambiguous. I can only say that I am hesitant about regarding the economic case for anything as capable of being clear and unambiguous. That applies even more so to business decision-making, which is usually about the balance of advantage and disadvantage, or the choice of evils.
With that caveat, I would assert that at this moment the United Kingdom would be more likely to prosper within the single currency system than some of the countries that have already joined. That is also true if the criteria of sustainable convergence are examined. Rather like my noble friend Lord Barnett, I believe that we have converged to the necessary degree and can sustain that position relatively easily. I am therefore much more optimistic about this matter than is my noble friend the Minister.
The noble Lord, Lord Skidelsky, gave the usual list of all the ways in which this country differs from all the other members of the European Union. He did not include the main difference, which I am convinced underlies the opposition of the so-called Eurosceptics. The main difference between us and them is that we are British and they are foreigners. That is the whole point about Euroscepticism. It has nothing to do with a serious analysis of economic matters. Happily, the noble Lord, Lord Skidelsky, did not take that xenophobic view.
The noble Lord led us to the serious question of the exchange rate. The document refers to exchange rate stability against the euro. I do not know whether that replaces the Maastricht Treaty condition, which related to membership of the ERM and exchange stability within it. For several years (I asked this question several times of the previous government) the Treasury appears to have said that the original Maastricht condition no longer applies. It would be useful if the Minister could confirm that.
Much more important is the question raised by the noble Lord, Lord Cockfield, to which I have to say I do not know the answer. Almost everyone agrees that the fixed value of our currency within EMU must be lower that it is at present against the euro. What is not clear is how we arrive at the correct value, assuming that we can work out what it is. The Bank of England's Monetary Policy Committee has a remit to hit an

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inflation target. The Chancellor has set fiscal policy in the medium term, and therefore has shown what used to be called Keynesian short-term interventionism.
It follows logically from that that the exchange rate is simply determined by market forces. The Government have no control over it at all. That means that at some point either the remit of the Monetary Policy Committee has changed, or something miraculous has happened. I, for one, am not a great believer in miracles. It is, anyway, true that in clue course new legislation must be introduced to replace the 1998 Bank of England Act. The Monetary Policy Committee of the Bank of England will cease to exist and the Bank of England will become just like the central banks of other member countries, sending a representative to the European Central Bank in order to help formulate monetary policy and retaining only a technical role for itself.
Here is as powerful an example as any of what we lose by not being a member now. A new form of policy-making is emerging at the European Central Bank. Member countries openly state that they are learning the ropes and gaining experience as they go along. But by the time we join, a great deal of their operating procedures and monetary policy philosophy will be determined, without our having any ability to influence or change it. In other words, it is a repetition of the story of the European Union in all its forms over all these years. That is a great pity.
Perhaps I may now make a few remarks on the practical details as they are admirably set out in the document. My noble friend and his committee (or committees) are doing an extremely good job in most difficult circumstances. It is a commonplace of economic theory that changing the currency unit has no economic effects. It is equivalent to the proposition that the real temperature is no different whether it is measured in centigrade or Fahrenheit. That said, it is interesting to the average academic economist how difficult and costly changing the unit of account turns out to be.
I also note, somewhat wryly, how IT appears to be as much a part of the problem as the solution. The miracle of computing power available at all levels of business and households would have caused naive people such as me to say that the changeover would be easy. It would be like my route-planning software. At one click I can tell it to calculate distances in miles or kilometres or petrol consumption in gallons or litres. Telling computers to calculate transactions in euros instead of sterling would be just as simple, I would have thought. But I am clearly wrong.
In those circumstances, I have to reflect on the following sentence on page 31 of the document, to which the noble Lord, Lord Williamson, has already referred:
"By and large the UK clearing banks have core systems which were originally built—"
believe it or not—
"in the 1960s or 1970s but which have since been expanded over the years as services have become more sophisticated. The systems are very good at what they do, but are quite difficult to adapt".
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I can only comment that you do not have to be a genius to see that in the contemporary world adaptability is of the essence. What kind of people, including the retail banking system, are ordering and building systems which are difficult to adapt to changing needs?
My last technical comment concerns business preparation generally. What assumption is business being asked to adopt? The document sets out clearly and forthrightly the problems of planning. But are businesses being urged to plan on the assumption that we will join? If not, when will they be advised to make that assumption? That point was made by other noble Lords. Presumably the public sector is planning on the assumption that we might join. But with what degree of probability? I do not expect my noble friend to answer questions like that now, but they cannot be left unanswered indefinitely.
That leads to my conclusion on information. It seems to me that the public is bewildered by all the single currency business. The reason is that ordinary people are being asked to respond to hypotheticals: what might be or what would be. What they need are actuals. My own view is that we require a public information campaign, but we require it now, precisely as the document says—
"the early provision of clear, accurate information and its delivery through primed information channels".
Unfortunately, there is a great deal of disinformation. Some people seem to be in the business of providing disinformation on a grand scale. The Government feel, on constitutional grounds I think, that they cannot yet intervene. That is a puzzle to me, but it relates to the point made by my noble friend Lord Barnett, that it is time the Government said, "Yes", and when.
One benefit of the document and of our debate is that perhaps it will reassure the public that we are taking the planning phase seriously, that we can say to the public that there are enormous potential benefits to be gained from EMU. If someone, perhaps, from the Opposition, would put the right subject down for debate, I would be happy to outline what I think the enormous potential benefits are. I happen to believe that they are not benefits that fall into your lap, but benefits you have to grasp and towards which the Government must lead us.
6.53 p.m.
Lord Hamilton of Dalzell: My Lords, I find myself in fundamental agreement with my noble friend Lord Skidelsky. Whatever the pamphlet is, it is not a discussion document because it leaves out the political factors. I shall always remain opposed to our joining the single currency because of our loss of sovereignty, which I think will inevitably occur. In my view, the pamphlet is designed to reinforce the impression of the inevitability that we should join. The noble Lord, Lord Simon, talked about the smooth transfer, the ability to make a choice in a hurry, flexibility, speed and all such matters. Having read the pamphlet, I turned to the front cover, fully expecting to see that it came from the "Ministry of Information"—that well-known euphemism, in countries where they have one, for the

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Ministry of Propaganda. The pamphlet follows the cardinal rule that if something is repeated often enough, most people will begin to believe it.
The first point that struck me was the repetition, eight times, of the blue diagram marking the 40-month period between the "decision" and the "end". It has been described by the noble Lord, Lord Simon, as "a provisional timetable". It is a clever device giving the impression of a fait accompli. Why otherwise would it be necessary to repeat such a simple thing so many times?
You have to hunt around to find out what the end is—perhaps aptly, because if we were ever to get that far, it would be the end of parliamentary democracy in this country, as we have come to know it.
Like my noble friend Lord Skidelsky, I made a note of the response of the noble Lord, Lord McIntosh, at Question Time. Indeed, I felt strongly about it because I received a Written Answer in the same vein. I have sympathy for the noble Lord, Lord McIntosh, who is captive in the position of having to answer such Questions. His instructions seem to be that all he can do is to give his name, rank and number. He might just as well say, "McIntosh, Lord, 2193131", and we would be just as wise as we are from his replies.
The opinion polls show some success in the effort to enshrine inevitability. Although the majority in the country are opposed to our ever giving up the pound, there are many people who think that we will join, whether they like it or not. I wonder whether that is a good basis on which to proceed.
Having lost all the other arguments, the selling of the idea that we will join and that there is nothing anyone can do about it is the only strategy left. It must be given the best chance possible to impress itself on the population before the difficult obstacle of the referendum has to be surmounted. To this end, the persuasion of business is vital.
The pamphlet is, in my view, aimed at continuing that process. However, I suspect that many businessmen who read it will be outraged at its effrontery in the way it tells them how to run their businesses in such elementary terms and how it attempts to inveigle them into spending large sums of money on what must still be regarded as a speculation. Surely they will see through the conspiracy that they are being persuaded to make the bet so that they will then want to see the horse run.
If the referendum goes against joining or even never takes place, money will have been needlessly squandered and the performance and share prices of companies will be adversely affected. If businessmen need more time after the referendum, why can they not have it? The real information they need on the basic assumptions of economic interest is not here. Again, my noble friend Lord Skidelsky mentioned various information that businesses would want and asked about our position as an oil producer. My noble friend Lord Cockfield mentioned how important it is to have
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the rate fixed at exactly the right level. But what is the right level for exporters against importers? It seems to me that you cannot satisfy both.
Will restructuring in the EU ever take place? We now have socialist governments all over the EU and it seems to me that that is becoming much less likely. There are many questions to which they must know the answer: what will be the rate against the US dollar and the yen? Since we last had a Labour Government in office, we have become a great deal more suspicious of government's expertise in corporate affairs. No doubt we had similar prospectuses for the benefits of nationalisation, the ground nut scheme, de Lorean, and the benefits of sending ships to Poland loaded with taxpayers' money so that the Polish fleet could compete on unequal terms with our own merchant fleet. Concorde and the ERM have been already mentioned. Those are just a few of the instances which spring immediately to mind. Noble Lords will be able to think of many more.
I hope that the chairmen and directors of banks, the motor car industry, the supermarkets, the City of London, and the water companies—I wondered why not the oil industry; is it because it already deals in US dollars or is it because its chairmen and directors are too clever to need it?—all of whom are paid to run their businesses and who are being offered this advice free, gratis and for nothing, will treat it with the scepticism it deserves. But before they put the document in the bin, they should turn to page 46 where they will find the green chart describing the public sector structure. There, they will see in the structure plan, the little triangles, government departments (for which they can read the Westminster Parliament) coming underneath euro ministers. I encourage them to take a pen and insert at the top "The unelected European Commission and Central Bank". They will then have its true significance in a nutshell.
7 p.m.
Lord Kingsdown: My Lords, in case I fail to make it clear in my speech, perhaps I may open by saying that my position is very close to that of my noble friend Lord Williamson. Certainly, my position is closer to that of my noble friend than the noble Lord, Lord Hamilton. I last spoke in your Lordships' House during a debate on the economy. I concluded by saying that what was then a very satisfactory situation would be perfected by the granting of independence to the Bank of England. This was received by the then Front Bench good-naturedly but as a plea inspired by special interest. Nevertheless, I admit that to my surprise that was exactly what took place within a matter of months. I have allowed myself since to feel that at least on that occasion I spoke with effect. I have been very selective about speaking since then for fear of compromising this record.
I must confess, however, to having already made a plea in respect of the subject that we are debating this evening in a publication entitled—I hardly dare say it—Kingsdown Revisited, which represented an assessment of where the United Kingdom's interest was likely to lie after the introduction of the euro. It was a report

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sponsored by an organisation called Action Centre for Europe and it commended the line taken by the Government then in respect of EMU, subject to the typical schoolmaster's comment "could do better". There must be a much clearer signal not only of where the Government are going but also in order to justify the need and cost of preparation in advance of a decision by the UK to join. In such circumstances I can hardly fail to approve the plan that the Government have put before us today. I was pleased to hear from the noble Lord, Lord Simon, that progress in it appears to be greater than I had realised. I would regard it as irresponsible of a UK government at the present stage not to prepare for conversion.
Lord Skidelsky: My Lords, I am very grateful to the noble Lord for giving way. As he has mentioned one of his previous publications which deals with the wider issues, does the noble Lord believe that there are any political implications in sterling joining the single currency, or in his view is it purely an economic issue?
Lord Kingsdown: My Lords, I cannot deny that there must be a political element in this, although I see it very much more as an economic matter. That is the basis of my argument this evening, as it always has been.
The UK may or may not join in the foreseeable future, but I believe it would be disgraceful if it transpired that it was in the national interest to join and we were incapable of doing so and could not qualify. Only those who believe that they can say with conviction that the UK will never join, or not for, say, at least 10 years, can argue that preparations are not now necessary given the kind of lead times that the Government's plans show and the experience so far of those who are now full members of EMU.
It is worth contemplating just for a moment what is likely to be ahead of the United Kingdom in terms of the world economic scene five or 10 years from now—indeed, well into the next century. There will be two large single markets almost equal in size: the USA and Euroland. Next in size of economy will be Japan and after that, but in a very different league in terms of size, the United Kingdom. The UK is a country with a long tradition of living by international business and with a currency, albeit small in volume compared with others I have mentioned, that is still quoted and traded in foreign exchange markets.
I believe that the constraints on our macro-economic policy in such a scene will be severe if we are to avoid the attention of those ever-hovering vigilantes—the international foreign exchange markets—whose daily turnover outnumbers the total reserves of the country dozens of times. It will also be a world in which something that has been taken for granted for generations will increasingly change. The Industrial Revolution and the rise of nationalism were roughly simultaneous changes, as a result of which economies are seen in terms of individual countries. But the great international companies whose activities are the driving force of the modern world know no national boundaries. For example, the components of a modern automobile are likely to be manufactured in three or four different
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countries and the final vehicle assembled in a fifth. Investment decisions will flow to whichever country offers the most advantage. I believe that, increasingly, large investors will seek to incur their costs in the currencies in which they plan to sell the final product, thereby obviating exchange rate risk. In my view, these and other considerations make it increasingly likely that the United Kingdom may well not be able to reach the highest levels of productivity or competitiveness on its own but only as a full member in a large single market.
It is argued that we may be able to avoid single currency membership of the large single market of Europe by furthering our special relationship with the United States of America. My assessment of US policy, especially economic and trade policy, is that it is coldly realistic and without sentiment towards what is not directly in US interests and that we cannot rely on special economic sympathy there if we needed it. I recollect only too well the US Treasury Secretary on one occasion concluding a discussion in a G7 (or G.5) meeting on the US dollar exchange rate with the simple words:
"I am sorry—our currency, your problem".
I also remember Mr. Ray Seitz, US ambassador to London, saying in one of his farewell speeches that the UK's relationship with the US would be just as special as the UK's influence in Europe was great—a sentiment repeated in public by Sir Robin Renwick when he came back from his post in Washington. Whether we like it or not, Europhile or Eurosceptic as we may be at the moment, I do not believe that we can dismiss membership of EMU; and, if we cannot, given the long lead times needed for changeover, we must prepare.
Perhaps I have laboured the general point of UK membership too much when we are discussing a particular aspect of it. But the conversion plan will be expensive and involve a lot of work on a myriad of details. Somehow the Government have to convince business as well as their own departments that this expense and labour is worth while. I hope that my brief arguments this evening will help to show this to be so. I watched with interest the preparations here for the introduction of the euro on 1st January this year. Those preparations, as well as what will happen in Euroland over the next three years, will provide useful lessons for us. I believe one is that the greater the acquaintance with what is involved, the greater the readiness to approach it at least with an open mind.
My feeling is that the more the preparations proceed, the more the public reaction to the possibility of the single currency will become a matter of pragmatic judgment rather than instinctive reluctance towards drastic change—reluctance in which an emotive phrase like "economic sovereignty" is likely to play such a part.
As I have just touched on briefly, sovereignty—independence of action—is nowadays much at the mercy of forces beyond our control. What is not beyond our control is to ensure that a major decision affecting investment, economic progress—quite simply, jobs—is not beyond our capability because we have not prepared for it and cannot qualify. In this context, progress with the changeover plan is essential and I wish the Government well in that respect.
7.10 p.m
Lord Grenfell: My Lords, it is a pleasure to follow the noble Lord, Lord Kingsdown. I was not surprised to find that I agreed substantially with everything he said.
I very much welcome this debate and would like to begin by congratulating my noble friend the Minister both on the outline plan and his presentation of it. The high quality of the outline plan is a reflection of the skill with which he led the Business Advisory Group in its work which provided the Treasury's Euro Preparations Unit with the essential grist for its mill.
It is the settled policy of this Government that the people should be allowed to pick between the two options of entry into a successful single currency or staying out of it. I do not believe that the Official Opposition are against the principle that the people must have the deciding voice in a referendum in the event that the Government recommend entry and Parliament agrees. So I do not understand why they attack this outline national changeover plan as being presented in an intellectual vacuum. Do they reject the Government's logic that if we are to have the option of joining we must prepare? The noble Lord, Lord Skidelsky, asked why we cannot postpone preparations until the people have decided. But, as my right honourable friend the Prime Minister said in his Statement on 23rd February,
"The sheer nature, scale and complexity of the arrangements require considerable time for preparation".
And as both he and the changeover plan make crystal clear, without preparation there simply is no practical option to offer to the people.
Instead of accusing the Government of trying to introduce the single currency by stealth—I regard that as an absurd charge—the official Opposition should instead be explaining to your Lordships the ridiculous inconsistency in their argument: that the people must be consulted but without a practical option on offer. That is the effect of their opposition to the publication of this perfectly sensible plan. If they think they can have it both ways, I suspect that the British people will think otherwise.
That is where the Opposition have got it wrong, and where, in my opinion, the Government have got it right. They have also got it right in recognising that even if the British people were to reject a firm and fully reasoned recommendation that we adopt the single currency, the welfare of our economy and our living standards would depend critically on how well we are able to maintain and conduct our economic trade and financial relations with our eurozone neighbours. Whether or not those against the single currency like it, the euro is with us, and every day more UK businesses are starting to trade in that currency. If, by a negative decision, we find ourselves coping with the consequences of remaining outside, we shall have given ourselves a better chance of making the best of our trade and financial relations with the eurozone by having prepared ourselves for possible entry—the point was made by the noble Lord, Lord Williamson—than by having stuck our heads in the sand in the hope that the whole thing will simply go away, which appears to be the preferred course of action of the official Opposition. If they feel that that is doing a service to Britain, I must most profoundly disagree.
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I move now from the general to the particular and address briefly three specific issues. The first concerns the government decision to join—if that is their decision—the first key stage on the "critical path". I cannot dismiss the five economic tests as totally irrelevant, as does my noble friend Lord Barnett. But commentators have been suggesting that the five tests were sufficiently broadly framed to allow some necessary flexibility in judging whether and when they were met. If that were the Government's intention, I welcome it.
The first test—whether the UK economy has achieved sustainable convergence with the eurozone economies—is obviously the most critical. Our economy has been moving measurably closer to that of the eurozone in recent months. No longer growing faster than its long term trend rate, it may not be long before it falls into step with those of the Euro 11. By reducing the eurozone's base interest rate by half a percentage point, the ECB has, of course, put more distance between our rate and theirs. But if the Government maintain their tight fiscal stance, and I pray that they will, there is no reason why the current downward trend towards convergence should not be maintained.
Meanwhile, if the European Central Bank is aiming for an average inflation rate of about 1 per cent., which seems to be the case, an adjustment in our own target, sooner or later, should be in the Government's mind.
A further sign of convergence is the fall in long-term bond yields here to close to German levels, and all those developments suggest that convergence is not a pipe-dream, even taking into account the list of divergences of the noble Lord, Lord Skidelsky. I refer to them as differences rather than divergences. The Government assure us that there will be no need for sterling to shadow the euro for two years before joining, and that they have no intention of doing so anyway, whatever Commissioner Yves-Thibault de Silguy and other commissioners, acting or otherwise, have to say. But this presumably assumes that the Government foresee, without any shadowing, a period of sufficient stability for the pound in relation to the euro to head off any excuse for rejecting our entry into EMU if entry becomes the Government's recommendation to Parliament and the people.
I sincerely hope that the Government's confidence on that point is well founded. The European Central Bank appears to worry less about exchange rates than the Bundesbank did, so the euro could become more volatile against the dollar than the deutschmark was. Because our economic cycle has been better aligned to the US than to Germany, the pound has been more stable against the dollar than against the deutschmark. If the aim now is to bring the pound into a stable relationship with the euro, the greater the markets' belief that we will enter the single currency, the more surely and calmly will sterling move towards the rate at which the markets expect it to lock into the euro. Conversely, if the suspicion in the markets is that we will stay out, then there will surely be a more volatile relationship between sterling and the euro.

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If their expectation is, and it seems to be, that Britain will make a positive decision in the course of 2002, and if in the meantime interest rates continue to converge, the markets will most likely hold sterling in a range against the euro in the short term close enough to the rate at which they expect it to go in. Yes, my Lords, I think that the markets will carry huge weight in this big decision.
Expectation is now really the name of the game, and that is why I have always held the view that the earlier the Government can make known their intention to enter the better. At the very least they must demonstrate their determination to take a decision as soon as is practicably possible, for many reasons, not least because the public information programme foreseen in Chapter 8 will not begin until a positive decision has been taken. That worries me as much as it worries my noble friend Lord Peston.
The second of the three issues I want to address is the cost of the changeover. The Official Opposition have been making much of what they see as an unacceptable paucity of pound signs in the outline plan. There are plenty of independent estimates around. The British Retail Consortium reportedly estimates the costs to retailers at between £1.7 billion and £3.5 billion. A Lloyds TSB survey puts the cost to small and medium-sized enterprises at £6 billion, and there are others. But the Government are quite right to reject criticism of their decision to exclude estimates beyond the reference to some tens of millions of pounds that will need to be spent over a number of years to make the information technology systems of the DSS, the Inland Revenue and Customs and Excuse euro-compatible.
I find convincing the Treasury's argument that it is difficult to disentangle costs generated by the transition from those that would have to be undertaken anyway. Further, the CBI has reportedly suggested that cost estimates are likely to be spurious because the real cost is not the cash sum but the cost of financing the spending earlier than would otherwise have been necessary. I find that plausible, too.
My third and final point relates to small and medium-sized enterprises. I take my hat off to my noble friend the Minister on the Front Bench for his huge effort, detailed in Chapter 2 of the outline plan, to raise awareness among SMEs of the implications for them of the euro's launch. It has obviously been very necessary, to judge by the results of the Treasury's EPU's two surveys which suggest a reluctance among many to face up to the challenge. While the second of the two surveys showed a doubling of awareness over six months, still only 13 per cent. had taken any action and that was principally related to information technology. Pricing strategies, marketing and staff training appear to have engaged only 1 per cent. of SMEs. This is serious and I applaud the Government for their determination to help turn this situation around.
However, here, once again, I suspect that expectation is a factor in the SMEs' reluctance to prepare. Doubts that are widespread around the country, encouraged by much of the tabloid press, that the people will approve entry into EMU in a referendum, are hardly an
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encouragement to make the effort to prepare. Those doubts will only fully subside when not only the SMEs but all those addressed by the changeover plan see a government wholly convincing in their arguments for entering and transparently committed in their intention to do so.
The outline national changeover plan is, in my opinion, a well conceived, practical and vital step in the right direction. We must not lose sight of the fact that meeting the five economic tests will not alone open the door to our participation in this great European enterprise which is economic and monetary union. Rightly, only the will of the people can ensure that. But only an informed people can make a decision worthy of the great question posed to them. I trust this Government to ensure that that is how it will be.
7.21 p.m.
Lord Newby: My Lords, I join other noble Lords in thanking the Minister for bringing forward a debate on the subject so quickly after publication of the national changeover plan. However, we have had a slightly strange debate because, with the exception of the noble Lord, Lord Hamilton, half of the argument has not been made. Normally, debates on European matters produce strenuous arguments against those put forward by the Government and European supporters. It is a great pity that when many Members of your Lordships' House play a part in public debate on these matters many are too busy to be here today.
As regard the line of the official Opposition, it is surprising that the conclusion of the noble Lord, Lord Skidelsky, is that we cannot yet have a proper debate on the subject. It is impossible to open a newspaper without reading about a debate on the subject and why uniquely the Opposition in this place feels constrained to take part is difficult to understand.
As regards the Government, the great shift is that the "when" word instead of the "if' word is used for the first time in this document. That was qualified on the front page—Members must be careful to use their magnifying glass to see it—but we have reached the position where, on balance, the Government are prepared to accept the principle. My Leader in another place described the plan and the Prime Minister's statement as the Government crossing the Rubicon. If that is the case, there can be few occasions when the analogy has been used to describe such a timorous advance.
However, we welcome the fact that the Government are taking steps at this early stage in order to prepare both the public and private sectors of the economy for the changeover to the euro. We must cross some hurdles before we get to that point; namely, the five economic tests. They play the part which the renegotiations played for the Wilson Government in 1974–75; there must be a pretext to justify something which might be unpopular. Although in this case the pretext is not required to deal with splits within the Labour Party, it is required to deal with splits in public opinion.
It will be necessary for the economic tests to be met, but on that front I am an optimist. Two at least are broadly met already. Clearly it will be better for inward

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investment if we are part of the eurozone. Anyone involved in that world admits that. Secondly, there is a view that, on balance, the City and the financial services sector will be better in it.
Two tests will always be largely subjective. The first is the flexibility to adapt to change and the second is the outlook for employment. Again, casting one's mind back to 1975, Tony Benn claimed that if Britain remained in the EU half-a-million jobs would be lost. That was not borne out by reality but at the time the argument was difficult to refute. Therefore, those two tests will be argued about but will not be capable of conclusive proof.
The final test is on sustainable convergence. I agree with those noble Lords who have said that even though there are differences between the UK's economy and cycle and those of our EU partners, there can never have been a likelihood of the eurozone and UK economies being marked closely convergent. The noble Lord, Lord Grenfell, said that there might be a need for a different inflation target in the UK. The rate of inflation in this country, calculated on the measure used across the eurozone, is not 2.5 per cent. but 1.4 per cent. Therefore, we are very close and already talking about fractions of per cent. There is already a considerable measure of convergence.
The one area where everyone agrees an issue must be resolved relates to the exchange rate. A number of suggestions have been made about how we move from what is generally considered to be too high a rate to one which would be more generally acceptable. On the one hand, we have the noble Lord, Lord Peston, seeking a miracle and on the other hand we have the noble Lord, Lord Grenfell, who has in mind a more benign scenario; that when the markets realise that we shall not be joining the euro there will be a movement in exchange rates towards the level which we and the majority opinion in this country would find more acceptable.
I hope that that is the case, but if it is not it would be difficult for the Government to set and achieve an exchange rate target. Amendments to legislation would be required and in addition to the inherent difficulties in the project that would make it almost impossible to contemplate.
The noble Lord, Lord Cockfield, sees the Machiavellian option as going into the euro when our economy is at the bottom of the cycle and therefore our currency weak. Unfortunately, our economy is at the bottom of the cycle and our currency is strong. Therefore, I am afraid that that will not be the way forward.
I turn to some of the detailed issues which arise with the changeover plan. First, the issue of legislation and the timetable. The noble Baroness the Leader of the House, in response to a question from the Leader of the Opposition when we discussed the changeover plan, said briskly, "Oh, well, you can get legislation through in a quick time and having a four month period between the decision and being able to hold a referendum would be no problem". My limited experience of this place suggests that on matters European and constitutional, if
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this House decides it wants to take more than "a quick time" it is adept at doing so. I do not believe that the Government should be too sanguine about taking through a referendum Bill in what, in the changeover plan, is a short period of time.
My suggestion for dealing with the matter, which I hope the Government will accept given that we are preparing, is to have the Bill introduced and passed before the next election. In my view, the most likely time for an election would be the spring of 2001, not 2002—as the noble Lord, Lord Cockfield, suggested. The earliest that notes and coins could be introduced would be February 2004. The changeover plan makes it clear that February and March is the time one would want to do that, so flexibility would be constrained. Even with an election in 2001, one could find that it was not possible to introduce the new currency until February 2005, unless legislation for the referendum were in place earlier. I urge the Government to look at that option.
What cheered me more than anything else was the announcement in the Prime Minister's statement that the Government will spend tens of millions of pounds in preparation. That cheered me up because I cannot believe that this Government, or any other, would contemplate such expenditure unless their heart was in it. I took some satisfaction from that.
The Minister was asked what assumptions had been made in the planning process as to a date by which the money will be spent and Civil Service systems will be ready for the introduction of the euro. I look forward to hearing what he has to say about that.
One thing I will say about the document's description of that process—in response to the noble Lord, Lord Hamilton of Dalzell—is that when it refers on page 46 to euro Ministers it is referring to domestic Ministers rather than euro Ministers from other member states. That is an example of the slight paranoia that can affect this debate—that if something has the word "euro" in front of it, it must be foreign and we must be against it. We are talking about Ministers designated by the Government within each government department to co-ordinate strategy.
Lord Hamilton of Dalzell: My Lords, is not the point from whom they get their instructions; to who they are attached logically? If they are euro Ministers it does not matter if they are over here or over there—if they are getting all their instructions from European Commissioners.
Lord Newby: My Lords, if it were the case that they were getting their instructions from the European Commission, it would not matter if they were here or there. If they were not getting their instructions from European Commissioners, equally that point does not bear carrying any further.
As to the business sector, the Government have got their phraseology and substance the wrong way around. It is not realistic to expect business to prepare in advance of a decision, except in the case of very large businesses and banks. It is unrealistic to expect many

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businesses to incur substantial expenditure without a clearer lead from government as to their intentions and the timetable. One sees that in the way that business has responded to the introduction of the euro. Big businesses were spending money, time and effort in advance of the euro's introduction but many—including those that do a lot of business in the eurozone—only started invoicing in euros and taking the currency seriously after its introduction. It is wishful thinking to expect too much planning by too many businesses at this stage—although I am reassured that many of the larger banks are already devoting significant resources to the matter.
The noble Lord, Lord Cockfield, spoke about retailers and price conversion. It seems to me that that will be a major issue. It was a major issue in decimalisation and will be more significant with the introduction of the euro. Although I understand why the Government are reticent about considering legislation, pointing out that only in Austria has dual-pricing legislation been introduced, that aspect needs further consideration, if only to give political reassurance that customers will not literally be short changed when the euro is introduced.
It is only too easy to be critical of the national changeover plan because it lacks the two things into which it needs to breathe life—a clear rather than ambiguous commitment on whether the Government really believe that we should join EMU at some point, and an indication of the timing. We on these Benches believe that it is in Britain's long-term economic and political interest to join. The sooner that is clearly enunciated by the Government, the better it will be for the UK economy and our political influence and the sooner we can begin planning properly for the changeover.
7.34 p.m.
Viscount Bridgeman: My Lords, there has been a distinguished list of speakers and we have not been disappointed by the contributions made. On the basis that the word "never" is not part of the vocabulary of those of us on this side of the House in this context, our objection to the plan is not so much its content. Any prudent preparation for entry into EMU, if and when it occurs, would require such preparation. Our objection is to its timing.
The noble Lord, Lord Grenfell, rather wrote off the costs to various businesses. If the vote goes in the no direction Sir Stanley Kalms of Dixons has said that the cost to his company would be £40 million, which will largely be wasted if we do not go ahead.
The other notable omission from the document is the point at which the pound would be locked into the exchange rate. If the pound is locked into the euro shortly after a referendum, the pound would have to start shadowing the euro, as required by the Amsterdam Treaty, before the next general election. That is in direct contravention of a reply by the Prime Minister to my right honourable friend the Leader of the Opposition on 24th February. The noble Lord, Lord Grenfell, indicated that a rather more flexible approach to shadowing will be taken. We shall be interested to hear the Minister's comments. I do not believe that the timetable of my noble friend Lord Cockfield will solve that problem.
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Lying at the heart of our objections is the lack of economic convergence. The noble Lord, Lord Peston, said that the points had already been rehearsed. They have but they will not go away. An omission from the plan is that no view is expressed by the Government as to whether or not the British economy is becoming more convergent with those of the eurozone. We reiterate, that is a vital condition before Britain even considers joining the single currency. It is worth repeating these facts. The domestic mortgage debt is a totally different shape. The pensions regime is totally different, in that ours is practically totally funded whereas those of members of the euro zone are largely unfunded. There is also the point about our trade outside the EU which was made by my noble friend Lord Skidelsky.
Lastly, and most importantly, the UK is the only member state that is a net exporter of oil. The Treasury confirmed in October 1997 that that is likely to remain the case for the forseeable future, with reserves possibly in excess of UK production to date. Changes in oil prices will surely have a mirror effect on our economy and those of the eurozone, affecting the rates at which we go in. Again, that point was emphasised by my noble friend Lord Cockfield. Given the Minister's particular background, I should much welcome his explanation on that point.
Despite the damage done by Labour's policies, the UK has far more flexible rates and lower unemployment than the rest of Europe. Our labour costs are lower than in Italy, France and Germany. Our concern is that, denied the option of exchange rates, interest rates and fiscal transfers, we would be left with the danger of imported unemployment.
Finally, I refer to the referendum. The Government are committed to a referendum. In view of the Neill report, perhaps I may sound a warning note to the Government that that referendum must be fair. Are we to have a recommendation to yes, to no or to neutral? I shall very much welcome the Government's response on that point.
Therefore, it is not the principle of entry which we on this side of the House dispute; it is the timing. In our view, the Government are forcing the pace and we urge them to reconsider their timetable.
7.40 p.m.
Lord Simon of Highbury: My Lords, immediately, I thank all noble Lords who have taken part in the debate. I agree with the noble Viscount that it has been an extremely interesting debate with many high quality contributions which the Government will read with care.
I enjoyed the clarification from noble Lords on the Opposition Front Bench that the real problem with the plan is the timing rather than the content. We can argue about that—and they would probably do so for at least another decade. Our intention is to do something about entering the euro. The first practical step that we can take, as we have said, is to prepare thoroughly so that the nation has the opportunity to take a decision which can then be carried out without delay in the interests of the nation, if that is its choice. Therefore, I am sorry that the noble Lord, Lord Skidelsky, regrets that we rave put the plan on the table.

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The noble Lords, Lord Williamson and Lord Kingsdown, and my noble friend Lord Grenfell put forward arguments as to why we need to prepare to give ourselves clear options—and they did that much more succinctly and with much more weight than I could. I was glad to hear those arguments because it seems to me to be pertinent that the plan should make real the options for the country. Therefore, I make no apology whatever for the nature of the plan, its contents or, indeed, its timing. The decision cannot be delayed beyond—we have made this very clear—early in the next Parliament.
My noble friends on this side of the House made extremely coherent contributions; in particular, my noble friend Lord Barnett. They have asked me whether I can clarify the position between "if' and "when". The noble Lord, Lord Cockfield, asked me quite the most complex questions that I have ever received at this Dispatch Box about whether the election will be in 2001 or 2002. They have taken me into territory for which the Prime Minister did not hire me. My psephological skills have always been known to be far less developed than my commercial skills and I shall let the matter rest there.
However, I was asked whether "if" is becoming "when" and whether the eye of the beholder is becoming more fixed upon his future target. Couched in those terms, I would say "yes". Our Prime Minister said that it is our intention to join the single currency, but we maintain the proviso that it must be in the economic interests of the country. We shall not take that away because we need time to adjust our economy so that we can put clearly to the people that it is in their interests that we join the third stage of monetary union and enter the euro.
Lord Skidelsky: My Lords, I thank the Minister for giving way. Will he explain the difference between saying, "It is our intention to join if the conditions are right", and saying, "We do not know whether we are going to join"?
Lord Simon of Highbury: My Lords, certainly there is a difference; that is what one does about attempting to make sure that the conditions are in place. The point of the five tests is precisely so that we can direct a route which will make our likely entry even more likely. The point of the five tests is that they demonstrate how the Government are setting out their progress towards changing the way this economy behaves and enabling the decision to be taken against a background of greater economic stability and predictability than we have had in the past.
Again, I am rather in the camp of my noble friend Lord Grenfell because I consider those five economic tests to be important, perhaps more important than some of my noble friends behind me have suggested in this debate. The key issues for our economy are convergence and stability with the economies on the Continent. I do not want to become involved with the noble Lord, Lord Skidelsky, in too many discussions about trade figures, but the fact is that 54 per cent of our trade goes
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to our continental partners and 13 per cent goes to the USA. Therefore, whichever way one tries to turn the figures, the balance and the bias is towards a stable and competitive relationship with our European partners.
I agree with the noble Lord, Lord Cockfield, that the absolute cornerstone of the single market, the free movement of goods, people and services for which we have been striving within the European Union, is the single currency because that demonstrates the competitiveness and relative productivity of the member states which are in the Union together. That is the advantage to consumers and that is why the five tests are so crucial to us.
The noble Lords, Lord Skidelsky and Lord Newby, asked me how we are doing in convergence terms and whether those tests are important. Yes, they are extremely important. It is important that we gain convergence with our inflation rate and our cost of money. It has been a major advantage to continental rivals to have a low cost of money and a sustainable investment environment which is brought about by low inflation. That is the cornerstone of our policy and is one of the five pillars on which we shall build our judgments. We are doing better. As was pointed out in the debate a year ago, there was a 400 basis points premium for short-term money which our businesses were having to pay in this country. That has been reduced to 275 basis points, broadly, in the current circumstances, and the five to 10-year money rate is also converging. It is now 60 basis points premium on the continent, or thereabouts. But we must bring ourselves into a state in which our front-end inflation expectations and cost of money are on par with those of our colleagues on the continent. They do not have to be exactly the same. Sustainability is not about single-point forecasting.
That takes me to the issue of the exchange rate, which has been raised. We do not believe that there will necessarily be a precondition of membership of the exchange rate mechanism. We do not intend to enter an exchange rate mechanism because we do not believe in a single-point forecast. We believe in following policies of sustainability, low inflation and encouragement of investment which will have outcomes in an exchange rate which the market will set, and the market will set the range of rates at which we make a judgment about the future sustainability of our position relative to our colleagues on the continent. That is how we intend to approach the negotiations with our partners which must take place in parallel with our own preparations which we have set out in outline in this plan.
Therefore, those are two key issues which have been raised on which I have tried to shed some light. As I said, the timetable will be set by the political calculations but also by our economic preparations. Our target is, as early as possible in the next Parliament, to take the decision to put this proposal to the nation.
On the exchange rate, there is no intention of entering the mechanism again, but we shall have a set of policies that will allow sustainability to be judged by the market-place, ourselves and the nation at a point at which we take the decision.

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Briefly, I should like to dwell on some individual points made about that market-place. The noble Lord, Lord Kingsdown, made an extremely valid point about the nature of the market we shall be entering and the nature of world-wide competition between three major blocs, the USA market-place, the European market-place and the Japanese market-place and its surrounds. It is absolutely important that we come to terms with the necessity to take a decision about the UK's place in relation to those future competitive structures. That will be absolutely vital to us. It is not about looking back at our history, but about looking forward to where competition and market-places will take us in the future.
I agree totally with the noble Lord, Lord Newby, that we are debating these issues currently. When I open my newspaper every day, I see those issues debated all the time. It is absolutely right that they should be, but I do not understand the statement that this plan about the alternatives is being put forward in an intellectual vacuum. The alternatives about the market-place are debated quite correctly by companies all the time. Companies take their decisions.
That brings me to the points about the cost of the exercise and the risk that companies take. It allows me to answer a question raised by the noble Viscount, Lord Bridgeman, on the issue of oil. I can speak for the oil industry as I still understand that industry even after two years away from it. Once outside such businesses one's lifetime as an expert is short. I should not want to estimate either the date of the UK joining the euro or the future oil price. All I know of current levels is that they present a small problem to us in terms of the management of our economy because we do not receive many revenues at such price levels. I do not think that it is a significant feature of the economic structure.
Perhaps I may refer to major industries and their preparation costs. Major industries have been preparing, as the noble Lord, Lord Newby, said, by and large because they understand risk, reward and opportunity costs. Preparation now means that the whole process will be much cheaper. Of course, a political judgment has to be taken, but that is what most business people are paid for. They do not view life as a certainty. They look at the risks and rewards and they make their judgments accordingly. I know, from my own company, that we took a judgment at least five years ago of how the market-place would develop and we placed our bets accordingly with, of course, the approval of our board.
That is the nature of the discussion about costs. It is about risk, reward, opportunity costs and who sees a competitive advantage and is prepared to take the risk. It may well be—that is why we have spent a lot of time on SMEs, the small business sector—that more understanding and preparation is needed of the risk and reward balance. When I started this work 18 months ago, I was shocked to find that most of our SME community assumed that an opt-out meant that we
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would have nothing to do with the euro and that it would not impact on their businesses. We now know that nearly 50 per cent. of our small and medium-sized companies are either trading with Europe, competing with Europe or are supplied from Europe. For SMEs to assume the euro would not impact on them was very dangerous in terms of business. I believe that the awareness and understanding of the small business community will grow by the nature of this exercise of preparation. The point of the national changeover plan is to make business more aware of the risk and reward profile which is in front of them.
I have tried briefly to cover some of the main points made by noble Lords on both sides of the House in what has been an interesting and helpful debate. To summarise, I believe that the Government's policy on UK membership of the single currency has been given much support in the House. It is the right policy. It is the policy that, ultimately, will give people a genuine choice. We must prepare and then decide. The decision will be made by Government, Parliament and the people. The task for Government and for business now is to continue to make the necessary preparations to ensure that British companies are fully equipped to do business in the euro while the UK is outside the euro and to make the practical preparations for the possibility of joining.
On 23rd February, when we published the changeover plan, we made it clear that we wished to have the option of joining the euro and that the British people must be presented with a genuine choice. Now we have made a change of gear in the preparations. The public sector is leading with IT investment and detailed planning. If the country decides that it wants to join the single currency, we estimate that the timetable for a positive referendum result from that date to the withdrawing of sterling could be completed within three years.
En passant, I would say to colleagues who raised the lateness of the time that the key issue in the timetable for most businesses is the joining date, the date when the currencies become fixed, which will be early in the cycle, as early as we can make it within the outline timetable plan. Of course, for the retail sector and the small business sector, notes and coins are also crucial. However, on the risk decisions that people have queried in the debate, we have outlined in the plan the joining of the currencies, which can happen quite early in the cycle.
I conclude by saying that we are grateful for the help that we have had from the business community to produce this plan. We look forward, using the ideas we have heard in the debate today and those that we shall receive in our further consultations, to making further real, practical preparations and to preparing the next document early next year. I beg to move.
On Question, Motion agreed to.
House adjourned at three minutes before eight o'clock.