Lords Sitting of 7 November 2001

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

Livestock Auctions
Lord Geraintasked Her Majesty's Government:
Whether livestock auctions will be reopened this year.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty): My Lords, some livestock auction markets have recently reopened in Scotland, where the last confirmed case of foot and mouth disease was on 30th May. In England and Wales, where the last confirmed cases were on 30th September and 12th August respectively, the Government have said that they will consider whether markets could be reopened in the new year, subject to continuing progress with disease eradication.
Lord Geraint: My Lords, I am very grateful to the Minister for his reply. However, does he agree that the public are entitled to a full public inquiry into the foot and mouth epidemic so that consumers and producers may be told the truth? Nothing less will suffice.
Lord Whitty: My Lords, I do not know how many times I must explain the Government's position on this matter. There will be a full, open and independent inquiry both into the Government's handling of the disease, with recommendations on its future handling, and into the science of the disease. Members of the public are entitled to put evidence to the inquiry and are entitled to publish that evidence should they so wish. I believe that a full public inquiry in strict terms—run on a quasi-judicial basis and lasting a substantial amount of time with people looking over their shoulders to see whether litigation will become a problem—is less likely to achieve the truth which the noble Lord seeks than will an inquiry of the type to which the Government are committed. The handling inquiry under Dr Iain Anderson will begin once we are in sight of the end of the disease. The scientific inquiry has started.
The Countess of Mar: My Lords, I declare an interest as the wife of a farmer with a small flock of sheep and as chairman of Honest Food. Noble Lords will be aware that last year Honest Food carried out a report on the meat business. One point that we raised was the lack of small abattoirs in convenient places. Various other reports on foot and mouth disease have recently agreed with that point, saying that the long distances that lambs are carried is not beneficial to them. Perhaps I may ask the Minister what action he is
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taking to get small abattoirs out of mothballs and back into action again so that sheep do not have to be carried on huge journeys in order to be slaughtered.
Lord Whitty: My Lords, the situation is slightly more complex than the noble Countess indicates. It is not clear whether the spread of the disease was proportionate to the distance animals were moved or proportionate to the number of movements. Nevertheless, there may be other reasons why one would wish to encourage more local movements and, therefore, more local abattoirs. But, taken on aggregate, capacity in the abattoir sector is still substantially too high. Therefore, the situation is not clear. However, the Government want to encourage small and medium-sized abattoirs. The Food Standards Agency has been given £8.7 million for the next three years precisely for that purpose and to try to reduce the costs to small abattoir operators.
Lord Hoyle: My Lords, given the present situation in relation to foot and mouth and, of course, the history of the disease, what is the assessment of the risks involved in reopening the markets?
Lord Whitty: My Lords, we are currently assessing the risk at this stage of the disease. While the disease was still live—of course, we are not yet clear of it—it was evident that there was a risk in opening markets. The highest risk of all, and the highest incidence of transfer of the disease, came from the mingling of animals in live markets. Indeed, if I were allowed visual aids, I could demonstrate to the House the way in which the disease spread, in particular from Longtown market but also from other markets, during its early stages. Therefore, we are very wary of reopening markets. Nevertheless, it appears that the risk of opening cattle markets is beginning to diminish substantially, and I hope that those markets will reopen early in the new year. The risk in relation to sheep is slightly greater but, again, as I said in my first Answer, we are keeping that under review.
Lord Mackie of Benshie: My Lords, I understand that the Government have a scheme to pay £10 a head for hill lambs which the farmers cannot sell. Does the Minister consider that £10 a head is a fair price?
Lord Whitty: My Lords, I believe that the answer lies in the noble Lord's question. That scheme is intended to avoid welfare problems on the hills for farmers who cannot otherwise dispose of their animals. The fact is that, in that situation, the market price is nil. Therefore, the Government's provision of a £10 fee and of the costs of transportation and disposal is, I believe, fair.
Lord Mackie of Benshie: My Lords, can the noble Lord say why the price is nil? Surely that is his fault.
Noble LordsOrder!
Baroness Byford: My Lords, perhaps I may press the Minister further. First, I remind the House of my

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family's farming interest. The opening of livestock markets will, indeed, be welcome news. I am sure that the Minister agrees that 80 to 90 per cent of store animals are sold through the livestock market rather than by modern technology. My understanding—it is only my understanding—is that farmers will now be precluded from working within the livestock market per se. Why has that rule been brought in? Obviously farmers have great experience of handling, and dealing with, livestock. It seems bizarre that, when the Government are asking farmers to diversify in order to obtain extra income, they will apparently now be precluded from operating within livestock markets.
Lord Whitty: My Lords, the figures quoted by the noble Baroness are slightly higher than the figures that I have in terms of the number of cattle. Even in relation to store cattle, the figure is 70 to 80 per cent rather than 80 to 90 per cent. Nevertheless, the farmers' method of trading is obviously important. When the markets are reopened, they will be subject to greater biosecurity precautions than has previously been the case. Indeed, some of the restrictions on access apply in the Scottish markets that have been reopened, mainly in relation to cattle but now also in relation to sheep. The precise rules for reopening English and Welsh markets have not yet been decided. Therefore, the issue of who can enter the confined areas has yet to be determined.
Baroness Masham of Ilion: My Lords, does the Minister agree that things have been particularly difficult for people with breeding stocks because markets have been closed? Will he try to help farmers who have too much breeding stock left on their farms? Does he agree that the fact that the light lamb scheme of £ 10 has now closed makes it very difficult for people with light lambs?
Lord Whitty: My Lords, the noble Baroness's comments on the light lamb scheme are true, but there is still a £10 fee for most sheep that are disposed of through the welfare disposal scheme. It is certainly true that some flocks are locked up and that there is therefore some over-stocking. However, the costs from foot and mouth apply to all sorts of businesses throughout rural areas. It is not the Government's intention to pay compensation to all the businesses that have suffered. If we went down that road, the Government would become the insurer of last resort, which is not our intention or policy.

Flood Defences
2.44 p.m.
Lord Renton of Mount Harryasked Her Majesty's Government:
What measures they are taking to ensure that local authorities, in areas where there were floods in 2000, are taking all possible steps to protect towns and villages from similar disasters this winter.
Lord Whitty: My Lords, the Environment Agency is primarily responsible for providing flood defences and
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flood warnings but local authorities also have a crucial role in providing funding and in leading the response to flooding emergencies.
Flood defences that were damaged last year have been reinstated so that communities are now at least as well defended as they were before the floods, and in many cases are better defended. Where appropriate, new flood defence schemes are being developed, although that often requires longer-term planning.
Lord Renton of Mount Harry: My Lords, does the Minister accept that for areas such as those that are close to me in East Sussex—I fortunately live half way up Mount Harry, but our neighbouring towns of Lewes, Uckfield and Robertsbridge were seriously flooded last year—very little has happened during the past year in terms of long-term improvements? In Lewes, for example, there is a greater availability of sandbags but of nothing else.
The Minister referred to the Environment Agency. Is he aware that it calculated that the cost simply of maintaining flood defences in Sussex at their present standards was £55 million? However, the Government have made available for the maintenance of land and flood defences only £51 million, and that sum has to be spread throughout the country and over four years. Is there not a huge potential problem here that the Government have yet to recognise? If it is not recognised, it will make the long-term capital investment problems of Railtrack seem like a flea bite.
Lord Whitty: My Lords, the noble Lord is not going to tempt me into discussing the railway system. On flood defences, I do not quite recognise his figures. In total, via the SSA, well over £400 million is being allocated on an annual basis and, in terms of capital grants, the provision by DEFRA has increased from £66 million to £114 million over the coming two years. Those are significant increases. However, that is not to minimise the problem. In the case of Lewes, the problem is particularly complex because there are substantial heritage considerations. As yet, the full scheme that will be needed to defend Lewes from all eventualities relating to flooding has not been developed because of those complications. Only temporary measures have been established. There are several other examples that are complicated in that way.
Lord Renton: My Lords, is the noble Lord aware that the most important consideration, in terms of reducing the flooding of rivers, is to ensure that the outflow parts of rivers are wide and deep enough to take an increased flow of water and that the river authorities are responsible for that? Will he bear that in mind and give such instruction and help to the river authorities as may be necessary?
Lord Whitty: My Lords, it is certainly true that the outlets and estuaries—and the continuous dredging thereof—are an important part of total flood management. In most cases, that responsibility rests with the Environment Agency, which has overall responsibility for the management of floods in the

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total river system. It is therefore already clearly its main remit to prioritise the measures that are necessary in a particular flood system. That includes dealing with outlets.
Baroness Miller of Chilthorne Domer: My Lords, will the Minister explain what changes have been made to planning policy guidance since last year's floods to stop continued building on flood plains? I also refer to the use of surfaces that soak up water, as opposed to those that cause run-off into drains and hence into rivers.
Lord Whitty: My Lords, on the development dimension, planning guidance has been altered so that it recommends that planning authorities should restrict more substantially developments on vulnerable flood plains and those that use water or transfer water as a result of being close to the main river system. That has been tightened up. It is up to individual planning authorities, when considering particular planning applications, to bear those matters in mind. Clearly, some planning decisions were taken in the past that have aggravated the problem substantially in some areas.
Lord Glentoran: My Lords, the Environment Agency has told many areas that protective measures are too expensive. Is that really the Government's thinking? Many householders and businesses are now being denied insurance cover because of the high risk of flooding. Do the Government acknowledge that that will pose a real threat to the economic survival of those vulnerable locations?
Lord Whitty: My Lords, the threat of flooding is pretty widespread. The Government and local authorities have to prioritise those areas in which the defences will be most effective. Therefore, by definition, other areas may have a lower priority. As I said, there has been an increase of about 70 per cent in the capital expenditure for flood defences from DEFRA and an increase in the money that is spent by local authorities in that area. Some economic problems were, as I said to the noble Baroness, Lady Miller, aggravated by inappropriate development, which I hope planning authorities will in future avoid.
Lord Mowbray and Stourton: My Lords, perhaps the Minister can give me comfort in relation to the area of the Ouse from Boroughbridge to York. As I suspect the noble Lord knows, the old, historic town of York is one of the country's main tourist centres. Are the Government aware that year after year the foundations of some of the lovely historic buildings are becoming more and more endangered and that such damage may be experienced in other parts of the town that have not yet been hit by floods? Can the Minister give me any comfort in that regard?
Lord Whitty: My Lords, I can give a degree of comfort. Clearly the floods in the Ouse area and in York over the past years have been substantial, but some improvements have been made along the river
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and in York itself. Heritage buildings cannot be defended from floods in the same way as modern housing. The town of Lewes has the same problem. It is a substantial problem and will require a long-term developed plan in order to minimise the risk to buildings in York.
Earl Russell: My Lords, I welcome the extra sums that the Minister has announced are to be allocated to flood defence. Can he give the House a guarantee that there will be no underspend on such funds?
Lord Whitty: My Lords, in relation to government expenditure, we shall endeavour to spend up to the limits. Clearly, the money that is dealt with by the local authorities will go via the SSA. Local authorities have to establish priorities for flood defences and for other pressures on their budgets. Therefore, I cannot give that absolute guarantee. As I believe the Liberal Democrat Benches constantly emphasise in other circumstances, some discretion is required by local authorities in this matter.

Asylum Seekers: Sangatte Centre
2.52 p.m.
Lord Dixon-Smithasked Her Majesty's Government:
What discussions they have had with the European Union and the French concerning the asylum seekers who have passed through Sangatte attempting to enter the United Kingdom.
The Minister of State, Home Office (Lord Rooker): My Lords, the United Kingdom is actively involved in discussions with European partners about the European Union's response to illegal immigration and asylum issues. The Sangatte centre has not specifically been discussed at European Union level. But Ministers and officials have regular bilateral discussions with their French counterparts about a range of issues, including Sangatte. My right honourable friend the Home Secretary met Interior Minister Vaillant in Paris on 12th September to discuss a variety of cross-Channel issues, including Sangatte.
Lord Dixon-Smith: My Lords, asylum matters within the European Union are regulated by the Dublin Convention of 1990. Can the Minister tell the House whether the Government have considered using Article 17 of that convention to bring about change? The article states:
"If a Member State experiences major difficulties as a result of a substantial change in the circumstances obtaining on conclusion of this Convention, the State in question may bring the matter before the Committee"—
that is a committee consisting of representatives of every government within the Community—
"… so that the latter may put to the Member States measures to deal with the situation or adopt such revisions or amendments to this Convention as appear necessary"
Lord Rooker: My Lords, the Dublin Convention does not work. It is a sham. There is no sense in pretending that it works. That is why it is to be replaced with Dublin II. The target date for that is 2004. The present system simply does not work. I understand that evaluation by the Commission itself showed that less than 5 per cent of the total of asylum applications made in the whole of the European Union were dealt with through the existing Dublin mechanism. The time limits do not work.
Simply because someone gets off a train from France, that is not proof that France was the member state that should have looked after him in the first place. That is a real problem and to make the system work we need to reform the Dublin Convention.
Lord Dholakia: My Lords, does the Minister accept that no one condones illegal immigration or asylum seekers coming here without the appropriate means by which they can enter the country legally? Can the Minister tell the House whether there is any way by which persons who suffer persecution can enter the United Kingdom through legal means? Is it beyond the scope of the European countries to try to harmonise the policy in that respect? More importantly, does the fact that there is a camp at Sangatte looking after the welfare of asylum seekers make the least bit of difference to people who, for fear of persecution, want to try to get to other countries?
Lord Rooker: My Lords, the noble Lord is inviting me to rewrite the 1951 convention which I cannot do. First, the application for asylum has to be made in-country; it cannot be made outside a country. Not everyone who travels here travels illegally, but the majority of the problems are caused by those who travel illegally.
Daily there is an average of 800 people living in the Red Cross warehouse—that is what it is—in Sangatte. If they are in genuine fear of persecution as a result of well-founded beliefs, they can apply for asylum in France. Basically, they are not asylum seekers; they are applying to come to Britain. If they genuinely feared persecution, they could apply to stay in France, which is a safe country. There is no problem in France. That is an issue to be looked at in relation to Sangatte.
Lord Corbett of Castle Vale: My Lords, at the moment one Secretary of State is in Spain trying to recruit 1,000 doctors, and yet we do not have in place the talked-about green card scheme that will enable the people whom we would welcome to come here as economic migrants. Can the Minister tell the House of the progress that is being made across the European Union to have a common system to deal with asylum applications?
Lord Rooker: My Lords, the latter part of that question refers to the reform of the Dublin Convention. The answer to the first part of the question was in a Statement made to the House on 29th October, in which we said that in January we shall publish a White Paper on asylum and immigration.
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That will include proposals for reform of the system including a system of managed migration. It will be a series of joined-up systems. At the moment there are many ways in which people can come to this country, but no one would call it a system of managed migration. We shall put that forward in the White Paper in January. If legislation is required, we have already said that we shall bring forward an asylum and immigration Bill in the early spring.
Earl Russell: My Lords, does the Minister understand that there is no such thing as an absolutely safe country? The only question is whether the country is safe for that particular applicant. If the applicant concerned is a victim of non-state persecution, such as many of those who have left Northern Ireland for fear of terrorism, France is not a safe country.
Lord Rooker: My Lords, most people who arrive here via Sangatte do not claim non-state persecution; they claim state persecution. I accept that France and Germany take a different view of non-state persecution compared with other European Union members. Both in France and in Germany there is movement to go with the majority and to change their policies. That is an important part of the negotiations that will have to take place on Dublin II. The issue of non-state persecution is not the primary claim made by people who arrive here from Sangatte.
Baroness Gardner of Parkes: My Lords, can the Minister explain the green card system that will commence next January? At least a year ago I had a reply from the noble Baroness, Lady Blackstone, saying that such a system would start in January last year. She did not use the phrase "green card", but it was to be a special form of application for people whom we wanted to come and work in this country.
Lord Rooker: My Lords, I hope that I have not confused the House inadvertently. I did not say that the green card or a system of managed migration would start in January. The Government will produce a White Paper with plans for systems of managed migration, some of which, I suspect, will require primary legislation. Therefore, we shall have to go through the legislative process.
On the second part of the question, I suspect that the noble Baroness was referring to the announcement that was made two Novembers ago by the Chancellor of the Exchequer about the scheme for highly qualified people—those with about five PhDs or something like that. We are ready to implement such a scheme, but it is only part of a managed migration programme. We delayed it on the assumption that we would before now be able to put forward full proposals. However, that matter is now being dealt with separately. A date has been fixed, which I am afraid I have forgotten, for the start of the scheme relating to highly qualified people which was announced by the Chancellor of the Exchequer.

Livestock Welfare (Disposal) Scheme
3.1 p.m.
Lord Willoughby de Brokeasked Her Majesty's Government:
Why the Department for Environment, Food and Rural Affairs has announced reductions in compensation paid to farmers for animals which due to movement restriction will have to be destroyed because of the lack of food and shelter during the coming winter.
Lord Whitty: My Lords, the Livestock Welfare (Disposal) Scheme is intended to provide a disposal route for animals whose welfare has been compromised by the foot and mouth movement restrictions. It is preferable for those animals to be marketed for further fattening or human consumption, and in most parts of the country that is now possible. The scheme is not intended to form an alternative market but to provide a temporary source of income to address the welfare problems caused by these restrictions. The payment rates are kept under review to make sure that they do not represent an alternative to normal market rates. I recently announced new rates applicable from 30th October. Those reflect the trends in current market prices, which in most cases have been downwards.
Lord Willoughby de Broke: My Lords, I am grateful for that Answer. Can the Minister confirm that it is only because of the Government's foot and mouth restrictions that these farmers are unable to market their animals? In that case, is it not somewhat mean-spirited of the Government suddenly to announce a savage reduction in compensation, particularly as the scheme has only six months to run? Will the noble Lord reconsider that decision?
Lord Whitty: My Lords, no. The rates as announced in the summer approximated to 70 per cent of market value for the temporary period while the restrictions still applied to a large part of the country. First, only a very small part of the country is now affected by those substantial restrictions; and, secondly, market prices have moved, in most cases downwards. In the case of breeding ewes, where the rates have moved upwards, we have raised the amount. As for being mean-spirited, your Lordships should know that the cost of compensation under this scheme, which is basically a safety net, is over £200 million. The total cost including disposal is more than twice that figure. I do not believe that that is mean-spirited by any stretch of the imagination.
Baroness Byford: My Lords, I accept what the Minister has just said. I remind the House of my family's farming interest. But the cuts are very drastic: from £18 to £10 for culled ewes; £25 to £10 for all lamb; £700 to £350 for cows and heifers; and a new category for breeding ewes. Those are not minor but major cuts. Will the Minister reflect that perhaps if the
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Government had got to grips with the outbreak in the first place we would not find ourselves in this position today?
Lord Whitty: My Lords, the various inquiries into this disease will undoubtedly show that there were some things that the Government could have done better, but their commitment and that of DEFRA's officials, in conjunction with the industry, to contain the spread of this disease was absolute throughout the epidemic. It is, therefore, wrong in any sense to ascribe to the Government the rapid spread of this disease. In many cases it was due to practices that had grown up within the farming trade, and were perfectly legal, which meant that the movement and mingling of animals spread the disease throughout the country much more rapidly than had ever been anticipated. As a result, there is a huge cost to the taxpayer in terms of compensation, administering the scheme and the safety net for livestock welfare disposal to which I have just referred. The total cost to the taxpayer of this epidemic will be over £2 billion. That is a tragedy for the farming industry and a huge cost to the taxpayer, but it is not the Government who caused this. The Government have had to pick up the bill and try to deal with the epidemic as far as possible.
Baroness Miller of Chilthorne Domer: My Lords, perhaps the Minister will agree that one way in which the Government tried to give farmers a fair price for their produce was to ask the Office of Fair Trading to look into supermarket pricing. That resulted in the Government publishing last week a code for supermarkets. Can the Minister say why the Government have failed to do anything about a regulator for that code which means that there is no one to enforce it? Does the noble Lord believe that that is a gap which the Government should rectify?
Lord Whitty: My Lords, this arose directly out of an OFT inquiry some months ago which produced a code of practice for the dominant supermarkets in their dealings with suppliers. I suspect that in the course of the deliberations of the Policy Commission on the Future of Farming and Food the issue of relationships between supermarkets and their suppliers will be addressed again, and there may be other issues that we need to deal with in that context.
Lord Tomlinson: My Lords, does my noble friend agree that, notwithstanding the £2 billion of special payments made to agriculture arising from the disease, to put some of these complaints into perspective it should be borne in mind that the normal subsidy to agriculture exceeds the total that is received by the whole of British industry?
Lord Whitty: My Lords, I agree that that is a correct perspective, and certainly payments mainly via the common agricultural policy need to be borne in mind. The Government are committed to major reforms of the CAP which they hope to start to negotiate next year.

House of Lords Reform
3.8 p.m.
Lord Waddington: My Lords, I apologise for rising before the noble and learned Lord, but I should like to raise one matter of considerable importance before he makes his Statement on the White Paper.
I am told that the White Paper is not available in the Vote Office. Obviously, that appears to be somewhat discourteous to noble Lords and will pose certain difficulties for those who wish to put questions. I am told the explanation is that it will not be made available until the Leader of the House of Commons rises to his feet at half-past three. If that be the explanation, that raises other very important issues. I should be grateful if the noble and learned Lord can tell us what he can do to help us over this difficulty and ensure that nothing of this kind ever happens again. It is very discourteous to this House.
The Lord Privy Seal (Lord Williams of Mostyn): My Lords, my understanding is that it is normal procedure.
A noble Lord: Yes—during your leadership.
Lord Williams of Mostyn: My Lords, I am fortified by that helpful support. I have not intended the slightest discourtesy to this House. I shall make the Statement first and my right honourable friend Mr Cook will make it second. The last sentence of the first paragraph was to have informed your Lordships that the White Paper published by the Prime Minister would be available in the Printed Paper Office today at half-past three. I take the other implication of the noble Lord's question. If, at some later stage, one of your Lordships suggests to me that we should have a fairly prompt debate about this important matter, I shall do what I can to assist through the usual channels.
Lord Elton: My Lords, the noble and learned Lord invited a suggestion that we should have an early debate. I merely answer that invitation by making such a suggestion.
Lord Williams of Mostyn: My Lords, with permission I should like to make a Statement on the Government's proposals for further reform of your Lordships' House. I need not read the next sentence.
These proposals form the second part of the two-stage reform that we promised when we legislated in 1999 to remove the automatic right of hereditary Peers to be Members of your Lordships' House. They will complete the process of creating a modern second Chamber to play its part in a Parliament fit for the 21st century. We believe that Parliament as a whole will be strengthened by these reforms.
The Government are very appreciative of the work done by the Royal Commission set up in 1999 to analyse the issues and put forward recommendations. The Government have consistently made clear that
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they found much of the Royal Commission's report persuasive. As we promised in our manifesto, we have given our general support to the Royal Commission's recommendations and will seek to implement them in the most effective way possible.
Like the Royal Commission, we have taken as our starting point the role and functions of your Lordships' House as part of our overall constitutional settlement. We concluded that your Lordships' House should be: first, a revising and deliberative assembly not seeking to usurp the role of the House of Commons as the preeminent Chamber; secondly, that it should be composed of a membership appropriate to its revising and deliberative functions, and not duplicate or clone the Commons; and thirdly, that it should be political in approach, but not dominated by any one political party. Further, it should be representative of independent expertise and of the broader community in our country, but not to disrupt the delicate relationship—the continuing relationship—between elected Members of the Commons and their constituents.
Like the Royal Commission, our fundamental principle has been that reform should not undermine the position of the House of Commons. Our system of parliamentary democracy is built on the accountability of government to the House of Commons and through it to the people. To assume power, a government must command a majority in the House of Commons. To maintain power, they must sustain the confidence of that House. This constitutional framework, founded on the pre-eminence of the House of Commons, has provided Britain with effective democratic government and accountability, and few would wish to change it. It is vital that reform of this House does not upset that balance but rather that it strengthens the capacity of Parliament to legislate, to deliberate and to hold government to account, whichever government happen to be in power at that particular time.
Reform of your Lordships' House must, I suggest, satisfy one key condition. It must not alter the respective roles and authority of the two Chambers and their Members in a way that might or would obscure the line of authority and accountability that flows between the people and those they elect directly to form their government. Decisions on functions, on authority and on membership of this House should be consistent with those well-settled principles of our democracy.
The Government's proposals are these: the House of Lords should remain subject to the pre-eminence of the House of Commons in discharging its functions. No group in society should in future have privileged hereditary access to this House. The 92 hereditary Peers who remained in the House under the transitional arrangements in the House of Lords Act will lose their right to sit in the House, although, like everyone else, they will be eligible for membership as appointed or elected Members.
The House of Lords' principal function should continue to be to consider and revise legislation; to scrutinise the executive; and to debate and report on

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public issues. In carrying out these functions, we shall be looking for the House to make a distinctive contribution.
The primary legislative powers of the House, as circumscribed by the Parliament Acts, should remain unchanged. Its powers over secondary legislation would be changed from one of veto to one of delay, so that as with primary legislation, this House can require the House of Commons to think again when considering a statutory instrument. That was, as your Lordships well know, a recommendation of the Royal Commission.
Membership of the House should be separated from the peerage, which would continue as an honour. That was also a recommendation of the Royal Commission.
Political membership of the House should be broadly representative of the main parties' relative voting strengths as reflected in the previous general election. This means that it is the people, not the Government, as has been the case in the past, who will decide the political make-up of the House.
The size of the House should be capped, in statute, at the figure of 600. To allow an orderly transition from the present House, this cap will apply only after a period of 10 years from the passing of the Act.
The House should be largely nominated. There should be a significant minority of non-political members. We have proposed a figure of 120 for this element. The contribution made by the Cross-Bench Peers is a distinctive feature of the present House to which many people attach great importance. The Government are firm in their belief that that should be preserved. The Royal Commission recommended that there should be an elected element, specifically to represent the nations and regions within the UK. A majority of the Royal Commission was willing to support option B. That provided for 87 elected Members. We have proposed that the figure should be increased to 120.
There should be increased representation of women and those from ethnic minority backgrounds. In order to assist with increasing the representation of women, at least 30 per cent of new appointments will have to be of women. At least 30 per cent will have to be of men. I think t hat I shall enjoy myself by waiting for the subsequent question. There will also be provision in relation to ethnic minority representation.
There should be a statutory independent appointments commission. It would be appointed by Her Majesty in response to an Address from this House. Its functions would be broadly threefold. First, it would manage the balance and size of the House, by deciding how many nominations each political party may make within the requirement, which I specified earlier, that political membership should reflect the share of the votes cast in the previous general election. Secondly, it would appoint the independent Members, using an open and transparent nominations process. Thirdly, it would vet those nominated by political parties for propriety. We do not propose to accept the Royal Commission recommendation that the appointments commission should have the final word
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about the identity, as opposed to the numbers, of the political members. The Government believe that political parties must be responsible for proposing those who are to represent them in a House of Parliament.
We would retain the Law Lords as full Members of the House.
We would retain the Bishops' Bench, but reduce those sitting to 16. We expect the appointments commission to have regard to the Royal Commission's recommendation that there should be representation for other faiths and denominations.
All life Peers who are Members of the House when the reform is implemented, including Law Lords, would retain their rights to life membership. We would, however, consider a retirement scheme.
In the gracious Speech, we said that we would publish our proposals for consultation. That is what this White Paper does. We have asked for comments on all or any of the proposals and specifically on the overall composition package, by the end of January. Within our proposals we raise a number of questions. The first is whether the overall balance between elected and nominated Members, Law Lords and Bishops, and between political and independent Members, is right.
The second is whether elections to the Lords should be linked to general elections, those for the European Parliament, or over time linked to those from devolved and regional bodies within the UK. The Royal Commission recommended a link with the European Parliament, but the Government see some difficulty with that.
The third concerns the length of term for elected Members. The Royal Commission recommended terms of 15 years or three Parliaments, and that there should be no re-election. Fifteen years is extremely long by comparative standards. The Government are interested in views on whether it is acceptable that elected Members should go on for so long without renewing their mandates.
The fourth question relates to the term of appointment. The same considerations apply here. The Royal Commission also proposed 15-year terms for appointed Members, although it accepted reappointment.
Fifthly, what grounds should lead to statutory expulsion from the House? With the ending of the link with the peerage, it will now be possible to expel Members from the House if that is wished.
Sixthly, should there be a change from an expenses-based system of remuneration? Members of your Lordships' House now receive expenses only. The Government see some attractions in continuing with that system, which I personally could bear with some fortitude. That system is consistent with the part-time status on which the proposals are based. However, it must be borne in mind that the absence of a salary might operate as a disincentive to broadening the social mix of the House. The Government have therefore asked for views on that.

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We are confident that the proposals set out in this White Paper will create a House of Lords that is fit for a modern democracy. I hope that it will strengthen Parliament as a whole by providing a better and more effective complement to the House of Commons. That will mean, I hope, better Government for our country.
My Lords, that concludes the Statement.
3.20 p.m.
Lord Strathclyde: My Lords, I begin by thanking the noble and learned Lord for the Statement and for making available to me earlier this afternoon the White Paper and a copy of the Statement. I agree with my noble friend Lord Waddington that it would have been desirable for the White Paper to have been made available to Members of this House at least by the time the Leader of the House rose to speak.
Having said that, can the noble and learned Lord take from me my bitter disappointment with what I believe are shabby and inadequate proposals? Those of us who have been Members of the House for some time have been promised for years plans to create a more authoritative, more legitimate House. What we have before us is an instrument of prime ministerial patronage hiding behind a fig leaf of token democracy. We were promised a stronger and more independent House. What we now have is a House with its powers reduced and the props that reinforced the independence of Members of this place kicked away. That is not reform. It certainly is not democracy and it is not even what my noble friend Lord Wakeham suggested in his Royal Commission.
This document is muddled, superficial and misleading. Frankly, it is an insult to the intelligence of Parliament. In the foreword to the White Paper, the Prime Minister talks of creating a Parliament "fit for the 21st century". That is a soundbite even Miss Jo Moore would have blushed at. The Government propose a House of patronage on a scale unknown in any country of the world and not seen in this country for many centuries.
Not only is the content of the document utterly inadequate; so also is the timing of its publication. Can you credit it—in the middle of a war, with public services literally falling apart—the Prime Minister picks further changes to this House as the flagship for the relaunch of his domestic agenda? There cannot be a single teacher, nurse, passenger or policeman in this kingdom who shares the priorities of the Prime Minister on this. When the duty of the leadership is to keep the country united, the Prime Minister has set out to divide Parliament and every party in it right down the middle. Make no mistake: opinions are divided on how to go forward in every single part of this House.
No longer can Parliament be treated as a political football, kicked and spun this way and that for the convenience of the inner circle at the top of one political party. Enduring reform should be built only on cross-party agreement. So will the Government now enter discussions on the functions, role, powers and composition of the House? Will they consider even
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now what they should have done a long time ago; that is, put the issues to a Joint Committee of both Houses and remit this White Paper to that committee in order to seek such a political consensus? Would not that be the right way forward? Parliament cannot be excluded from discussions on the future of Parliament itself any more.
Will the noble and learned Lord explain to the House the reason why there is such a desperate rush? Is not the limit of a few weeks to 31st January next a surprisingly brief period for consultation? Furthermore, can the noble and learned Lord say whether legislation is planned for this Session? That, at least, should be a question to which he should be able easily to reply "yes" or "no".
Parliament stands at a cusp. Unless this place retains its independence, powers and free procedures, and builds its authority to hold the executive to account, parliamentary accountability will be at risk. The other place is not functioning well as a check on the executive or as a filter for bad legislation. We must not be distracted from focusing on that fundamental truth by an executive in a hurry with its own private agenda of manipulation. It is of course essential that we debate the many issues arising from the White Paper. I hope, therefore, that the noble and learned Lord will tell the House what plans he has made to facilitate such a debate and when.
I have not had time to study the White Paper in detail, but I should like to put to the noble and learned Lord some specific points. How can he claim that elected Peers will strengthen this House when he proposes to reduce the powers that Members of the House already enjoy? Is it not astonishing that, at a time when governments rely more and more on legislation by regulation, the Government want to remove from this House its power to reject secondary legislation? How do the Government propose that Parliament should prevent the passage of oppressive regulations? Can he further take it from me that we shall be implacably opposed to any reduction in the powers of this House?
I do wonder what happened to the Jay doctrine; that through reform, this House would be more authoritative and more respected by the Government. It is obvious that elected Peers should mean more power and more authority for this House. If the noble and learned Lord does not accept that, then why on earth are we bothering with this process? The blunt truth is that this Government simply do not want a more powerful House. That is why they go on resisting any proposal to give this House more opportunity to consider and amend financial legislation. How can that position be maintained after the arrival of elected Peers?
Earlier, I said that the Government were out to kick away the props of independence in this House. Why else have they rejected the proposal, common to the reports of both my noble and learned friend Lord Mackay of Clashfern and my noble friend Lord Wakeham, that elected Peers should serve for 15-year terms? The very purpose of that recommendation was

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to stop Government Whips creeping up to noble Lords and saying, "Oppose Shaun Woodward again, mate, and you'll be deselected". No wonder that is something which the Prime Minister cannot stomach.
Let us consider the proposed method of election. Can any Member of the House believe that the Government are planning to introduce the discredited system used for European elections—the notorious closed lists? It is the system that gives party bosses the say over who is elected. In fact it is appointment at one remove, but appointment none the less. I have to remind the Leader of the House—he may have forgotten—that the system was imposed on this House only by the use of the Parliament Acts. What an insult to propose its use to send party appointees to your Lordships' House.
Can the noble and learned Lord confirm that the new Members of the House would be called "ML", so that the peerage would no longer be linked to a seat in this House? Is not that the very proposal that the noble and learned Lord himself voted against when it was put forward by my noble friend Lord Ferrers? What has changed?
Will the noble and learned Lord also explain a little further the numbers? Currently there are 704 Members of the House. After the proposals before us, excluding the hereditary Peers, the total will be 733 Members. But the noble and learned Lord has talked of a cap of 600 Members. What is the plan to reduce the numbers? Will those aged over 75 be forced into retirement, as I understand is set out in the plans envisaged for senior former Law Lords in the House? How will the transition be operated? Will the noble and learned Lord explain the mechanism? Furthermore, how will the House be rebalanced to reflect party strengths after each general election?
In 1999, the Government were able to tear up a stable constitutional settlement, but they cannot dictate in what shape that settlement will again bed down. That must be a matter for this House and for another place. Inevitably those decisions will be affected by opinions outside the House. Given that, can the noble and learned Lord explain to the public that we now have an 80 per cent-appointed House and that the effect of these so-called modernising reforms will be to deliver in its place an 80 per cent-appointed House?
What is the noble and learned Lord's defence, in what the Prime Minister calls "a modern Britain", for a scale of patronage that has seen the Prime Minister appoint over one-third of the Members of this House in a little over four years? What is the justification for keeping that power? In the Government's view, will elected Peers be more legitimate than life Peers? Does the noble and learned Lord believe that, when elected Members are brought in, Ministers of this House will be drawn only from their ranks?
In 1999, the Government advised another place to reject a statutory appointments commission that this House had demanded, on the grounds that it was not appropriate. Why is something that was inappropriate
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then appropriate today? Is it something to do with the reception so unfortunately given to the appointment of so-called people's Peers? Or what, my Lords?
Where is the consistency and rationale in all of this? Whenever I look for a philosophy behind this reform, I find only opportunism, and whenever I look for a set of principles, I find only expediency. It is a fig leaf, a token element of elected Peers that is designed to mask the design of the Prime Minister and his cronies to keep their grip on this House. This is the last chance to secure the strong and effective House of Lords that many of us have wanted and were promised. Noble Lords of all parties and none must unite to embrace changes that strengthen our Chamber and unite to resist those that would sweep away the powers and duties of our House.
These are shoddy proposals that were cooked up in the Cabinet Office over a decanter of port and are fit only to get a divided Cabinet past the end of today. The Government should be ashamed of this document. It demeans this House, it demeans Parliament, and, worst of all, it demeans the Government themselves.
3.31 p.m.
Baroness Williams of Crosby: My Lords, I, too, thank the Leader of the House for allowing us to see the Statement a few hours in advance. I am most grateful to him. May I also say that I hope that it will be made as widely available as possible?
First, we are concerned that the White Paper has been published at a time of urgent emergency legislation, because we believe that it requires very careful deliberation by Members of this House and of another place. Therefore, I ask the Leader of the House to give an assurance of the kind that was requested by the Leader of the Opposition. Will he assure us that there will be a full debate in this House before Christmas—that is to say, well before the consultation period runs out—on the basis of at least a full two days of discussion? I ask that question because the White Paper makes it plain that consultation is not open beyond the end of January. Given the Recess, Members of this House will know that, unless we have a commitment to such a debate, there will be no possibility of having the full discussion that is essential on a matter of such importance. It would have been open to the Government to raise this matter later, but the fact that they have not done so means that there is virtually an obligation to make such time available within their own timetable.
Secondly, I have a very central problem with the statement. I believe that it is a problem that should be shared throughout the House. I do not believe that any Member of this House wishes to usurp the House of Commons or would challenge the pre-eminence of the other place. Indeed, during the period in which I have been a Member of this House, I have noticed it defer time and again to the elected House. In some cases, it has done so even to the point of not pressing an amendment on being informed that the other place

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takes a different view. Of course, it is subject to the Salisbury convention, which, in a sense, enshrines the doctrine of the pre-eminence of the other place.
However, with great respect, that is not the problem. Here I may echo to some extent the sentiments expressed in rather fiercer terms by the Leader of the Opposition. The problem is simply that, in this country, we have an executive that is consistently growing in power and a legislature that is incapable of holding it fully to account. We see in the other place—of course, I was a Member of it for many years—a growing flow of legislation, which means that none of it can be scrutinised as fully as it should be. We see a situation in which Bills are guillotined and are not, therefore, fully debated. I am not making a party point. I hope that I can appeal to Members of this House on the constitutional grounds that this is not a point of that sort, but one about the whole nature of our democracy. I have seen more and more amendments—sometimes they are tabled as late as the Report stage of a Bill—being inadequately discussed, scrutinised and debated and then folded into legislation. Often only a few years later, the government of the day—I repeat that this is true of all governments—deeply regret that legislation, change it and reintroduce it in another form. I have seen as many as nine education Bills in a period of only seven years. That means that governments go back and rework the legislation because it was enacted without adequate discussion and scrutiny. In that context, I very much welcome what the Leader of the House said—I believe that he will stand by it—about making an attempt to ensure more pre-legislative scrutiny and more study of draft Bills.
Whatever our party, we cannot fail to recognise that the fundamental problem is the weakness not only of this place, but, indeed, of another place as well. It is a place that responds time and again to these strong instruments of reward, patronage and promotion, and in which it is, quite honestly, therefore difficult to get independent concerns expressed fully. That is the case because the whole structure of our system means that what is essential is party loyalty, which is a very fine virtue, but is very often to the exclusion of the operation of judgment and common sense on the passage of legislation.
Therefore, the question that is before this House and another place is how we can so far reform our legislature that it becomes a powerful and significant one that can hold the government of the day to account. That is what people want. They want a government who are accountable to the people, and it is the job of the legislature to ensure that that accountability is real and transparent, and that it is upheld.
In that context, one of the things that seems to me and to those on my Benches to be crucial is the need for us to consider the issue of Lords reform in the wider context of reform of the whole of Parliament. It makes no sense for us to talk about having lesser or more functions without knowing how far that will complement—I use the word carefully—the work of
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the House of Commons. We cannot seriously discuss the composition of this House without knowing what our most crucial functions are to be. If I may say so, that is simply to put the job before the job description, and it makes very little logical sense.
If it is the view of the Leader of the House—and I hope that it is—that there should be very close liaison with another place in determining the reform of this House, I suggest that he might look at the Committee on Working Practices that he has established and at the Committee on Modernisation in another place and consider whether they could work together to ensure that the reforms are complementary and are carried out in a way that makes cohesive sense. May I ask him directly whether he would be willing to consider such a joint gathering or Committee? In that regard, I should like to quote to him some words spoken by the Leader of the House of Commons. With reference to pre-legislative scrutiny, he said:
"We are currently consulting on the best way in which that can be done, but a Joint Committee is obviously one of the options, and I understand that there is willingness in both Houses to proceed with such a Committee."—[Official Report, Commons, 1/11/01; col. 1007.]
Can the Leader of the House tell us where discussions have got to on that issue, what the scope of that Joint Committee might be and whether he is working with his right honourable friend in another place to bring about the cohesion that that implies? I should like to add that it is the view of my colleagues and myself that this requires a reform that looks both at the functions of this place and then, subsequently, at its composition. I fully accept that it would be inappropriate for such a committee to consider composition, but it would be wholly appropriate and, indeed, essential, for it to consider functions.
Turning to the issue of functions, perhaps I may make the following points. We very much welcome the proposal put forward earlier for a committee on statutory instruments. Your Lordships will know of the huge multiplication in secondary legislation—again under governments of both colours—that we have seen over the past 15 or 20 years. I, for one, am profoundly fearful of this multiplication. In many parts of our society it leads to a great sense of grievance that they are over regulated, over instructed and over told what to do. As a democracy, we must be careful about the multiplication of ill-debated secondary legislation. That is why I welcome the lead given by the Leader of the House on this.
I associate myself with the Leader of the Opposition in that we would be extremely reluctant to see the abandonment of the ability of this House to reject a statutory instrument—or, at least, the ability to insist upon a rethinking because of the possibility of its rejection. Many Members of the House—not least the distinguished members of the Delegated Powers and Regulatory Reform Select Committee—are aware that, in some instances, statutory instruments now carry very heavy burdens and, in some cases, intervene in the traditional civil liberties that the people of this country have long been able to enjoy.

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Further on the issue of functions, perhaps I may draw attention to an area which is not examined by Parliament at all. Perhaps the Leader of the House will tell us whether it is an area which is open to consultation and discussion. Your Lordships will know that on these Benches we have pushed very hard for the concept of a committee to scrutinise treaties. At a time when a body such as the World Trade Organisation is attracting passionate controversy among young people, it is rather absurd that Parliament cannot discuss such treaties. Of course any decision must lie with the Government, but is it really right that we cannot discuss or scrutinise any of these treaties? Another example is the convention on biological weapons, which today is central to the concerns of many of our fellow citizens. So can we look further at the areas which are not considered by Parliament? I gave an example of treaties; another is the area of public appointments.
Let me turn now to the issue of the composition of the House. In this context, I shall refer again to the Leader of another place. He referred to the need for,
"a democratic and representative second chamber".
On these Benches we, simple-mindedly, understand the word "democratic" to mean that people should be elected and accountable to their electors. Therefore it has long been our view—we have never strayed from it—that in the House of Lords political Peers should be elected. I repeat: political Peers should be elected, either directly or indirectly. They must be accountable.
We believe that the combination of a fixed term Parliament and a different system of election—I share the view that a closed list is not a fully democratic method—is critical if this House is to operate as an effective scrutinising chamber. We do not depart from that view. It is important to my position and the position of my colleagues on these Benches that I make that absolutely clear.
In the White Paper, the appointments board has the important function of testing the probity of potential Peers. We agree with that. It also has the function of suggesting the appointment of those who might sit as independent Peers. In our view, none of that retreats from the principle of the election of political Peers.
In that context, we strongly support the proposal of the Leader of the House and the Government that there should be a limit to the size of the House—although, like the Leader of the Conservative Party, I find it hard to see how that can be achieved. We agree with them about the dropping of the title of a peerage and making it entirely honorary. The "Freimeisters" and so on of the Federal Republic of Germany are perfectly acceptable in our country, but they should not carry political power for one moment. We support and commend the Government's proposal that this House should broadly reflect the position of the electors at the last election. That would bring us to at least a kind of dim reflection of democracy. It is certainly a long first step.
I shall not detain the House much further. I should like to ask the Leader of the House whether he can tell us something about his intentions for reducing the size
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of the House. Does he have in mind a voluntary retirement system or an upper age limit? I should also like to ask him whether the invitation to consultation in paragraph 96 is, as it were, open-ended, or is it a closed list of issues for consultation?
In conclusion, let me stress again, very clearly, that, first, there must be careful consideration of how to scrutinise effectively and hold to account the Government of the day— whatever day, whatever government. Secondly, there must be a combination of reform in the other place and this place, and the two must be harmonised and brought together into an effective common proposal. Thirdly, and finally, we do not believe that you can have a democratic and representative House unless at least the majority of that House is elected by our fellow citizens and given the credibility and legitimacy without which it cannot hope to achieve that position.
3.46 p.m.
Lord Williams of Mostyn: My Lords, the noble Lord, Lord Strathclyde, was uncharacteristically ratty today. It must be something in the water. He used phrases such as "patronage" and "stranglehold on the House". Unlike Marshal Goering, I did not reach for my revolver but for my statistics. In November 1999, there were in this House 483 Conservative Peers; in November 1999, there were 194 Labour Peers. Did patronage and stranglehold not matter then, or was it simply overlooked?
Let me look at "stranglehold" and "patronage" for a second or two. At the moment, despite the fact that we have won two crushing victories in general elections, we have in this House about 25 fewer Labour Peers than Conservatives. We are in a minority. That does not sound like very effective patronage to me.
In speaking of patronage, I beg your Lordships to allow the facts to intrude for a moment or two. Historically—not least when Mrs Thatcher was Prime Minister and when the noble Lord was a member of the Government—the Prime Minister designated the number and identity of the Cross-Benchers; the Prime Minister designated the number and identity of Conservative, Liberal Democrat and Labour Peers. This Prime Minister—it must have been overlooked—is giving away virtually all his patronage. None of the Cross-Benchers will be subject to his control; none of the Conservatives will be subject to his control; and none of the Liberal Democrats. The only element of choice that he will have over Labour Peers is to nominate the identities. He will not even be able to select the number. That is for the Appointments Commission. So shall we, once and for all, shoot that particular fox?
The noble Baroness, Lady Williams, asked, as did the noble Lord, Lord Strathclyde, about the plans for a debate. I entirely agree that we need a full debate, at a convenient time and with sufficient time for all to speak who wish to do so. Obviously, the usual channels will take that forward in the normal way.

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I do not believe that what is in the White Paper is the end of the story. I agree with the noble Baroness. As I have suggested previously, we need to look at this matter in the round. We need to examine working practices.
The noble Baroness rightly said that we do not do our work of scrutiny properly. That is partly because we do it at half-past two in the morning, when everyone is exhausted. I have suggested in this Chamber that we might perhaps think of working in the morning; and that we might think about not having two and half months off every summer. These are merely tactful suggestions; they are not intended to frighten the horses. But if we mean business in the way the noble Baroness suggests—and I agree with her—that is the way in which we should begin to work.
I am all in favour of learning what we can from the Commons. I endorse the noble Baroness's view that if Members of another House are going about modernisation in a way that is consistent with our methods and our traditions, of course we ought to learn from them, and they might usefully learn from us. It is a matter of literal indifference to me what the identity of a powerful executive is. I believe that it is the duty of this House to challenge the executive and bring it to account. I do not believe that we do it sufficiently at present. I believe that our working practices ought to improve in that way. I do think that composition is important; and I believe that we shall be a more effective House.
How is the cap to be brought about? Sometimes—not very often —Members of this House are called to service elsewhere. There is a possibility that we might consider retirement. No one is suggesting compulsory retirement. However, if some of your Lordships wish to take retirement, it is suggested in the White Paper that we ought to examine the possibility in a decent, sensitive, thoughtful way. No one is bullying anyone to leave. In any event, I have no power, nor does the Chief Whip, given our minority in this House compared with the Conservatives alone, to insist on anything. I am putting these proposals forward in a spirit of genuine consensus.
There is a 12-week consultation period, which is the usual length of time. It cannot be said that we have not consulted, or at least argued about this matter. We have spent the past four and half years fully engaged on it—and the previous 100 years!
I ask for a decently neutral and objective view. There will be independent Cross-Benchers who are wholly free of prime ministerial patronage. The numbers of the political Peers will be designated by the Appointments Commission. No Prime Minister in the past 100 years of whom I have read has given away so much patronage, so quickly, on a voluntary basis.
The noble Lord, Lord Strathclyde, spoke about political philosophy. He said how important it was—we approach the purple passages—that this House should be strong, independent and authoritative. On the "Today" programme this morning, he said that what is wanted is a second Chamber that revises
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legislation, stands up to the Government and holds the executive up to scrutiny. I agree on all three counts. The noble Lord went on to say, "If you want that authority, that inevitably leads you down the road of elections". Now we come to the philosophy. He said, "What that proportion should be, we have not yet decided". That does not sound like a particularly coherent approach to these proposals, which have been trailed for a very long time.
It is idle to talk about further research. We have had a Royal Commission, chaired by a former Leader of the House and former Chief Whip. The noble Lord, Lord Hurd, served on the commission. The other persons sitting on the commission, whatever one thinks of its conclusions, were extremely distinguished. We have had these arguments.
The noble Baroness asked whether the list of questions in paragraph 96 of the White Paper was a closed list. The text makes it plain that it is not. The wording is that the Government are,
"particularly interested in views on the following questions".
We have put this out for debate. But the debate must come to a sensible end and we propose to legislate in due time. The noble Lord asked me when. I am not in a position to say when. I do not know how the parliamentary timetable will pan out. Self-evidently, to be deeply serious for a moment, we have very heavy work to do arising out of events that none of us could possibly have anticipated. I hope—
Baroness Williams of Crosby: My Lords, I am grateful to the noble and learned Lord for giving way. I ask his forgiveness for intervening. Perhaps I may ask him this direct question. Does he see the possibility of a link between those in this House who are concerned with reform and the Commons modernisation committee? Such a link would enable us to consider some of these issues in that particular context—between the Houses rather than on our own.
Lord Williams of Mostyn: My Lords, I have no objection to taking that suggestion forward to the Lord President. I am happy to discuss it with him.
We have already started on pre-legislative scrutiny—not sufficiently, but we have made a good start. I have stated privately to both Leaders of the opposition parties—I state it publicly now—that it is my presumption that we should accept any PNQ that is proposed. I believe that the noble Lord, Lord Strathclyde, will agree that I have done that.
We can do all kinds of important things. What we cannot do is just muddle along in the same old way, whether in the way we work or in terms of our composition.
3.56 p.m.
The Lord Bishop of Durham: My Lords, it may be appropriate for me to intervene briefly from these Benches in view of the implications of the White Paper. We are grateful to have had a brief sight of it, and we are pleased with the progress that is being made. We

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believe that a half-reformed House is worse than no reform whatever. We shall study the White Paper carefully and make our representations.
So far as concerns religious representation in this House, we recall our submission on the Wakeham report, when we concluded that a minimum of 20 Bishops should have places in the second Chamber in order for us to be effective parliamentary servants. We stated then that fewer than that number would mean that a diminished range of experience would be represented. It could result in Bishops facing a conflict between their diocesan and their parliamentary responsibilities. We look forward to further opportunities to make the case in more detail. I emphasise that we approach the matter in terms of an argument for responsible service, certainly not privilege.
I note that the Government's present proposals have recognised the practical difficulties in broadening the religious constituency in this House. I sympathise with those problems. However, I want to emphasise that the principle of broad religious presence is one which we have strongly affirmed, and will continue to affirm. The Church of England seeks assurances that in some way this principle will be given real substance in the final arrangements for the composition of the House. We believe that it is especially important, following the recent tragic events, that forums are developed in which complex and sensitive matters to do with relations between the faith communities and their place in modern society can be aired and debated in a measured and well informed manner. The House of Lords, with its distinctive tradition of religious presence, has a unique potential to play a significant part in meeting this challenge.
Speaking personally, perhaps I may add a word on the subject of election or appointment. The issue touches the perceptions of this House's contribution. I hope that we shall give close attention to the broad representation that unelected Members can bring to the deliberations of the House.
Noble Lords: Cross-Bencher!
Lord Craig of Radley: My Lords—
Lord Williams of Mostyn: My Lords, I think it is for me to answer the right reverend Prelate at this stage. I understand his point. I think he will know that I wrote to the Archbishop in the early summer. We are having a meeting shortly on this question. We shall listen carefully to any concerns that are raised.
I immediately endorse the principle that there must be real substance in religious attendance and representation in this House. I have no doubt that the Appointments Commission would regard that as an extremely important duty.
Also, if one does not simply adopt the purist approach—which I entirely recognise—that everyone ought to be elected who has any part to play in a modern democracy, I believe that unelected Members are capable of giving a considerable amount of value and public service to this House.
Lord Craig of Radley: My Lords, first may I thank the noble and learned Lord, Lord Williams, for the Statement and for his courtesy in allowing me to have a copy of it and the White Paper? There is much to absorb in nearly 40 pages of the White Paper, but may I first welcome the intention to preserve the Cross-Bench element and Her Majesty's Government's recognition of the great value of the Peers who sit as independents?
Does the noble and learned Lord agree that it will be necessary to look closely at, and to have rules about, who should be included in the make-up of the suggested low figure of 120, which represents only 20 per cent of a 600-strong House? On these Benches we now total almost 25 per cent, excluding the Law Lords.
The Statement appears to lump together representation of independent expertise and the broader community in the United Kingdom. Is it the Government's proposition that the 20 per cent is to embrace all non-party members of the new Chamber, including those from other faiths? What if a Member of your Lordships' House decides to surrender a party Whip? While such Members are welcome to sit among us on the Cross Benches, and to be supported by the Convenor, their political independence will not have been screened by the appointments commission. Does the noble and learned Lord agree that the Government should not be allowed to diminish the total number of independents appointed to the House?
Increased representation of women and those from ethnic minorities is mentioned. Are the Government proposing that the 30 per cent guidance should be applied across the House as a whole, or to each party and group within it? Reference is also made to the peerage continuing as an honour. Will such honours be awarded along with others in Her Majesty's New Year and Birthday honours lists? Who will be responsible for selection for these awards?
Finally, have the Government a view on what the new House will be called?
Lord Williams of Mostyn: My Lords, the House will be called the House of Lords and Members of it will be called Members of the House of Lords. The question of honours will be a matter for Her Majesty and it will be her decision as to whether there should continue to be New Year and Birthday honours lists. The fact that a peerage is decoupled from the right to sit in the House of Lords will have no effect on that.
It is intended that new appointments should comprise not less than 30 per cent women. On the question of political independence, one would have to trust noble Lords. If they said that they had left the Conservative Party, or indeed any other, one would assume that they had done so scrupulously and that they had genuinely gone to the Cross Benches. Obviously, the appointments commission will have to monitor those matters, which are some of the intricacies we shall need to work through. There will be no difficulty if one has a statutory appointments commission with a good deal of power.

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I shall consider any figures that are suggested by noble Lords. The Royal Commission figure is 120, but if the noble and gallant Lord wishes me to reconsider it I shall be more than happy to discuss the matter with him.
Lord Waddington: My Lords, will the noble and learned Lord give an assurance that hereditary Peers will not lose their right to sit until after the elections have taken place? Otherwise, there would be a temporary imbalance between the parties, which the appointments commission would hardly want to address. If it did so, a new imbalance would occur as soon as the elections took place. It is obvious that the Government cannot get rid of hereditary Peers until after the elections have taken place.
My second point concerns remuneration. Has the noble Lord closed his mind to the possibility of different remuneration for the elected, as distinct from the unelected?
Lord Williams of Mostyn: My Lords, no, I have not closed my mind to that issue. The first point made by the noble Lord has some validity and needs careful thought.
Lord Hurd of Westwell: My Lords, does the Leader of the House accept that this Statement has a rather different impact on this House than most government Statements? Whatever the precedents, opinions are being formed as we speak. It is difficult to have such exchanges on the matter when most noble Lords have not seen the White Paper.
I support the protest of my noble friend Lord Waddington. We made a powerful case in the Royal Commission for a mixed elected and nominated Chamber. Will the Leader of the House accept that despite his own silver tongue, the Government have done their best to undermine that case?
I have always argued for a strong elected element, but the case for a nominated element is also strong. It is made stronger by the rapid disappearance from the other House of practical experience of life outside politics. That is a real deficit in our parliamentary system that we can remedy if our arrangements in this House are right. But that will not happen if the arrangements consist of providing that 360 out of the 600 Members of this House are nominated by the party machine. That is not the correct remedy.
Will the Government please consider the matter again in the light of the arguments in our report? Unless they do so, I have the feeling that no Bill will pass through the House because the parties are so deeply divided on the question of composition. We shall be left to proceed more or less as we are, and imperfect as we are, for several years to come.
Lord Williams of Mostyn: My Lords, I do not follow the point that the noble Lord seeks to make. The majority on the Royal Commission, which he dignified by his presence, chose option B, which suggested
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87 elected Peers. However, the Government are proposing not 87, but 120—a significantly larger number of elected Peers. We have erred on the side of generosity rather than on mean heartedness.
I am talking about 120 elected Members. There will be 120 nominated and the remainder will be those who are life Peers who continue here. It is true that they come here—we all did, virtually— by one form of patronage or another, but I have not found that that historical patronage has caused people to be any less independent than one would hope.
Lord Lea of Crondall: My Lords, is my noble friend aware of the strong support on this side of the House for the White Paper? On the specific criticism from the Conservative and Liberal Democrat Benches about how the cap of 600 will work, has not that been answered by the 10-year adjustment period? Is not that the only solution? If there were no cap, the House would continue to increase in number or people would have to be dismissed instantly. Is it not the case that, for once, the Government have got it right? I should have thought that the Opposition Benches would have recognised that this piece of arithmetic is a perfectly tenable solution.
Lord Williams of Mostyn: My Lords, I am sure that my noble friend is right. When the Opposition have had the opportunity to reflect, I am sure that they will agree with what has just been said.
Earl Russell: My Lords, should some future Members enter this House as a result of voting for a closed list ranked in order by the party rather than the voter, should such Members be classified as elected Peers or nominated Peers?
Lord Williams of Mostyn: My Lords, they will be elected Peers in exactly the same way that elected Members of the Commons, who are elected on a closed list of one, are regarded as elected.
Lord Trefgarne: My Lords, I had the privilege of coming to your Lordships' House almost 40 years ago when I was 22 years of age. I do not think that there has been a time since then when reform of one kind or another was not being considered and when the hereditary system was not being subjected to one kind of scrutiny or another.
On all those occasions, it was hoped that the new House, whatever form it might take, would be more democratic, more responsive and, above all, more accountable. Sadly, the proposals that the noble and learned Lord has unveiled this afternoon meet none of those requirements. I share the deep concerns of my noble friend Lord Strathclyde.
Lord Williams of Mostyn: My Lords, those comments are not fair. They are not an accurate reflection of what is in the White Paper. Nor are they a fair reflection of the relationship between the White Paper and the Royal Commission report. I am

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confident that the thrust and theme of the White Paper is in harmony with the thrust and theme of the Royal Commission report.
Lord Sewel: My Lords, will the noble and learned Lord explain how any elected element will enhance the ability of this House to perform its functions within the context of maintaining the pre-eminence of the other place?
Lord Williams of Mostyn: My Lords, I do not see any difficulty in that at all. It is important that regions of the United Kingdom are represented here. It is important that there should be that opportunity of election. It seems to me that one will draw on a different reservoir of talent and industry from all kinds of different parts of the community that may not be represented here at the moment. The mere fact that we have a minority elected element I do not think challenges the Commons in the slightest way.
Lord Elton: My Lords, what is striking in my view during the past few years' discussion of this issue has been the enormous general ignorance of what goes on in this House among those outside it who are being invited to comment on the White Paper. Therefore, I ask the noble and learned Lord the Leader of the House to accept the suggestion of the noble Baroness the leader of the Liberal Democrat Party and arrange an early debate so that we can do our best to inform the public about what the issues are and what our experience of them has so far been. If the noble and learned Lord can find some way in which that information can be more generously distributed from this Chamber to the public than is usual, that would be an additional advantage.
Lord Williams of Mostyn: My Lords, I rather agree with what the noble Lord, Lord Elton, said. Of course, there is a respectable argument for saying that if we have a partially elected element in this House, that will generate wider public interest in what we do. We are not properly served by the media. We had extremely important debates on the events of 11th September but there was hardly a mention of them in the newspapers. I do what I can and the information centre is diligent. Unfortunately, although we are sometimes pleased with ourselves, it is not a universally held emotion.
Lord Mackie of Benshie: My Lords, does not the noble and learned Lord agree that the elected Members will be elected from large constituencies? Others will be chosen not for their personal qualities but will simply be nominated by the relevant parties. What is the difference in that kind of election between the so-called elected people and those nominated by the political parties?
Lord Williams of Mostyn: My Lords, the difference is that they will have to present themselves, their manifestos and their individual personalities to the electorate. There may have been a time, which I cannot remember, when the individual Member of Parliament
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made a difference rather than about 500 votes per constituency, but that has not been the position for a long time, certainly not since the death of the university seats.
Lord Acton: My Lords, can my noble and learned friend say if it will be open to everyone to apply to be independent Members? If so, will the appointments commission be limited to selecting the independents from among those who apply or will it be open to the appointments commission to select whoever it thinks most suitable either from those who apply or from anyone else it may choose?
Lord Williams of Mostyn: My Lords, to gain the prize of sitting in this House one would have to make an application. I do not think that a pantechnicon will travel around the country with its occupants stopping disconsolate people on street corners to ask them whether they want to be Members of the House of Lords.
Lord Ampthill: My Lords, this problem has been rumbling for 90 years. Does not the noble and learned Lord think that he is being a little— I hesitate to use my next word—mean in trying to bring this discussion to a conclusion by the end of January? He talks of 12 weeks but there is an intervening feast. Will he be a little generous and give longer than that?
Lord Williams of Mostyn: My Lords, one of the reasons the noble and learned Lord the Lord Chancellor and I would like to make some detectable progress is precisely because for nearly a hundred years we have done nothing at all apart from having discussions. Twelve weeks is the usual period. The Royal Commission report has been available for a long time. There is no one who does not know what is in it. To coin a rather crude phrase, it is "make your mind up" time now. We must progress with reform or at least we must focus our minds on the possibility of it.
Lord Davies of Coity: My Lords, I have not yet seen the White Paper and, therefore, my question may be premature. However, if 120 Peers are to be elected, how can we be assured of the political balance of this House?
Lord Williams of Mostyn: My Lords, the appointments commission is charged with doing that and it has the power and authority to bring that about.

Commonhold and Leasehold Reform Bill [H.L.]
The Lord Chancellor (Lord Irvine of Lairg): My Lords, I beg to move the Motion standing in my name on the Order Paper.

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Moved, That the amendments for the Report stage be marshalled and considered in the following order:

Clauses 1 and 2,

Schedule 1,

Clauses 3 and 4,

Schedule 2,

Clauses 5 to 33,

Schedule 3,

Clauses 34 to 57,

Schedule 4,

Clauses 58 to 66,

Schedule 5,

Clauses 67 to 70,

Schedule 6,

Clauses 71 to 100,

Schedule 7,

Clauses 101 to 121,

Schedule 8,

Clauses 122 to 146,

Schedule 9,

Clauses 147 to 152,

Schedule 10,

Clause 153,

Schedule 11,

Clauses 154 to 164,

Schedule 12,

Clauses 165 and 166,

Schedule 13,

Clauses 167 to 170,

Schedule 14,

Clauses 171 to 173.—(The Lord Chancellor.)

On Question, Motion agreed to.

Barnett Formula
4.16 p.m.
Lord Barnett Lord Barnett rose to call attention to the case for a review of the Barnett formula; and to move for Papers.
The noble Lord said: My Lords, it will be clear that this is a non-controversial debate. There has been much written and said about the formula. It would, therefore, be sensible to start with a clear explanation of precisely what it is. I shall then try to explain why it was invented—if that is the right term—why it has survived for more than 20 years, whether it should be changed and, if so, how?
The formula was invented—I have used that word incorrectly—in 1978. Perhaps I should say at the outset that it did not occur to me at the time that it would become a formula, or that it would last so long. The formula really is quite simple. It applies to changes, whether up or down, in the Great Britain total of what is called comparable expenditure. Such expenditure is allocated on the following basis: England, 85 per cent; Scotland, 10 per cent; and Wales, 5 per cent. On that basis it was intended to be approximately population based. I had always assumed that the arrangement would be temporary until a more sophisticated method could be devised which took account of needs. In fact, not only has
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there been no change to take account of needs, there have been only minor changes to take account of changes in population.
Scotland's share of total UK population has declined ever since the formula was introduced. The White Paper on Scotland's Parliament indicated that the formula would be updated regularly to reflect the population ratio. In response to pressure from English MPs, Alistair Darling, then Chief Secretary to the Treasury, gave a commitment that it would be revised annually. I hope that my noble friend Lord McIntosh of Haringey will be able to assure us that that has taken place.
I should like to say a few brief words on population figures. I quote from a paper by Professor Heald of Aberdeen University who has done a great deal of work in this area. He states:
"The official population projections for Scotland are chilling, only 4,524,000 persons in 2031 which constitutes an absolute fall of 13.7 per cent from the peak population of 1974. On the basis of the projection, Scotland's share of GB population would be 7.60 per cent in 2031".
So much for the facts on the formula. The next question is why it was invented. The nearest that anyone in the present Government has got to answering that is my noble friend Lord McIntosh on 3rd December 1997. In case he has forgotten, I have extracted his comment from Hansard. He said:
"The advantage of the Barnett formula over the years has not been that it is based on strict rationality but that it avoids argument each year when the allocation of resources is determined".—[Official, Report, 3/12/97; col. 1362.]
I can confirm that that is true. As far as I was concerned, the formula was not strictly rational. As I have said, it was basically decided on a population basis. However, I would not have been able to obtain Cabinet agreement at the time without being able to satisfy English departmental Cabinet Ministers that there were reasonable grounds for allocating a greater level of public expenditure to Scotland and Wales than population figures alone justified. The substantial case that convinced Ministers was the different levels of income per head in Scotland and Wales. My life as Chief Secretary at that time was therefore made just a little bit easier, although I hasten to add that that was not the case that I presented to the Cabinet, because they might not then have agreed it.
As the figures that I shall quote make clear, the situation now is very different. There is obvious unfairness in the working of the formula—although, I hasten to add, not for Wales. I see someone nodding on the other side of the Chamber.
Why has the formula survived for more than 20 years? The major—and, some might think, too simple—reason is that governments generally prefer not to make changes, as that only leads to difficult questions. If that is thought too simple, there is another, more political reason. For 18 years, Margaret Thatcher and John Major resisted making the changes that the figures clearly show should, in fairness, have been made. They were obviously worried that it would lose them votes in Scotland and Wales. The net result was that, despite not changing the formula, they lost

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every Conservative seat in Scotland and Wales. I do not pretend that that had anything to do with the formula, for or against. The new Labour Government have also resisted any changes to the formula. I look forward to hearing from my noble friend the Minister why.
The latest available figures come from the Treasury and the Office for National Statistics, so I assume that they must be true. The Chancellor of the Exchequer's document costs £15.60. I hasten to say that I got it from the Library, but at that price it surely has to be true and, I hope, accurate. The documents show that in 1999—the most recent figures available—GDP per head in Scotland was £12,512, in Wales it was just £10,449 and in the north-east of England it was £10,024. What is called "identifiable" managed government expenditure per head in 1999–2000 in Scotland was £5,271, in Wales it was £5,052 and in the north-east it was only £4,837. I shall not quote many more figures, but I hope that those are simple enough to make the position clear.
As a confirmed sceptic on statistics, I feel bound to say that the figures at least show a general factual position, if nothing more. In this context, I assume that the word "identifiable" is important in relation to expenditure. For example, Professor Heald, in an important paper, has given an indication of why the comparatively simple formula has in practice become rather complex over the past 23 years. He describes the changes since 1978 as "Son of Barnett". I do not complain about that, although I do not know what it means, except that there have been major changes. He said:
"an introduction of cash planning in 1982, and the new planning total in 1990 have fundamentally affected the operation of the formula".
In addition, he points out that the formula applies only to block expenditure. I know that all your Lordships will know what that means. It certainly means that it is not the same as it was.
If the Minister has new figures, I am sure that the House would be glad to hear them, but for the moment these are the latest figures published. I would be pleased to hear what the Minister has to say in addition. It is clear that within any set of figures that one cares to take, be it the Barnett formula, "Son of Barnett" or "Grandson of Barnett"—although I have not got one; it would have to be "Granddaughter of Barnett"—there have been many changes that have confused an originally simple formula and made things rather difficult to comprehend.
Action taken on the basis of these figures alone would not solve the present unfairness of the allocation of resources. For example, within each area and region there are large differences. In the northwest of England, Merseyside is very different from my area of Greater Manchester—and most other parts of the region—in respect of GDP per head. Even in what is thought of as the affluent south-east, there are pockets where there is undoubtedly a need for higher levels of public expenditure. Relatively prosperous London, which is always much in the news, has the highest income per head, at approximately 130 per
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cent of the UK all-region average, yet I am sure that government expenditure there is much higher than in the north-east or the north-west. It is about the same as in Wales, where income per head is only 80 per cent of the UK average. I am sure that that will not stop the Mayor of London seeking even more.
Despite clearly doing very well in terms of income and expenditure per head, I am sure that Scotland can and will argue its case for even higher levels of expenditure. I am sure that we shall hear the arguments of sparsity of population, a colder climate, poor health records and problems of education. The case is further confused by the lumping together of capital and current expenditure. Yet even the general figures show conclusively at least one example of terrible unfairness. The latest figure for income per head in Scotland is £12,512 and government expenditure per head is £5,271, while in the north-east, with income per head at only £10,024, government expenditure per head is lower, at £4,837.
Lord Forsyth of Drumlean: My Lords—
Lord Barnett: My Lords, I am afraid that I have a problem fitting my speech into 15 minutes and I have to stick rigidly to the rule. In the other place I would normally have given way to the noble Lord at all times.
There will undoubtedly be scepticism about the figures. As I have said, I share that scepticism, but I hope that there can be little doubt from the figures that I have quoted about the overwhelming case for a change in the formula. As the founder, I readily admit to having given no consideration to needs at that time or where public resources should be allocated, not just in Scotland and Wales, but in Great Britain generally. In fairness, the job of Chief Secretary does not lend itself to doing what is essentially a departmental job.
What should be done? I hope that, inadequate as they are, the statistics show that the changes required go much wider than a simple amendment to the Barnett formula. The information currently available makes it impossible to propose the kind of major changes that are clearly required. I hate to recommend yet another review, but without one we shall not know where and what action is needed. The current Comprehensive Spending Review, as it is called, will not do the job.
The Motion relates to the subject of the Barnett formula. It would have been nice—over many years I have grown rather fond of the name of that formula—if I could have concluded that it was so good that there was no need to make substantial changes.
But I have previously suggested that instead of scrapping such an excellent name, any changes that result should perhaps be described as the Barnett Formula Mark II or the Barnett grandson's or granddaughter's formula. If the major review that I am suggesting concludes that the changes required would still need a formula for Scotland and Wales, I inform the Government that I should be very happy indeed if they wish to continue using the present name for the new formula. But as I have said, if the proposal should

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be scrapped, as I hope it will be, then as the man who introduced the formula, I hope that it will be wholly non-controversial in your Lordships' House.
My Lords, I beg to move for Papers.
4.30 p.m.
Lord Campbell of Croy: My Lords, I would like to start by congratulating the noble Lord, Lord Barnett, for putting down this Motion for debate and for being successful in the ballot. I also congratulate him on the way in which he introduced the debate and explained the mysteries of his formula. I believe that my contribution would best be from my experience as a junior Minister at the Scottish Office in the early 1960s, which is nearly 40 years ago, and later as Secretary of State for Scotland between 1970 and 1974, before the Barnett formula was available.
In reaching decisions on the amount of the Scottish block expenditure in relation to that for England and Wales, which were together at that time, negotiations had to take place. I understand that they were much easier after the Barnett formula was introduced. The formula has been much misunderstood. As the noble Lord explained, it does apply only to changes in block expenditure in England which automatically apply to Scotland in a set proportion. As it is sometimes thought, it does not set the initial block expenditure decided on for England and Wales and then for Scotland.
It has not been affected by devolution. As I said, I go back to the early 1960s when I was a junior Minister at the Scottish Office and this area was within my portfolio. Then we had to take decisions on the block grant for England and later for Wales. A pattern had been set by what was called the Goschen formula after 1888 when he was Chancellor of the Exchequer. The formula recognised that more expenditure was required in Scotland per capita for geographical and other reasons; for example, for areas of sparse population. The Exchequer contributions were accordingly larger in proportion in block grants for Scotland than for Wales.
At the time I was a Minister in the early 1960s, when the contribution by central government to local government expenditure, for example, with the rate support grant, for England was at 50 per cent, the contribution for Scotland was 8.5 per cent more. So that 58.5 per cent was contributed by the Exchequer to the total local authority expenditure for Scotland. Proportions had to be negotiated each year. I believe that when the noble Lord was Chief Secretary he performed a signal service in codifying and institutionalising the process through his formula.
Now he says that it is time to move on and that the formula should be altered and reviewed though it is still applicable now. I believe that the name Barnett is likely to become as famous as the name Goschen. That was suggested in 1988, I believe, and it has come true. The formula was extended to Wales in 1980 and I believe that it now applies also to Northern Ireland.
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But is it still relevant and necessary? I believe that the noble Lord, Lord Barnett, suggested that it may not be.
One favourable attribute of the formula has been its flexibility. For example, an increase in expenditure in England on health would lead to a proportionate increase for Scotland although it did not have to be in the health sector. It may be in other areas of public expenditure and for other purposes.
The advantages for the smaller parts of the United Kingdom have been that the formula recognised and protected the existing principle of differentials. It has reduced the amount of negotiation and argument each time England receives an increase to meet anticipated expenditure. I look forward to hearing from the noble Lord, Lord McIntosh, as regards what system or formula should be devised in future, if it is necessary and relevant, given that the Barnett formula has served its purpose and may no longer be needed.
4.36 p.m.
Lord Thomas of Gresford: My Lords, who is Goschen? We all know who the noble Lord, Lord Barnett, is, and he is to be congratulated on bringing forward an issue of great importance to the people of Wales. Perhaps I may also say how glad I am to be with my noble friend Lord Livsey of Talgarth on the day he makes his maiden speech. He is an expert in this field and I look forward very much to hearing what he has to say.
It has to be the aim of any government to distribute resources fairly between the nations and regions of the United Kingdom in order to remove deprivation and disadvantage and to equalise prosperity. The Barnett formula, based on a population count, assumed that if a higher average of percentage of available resources was given to the people of Wales, Scotland and Northern Ireland, then their pressing needs would be met. It was thought that in due course such an approach might lead to a level platform of prosperity throughout the United Kingdom. It may appear to have worked in Scotland because its per capita income has been lifted very nearly to the average of the United Kingdom, but only at the expense of the loss of population to which the noble Lord, Lord Barnett, referred.
It has most certainly not worked for Wales. In 1988 the income per capita in Wales was 87 per cent of the United Kingdom. Now it has dropped to 80 per cent. Wales is becoming poorer in relative terms. Therefore, 63 per cent of the land area of Wales, covering 65 per cent of the population of 1.9 million people, has now been granted objective one status for the purpose of European funds.
There is a clear unfairness in the formula. An inter-departmental study led by the Treasury in 1979 constructed a needs-based formula as opposed to a population-based formula. It calculated that, considering mortality rates, literacy, numeracy, unemployment, housing, deprivation and so on, Wales needed nine per cent more funding than England to achieve parity over a period of time as opposed to the

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Barnett formula allowance of six per cent. Wales would require 9 per cent on the needs-based formula that the Treasury constructed in 1979. Since that period Wales would have received £77.739 billion more for its needs than it actually had. That is a very considerable sum.
Scotland did better. The needs model produced a 16 per cent requirement, but Scotland's needs were met by Barnett to the extent of 22 per cent. That may be why Scotland has done rather better under the formula and has caught up, while Wales has slipped behind.
It is unacceptable that the prosperity gap between Wales and England should be widening and that the Welsh Assembly should be deprived of funds to deal with the endemic problems that Wales faces—problems that will no doubt be increased by fresh burdens on Welsh agriculture and the Welsh rural population. It is said that there are inequalities between the English regions. Well, it is up to them to press for the framework of government that they require. Wales cannot wait while areas of England complain about their relative poverty but do nothing about it. We already have some of the machinery to effect change in the Welsh Assembly. However, we in Wales pay our taxes entirely to the Westminster Government and nothing to the Assembly. We want that money back, and with it a fair share of the wealth and prosperity that accrues to the United Kingdom as a whole.
The way in which objective one funding has been allocated shows the difficulties arising from the mechanical nature of the Barnett formula. In last year's comprehensive spending review, the Chancellor had to bust the formula and announce a significant increase in the Assembly's budget. That, it is hoped, will release the additional European structural funds that Wales requires but, despite considerable lobbying by the Assembly, will not provide the matched funding that should accompany it. The Assembly will be required to find £380 million from its existing budget to provide matched funding for the structural funds. That will squeeze other areas of expenditure. What on earth is the use of giving additional European funds to Wales if its own expenditure on schools, hospitals and roads has to be cut?
The Barnett formula has run its course. It had its part to play in allocating funds between departments in Whitehall when the Welsh Office was simply another department, but even then it failed in its long-term goal of promoting fairness and equality between the nations of the United Kingdom. It is too inflexible and mechanistic to be applied to the allocation of resources between Westminster and the Welsh Assembly. A needs-based formula must be devised.
Baroness Farrington of Ribbleton: My Lords, perhaps I may remind the House that when the figure five appears on the clock, the speaker's time is finished. Recently, we ended up with the Minister having only half her allotted time to reply.
Lord Thomas of Gresford: My Lords, I apologise to the House for having taken too much of your Lordships' time on what is a matter of considerable concern in Wales.
4.43 p.m.
Lord Morgan: My Lords, the name of my noble friend Lord Barnett has been compared to that of Goschen. While Lord Randolph Churchill famously forgot Goschen, none of us will ever forget Barnett.
The Barnett formula was valuable in its time; it provided a rough-and-ready formula based on population that helped to ensure that the passage of devolution was not impaired or handicapped by conflict between Westminster, Edinburgh and Cardiff over the distribution of expenditure. For Northern Ireland, I am tempted to say that it was a godsend, if that is not too sectarian a remark for that part of the United Kingdom.
It was a rough-and-ready, practical approach, as my noble friend Lord Barnett observed. My noble Friend, Lord Callaghan, who was Prime Minister when it was introduced, observed in this House that it grafted something that was broadly rational on to something that was fundamentally irrational. Let us now consider it pragmatically, as was done in the 1970s, to see whether, for practical reasons, it is not time for a revised version.
The previous speeches have focused on fiscal aspects. I should like briefly to make three constitutional observations, because the formula bears so strongly on devolution. First, the Barnett formula illustrates how centralised is our system—how it works contrary to devolution. It is based on grants from the Treasury and power at the centre. It illustrates why the United Kingdom has been slow to devolve, and how devolution is still not observed in the spirit, although it is in the letter.
Secondly, the process under the formula is dominated by the needs of England. It is the expenditure on England from which the other percentages derive and the concept of needs is devised. That can lead to great distortions, as we have heard. There is a fundamental divergence in principle between the effect of the Barnett formula and the fact of devolution in Scotland, Wales and Northern Ireland.
Thirdly—although others, notably my noble friend Lord Radice, who will be speaking later, know more about this than I do—the formula contains a misconception of England. England is presented as a unit. There is no observation of regional variations within England. It may be fair to Scotland; it may have once been thought fair to Wales, although I do not believe that. But the north of England, especially the North East, has been a big loser under the Barnett formula. There is no conceptual way or policy mechanism by which the needs of the north of England can be spelt out and dealt with. We have heard the statistics that show that gross domestic product, income per head, and so on, in the north and northeast of England are unfavourable, and the region receives no assistance under the Barnett formula.
That illustrates the same point. Devolution, local needs, local democracy and accountability are not recognised under the formula. However well-intentioned it was, its effect is to work against the spirit

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of what is, after all, one of the Government's great triumphs—namely, the achievement of devolution and the recognition of the nationhood of Wales and Scotland.
The Barnett formula was conceived as a way of giving governments a quiet life. There are many reasons for that at a time of great complexity. However, it has not achieved that. As we have heard, it has produced problems in Northern Ireland; others far more knowledgeable than I will speak about Scotland; it has been disadvantageous to Wales. The noble Lord, Lord Thomas of Gresford, mentioned the effect of objective one. The Barnett formula was bypassed so that objective one funding could reach Wales at all. Repeated bypassing of the formula has helped to make it increasingly ineffective. Professor Hazell of the constitutional unit recently observed that, for Wales and for many parts of England, the Barnett formula has become the Barnett squeeze. That squeeze is likely to be felt shortly in Scotland and, perhaps more damagingly, in Northern Ireland.
There is therefore a strong case for a change in the Barnett formula. I suggest that that change should be deferred for a while. At present, in Northern Ireland, it could be catastrophic to hold a prolonged argument between Belfast and Westminster. The Barnett formula should be dealt with as St Augustine dealt with chastity: it should be enthusiastically endorsed but prudently deferred.
4.49 p.m.
Lord Livsey of Talgarth: My Lords, I welcome the opportunity to make my maiden speech on the Barnett formula. It is a privilege to take part in this debate with the noble Lord, Lord Barnett, himself. I had planned to make a 10-minute speech, but it has been cut to five minutes.
Autobiographically, I am lucky to be here at all, because my father was the youngest of seven and my mother was the youngest of six. I am proud to be a Welshman. My family, as my name betrays, has been in Wales for five generations. They were originally blacksmiths in Cyfartha ironworks in Merthyr Tydfil and made thousands of wrought iron gates for nonconformist chapels throughout Wales. They were also musicians, conducting the famous Cyfartha brass band and won a competition at the Great Exhibition of 1851 so doing; but I must move on because that was extinguished in the Great Depression. My family worked in both industrial and rural Wales and my maternal grandfather was orphaned at the age of nine on the family farm.
My career spans both industry and education as an agricultural economist and I entered politics later in life. Suffice it to say, before becoming leader of the party in the Commons, I fought seven elections, won three and had eight recounts. There we are; it has been a very invigorating political life.
It is inspiring to speak in this Chamber, but I must now turn to the two questions I want to address. One of them I must ask with due respect to my former
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constituency, Brecon and Radnorshire, which is the most beautiful in Britain. It was earlier this year struck by the dreadful foot and mouth disease. The experience was doubly galling for me because I was in Northumberland in 1967 and saw the terrible and tragic circumstances there, and I never wanted to see the disease rear its ugly head again.
I cannot compliment the Government on their handling of the disease. I coined the description "lamentable" long before Devon County Council. I described the lack of MAFF communications as "lamentable" over the proposed Eppynt mountain burial site in the Brecon and Radnorshire constituency last April. Suffice it to say that after seven hours on a mobile telephone, I achieved a meeting between farmers and a Minister at 11.30 at night in Brecon barracks. We persuaded the Government to abandon that site on geological grounds. Many families and children have been heartbroken by what has happened and a full public inquiry is essential to sort the matter out.
Rurality and farming impinge on the Barnett formula. That is especially so in Wales where population sparsity and urban deprivation—for example, in the valleys—predominate. The formula allocates and allows for changes in public expenditure in Wales, Scotland and England, but does not take regional inequalities into consideration.
The criticisms of the Barnett formula are that it is too crude because it is based on population statistics and results in per capita allocations. It ignores differences in health; rurality and sparsity of population; urban deprivation; lack of transport infrastructure; and, to a large extent, low wages. It does not reflect the changes in relative prosperity since 1978—there is no question about that.
When one looks at the GDP figures, particularly those mentioned by the noble Lord, Lord Barnett, in relation to 1999, one sees that the differences in the inequalities between Wales, Scotland and north-east England stand out starkly. North-east England and Wales account for just over 80 per cent of GDP while the proportion relating to Wales has declined by 10 per cent in the past 20 years. A new needs-based formula is absolutely vital to take account of the cost of providing services to sparsely populated areas on the one hand and to deprived and congested urban areas on the other. They have been blighted by poverty and social exclusion, particularly in Wales—I am also familiar with north-east England—with poor health and low wages.
The solutions we ought to be discussing today are ones which involve positive change. World-wide models are available; for example, from Germany and Australia. In Australia, the Commonwealth Grants Commission aims to secure equality and diversity to its federal states. Liberal Democrats propose a finance commission for the UK nations, which would have "constitutional status". That replacement device would introduce a revenue distribution formula and the Government should come forward and correct the inequalities within the regions and nations of the

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United Kingdom. I call on the Government to embrace such a proposal because we must stem the tide of urban and rural poverty which now affects important parts of the UK.
Finally, economic equality of opportunity must surely be the battle-cry for our deprived communities and their citizens.
4.55 p.m.
Lord Roberts of Conwy: My Lords, it gives me great pleasure to compliment the noble Lord, Lord Livsey of Talgarth, on the high quality of his maiden speech. We have known each other since he was first elected as Member of Parliament for Brecon and Radnorshire in 1985. I am sure that the whole House will look forward to his future participation in our proceedings.
I must also compliment the noble Lord, Lord Barnett, on securing the debate. It is more timely now than when he first called for it in 1997. More devolution is in the wind, the macro-economic scene is changing and his formula is approaching its silver wedding. Successive governments have been wedded to it for so long because it has provided them with a comparatively simple way of ensuring that each of the countries of the United Kingdom receives its population share of annual increases in public expenditure relevant to its block.
The Government claim that the formula is fair—and it is in principle—but there was that lengthy period when the population share figures used were wrong. The result was that Scotland received 1 per cent more than its due and Wales received 0.14 per cent less at the time of the great correction in 1992. It is too late for us to say, "Wales was robbed". The Government are now committed to annual revision. That sounds right, provided that the revision is unbiased. I, too, would like assurances about it.
The use of the wrong figures vitiated the intended convergent effect of the formula and has led some people to describe its proper working in future as the "Barnett squeeze". In Wales, we should be careful about that. Perhaps we should call it more endearingly the "Barnett hug" because we may benefit from its operation in years to come.
Criticism of the wide divergence in per capita spending across the UK should be levelled at the inherited underlying baselines rather than at the formula itself and at the bypassing of the formula by special items of government expenditure outside the block. Throughout the years there has been much talk about the need to base regional expenditure on needs assessment. Indeed, such a study was carried out in the late 1970s and it concluded that per capita expenditure in Scotland, Wales and Northern Ireland would have to be substantially higher than in England in order to provide a comparable level of service in the six areas examined in 1976–77.
I shall not quote those antiquated figures, except to say that Wales would have received more on a needs basis—that it did in 1976–77—and Scotland would have received less. Much has changed since those days. The problem—and I give due warning—of providing
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an acceptable needs-based formula has not diminished. As those who have had experience of local government finance know only too well, there would be endless arguments about the factors to be taken into account and the weighting attributed to them; for example, sparsity, morbidity and so forth.
Should the Government review the Barnett formula? I suspect that the Minister who is to reply will say that the Treasury is always reviewing its working. Since the year 2000 we have had expenditure figures for the English regions, which are not at all happy with the outcomes. If there is to be more devolution to the English regions, a funding formula will have to be found in order to ensure parity of treatment.
Personally, I should like to see a closer relationship between per capita spending by the Government and disposable household income per head. Regions with most income should have least government support and those with least income per head should have most support. That seems right to me. Such a correlation is currently lacking. Wales would come out of it well as, indeed, it would on a GDP basis, which is another possibility.
5 p.m.
Lord Radice: My Lords, I begin by thanking, noble Lords and the staff of this House for their very warm welcome. If this is the aristocratic embrace, then there is a lot to be said for it.
I say at the outset what a great honour it is to take part in a debate initiated by my noble friend Lord Barnett, at whose feet I used to sit when I was a rookie Member of Parliament and he was Chief Secretary to the Treasury in the Labour governments of the 1970s. I doubt, however, whether any of us, including my noble friend, ever imagined that one of his main claims to fame would be the so-called "Barnett formula". Incidentally, I note that it does not even rate a mention in his excellent account of his stewardship of public spending. Therefore, perhaps he was not aware of the controversy which would arise.
However, of course, it is now a matter of controversy. For example, in the North East, which I represented in Parliament for 28 years, there is a widely supported campaign if not to abolish the formula then certainly to reform it radically. The campaign for the English regions takes a similar position. It calls for a replacement of the Barnett formula and the establishment of a new mechanism to distribute public money on the grounds that the present system is over-generous to Scotland and discriminates against the English regions.
It may well be that some of the criticisms of the Barnett formula have been unfair, as was pointed out in the preliminary investigation by the Treasury Select Committee of which I was then chairman. As my noble friend pointed out, it is not always understood that the Barnett formula does not determine the overall size of the budget in Scotland, Wales and Northern Ireland; it is all about apportioning the increases in public spending on comparable programmes between the countries of the UK on the basis of population.

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Of course, as a short-term solution, the Barnett formula made a good deal of sense because we believed that we were going to get devolution. It provided an agreed way of allocating increases without unseemly annual haggling. It was also expected to provide over a period of time a mechanism for convergence in spending per head between the countries of the UK. However, for a number of reasons which I do not have time to address at the moment, that convergence has not happened.
Therefore, partly as the result of an initial pattern of public spending and partly due to the way that Barnett has worked in practice, the spending differences between, on the one hand, Scotland, Wales and Northern Ireland and, on the other hand, England, including, of course, the English regions, has remained pretty well the same. Indeed, according to the latest public expenditure statistical analysis, if one takes UK expenditure as 100, England is 96, Scotland is 118, Wales is 113 and Northern Ireland is 133. If one then starts to place the English regions on the index, only London with 113, the North East with 109 and the North West with 104 are above 100.
Of course, there may be strong arguments for high public spending in Scotland, Wales and Northern Ireland. I shall not raise that issue. But many of those arguments apply also to the English regions. My own region, the North East, which I know best, has lower GDP per head, higher unemployment and greater educational problems. It is very difficult to justify the following pattern of educational spending: £686 per head in the North East compared with £863 per head in Scotland. Perhaps there are good reasons for that, but I believe that people in the North East would like to know what those reasons are.
I believe that the time has now come for a fresh appraisal. It should be possible to devise a mechanism which takes more account of needs and brings the English regions into the equation as well. Therefore, I believe that the exercise should draw on the experience of the standard spending assessment. We have a model for local government expenditure. It is based on population, but it takes additional needs into account.
I consider it to be essential both for the legitimacy of public spending and for the strength of the Union that all parts of the UK should believe that the distribution system is fair. That is the case for change which I believe the Government should now address. I thank noble Lords for their attention.
5.5 p.m.
Lord Forsyth of Drumlean: My Lords, I begin by congratulating the noble Lord, Lord Radice, on an excellent maiden speech. He has shown himself to be a member of a very select club of people who understand what the Barnett formula is about. Over a number of years I listened to his excellent contributions in another place, and I am sure that this place will benefit greatly from his wisdom and knowledge.
I also congratulate the noble Lord, Lord Barnett, first, on securing the debate and, secondly, on the very skilful and elegant way in which he indulged in what
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was—perhaps your Lordships will forgive me for describing it—nothing less than a political heist. The noble Lord is intent on doing what he set out to do when he was Chief Secretary to the Treasury; that is, to grab money from Scotland for the north-east of England. That was the game.
As the noble Lord, Lord Radice, pointed out, the intention of the Barnett formula was to produce convergence and to remove what was seen as an anomaly between expenditure levels in Scotland and those in the rest of the United Kingdom. The reason that the noble Lord is dissatisfied with the operation of the Barnett formula is that it has not achieved its purpose. Its purpose was to reduce expenditure in Scotland relative to England. Indeed, that is why the Barnett formula was kept secret for two years and was revealed only by accident in a parliamentary Answer at that time.
Of course, the effect is that, if public expenditure increases, the gap between Scotland and England narrows and, at times when public expenditure is cut—I suspect that we may be embarking on that if we are not to see taxes go up—it produces divergence. The noble Lord and others spoke of the necessity of a needs assessment. I would counsel caution on the part of those who speak for Wales. My understanding is that a needs assessment, if carried out on the devolved matters for Wales and Scotland, would produce some very uncomfortable results.
When I was in the Scottish Office, I was told by my officials that a needs assessment would probably result in the Scottish Office budget being cut by £2.5 billion. They believed that the Treasury considered that it could be reduced by £4 billion. If that is the idea of Members opposite of how to make devolution work in Scotland, I believe that we should think again. It is nothing less than an insensitive raid in the tradition of the Border reivers which is likely to produce a vigorous response from north of the Border.
I welcome the opportunity to discuss these matters if for no other reason than that the debate provides us with an opportunity to underline the very unsatisfactory way in which the Government introduced devolution in Scotland, the half-baked nature of the proposals and the failure to put in place a stable system of finance. Therefore, north of the Border Mr Henry McLeish is committing himself to paying teachers considerably more than they are paid in England for the McCrone proposals will result in expenditure of well over £0.5 billion, to introducing new standards of care for the elderly north of the Border, and to having different arrangements for tuition fees. At the same time, he is looking to England to continue to provide more relative per head of population than is the case in Scotland. That is bound to create the kind of tension which has brought the noble Lord, Lord Barnett, to his feet complaining about the position relative to Scotland and England.
The Scottish nationalists are arguing that the Scottish Parliament should determine its own needs and raise its own taxes. That would put us straight into an argument about who owns North Sea oil and the

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value of that oil, and would create the type of tensions and divisions which we do not need in our country at present.
I say to the Government that they did not think through the financing of devolution. That is why we are now in this mess. This afternoon we had yet another example of constitutional reform which has not been thought through and which threatens our democracy and the integrity of the United Kingdom. I say to the noble Lord that we should let the formula alone; in time it will do the job that he intended. To embark upon a needs assessment will set one part of the United Kingdom against another. The only beneficiaries will be the nationalists and those who wish to divide and break up our country.
5.10 p.m.
Baroness Ramsay of Cartvale: My Lords, speaking as a Scot, I cannot help thinking that the fact that the Barnett formula is simultaneously being attacked by some because it gives Scotland too much and by others—in Scotland—because it gives Scotland less than its due, means that the chances are that it might have got things more or less right.
The Barnett formula has provided stable settlements under successive governments for more than 20 years. It is fair because it gives the same overall increases for devolved programmes per head of the population in all four parts of the United Kingdom. It has for the past 20 years been the mechanism for determining changes in the assigned budgets of the three territorial departments, and it continues to operate under devolution. Within their assigned budgets, it is for the devolved administrations to determine their own priorities for allocating their budgets.
The Barnett formula automatically applies a population-based proportionate share of any increase in comparable English spending programmes during a spending review to the Scottish assigned budget, which was formerly known as the Scottish block.
I put it to noble Lords that it is very important to maintain continuity and stability in a period of rapid change. The commitment in the devolution White Paper, Scotland's Parliament, that the Barnett formula arrangements would not be changed without a full assessment of relative needs in the two countries reflects, as does so much of the White Paper, the conclusions of the Scottish Constitutional Convention. That convention brought together all strands of Scottish political and civic society except, for their own peculiar reasons, the SNP and the Scottish Conservatives—the SNP because it saw in the successful establishment of a Scottish Parliament its own nemesis, and the Scottish Conservatives because they considered a Scottish Parliament to be anathema.
I should declare an interest—I do so with some pride. I was the final co-chair of the convention, along with the noble Lord, Lord Steel of Aikwood. The convention worked from 1988 to produce, in 1995, the document that was the basis for the White Paper and the subsequent Scotland Act. Under the heading, "Secure and stable finance", it recommended the
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continuation of the principle of equalisation and of the Barnett formula as the basis for the allocation of Scotland's fair share of the UK's resources. It will come as no surprise to the noble Lord, Lord Forsyth of Drumlean, to hear that I do not agree with a word that he said about the way in which devolution was brought about in Scotland. The convention believed that those arrangements would help to guarantee the Parliament's income on a long-term, stable basis and that its income would not require annual negotiation.
That was good thinking then, and it is good thinking now. Nobody says that the Barnett formula is cast in concrete for ever—because it is population based, and because populations fluctuate, it is clearly not at all set in concrete. The Government's spending plans have been set down and agreed for the years until 2004. That includes the spending plans for Scotland, Wales and Northern Ireland. There seem to be no plans to change them or to scrap or review the Barnett formula. I am happy about that because it provides the kind of stability that is necessary in these early days of devolution and of seismic constitutional changes. I say to my noble friend Lord Barnett, with the greatest of affection and respect, that it seems to be madness, just over one year into devolution, to think about rocking the financial boat.
During the general election campaign, my right honourable friend the Prime Minister spoke in May of this year on radio in Scotland. He said:
"I support the Barnett formula. I think it is the right way in order to make sure we get a fair settlement for the UK. I have said we have no plans to change the Barnett formula and I have supported it because I think it is the best and fairest way to distribute resources".
My Lords, I agree with him.
5.15 p.m.
Lord Morris of Aberavon: My Lords, there cannot be many instances of a debate that is initiated by a noble Lord on the need to revise a formula that bears his own name. I congratulate my noble friend on so doing.
When I was Secretary of State for Wales and my noble friend was Chief Secretary to the Treasury, I was one of his first victims, but I lived to tell the tale. The apportionment of public expenditure was done in a series of bilaterals, with each spending Minister. If one was a multi-functional Minister, as I was, one attended a kind of modern Spanish Inquisition, which involved if not death by 1,000 cuts then at least the perception of it. My noble friend's saving grace was that he did it all with a great smile. If his victim left his room also smiling, it was a smile of relief that my noble friend had not abolished his victim's offices and confiscated the seals of office.
When I was called to those painful meetings with my noble friend, there was no Barnett formula. It is not even discussed in my noble friend's most entertaining book, Inside the Treasury. I believe that we argued about means and needs based on history, as the Treasury puts it. Even if they were one-sided arguments, my noble friend records very faithfully in his book his victories and his defeats.

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It is important to remember that the formula governs only changes in expenditure; it guarantees that Wales, for example, receives a population-based share of any increase—or, as I found in my time, decrease—in spending by a relevant UK department. However, the formula does not set the baseline for spending in Wales. That reflects the position before the formula was set up. In Wales, higher levels of public expenditure reflect longstanding problems of deprivation and poverty. It is vitally important to distinguish the two components in the allocation of money. The advantage of some kind of formula is that it is a means of calculating the lump sum that is given to the Assembly. Once granted—this is fundamental to devolution—the Assembly makes it own budgetary decisions within the financial framework. It no longer has to argue or haggle with the Treasury.
Without some kind of formula, the Assembly would be open to second-guessing by the UK Government. I have no objection in principle to reviewing or revising the formula, but I suspect that that would only be tinkering so far as concerns Wales. There has to be some kind of formula—otherwise, one is in danger of undermining the whole mechanism and philosophy of devolution.
The baseline of expenditure may well be over-ripe for examination. That is very important. The extent of the needs of yesterday are not necessarily those of today. As the baseline cannot be set in stone for ever there will come a time when either the UK Government and the Assembly together, or, after full consultation, some independent body will have to examine the baseline. We have referred to an example of overriding—indeed, of breaking—Barnett; it involves the provisioning of Treasury funds to trigger the EC provision for objective one. Objective one funding was simply the identification of need, accepted by the EC and not covered by existing expenditure allocations.
The only argument within Wales is about the extent of funding. That is against a background that public spending in Wales, through the Welsh block, is now growing marginally faster than public spending in general, including a total of £3.4 billion extra spending in the July 2000 review, which is important. The principle of objective one funding—the breaking of the Barnett formula—underlines the need for an examination of the baseline itself.
5.20 p.m.
Baroness O'Cathain: My Lords, the number of speakers who have put their names down to participate in this debate could be a measure of the enduring interest in the subject or a determination to understand what it is all about. The two words "Barnett formula" crop up on a regular basis in this House, in the more serious articles in the printed media and from time to time in the broadcasting media. I do not believe that I am unique in having been somewhat ignorant of what it is all about, but no longer. Thanks to the action of the noble Lord, Lord Barnett, in winning the ballot for
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this debate, we have all had to do a fair amount of research and to rid our minds of misconceptions about the formula.
In the interests of brevity, I want to make two points, ask one question and make one somewhat facetious observation. First, it seems quite incredible that there has been no needs-based assessment of the Barnett formula since 1978. That is quite unbelievable. That would be somewhat—but only somewhat—acceptable if the parameters of the formula were unchanging. In the case of the formula, the fundamental basis on which it was fixed; namely, the population relativities of the constituent parts of the United Kingdom, is ever-changing as the noble Lord, Lord Barnett has shown. I am sure that any sensible business organisation, on a regular, probably an annual basis, would consider disparities in its budget of a similar nature to the formula; for example, allocation of special sums to cover development costs or to attempt to iron out inherent discrepancies. The allocation of the national budget is even more important, not least in the quantum. It really should be reviewed on a regular basis. In 1998, the Treasury Select Committee of another place stated that it was,
"disappointed that no Government studies have been made in relation to the appropriateness of the Barnett Formula and how it relates to needs".
Such studies are long overdue.
Secondly, the constitutional changes introduced by this Government in the area of devolution of Scotland and Wales should have led to a root and branch examination of what could be termed "grey areas". As that was not done, it should be done, and speedily, if only to remove the perception that the Government are less than even-handed in their treatment of the constituent parts of the United Kingdom. Several noble Lords have already drawn attention to the situation in the North East.
I now come to my question to the Minister. The very existence of the formula, working it out, managing it, dealing with parliamentary questions about it and updating statistics, probably does not cost much to administer. However, I am sure that a sole junior official in the Treasury or the Scottish Office or the Welsh Office does not sort it out alone. I would be prepared to bet that there are a series of meetings, papers prepared, arguments undertaken and rebutted all in the name of the Barnett formula. Has the Minister any idea of the actual costs of that on an annual basis? I would also like an idea of the opportunity costs, but I appreciate that that may be a little more difficult.
My somewhat facetious observation relates to the position of the noble Lord, Lord Barnett. I fear that he is in danger of slipping into oblivion if a review of his formula resulted in the said formula being abolished. Perhaps we should consider giving him a cross-party, inter-parliamentary task to ensure that his name shall continue to be attached to a concept that is difficult to understand, but which will be known by many for at least the next 25 years.
5.24 p.m.
Lord Peston: My Lords, Keynes had a general theory, Planck had his constant, Heisenberg his principle, Euler his equation, Fermat his last theorem and my noble friend has his formula. I ask my noble friend whether he has noticed that of the 19 Back Benchers who are taking part in the debate, 14 come from Wales or Scotland. I hasten to add, of course, that each of their contributions is entirely objective and dispassionate.
Should public expenditure be redistributed, especially as the British tax system no longer is? My answer is unequivocally yes. Fundamentally it should be redistributed between individuals and families. We have to ask whether that aim can be met by focussing on regions or other measures of area. The problem is that in concentrating on large regions one may miss important pockets of need within them. Moreover, without regional government we have no mechanism for concentrating on those important pockets.
Subject to that, it seems to me overwhelmingly obvious that a formula based on population is not satisfactory and in no circumstances could it possibly be satisfactory. My noble friend accepted that by saying that the formula was intended to be approximately population-based but that it was intended as a stop-gap until a needs-based system came into operation. Again, I entirely agree with him. It was intended to do that but it is about time we had the appropriate formula.
What criteria would be better? Clearly, regional GDP per head is one possible criterion. My view is that regional unemployment would be another to look at and regional poverty would be a third. I say that, although I also add the point that I am generally doubtful about the accuracy—if I can put it that way—of regional statistics. Indeed, any change that we make would, first, require major work on reassuring ourselves that the statistics are right. We need better statistics and appropriate criteria that turn out to be needs-based.
The criteria that I have mentioned give different answers. On GDP every noble Lord has pointed out that Scotland is above average relative to the median. On the other hand, it is also worth pointing out that Scotland is above average—in this case I mean worse—in relation to unemployment. If that is one's criterion, one would approach Scotland in a different way. Of course, Wales and Northern Ireland are both worse on the GDP figure per head and on the unemployment figure.
We then have the special case of the North East. Although prima facie on a needs-basis it does not receive enough public expenditure, that must be the result of central government policy rather than anything to do with the formula. It is probably an unintended result, but there is no doubt that it is a result.
My noble friend referred to the expression "identifiable general government expenditure". To use a rather crude phrase, that is a rather dicey concept on which to base a policy.
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Like the noble Baroness, Lady O'Cathain, I intend to be brief. I have one suggestion about how to deal with the problem that concerns us all, which is a change in government policy of a different sort: namely, to restore full employment to the economy. There is still overwhelming evidence that the main cause of poverty in our country is long-term unemployment. I hope that a policy to remove long-term unemployment would commend itself to all noble Lords although in the end—I say this with great regret—it would mean that formulae like the Barnett formula became irrelevant.
5.28 p.m.
Baroness Maddock: My Lords, for most of my life I have lived in the South East of England, but now my home is in the North East. For the past two years I have been getting to know that part of the country. I have done that through reading local newspapers and listening to broadcasts. It does not take one long to realise that the people of the North East feel extremely hard done by when it comes to financial settlements from government. I live near the Scottish Border, so when I cross the Border I can see that the quality of local services are better.
When the Barnett formula was introduced, it was a temporary measure. Other noble Lords have detailed the figures for the North East, so I shall not repeat them. When the formula was introduced, Scotland had the lowest gross domestic product per head. However, it is a fact that the lowest GDP per head–77 per cent of the UK average—is now in the North East. If one considers other indicators alongside it, it is no surprise that there has been a real clamour in the North East for regional government. The North East has a convention based on similar arrangements to those described by the noble Baroness, Lady Ramsay of Cartvale, and is well on the way to arguing a very good case for regional government.
Just before and during the local elections, the Labour Party promised that in the first few months of the Government's second term there would be a Green Paper on regional government. I suggest that that will be a good opportunity to look at how to deal with the regional disparities that particularly affect the North East.
Last week saw the publication of a fairly damning report by the Regional Studies Association. It accuses new Labour of adopting neo-Thatcherite policies towards the North East and is a fairly devastating critique of the Government's record in that region. The noble Lord, Lord Peston, said that perhaps the problem in the regions was the policies of the Government. I do not have time to go into that in detail, but for me one of the most telling statistics in the report is the need for 180,000 jobs in the North East if employment levels are to match those in the South East. But the report also points out that on the basis of an annual increase of 0.5 per cent, which is the growth envisaged in this year's enterprise White Paper, it will take 35 years to produce those 180,000 new jobs in the North East.

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I believe that the evidence in that paper backs all the demands in the North East for a better way to deal with the problems in that area. Hugh Morgan-Williams, vice-chair of North CBI, has called for money to be found from a reform of government spending rules. I do not have time to go into what we should do and how the formula should be replaced. I hope that my noble friend Lord Newby will have more time to say something about that. But I believe that all noble Lords in the Chamber agree that the formula must be needs-based and that we all recognise that needs change and that we must also look at other indicators, such as health, poverty and education. From my brief time in the region, I know that for those who live in the North East reform of the Barnett formula cannot come too soon.
5.33 p.m.
Lord Sewel: My Lords, there is little doubt that the Barnett formula has had a pretty bad press recently, although it has helped to keep my friend Professor Heald and others in gainful employment for some years. In Scotland it tends to be seen as a means by which Scotland's share of UK expenditure is being excessively squeezed. In some parts of England it is seen as a means by which Scottish expenditure is maintained at a higher level than can be reasonably justified, so there are very conflicting perceptions of the effect of the formula.
The truth is slightly different. The formula provides a means by which, admittedly over time, expenditure between Scotland and England can be made to converge in a way that avoids major disruption and dislocation. Part of the problem about the general debate, not today's, is the confusion about what the Barnett formula is all about. I believe that that has been cleared up very satisfactorily during the course of today's debate. But an important point to bear in mind is that it means in effect that although public expenditure in Scotland will increase it will do so more slowly than in England.
It is also true that convergence has not occurred at the rate originally expected. I believe that that is due to two major factors: first, the extent to which, particularly in the 1980s, it was necessary to bypass the formula to fund significant public sector wage settlements; and, secondly, Scotland's higher than expected population decline over the period. But we must remember that a decline in population does not of itself generate proportional cost savings.
A major component of the Barnett formula's bad press, which has emerged during the course of today's debate, is the belief on the part of some English regions that they are being short-changed as a result. But from the perspective of English regional expenditure to concentrate on Scotland's level of expenditure is very much a blind alley. Quite simply, any reduction in Scottish expenditure would make precious little impact on the amount available to deal with imbalances within England. Regional imbalances and the claims of the North East, North West and far
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South West are not a product of the Barnett formula or any Scottish-English debate; rather, they are essentially an internal English matter and are determined by decisions made within Whitehall departments.
If we are to move to a more needs-based approach—I share the caution of the noble Lord, Lord Forsyth, about pursuing that particular route—a good deal more work must be done. It is not as simple as it may seem initially. We must do more work on expenditure drivers, but the process of establishing the needs base will require a degree of credibility and transparency. Any approach must take into account such factors as geography, to which my noble friend Lord Barnett referred. Reference has also been made to sparsity, which is undoubtedly a cost driver; demography, particularly in the form of the relative size of the dependent population; and the differential participation in the major public services such as health and education.
Any needs assessment must carry a very high degree of credibility which I believe would arise only if it was done by an independent body. I am afraid that any exercise carried out by the Treasury would not carry that credibility.
In the short term it is important that debates like today's are better informed. It is here that I make a plea to the Minister. The present PESA figures are of little value. Their level of aggregation is too high to enable one to understand what is happening within programmes. At the same time, some lines, such as that concerned with housing, are virtually useless in trying to understand what is going on. Most importantly, as the debate deepens we shall require greater transparency. For example, we simply do not have a series of comparable English expenditure figures that allows us to follow through the numerical operation of the formula. That is a basic requirement of any such debate. I hope that the Treasury will loosen up to some extent and make such figures available in the near future.
By all means, the approach should be based on needs assessment, but let us do it carefully because there are significant pitfalls, both methodological and political, in going down that route. In the meantime, I believe that there is very little need to cast Barnett aside in the near future.
5.39 p.m.
The Duke of Montrose: My Lords, I also congratulate the noble Lord, Lord Barnett, on securing this debate. I have always thought that the noble Lord achieved the true mark of genius by reducing an extremely complicated matter down to a level that a Scottish farmer, like myself, might almost comprehend. I hope that I shall not become disillusioned as the discussion goes on. I declare my interest in farming. Noble Lords will see why as I proceed.
The noble Lord, Lord Thomas of Gresford, mentioned that the 1976/1977 Treasury study concluded that Scotland required funding that was 16 per cent higher than the UK per capita level.

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Unfortunately, as many noble Lords have pointed out, those figures do not translate into meaningful guidelines for the present day because so many things have changed. We possibly need to have a further look at needs assessment.
Professor Midwinter of Strathclyde University made a submission to the Treasury Committee's second report in 1997. He raised the point that the study did not include spending on agriculture, fisheries, food and forestry and that these now have to be included in the Scottish calculations, particularly following on from the devolution arrangements. He also stated that the per capita figures at that time included payments for social security and other items that were completely outside the Scottish block grant and the Barnett formula. Is that a change also from the time of the earlier assessment?
The noble Lord, Lord Barnett, referred to the Treasury's Public Expenditure Statistical Analyses for 2000–2001 showing that on a per capita basis Scotland's funding exceeds other regions and detailing several areas such as roads, environmental services, trade and industry. Agriculture, food and forestry are one of the major gaps. Given the current support levels for agriculture, there is a certain inevitability in that direction. I draw to your Lordships' attention the fact that agriculture's contribution to GDP in Scotland is 1.3 per cent whereas in England it is only 0.8 per cent. Similarly, the number of those employed in agriculture in Scotland is 3 per cent as against 1.7 per cent in England. If the Government want to revisit the question of Scottish funding, no doubt they will have to come up with an entirely new calculation of relative need.
My only worry about those tables is that I understand they contain moneys received from Europe. I question whether that should be taken into account for agriculture. Perhaps the Minister can say whether the Treasury has also included the payments received under the various European structural funds such as objectives 1, 2 and 5b.
My reason for inquiring about that matter is that these funds are not a direct cost to the Treasury. In some ways it is reclaiming some of the money we have already paid to the European institutions and should be regarded in a slightly different light from moneys which are a direct burden on the taxpayer. I ask the Minister whether the regional totals of EU money received can be made available so that this factor can be more easily understood.
5.43 p.m.
Lord Elder: My Lords, it is given to few, even in this House, to have the near immortality of a formula named after them. My noble friend Lord Barnett has that claim, but he has now made it clear that he would be happy to let the substance of the claim drop, even if he needs to keep the name itself. I intend to argue that he should be prepared to accept the fame it offers in its present form for some time to come.
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I argue that the reasons that led to the institution of the Barnett formula are still there and valid; and that while there may be issues about the particular statistics used, they do not outweigh the advantages which the status quo allows.
I say in passing in response to the comment made by the noble Baroness, Lady O'Cathain, that during my period in the Scottish Office as a special adviser, I did not come across rooms filled with people beavering away and trying to work out what the Barnett formula was, or sending papers to anyone. However, if we go down the road—it may well be sensible—suggested by my noble friend Lord Peston, many people will be working very hard in such rooms in the Scottish Office. Perhaps even more significantly, many economists will be in work as well.
The Barnett formula was introduced to overcome the need for the bruising annual debate about the allocation of spending to the devolved administrations of Scotland, Wales and Northern Ireland. In those days, decisions about spending priorities were devolved to the appropriate Secretaries of State and the government departments who then oversaw a wide range of expenditures. It was always up to the Secretary of State to decide where that money was spent. It did not have to match expenditure in corresponding English departments. That system has been built into the present settlement of the devolved parliament and assemblies. Removing the Barnett formula would mean that some alternative would have to be found. We would need that if we were to avoid a return to the annual round of bickering. That would benefit neither side. The underlying problem that led to the creation of the Barnett formula over 20 years ago has not gone away.
The Barnett formula deals with changes. The bulk of the expenditure available to the Scottish Parliament comes from the underlying block, as it used to be known; it is the assigned budget now. That was originally decided on the basis of an assessment of need. That properly took account of the additional costs involved in providing services in remote parts of the country. It made proper allowance for the fact that more Scots chose to send their children to local authority schools, use the NHS and live in public sector housing than was the case, overall, in England. The overall intention was to achieve equality of service provision—not, it must be emphasised, equal expenditure per head—across the country. It has proved flexible, and, because it gives the same overall increases in expenditure for devolved expenditure matters across the country, it has been generally perceived as fair.
Where there are issues of fairness, I would argue that they relate not so much between Scotland, Wales and Northern Ireland on the one hand and England on the other, but between the richer and the poorer regions of the United Kingdom, wherever they are. Even taking account of that, there are now substantial payments—the most significant perhaps being housing benefit, although there are others such as the working families' tax credit—which mean that sometimes the basic underlying figures of Barnett need to be adjusted to

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give a more valid comparison. That is where the kind of work being talked about by my noble friends Lord Sewel and Lord Peston is so important.
The Barnett formula was intended, in time, to bring about a convergence in expenditure between Scotland and England. With substantial rises in public expenditure now flowing through, that convergence will become real in a way that was not the case when rises in public expenditure were more limited. Ironically, it is only now that Barnett has been given a chance to work that criticism of it has become so vocal.
During the general election earlier this year, the Prime Minister made his views clear, as was pointed out by my noble friend Lady Ramsay. I wholeheartedly agree with his support. The position has not changed since then. I believe that whatever the views of my noble friend Lord Barnett, his formula has much to recommend it and should remain for some time to come.
5.47 p.m.
Baroness Carnegy of Lour: My Lords, I agree wholeheartedly with the noble Lord, Lord Barnett, that the formula, even as adjusted over the years, simply is no longer suitable. I disagree with my noble friend Lord Campbell of Croy and with the noble Baroness, Lady Ramsay, about devolution. With devolution one cannot base block funding for the devolved administration on what Westminster decides for equivalent services in England. One simply cannot do that. For one thing, services will become less and less equivalent. In any case, as the noble Lord, Lord Barnett, said, there are many devolved functions which are not included in the formula.
I am told by colleagues who are Members of the Scots Parliament that their budget meetings when they allocate the block grant are unnecessarily difficult to follow for elected members, let alone for the public. So the Government now must produce a single method for the overall funding of devolved administrations, not just the part currently covered by Barnett. That system must be stable and one that will last for a number of years ahead.
In Scotland it should include surely the cost of the parliament, the running costs of the building and ancillary buildings, as well as the salaries of MSPs, civil servants, special advisers—of which there are now 11 and the number is rising—and other staff. Moreover, the figure should be adjusted for any change in the responsibilities of these devolved administrations resulting from decisions made at Westminster.
I shall cite only two examples to illustrate what I mean, although I wish there was time for more. I understand that the cost of Scotland's new parliament building is being met by a total freeze on new road building in Scotland, however great the need for those roads. Yet the choice of the expensive Holyrood site, as opposed to the far more economical Calton Hill proposal, along with the choice of architect and approval of his original plan, were Westminster decisions made before devolution took
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effect. The cost has now risen from the £10 million originally mentioned to something in the order of £300 million. Furthermore, one contractor has recently gone into receivership. That puts the Dome in the shade. The lack of control has stemmed from Holyrood, but the original costly decisions were those of Westminster. Will Westminster make any financial recompense to the Scots Parliament, or will it not? At present, we cannot tell.
My second example is one that was mentioned by my noble friend Lord Forsyth. The Scottish Executive wants to provide free personal care for the elderly, an exceedingly expensive plan whose costs will mount massively in the future. MSPs and the Scottish electorate need to know whether the proposal will be funded entirely from the Scottish block or whether some Westminster funding will be added because of the reduced need for attendance allowance, a Westminster responsibility. At present, the matter is in dispute and there seems to be no formula for resolving it. In any case, MSPs need to be clear on what future funding will have to be found, or what the increase on the basic rate of income tax—with its consequent damage to Scotland's economy—will have to be. MSPs need to know this, but at present they cannot tell.
The divergence of decision making brought about by devolution, along with the effect that Westminster decisions may have on the devolved administrations, means that an entirely new funding system is required. It should be one much simpler and more transparent than the Barnett formula. Unlike my noble friend Lord Forsyth and the noble Baroness, Lady Ramsay, I had hoped that the Government would have thought this through before devolution ever took place. It is absolutely vital to the system. If they have done so, the sooner they make clear their plans, the better. If they have not done so, then the sooner they make up their minds, the better.
5.52 p.m.
Lord Hughes of Woodside: My Lords, I begin by congratulating my noble friend Lord Barnett on raising this important topic for debate. I was brought up to believe that there are liars, damned liars and statisticians. All the statistics that have been referred to in our debate tell different stories, depending on how they are interpreted.
Other noble Lords have pointed out that, when the Barnett formula first came into being, Scotland's GDP was far lower than that of England. Now the position is reversed. But over that period Scotland has lost the motor car industry, the ship building industry, the mining industry and, I am sure, many others, yet the GDP is higher. I have to tell my noble friend Lord Barnett, fond though he may be of his formula, that it has little, if anything, to do with the improvement of GDP in Scotland. It may be that oil was the cause of it. Who knows? I simply point out that it may be one part of the equation which may not have been taken into account when examining this matter.

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Many noble Lords have commented that the Barnett formula affects matters only at their margins. Nevertheless, the formula has become something of a totem. Depending on which year, the time of year and which part of the country is concerned, my noble friend Lord Barnett is cast either as the Good Fairy or the Wicked Witch. In some cases, he may be the Good Fairy and the Wicked Witch simultaneously. In Scotland, so long as it appears that its portion of the budget is not reducing, or is possibly increasing, then my noble friend is the Good Fairy. If the portion moves the other way, he becomes the Wicked Witch.
I understand perfectly the view taken by those in the North East and the North West of England, and even in parts of London. They deeply object to the difference per capita made available by the Government. Unfortunately, as was pointed out by my noble and learned friend Lord Morris of Aberavon, those objections are misdirected. It is not the Barnett formula at fault, but the baseline. Once we examine the baseline for the distribution of expenditure, boy, are we in trouble. The furore over reform of your Lordships' House would look like a storm in a teacup—a saucer—in comparison with attempts to re-examine the general basic distribution of public expenditure.
Nevertheless, it has to be done. No one who claims to be a socialist, as I still claim to be, can argue that things should never change. The whole point of instituting change is to direct help to where there is the greatest need. Paradoxically, even when circumstances are improved in Scotland, the North East or elsewhere, that does not diminish the amount of money needed to sustain such improvement.
Those of us who were councillors in Scotland some 40 years ago had absolutely no idea of the social deprivation being addressed by the local authority schemes that we were building at the time. We were right to start the work, but changed circumstances mean that those schemes need to be regenerated and renewed. The living standards of the local people are the most important consideration.
I believe that much of the rest of what I wanted to say has already been said, although my late and very dear friend Lord Shepherd used to say, "Ah, but not everyone has said it yet". I shall finish on this note: I hope that the House and the Government will not become bogged down in abstract arguments over formulas and statistics. We are all in government for only one purpose; that is, to try to improve the lives of the people of the different nations of the United Kingdom. If we bear that in mind, perhaps we shall get somewhere. However, I certainly do not believe that rushing in to bring about change without proper thought will do anyone any good.
5.57 p.m.
The Earl of Mar and Kellie: My Lords, as the ninth speaker from Scotland taking part in the debate, I am certain that everyone has already said all that is to be said. However, I want to talk about the effect the possible removal of what is generally known as the
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Barnett formula would have on Scottish sovereignty and the Constitution. The advantageous funding for government activity in Scotland which the Barnett formula seems to represent is the current manifestation of the constitutional set-up. In short, the treaties which led to the Union of the Crowns in 1603 and the Union of the Parliaments in 1707 ensured that Scotland would swap sovereignty for over-representation and economic advantage. Perhaps I should modify the term, "swap sovereignty", so that it becomes, "place sovereignty in a union state as a sovereign partner".
The ongoing evolution of that union state has led us to devolution, a finely balanced package of subordinated autonomy. The devolution scheme represents one of four options for Scotland, the others being a return to direct rule, a federal constitution and independence from the United Kingdom. The devolution package should not be tampered with. Its funding by grant from this Union Parliament must be maintained and must be generous. Otherwise, demand will evolve for federalism or independence.
Already there is talk of fiscal devolution; that is, the devolution of tax gathering beyond the limited tax varying powers which form part of the devolution package. I would argue that fiscal devolution is out with the scope of devolution. Fiscal devolution is in fact a part of federalism and, if adopted, would make the Scottish Parliament sovereign within its own scope and vires.
I believe that the people of Scotland, as sovereign partners, always have the right and opportunity to place their sovereignty wherever they wish. So far, those who seek to lead the people of Scotland away from the United Kingdom have only one valid argument: that Scotland has the right to leave the United Kingdom and should do so on principle. The second and more powerful argument, which is that Scotland would be better off outside the United Kingdom, is not valid and will not be so until the generous funding of government activity in Scotland comes to an end.
I believe that government activity at all levels in Scotland costs about £36 billion per annum, of which £20 billion is granted to the Scottish Parliament. I believe that Scotland raises about £33 billion in taxation. It is that shortfall of about £3 billion that separates from validity the argument that Scotland would be better off economically outside the United Kingdom.
Noble Lords will, of course, enjoy the irony of principle versus generous funding. They will also see the merit of not being too quick to kick away the devolution package and the consequent economic advantage that United Kingdom membership represents. If Scotland is reduced to some form of per capita parity with England, the separatists' second argument will begin to have validity.
The United Kingdom is one of Scotland's finest achievements. King James VI saw in the Great Britain over which he came to rule after 1603 huge advantages in terms of economy, trade and freedom from war,

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although I must acknowledge that the 1603 settlement did not work out and that a somewhat paranoid Whig government insisted on an unwanted parliamentary union in 1707 and backed their insistence with threats of force. Now King James's dream is the reality that we know. Let us be aware of the risks that are involved in populist tamperings.
6.2 p.m.
Lord Newby: My Lords, like other speakers, I congratulate the noble Lord, Lord Barnett, on initiating this debate. The number of speakers and the quality of their speeches demonstrate the tremendous interest in this subject in your Lordships' House. In the two and a half hours after this debate, the House will discuss such minor issues as mass destruction and global terrorism. It is notable that a much smaller number of your Lordships are interested in that matter, which is relatively secondary in comparison with the burning issue of the Barnett formula. I must also, of course, congratulate the noble Lords, Lord Radice and Lord Livsey, on their maiden speeches, which were excellent. We look forward to hearing from them further. I look forward particularly to having a discussion with the noble Lord, Lord Livsey, about the respective cultural heritage that we share in the brass band world and about whether the tradition is stronger in South Wales than in West Yorkshire.
The resilience of the Barnett formula demonstrates at least two things about the British constitution: first, nothing lasts longer than the temporary; and, secondly, the pillars of our constitution are most often non-statutory. Although, as many people have said, the Barnett formula is not much understood outside the Chamber, its success relates to its elegant simplicity. It starts on the basis of an assessment or allocation of expenditure between Scotland, Wales, Northern Ireland and England that substantially—even if not by universal agreement—reflects needs. Then, by relating changes to population, it both takes the annual argument out of the question of who gets what, and, at least in theory, reduces inexorably, but slowly, the disparity between the different territories of the UK.
What are the problems? They have been eloquently addressed this afternoon. I should like to mention four of them. First, the annual increases in expenditure are not related to need and do not even pretend to be so. Even if one accepts the initial allocation between the different territorial parts of the UK, the annual changes take one very far away from any needs-based system.
Secondly, the basis on which the figures are built does not reflect the changes in relative prosperity that have taken place since 1978. That applies especially to the growing strength of the Scottish economy. In 1999, Scotland's GDP per head was higher than that not only of Wales and Northern Ireland, but of six out of the nine English regions. That is a measure of the success of the Scottish economy, which has occurred for a raft of reasons, of which I am sure that the
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Barnett formula is only a part. That is a massive shift from the position in 1978 when the formula was established.
Thirdly, as we have heard, the formula has become more complicated. It has accreted barnacles, as it were, which make it less simple and therefore less elegant.
Finally, and perhaps most importantly in terms of politics, the combination of devolution to Scotland and Wales and the establishment of regional development authorities in England has thrown the whole question of territorial expenditure into a harsher light. The result is that everybody is complaining. In Scotland, the continued working of the formula is now being described disparagingly as the Barnett squeeze, as it was by the noble Lord, Lord Sewel. That must be distinguished from the Barnett hug mentioned by the noble Lord, Lord Roberts. The squeeze is a bad thing, while the hug in Wales may be a good thing, but the Scots are clearly worried about the effect of the formula over a period.
In the northern regions of England, people increasingly ask why they should receive substantially lower expenditure than Scotland when they are poorer, their education attainment levels are lower and, on the basis of a number of indicators, they are more needy. In the South East and in London, the questions are the other way around. People there ask why they should subsidise Scotland, Wales, Northern Ireland and the majority of the English regions when they are in need of higher rates of investment in transport, education and housing and when, in the case of London, there are pockets of extreme deprivation that are among the worst in the UK.
We now have a situation that the Barnett formula successfully sought for many years to avoid: namely, one in which all the regions and nations of the UK are at each other's throats about the level of expenditure that they are currently receiving. As we move towards devolution to the English regions, with elected regional assemblies, that cacophony will grow.
I think, therefore, that now is the time to be considering change. I disagreed very strongly with the noble Baroness, Lady Ramsay of Cartvale, when she said that it would be madness to rock the financial boat at this point. We may be only one year into the devolution settlement, but a number of English regions would argue that there have been 20 years of unfairness and that they have had enough of it. Certainly, I would have considerable sympathy with people from the North East who say that they are fed up with receiving more than £400 per annum less per head than their neighbours north of the Border. Even if such a disparity could be justified on the basis of need—and I do not believe that it could be—the current basis of allocating expenditure simply does not provide a justification for it. The question that many noble Lords have asked is this: if you are going to change it, how are you going to change it? Clearly, that is the most difficult part of the debate.
On these Benches, we have spent a considerable time trying to think of a way of making such change. Our view is that we need to establish a new institution,

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which we have called a finance commission for the nations and regions. It should have the question of allocating expenditure very much as its remit. We believe that it should be chaired by a new Secretary of State for the nations and regions, and that it should be composed of representatives of the national parliaments and assemblies of the UK, along with representatives of regional assemblies in England. Its job would be to establish a new revenue distribution formula, or RDS. That is a terrible and inelegant phrase; I suspect that we should call it Barnett 2. It would establish a Barnett 2 formula that would take account of the factors to which a number of noble Lords have referred: GDP per head, health, poverty and education indicators, demography and the problems of providing services in areas with widely dispersed populations.
I agree with the noble Lord, Lord Sewel, that getting it right is extremely difficult and that anything that is produced must be credible. Whether that means that it has to be produced independently of the Treasury I leave for another time.
Once you have decided on a new distribution formula, a key issue will be the timescale of implementation. To a certain extent, this is a reply to the noble Lord, Lord Forsyth, who was worried about cutting expenditure in Scotland. I do not believe that anyone would argue that we should cut expenditure. The aim would be for the whole country to achieve the high standards reached elsewhere, to be funded over a period by growth in the economy rather than by an increase in the tax burden or cuts in services. That will inevitably take time, but a phased change rather than a sudden, abrupt gear shift is the only way forward.
In the short term, and before we get to that point, the Government should allow the RDAs and, more generally, the English regions more flexibility in the way they allocate expenditure within their regions. The decision to have a single pot for the RDAs within England is a good move, but in whole swathes of expenditure—health and education are obviously the most prominent—there is absolutely no flexibility at regional level in how priorities are set and how regional strategies could be developed and implemented.
The debate has demonstrated the need for change. The Barnett formula has had a good innings but, frankly, it has not worn as well as its author. No one has claimed that finding a replacement will be easy, but a replacement must now be found. The debate has demonstrated the expertise in the House on this issue. I look forward to the debates we shall be having on devolution in England in the coming months, and the opportunities that that will give to look afresh at fashioning a Barnett 2.
6.11 p.m.
Lord Saatchi: My Lords, I thank the noble Lord, Lord Barnett, for initiating the debate and for sending me on a voyage of discovery to find the reasons for the enviable and, as the noble Lord said, surprising longevity of his famous formula.
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I share the affection and respect that the noble Baroness, Lady Ramsay, has for the noble Lord, but I must tell him that when I first got involved in Treasury matters in your Lordships' House I was advised to steer clear of this topic at all costs. I was told that it was a treacherous sea with dangerous currents—and anyway the only person who knew anything about the Barnett formula was the noble Lord himself, so I should under no circumstances speak about it in case he may be listening.
I know that your Lordships will agree that we are very lucky in this House to hear from so many distinguished speakers who have such obvious expertise and experience in this subject. We have also been lucky to hear two wonderful maiden speeches from the noble Lords, Lord Radice and Lord Livsey, from whom I hope we shall hear much more in the years ahead.
Blessed is the man who has a formula named after him. Some men or women have streets or avenues named after them; some a park or a bridge or even a town square; for the lucky few, an airport; or, in the rarest cases, a city. But to have a formula named after one, as the noble Lord, Lord Peston, said, is very special. It is worthy of Galileo, Newton or Einstein—and there is the issue which perhaps lies at the heart of the debate today.
The noble Lord said that the formula is not strictly rational. But for something to be described as a formula at all gives it a disarmingly rational provenance; a scientific authority; a mathematical or mechanical certainty in which the noble Lord himself, as he said, is far too pragmatic to have ever believed.
The reality of regional funding is that it does not take place under laboratory conditions. That is why we find that, for some, the Barnett formula is the Holy Grail and is therefore untouchable, and for others—especially following devolution and especially in some of the English regions—the formula perpetrates a grotesque injustice and has legitimised an intolerable economic discrimination against some regions for more than 20 years.
The former Prime Minister, John Major, said that he always,
"feared that by exposing the reality of the favourable spending treatment given to Scotland, devolution would stir up latent English nationalist resentment, leading to a backlash".
That seems to be exactly what has happened.
So, like the noble Lord, Lord Morgan, people look at, for example, the North's level of unemployment and its deprived areas, and see those as the price paid while successive governments over the years satisfied other UK regions' political priorities with the extra Barnett money. These critics say that Barnett has made possible over payments by Wales and Scotland to lure industry away from the North.
But, by contrast, as my noble friend Lord Forsyth said, some Scots would happily consign the formula to history in return for the reclamation of confiscated Scottish assets such as North Sea oil. The noble Lord, Lord Thomas, said something similar about Welsh tax payments to Westminster. Certainly, Mr Salmond of

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the SNP puts the annual subsidy from Scotland to the Treasury at £1.2 billion and says that the starting point for this debate should be,
"the indisputable fact that Scotland subsidises the rest of the UK—not the other way round".
That is just the start of the disagreements that confront us in this debate. For some people, as the noble Lord, Lord Radice, said, the charm of the formula is that it will achieve convergence. I asked some statistical experts whether they could tell me when this convergence would take place. I got a range of opinions, from about three years to about 30 years. It would seem that views on Barnett convergence are as varied as views on euro convergence.
For others, the aim is precisely the opposite of convergence; it is to preserve, or even expand, the disparity because of a higher order good which the inequality is thought to serve. This, of course, is the unequal need of the regions, which they say the formula does, or should, or should better reflect.
Would it not be wonderful if political differences such as these could be settled by reference to a scientific formula? Sadly, that is not possible. It is an inconvenient and stubborn fact that outside Newton's universe, where rational formulae really do govern reality, the world of the Barnett formula is conditioned by perception. One of Tom Stoppard's characters explained that, although it appeared to a casual observer standing on the platform at Paddington station that the train had left Paddington, in fact,
"All the observable phenomena indicated that Paddington had left the train".
We should remember Professor Popper's warning that even in the natural sciences there is no such thing as final proof of a formula because the closest approach to proof is a succession of unsuccessful attempts at falsification. There have certainly been many attempts at falsification of the Barnett formula, most of them, as we have heard in the debate today, based on the requirement for a definition of "need". I am not clear what a definition of "need" may look like. I am also not sure who we could trust to carry out such a task. Perhaps it would be the new commission that the noble Lord, Lord Newby, described. That would be better than the Treasury. In awe of it as I am, I believe the Treasury would have an agenda of its own which might worry your Lordships.
In any case, even if one could arrive at a definition of "need", some critics go much further than that. They argue that there can be no fair and final resolution until it is clear that total expenditure—the "baseline", as the noble Lord, Lord Hughes, put it—not only the increase, should be allocated according to relative need. For critics from that direction, the Barnett formula itself is not the problem. The problem is the size, for example, of the Scottish block itself to which the changed formula is applied, and also for those critics, the cost of the Scottish Parliament at its centre.
We have heard so many views. The noble Lord, Lord Newby, said that there was a cacophony outside. We are certainly not in a scientific laboratory. That is
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why we must look forward, with eager anticipation, to what the Government may say to give us a lead. I should like to end on what the Government may say in a moment or two.
Let me remind your Lordships of a ministerial answer in another place just before the 2001 general election. The Minister of State in the Scotland Office said of the Barnett formula that it provided a fair deal and,
"we have no plans to change it". —[Official Report, Commons, 6/3/01; col. 135.]
Meantime, however, I gather that the Government were coming under pressure from some Labour MPs, particularly those from the north-east of England, to amend the Barnett formula. So, at about the same time as that statement was made in Parliament, John Prescott warned that the Barnett formula,
"was not written in stone".
Peter Mandelson chipped in with the words:
"A review is timely".
So what are to make of that?
Just before I entered the Chamber I was asked: "What will the Government say?". I hope that the Minister will not take this too badly. I am afraid that I said: whatever they say makes no difference to what they will do. I know that the Minister will forgive me. If the Government say "no review", that does not mean that no review will occur—only that today is not the day, and that this House is not the place where they have chosen to announce it.
These days, government policy is revealed to us in only two ways: by accident, when a newspaper discovers it and there is a need for a response; or by design, when a day is judged to be a good day to bury, exhume or review a policy. I hope that the House does not think that I am being too unkind to the Minister; I do not mean to be. This is certainly not a criticism of him. What little I have learnt about conduct at the Despatch Box, I have learnt as his shadow.
I am thinking of the description by Sir Richard Wilson, the Cabinet Secretary, of the way in which this Government work:
"Major news stories can trigger a process of policy assessment that might traditionally have taken three or four months and now have to be handled in a matter of days, or even hours, sometimes overnight".
The Minister always sweetly and humbly says that he is his master's voice. The trouble seems to be that on this topic, as on so many others, his master speaks with two voices.
6.21 p.m.
Lord McIntosh of Haringey: My Lords, in 1860, Robert Browning was asked about a poem entitled "Sordello" that he had written in 1840. He said:
"When it was written, God and Robert Browning knew what it meant; now only God knows".
I felt that way about the Barnett formula. I used to think that I understood it reasonably well—at least enough to answer casual questions in this House, when I could away with a sentence or two without having to

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go into detail. But the more I looked at the briefing available to me from the Treasury, and indeed from the Scotland Office, the more I realised that I did not understand it at all. I thought that for the benefit of those speakers who understand the subject a great deal better than I—it does the noble Lord, Lord Barnett, credit in more ways than one that he attracted many expert speakers to the debate—I ought to outline the fundamental characteristics of the formula. Some of the comments made do not entirely fit the facts.
First, the formula is used only to determine spending in devolved areas. Spending in reserved areas, such as social security, is determined by UK government departments in Westminster. The noble Lord, Lord Peston, talked about unemployment as being the objective. Yes, it is the objective, but it is addressed largely by reserved expenditure rather than by devolved expenditure.
Secondly, the formula is used only to determine changes in spending and not the level of spending inherited from the past. The original block was needs based, and needs change over a period of time. But the formula provides the devolved administrations with a population share of increases in comparable spending of UK government departments. It is a factual question, not one of formulae, and not even one of statistics. It is certainly not a question of what the noble Lord, Lord Barnett, called "strict rationality" as to whether that works in 2001.
Thirdly, the formula determines an overall increase in the assigned budgets of the devolved administrations. It is up to the devolved administrations how they allocate this to their programmes reflecting their policies and priorities—as the noble and learned Lord, Lord Morris, reminded us. That enables me to say to the noble Baroness, Lady Carnegy, that whatever she may say about the Scottish Parliament at Holyrood, I could not possibly comment. It is nothing to do with me or with this Parliament.
Baroness Carnegy of Lour: My Lords, it has a great deal to do with the Barnett formula. We are talking about the whole thing. In this respect, the noble Lord should comment.
Lord McIntosh of Haringey: My Lords, we in this House are not concerned with devolved expenditure.
If anyone thinks that this is a rigid formula, the coverage of the blocks determined by the Barnett formula has increased over time since its introduction. It now covers the bulk of the departmental expenditure limits of the devolved administrations. Again, that has an effect on the degree of flexibility.
Finally, for the minority of speakers in the debate who represented England, the Barnett formula is not used to allocate spending within England. UK government departments allocate funding within England on a basis appropriate to the spending programme. That is why it is not easy to make comparisons between regional expenditure in England and country expenditure in the devolved administrations.
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I want to emphasise that there have been substantial changes. The noble Lord, Lord Thomas, referred to the "great correction" of 1992. He was referring to the population correction. Until 1992, but not after that, the original block was updated for inflation. That made a substantial difference to the changes.
I say to the noble Duke, the Duke of Montrose, that European structural funds are included in the public expenditure figures for the devolved administrations. However, it is not true to say that they do not cost the UK taxpayers money. The costs are reflected in the net contributions, which are not part of the devolved administrations' blocks, but in a charge to the UK as a whole.
What are the arguments about the Barnett formula to which we ought to pay attention? The first is one of convenience. A number of speakers referred to it Yes, it is true that it avoids negotiation during public spending reviews. The noble Baroness, Lady O'Cathain, asked what the actual cost of negotiation was nevertheless. The noble Lord, Lord Elder, gave a satisfactory answer: whatever it is, it is certainly a great deal less than if we had fundamental reviews of the formula or of any other formula each time we had a new public spending review, even though they are not now held every year. I do not underestimate the value of the transparent, durable and simple rule for reaching spending settlements without direct negotiation. That may be a government point of view rather than a national point of view, but it is not insignificant.
The second point that must be taken seriously, as it was by a number of speakers, is that the formula was the basis for the devolution settlement. If we were to start going back on it so soon after the devolution settlement, there are those who would accuse us of bad faith.
The noble Lord, Lord Forsyth, and the noble Baroness, Lady Carnegy, do not like the devolution settlement. They think that it was not thought through. The noble Earl, Lord Mar and Kellie, and the noble Lord, Lord Morgan, on the Government Benches, thought that it worked successfully and that it was a reasonable basis on which to assure the Scottish and Welsh people of what it was they were being asked to vote for. The funding arrangements, which include the Barnett formula, have been published in the statement of funding policy which was updated in July 2000 following consultation with the devolved administrations and agreement with the Secretaries of State for Scotland, Wales and Northern Ireland.
The noble Baroness, Lady Carnegy, wants a new, stable formula. I do not think that this is the time to ask for a new, stable formula when the existing formula has been the basis of a concordat, so to speak, in the past couple of years.
A number of noble Lords referred to the English regions. I have made it clear why it is difficult— although I do not understand fully why it is impossible—to make the comparisons that we should all like to make. It is clear, because of the difference

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between devolved and reserved matters, why it is difficult to make comparisons between regions. Certainly, the figures referred to by the noble Lord, Lord Radice, in his excellent and well-informed maiden speech—namely, for the total managed expenditure per head—are correct. Indeed, I should have been astonished had the noble Lord said anything that was not correct.
It is also the case that the convergence that some people seemed to anticipate with dread, and others with hope, has not happened in quite the way that was anticipated at the beginning. That is partly because for the bulk of the life of the Barnett formula the block was updated for inflation, and the block itself is more important than it might otherwise have been. It is also because there is not a fixed and predetermined convergence path built into the Barnett formula. The noble Lord, Lord Sewel, made that valid point. The so-called convergence characteristic simply reflects the fact that population-based increases represent a smaller percentage increase where baseline levels of spending per head are higher. That of course has been the case in Scotland and was the case in Wales at the beginning. Those considerations must be taken into account.
We are obliged to look at the results of the Barnett formula over a 20-year-plus period. I do not accept the attacks on statistics or statisticians. I always resist that anti-knowledge point of view whenever I hear it in the House. Nevertheless, it is not just statistics; it is a matter, as the noble Lord, Lord Saatchi, said, of perception as well.
The Barnett formula has survived because it is generally accepted as effective in determining the allocation of public expenditure in Wales, Scotland and Northern Ireland. It has produced public expenditure settlements that have been perceived as generally fair and broadly acceptable since it was introduced. It has been used without query or major change by both Labour and Conservative Governments—governments with different representation in England and the other three countries of the United Kingdom.
It is right for the noble Lords, Lord Newby and Lord Saatchi, to demand transparency, but surely the Barnett formula is relatively transparent, relatively straightforward, relatively durable and a simple rule for reaching spending settlements without direct negotiation. Compare it with local government spending assessments, which are renegotiated every year on a multi-variant analysis and are utterly incomprehensible to 99.99 percent of the population.
I have to play the game of saying what I intended to say, rather than what the noble Lord, Lord Saatchi, expects me to say. He wants me to say that there will be a review. We responded to the Treasury Select Committee in 1998 and published a statement of funding policy in July 2000. We set out the details of the funding arrangements fully and transparently, most of which, after two nights of falling asleep on, I
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think I finally understood. The position remains the same. We have no commitment to review the Barnett formula. On the other hand, it is not fixed in stone.
I say that not because we are putting two points of view at the same time, as the noble Lord, Lord Saatchi, would wish, but because we have been changing the Barnett formula at the margins. We have updated the population figures and the comparability factors used in the formula. The noble Lords, Lord Thomas and Lord Livsey—who made an excellent maiden speech— both said rather grudgingly that for Wales we had excluded the objective 1 payments from the Barnett formula. I do not know what is wrong with that. When it is necessary and appropriate, we take the opportunity to make decisions that supersede a part of the Barnett formula.
Lord Forsyth of Drumlean: My Lords, I am grateful to the Minister. Will he tell the House whether it remains the Government's objective to reduce the over-expenditure in Scotland, relative to England, which was the original purpose of the Barnett formula?
Lord McIntosh of Haringey: My Lords, my noble friend Lord Barnett will have to answer the point about whether that was the original purpose, although I never understood it to be so. I think that that was a bit of oppositionitis on the part of the noble Lord, Lord Forsyth.
Lord Roberts of Conwy: My Lords, can the Minister clarify whether there is a commitment to an annual revision of the formula and how it would work?
Lord McIntosh of Haringey: My Lords, there is no commitment to an annual revision, although changes have been made to the formula as and when necessary. A commitment to an annual revision would be a commitment to some other basis of making an allocation to the different countries.
The thrust of the debate has been that even those who want to abolish the Barnett formula, or replace it with some son or granddaughter of Barnett, are by no means agreed on what that replacement should be. I think that my noble friend Lord Barnett would accept that, having heard the debate.
Is it the case, as has been suggested, that Barnett has somehow run its course? Is Barnett worse now than in 1978? We do not accept that. It is still as relevant as in 1978. It is updated in each spending review to reflect current circumstances in each country, without a commitment to revise or review it. Of course it does not cause differences in GDP, which is one of the few misunderstandings that appeared in the debate. I think that the noble Lord, Lord Thomas, fell into that trap. As the large bulk of income-related spending is reserved, we cannot blame changes in GDP on the Barnett formula. The noble Lord, Lord Hughes, made that point successfully. Indeed, the noble Lord, Lord Roberts, referred to the degree of updating on population that took place. If we were to undertake a review with a particular view in mind—no particular

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view has emerged from this debate—we would be responding to partial criticisms of a system that has stood the test of time.
I know that we do not have constituencies in this House, but I looked at the origins of the speakers in the debate. Of the 19 Back-Bench speakers, nine came from Scotland and five from Wales. With the exception of the noble Baroness, Lady Carnegy, from Scotland, who honourably wanted to scrap the Barnett formula, I could have predicted not the arguments but the conclusions that everybody in the House reached. They were none the worse for that.
We have heard a wide range of somewhat conflicting views. We think that the formula served us well, but we shall continue to listen to the views expressed.
6.40 p.m.
Lord Barnett: My Lords, I, too, could have predicted my noble friend's reply to the debate. I am not too surprised about that. I would have been astonished had it been otherwise.
In the brief time that I have available, I should like to thank everyone who participated in the debate, including those with whom I disagreed as well as agreed. I have learnt a lot. I have heard about the Barnett squeeze, the Barnett by-pass and the Barnett hug and that I am either a good fairy or a witch.
I also wish to thank the two maiden speakers. I am glad to have provided the opportunity for us to hear such excellent maiden speeches. I have learnt how people have misunderstood the Barnett formula over all these years, even the noble Lord, Lord Forsyth. Incredibly, after all that I said—he surely listened—he had in mind that the formula would eventually converge. Nothing of the kind was intended; it was intended to make life easy by having a simple formula. That is what I said it was about. My noble friend accused me of referring to rationality but I quoted him. He may have forgotten that I quoted his words when he said it was not rational.
Lord McIntosh of Haringey: My Lords, he must have been right then.
Lord Barnett: My Lords, the important point that has been made time and again by a number of noble Lords is that the real problem—this is even more of a problem than the fact that the Barnett formula does not help convergence—is the need to look at the baseline. That is the crucial question that has quite rightly arisen because until you look at the baseline you are dealing only with the margins. That, I believe and hope, has come out of the debate.
The Whip, the noble Baroness, Lady Farrington of Ribbleton, may be looking at me closely. Perhaps she is not. In that case I shall carry on. She knows very well that I obey her every word—well, sort of. The debate has been in some ways an excellent one. We have heard some good speeches and, like the Minister, some of them have not surprised me too much when delivered by noble Lords from northern parts of the UK who think that the Barnett formula as at present
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constituted is doing a grand job. I see that the noble Lord, Lord Forsyth, nods. No one took any note of the danger of fighting an election on the basis of not changing the formula. The noble Lord, Lord Forsyth, did not say anything about that as he knows very well that it did not do anyone any good, but nevertheless it has kept going for some 23 years.
As I say, I have grown to like the name. I do not want to see any changes made to it. I have a formula; that is marvellous. The noble Lord, Lord Saatchi, made some kind remarks. I suppose that he has other suffixes after his name, but I have a formula after mine. Not many people have that. I am grateful for that but I am even more grateful to those who participated in the debate. I am told that if I press the Motion to a vote—I see that my Whip looks at me closely—and I win, hoards of paper will fall on my head. Therefore, for that and other reasons, I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Terrorism
6.43 p.m.
Lord Lucas Lord Lucas rose to call attention to the case for planning for the possibility of a successful terrorist attack on the United Kingdom using a weapon of mass destruction; and to move for Papers.
The noble Lord said: My Lords, we move now from Barnett fair to the bazaars in Peshawar with which I am rather more familiar. The previous time I was in Peshawar, which is a wonderful place to buy all kinds of things that governments do not want you to have, we went up in the hills to try out a Kalashnikov. We set up a tin can on a rock a couple of hundred yards away, took a pot shot at it and missed. It took five minutes for the firing in the hills to die down, so we did not try it again.
These days Peshawar is a place where you can buy rather more dangerous things than that. Indeed, there are quite a lot of places in the world where you can get hold of nuclear materials and possibly chemical and biological weapons. Someone with the resources of Mr bin Laden can doubtless hope at least to lay his hands on them. As President Bush was quoted as saying yesterday—I think quite rightly—we face a real danger that weapons of mass destruction will fall into the hands of terrorists—and not terrorists as we have been used to them. These terrorists know no limits to the destruction they are prepared to cause. They have no fear for themselves; they have no regard for the life of others and they are not susceptible to negotiation. As I have said, the raw materials are there, or at least potentially there, for them to make use of and to attack us with.
What concerns me today is to look at the long-term consequences of a successful attack; at what we should do to try to prevent such an attack and at how we should plan to overcome the consequences should one occur. I look first at the old-fashioned weapons of mass destruction—chemical weapons, nuclear

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weapons, dirty bombs and all that kind of thing, which share the characteristic that they are limited in time and area. Probably we are looking at only a single attack; these weapons are hard to deliver and equally hard to get hold of. There will be one event, at one time, and it will cause a terrible amount of destruction, but that will be the limit of it.
What would we do should such an attack occur in this country? I suspect that we would do quite well. It is the sort of attack we imagined being part of during the Cold War, although I suspect our plans have lacked some polish since then and could do with some reviving. Should such an attack occur, it will be much better if we have planned well. What we need is a plan that people know about. If something like that happens, people want to know that the Government know what to do. If they have a role to play, they want to know what they should be doing or who they should ask to find out what they should be doing. If we cannot react fast, we invite the spread of chaos.
We need to plan ahead to be resilient in the face of such an attack. Telecoms is a good example as even when just one building collapsed in the United States it was clear how badly affected the mobile phone services were. It took a month for some of them to recover. Certainly some of them were unusable for a week or so because they had not been built in a resilient way. If we want to have services that are resilient, we must plan for that, just as the Internet was planned to be resilient. Such services should not be, or at least sufficient of them, should not be vulnerable to one event. Let us imagine what such an event might be. Suppose someone set off a small nuclear bomb outside Westminster Hall on a day when Parliament was sitting. What would happen to government? What would happen to the administration of this country? What would happen to telecommunications, the media and commerce? Do we know? I do not suppose that we do because we have not asked the questions. It does not take much to ask those questions, but it would take several years to make proper plans for the consequences.
Businesses are beginning to ask those kind of questions following the attacks in New York. They are beginning to ask, "Do we really want all our people in one place? Do we really want to have all our telecommunications going through one pinch-point that could be taken out in a terrorist attack?" Those are the kind of questions we ought to ask here. We ought in our forward planning for government to make sure that in 10 or 20 years' time we have a governmental system which will be more resilient to any such terrorist attack.
Planning has always had a bit of a bad name. It has been notable by its absence in recent crises. When we hit the petrol crisis it was clear that there was no great plan. In the foot and mouth crisis, we took far too long to react because people had not planned for it. In the BSE crisis, which I found myself in the middle of, there was an absolute prohibition on planning on the basis that if we made any plans as to what we should do if BSE proved to be infectious to humans, people would
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worry that it might be infectious to humans and so it was therefore considered better all round if we did not plan.
That is a bad argument, but a reasonable one because people worry if they know you are planning for something horrible to happen. But just at the moment we all know what terrorists are capable of. We all know—it is in the papers every day—what they might become capable of. People already have those concerns in mind. This is an excellent time to plan because just at the moment planning will calm rather than frighten. It will also have the beneficial effect of helping people to understand why we need to engage in what I suspect will be a long, difficult and bloody campaign in Afghanistan.
It is not too hard, given the time and the will, to plan to react well to an old-fashioned weapon of mass destruction, not least because, should such a thing happen to us, all our friends round the world would pile in to help. We would not be lacking assistance or resources to deal with the problems that resulted.
However, what would happen if we were the subject of a biological attack? Suppose that someone released an organism in the middle of London that was as infectious as the common cold and as deadly as the plague. First, all our borders would slam shut. No one would want anyone to carry the plague from England to anywhere else. We are easy to isolate because we are an island. We would find ourselves in an island isolation ward on our own.
What would we do other than die? I am sure that we do not have a clue. There has been no plan for that sort of thing in this country and it is evident from the American reaction to anthrax that there has been no plan there either. How likely is an attack at such a level? At the moment it is not very likely. We can see from the current anthrax outbreak in the States that we are not facing anything as dangerous as chemical or nuclear weapons. The diseases involved are easy to conquer and limited in spread. They also do not appear to be widely available—they certainly have not been used in the way that they might have been if they were widely available.
However, we also know that the technology to make such diseases easily available is on the way. We have sequenced the human genome and the genomes of about 100 human pathogens. Every day we understand more about the mechanisms of diseases and disease-resistance. The machinery to make pathogens—certainly to make viruses and possibly to engineer bacteria in serious ways—is available in thousands of laboratories all over the world with standard biological laboratory equipment.
Mistakes in conventional experiments in Australia have shown just how close people can get to such a result. About a year ago, while trying to do something else, the Australians engineered a mousepox virus that destroyed the immune system of the mouse that it infected, so it became impossible to immunise against it. They inserted into its genome a copy of Interleukin4, which is a standard component of the mouse immune system. They had not expected that effect.

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Should Mr bin Laden get hold of smallpox, which is not impossible—there are certainly some remaining traces of it in the world, although not much, thank goodness—it would not take much more than a standard biology laboratory for him to be able to create a smallpox that we could not vaccinate against. Even at this moment we would have no defence against that.
In a few years, when we can really engineer pathogens and produce viruses whose coats are human protein so that the immune system does not attack them, when we can combine the virulence of plague with the ease of movement and infection of the common cold, then we will be able to produce some truly terrifying pathogens. The knowledge and ability will be there and we know from what happened on 11th September that the motivation to use them will be there, too.
What should we do? First, we should pursue with resolution the task of dealing with international terrorism that we are currently set about. The less powerful the terrorist networks, the less chance there will be of one of them producing this sort of weapon.
Secondly, we should do what we can to prevent bioterrorism in particular. The first weapon against it should be intelligence. Anyone producing an engineered pathogen needs a laboratory, equipment and, above all, reagents. All of those are traceable, but it takes time. The Americans still have not tracked down a list of all the laboratories in the United States that could have produced the anthrax that is troubling them at the moment, because they had not prepared and planned. These things cannot be done in a few weeks from a standing start. If part of the task of the intelligence services was to monitor any facility that might be producing such pathogens, they would be in a much better position to react should one appear.
We also need co-operation. No state should be in the business of producing the sort of pathogen that could cause us real trouble. States need bioweapons that cannot bite back. They need something that will destroy their enemy, but not come back and kill the state that sent it. An engineered smallpox or common cold would not be a good state bioweapon. Everybody—or almost everybody; I am sure that there will be a few exceptions—ought to be prepared to cooperate to make sure that the intelligence services world-wide have the information that they need to keep bioweapons development under control. The United States Government need to learn a lesson on that. They have come close to wrecking the bioweapons treaty by refusing inspections. They have to turn their minds to that again.
We need to make sure that we study from a defensive point of view the sort of technologies that will be used by bioterrorists and the proper counter-measures to them. I hope that Porton Down is doing that at the moment. We should watch world-wide for terrorists testing bioweapons. With current technology, no one will produce a perfect pathogen at a first try. They will produce something and then try it out to see whether it works. We need to watch for unusual diseases or
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unusual variants of diseases appearing world-wide, as a symptom of someone being on the way to producing a bioweapon. We need to be imaginative in thinking about how such an attack might occur. One obvious way would be to produce a fungus that successfully attacked wheat. A new wheat fungus that was resistant to all known methods of killing it might very easily wipe out the US wheat harvest for a year or two, which would have considerable effects. We should not limit ourselves to the obvious human pathogens.
Thirdly, we need to be able to react fast. We need to plan a reactive structure that could be used in the event of an attack. We need microbiologists. Microbiology as a medical discipline is very run down at the moment. There are only one or two such professors in the UK. We think that we have defeated pathogens, but if we are to defeat an attack, we need the resources in place. We need more microbiologists. We also need diagnostics and laboratories. That means that we need to do a great deal to preserve the presence of the international pharmaceutical industry in this country, because we will not have the resources in our national laboratories.
Communications and power facilities need to be available whatever might happen to the nation. If we have to close off parts of the country to prevent disease spreading, we still need to be able to react to the disease. We need to plan to limit the spread. We do not want to follow the foot and mouth example and use culling. We need to plan for isolation and know what we are going to do if we are cut off and cannot get food and fuel into the country. There will be a premium on being able to deal with the outbreak fast, but we need to understand how we would deal with it if it took time.
Lastly, we need to plan for recovery. That may come more into the sphere of Mr Opik in another place and his near-earth objects. What happens if something really gets out of control? What do we need to have in place and how do we need to design our basic systems so that we can pick ourselves up off the floor? The Internet is a pretty good example of something that will work in the case of disaster. We need to extend that principle to power in particular and to some elements of manufacturing and distribution.
We need a back-up. We need to back up our civilisation in the way that we back up a computer. When people have died in large numbers, no one will know what is where or how to do things. We need to know where to find that knowledge and the Government need to provide a place for it.
If we plan, we will do much better. We will be much less likely to be attacked successfully; and if we are attacked, we shall resist and survive it much better. If we do not plan, we are putting ourselves at the risk of one man coming into Heathrow airport and putting an end to what we have all known in this country. My Lords, I beg to move for Papers.
7 p.m.
Lord Davies of Coity: My Lords, I clearly appreciate the thrust of this debate, which addresses the possibility of a successful terrorist attack. It is of

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course concerned, as I see it, with our local authorities and the emergency services, how they will cope and the extent to which that has been planned for. What preparation have the police made? How ready are our fire services? Are our hospitals, doctors and nurses prepared for the worst of scenarios? And if needs be there are the Armed Forces.
I do not dissent for one moment from this concern. I indeed support the concern for a comprehensive programme to deal with such an atrocity. However, on the basis that prevention is better than cure, the prime objective must be to do all in our power to avoid the possibility of a successful terrorist attack. Although I know that all noble Lords will understand, it is my intention to stray into that area because I believe that too many too often pay lip service to it and the necessary practical steps are either not taken or, if they are, they are not enthusiastically implemented.
That brings me once again to the conflict between human rights and civil liberties on the one hand, and safety and security on the other. Perhaps I may first say that practical steps should be taken to make secure nuclear power stations, railway tunnels, particularly the Channel Tunnel, and airports which are likely targets for the terrorist. However, as regards aeroplanes, I believe that the possibility of hijacking a plane for the purpose of turning it into a guided missile, as occurred on 11th September, is now a more remote possibility. I say that because before 11th September the culture was that where hijackers were attempting to take over a plane the crew were to obey the hijackers, calm the passengers and bring the plane down safely and allow negotiations to take place. There are numerous examples of such incidents. But 11th September changed all that. Whether or not there are sky marshals and more secure cockpits, it seems to me that never again are 200 to 300 passengers placidly going to allow four or five hijackers to take over a plane without a struggle. Any potential hijackers will now know of that.
Another area of concern must be to make more secure hospitals and research establishments where there are ingredients for assisting the terrorists in practising their insanity through the bringing about of nuclear, chemical or biological atrocities.
Of course, the areas to which I have referred are not an exhaustive list and many noble Lords could no doubt refer to many others. I am sure that there will be no complacency on the part of the Government in exploring every avenue to prevent terrorists acquiring from this country the means to spread their terror. I believe that there will be no complacency in taking steps to increase the security around the establishments thought to be likely targets.
I now want to turn to our democratic system, which is very largely underpinned by laws in relation to human rights and civil liberties and the extent to which in the present climate they make the safety and security of this nation's people more difficult to achieve. It is not an issue that I raise for the first time. Noble Lords may recall that during the debate in the recess, on 4th October, I stated that I believed that the balance
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between human rights and civil liberties, and safety and security, had to be re-established. Everything that has happened since has only reinforced my view.
On 4th October I suggested that the Government should seriously and urgently consider and examine the introduction of ID cards, the law on extradition, the law in respect of asylum seekers and as regards those openly preaching support for the terrorist actions of Osama bin Laden. We are now told that many are recruiting for his Taliban army. I am extremely pleased at the action the Government have taken so far in these areas.
I appreciate that there are those who say that to reduce or dilute our human rights and civil liberties legislation would be a betrayal of our civilised behaviour and would be to surrender to the terrorists. I do not accept those arguments in the present climate. My view is that the first priority in the provision of human rights and civil liberties is for people to live without the threat or fear of terrorism. I believe that our laws must be drafted or redrafted to ensure that as far as possible that approach is reinforced. Some may believe that in achieving greater security and safety our human rights and civil liberties are being diluted; then so be it. It seems to me that we have reached a stage in this country where the vast majority of our people are law-abiding and innocent of any wrongdoing and are now being exposed to dangers because our laws enable unscrupulous wrongdoers to practise their evil. That cannot be right. It is about time there was a revaluation of our legal system which currently enables villains to use our generous and liberal laws to escape what most people understand to be justice. As a result, they continue to be a threat to our people and our cherished way of life.
7.7 p.m.
Lord Tope: My Lords, perhaps I may begin by thanking the noble Lord, Lord Lucas, for introducing this debate. After only two speakers it is already wide-ranging and I shall probably widen it a little further. I begin by declaring some interests. I am, and have been for the past 28 years, a London borough councillor. I am now a member of the Greater London Assembly, a member of the Mayor of London's advisory cabinet and perhaps even more relevant to this debate, a member of the Metropolitan Police Authority, whose finance, planning and best value committee I chair. So the subject under discussion has been a matter of some concern in wearing all of those hats over the past month or two.
Because of that, although I speak today from the Front Bench, I wish to speak primarily about London and the role of the Metropolitan Police. I do that because it reflects my knowledge and experience and also because we have to accept that, while these attacks could take place anywhere, London must be one of the more likely targets for obvious reasons. In addition to its role in London, the Metropolitan Police is also the national lead on matters such as this. I also believe that some of the lessons learned from London's experience over the past 30 years could well be applied and adapted elsewhere. I shall return to that shortly.

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In one sense I wish to follow the noble Lord, Lord Davies. The Motion refers to "A successful terrorist attack". I understand why it deliberately states that and why that is the purpose of the debate. But we should begin by stressing that great effort has been put into ensuring that any such attack is not successful. I am absolutely certain that for the noble Lord, Lord Lucas, that has to be the first priority. We have not had any intelligence that suggests that such an attack in London or elsewhere is planned. But the same was said in New York, whether correctly or not I would not know.
Much of the activity since 11th September has been designed to give public reassurance. That is why we have had variously 1,000 or 1,500 additional police officers on the streets of London to give reassurance to the public and to those sections of the community which feel particularly vulnerable. I refer in particular to the Muslim community and their mosques. I know that that has been much appreciated.
I refer to the theme of public reassurance which the noble Lord, Lord Lucas, mentioned. I could not be here for Questions on Monday but I have read Hansard. I noted that they revealed a degree of ignorance of current arrangements on the part of those noble Lords who took part. Clearly, your Lordships are generally better informed than are most members of the public—I genuinely believe that—so I suspect that if noble Lords are not well informed, neither is the general public.
It might be useful for public reassurance for the Government to give greater publicity to the structures and arrangements that exist—and have done for years—to deal with such emergencies. What is done may sometimes be secret and confidential; but the existence of such structures is certainly not. It is in the public domain and perhaps the public should be more aware of it. The Government should consider that as part of public reassurance, which may be all the more necessary after the rather chilling speech of the noble Lord, Lord Lucas, tonight.
It is for the Minister, not for me, to explain what are the arrangements, and he has more time to do so than I have been given, but I want to refer to one aspect—the situation in London. At operational level, planning to respond to emergencies is carried out through the London Emergency Services Liaison Panel—LESLP to its friends. It has met regularly, on and off, since 1973; it is not a new body. It brings together the three police forces operational in London—although, interestingly, not the Ministry of Defence Police—as well as fire and ambulance services, the Port of London Authority and representatives of the London boroughs and the City Corporation. As the Minister confirmed on Monday, the Metropolitan Police is in overall charge—it chairs LESLP and takes overall operational charge.
Sadly, since LESLP was established in 1973, London has had too much experience of emergencies, whether terrorist bombs or civil emergencies such as train crashes. I am confident that operationally our emergency services work well together on such
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occasions and will do so almost whatever happens. LESLP has been developing for almost 30 years, but I understand that it is not fully replicated elsewhere in the country. What lessons have the Government learned from the experience of LESLP? To what extent could it or should it be replicated elsewhere, especially in our major cities?
However good it is, LESLP has one big weakness: it has no statutory basis or funding arrangements; it relies on the good will of its members. Are the Government considering giving LESLP a statutory basis—preferably, but not necessarily, under the Greater London Authority—together with recognised funding arrangements? That could help information-sharing among the various agencies involved, which, I gather, can sometimes prove a problem.
I turn more closely to the Motion, which envisages a successful terrorist attack using a weapon of mass destruction. The events of 11th September have caused all of us, including our emergency planners, to think the unthinkable. Before 11th September, no one seriously contemplated what happened then and what could happen. The noble Lord, Lord Lucas, has described for us tonight other possible scenarios. These involve envisaging casualties on a scale higher than ever previously contemplated or planned for.
Will the Minister give us assurances tonight on some necessary questions? For instance, are there sufficient available and suitable areas for use as survivor reception areas? Are temporary mortuary facilities available for thousands of fatalities? Could accommodation, catering and medical facilities be provided for the non-fatally injured and evacuees? Do we have facilities quickly to set up family reception areas? We are thinking on a scale that we have not previously had to contemplate.
Those are important issues, and the noble Lord, Lord Lucas, is right to draw our attention to them. He is right to say that such scenarios are difficult to contemplate. We hope they are unlikely to happen, but they may and we should plan for them. Those questions assume large numbers of casualties, and we must be ready for that should it happen.
However, in my inexpert view I believe that, if anything should happen in London—God forbid—it is unlikely to be an attack by a weapon of mass destruction and will not necessarily lead to major casualties. It is more likely to lead to major disruption. We all know that there are a relatively small number of locations in London which, if attacked, may produce no casualties, or only accidental ones, but could bring the whole of Greater London to a halt, not just for the day—London Underground manages that quite easily—but for a significant period, with millions of people within that area needing to get out. I wonder whether our emergency planners are seriously preparing for such an emergency. Reassurance on that from the Minister would be welcome. I do not know what steps are being taken to deal with such an eventuality, which I think is more likely than a successful attack with a weapon of mass destruction.

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I turn to the political—with a small 'p'—aspects of the matter. We know that the police are in overall operational charge in London. Who is in political charge in London? One lesson that we learnt on 11th September and in the following days was that nobody had given any thought to the fact that we now have a London government and a directly elected mayor. I plead guilty to that too. I spent many happy hours in the Chamber considering the Greater London Authority Act 1999, and I do not recall us discussing the matter at all. It became clear that the mayor and the GLA, as distinct from some of its functional bodies, had no role in such emergencies.
I am sure that the Minister will tell us of the London resilience sub-committee within the Civil Contingency Committee structure. Since 11th September, the mayor and the chief executive of the GLA are members of that sub-committee. I know that it meets every few weeks; I believe that it is attended by about 50 people, and I am sure that it is doing great work. The mayor has expressed publicly and privately his satisfaction with those arrangements, so I am in no sense speaking on his behalf. However, communication with and reassurance of Londoners, and perhaps others, will be an important role after a major attack such as we are envisaging tonight. Who will provide that?
The Minister for London is a fine fellow and at present a London Member of Parliament, but he has an electorate of perhaps 60,000 and is appointed by the Prime Minister. The mayor of London—whoever that may be; I do not refer to the present incumbent in particular—has an electorate of 5 million people and has been elected by Londoners to do the job and to represent them. Londoners will expect whoever is mayor of London when, God forbid, such an emergency occurs, to take the public and political lead and provide reassurance and communication. Are the Government ready to contemplate that? If they truly believe in devolution—in this case, to London government —they should be. Of course, I recognise that in a national catastrophe the Government have a role to play on a national and international scale.
Finally, I will use this opportunity, as chairman of the finance committee of the Metropolitan Police Authority, to raise the "give us the money" issue. It is a serious issue. Much has rightly been made of having an additional 1,000—or even at times 1,500—police officers on the streets of London. An obvious point that is not often recognised is that they are not actually additional officers but existing officers working considerable additional overtime, whether they have come from the territorial support group or the borough police services. There are an awful lot of tired police officers in the Metropolitan Police.
Since 11th September, the additional officers have cost the Metropolitan Police Authority more than £1 million a week. The MPA is already overspending on its budget this year and it is taking strenuous steps to get back within it, regardless of the events of 11th September. The GLA took over as police authority from the Home Secretary only last year. We inherited
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no reserves at all—none, not a penny. We tried to create a small reserve in the current year's budget but that has gone. We do not have the money to continue to meet the additional cost week after week for goodness knows how long. We do not yet know what is expected from us next year or what the Government will pay for. It would enormously enhance my reputation if the Minister would stand up today and hand over the cheque to me. I could then bank it tomorrow.
I suspect that that will not happen. I am sure that the Minister is in no position to tell us today how much we shall receive, but I hope that he can tell us at least when we will know how much we shall receive. We have had to satisfy the statutory responsibilities of our treasurer in making arrangements for covering the cost in the, I hope, unlikely event that we have to meet it. However, if we had to do so, there would be serious consequences indeed for policing in London. We need to know—and we need to know urgently—I suspect from the Chancellor rather than the Home Office what we are to receive, and when, to cover the cost of this year's emergency policing and in response to the proposals for next year. It would be most helpful if tonight the Minister could indicate the amount or, more likely, the timescale.
Short though the debate will be, it has been useful. I hope that in reply the Minister will give me not only the reassurances I seek but the wider reassurances which the public want.
7.22 p.m.
Lord Dixon-Smith: My Lords, my noble friend Lord Lucas has done the House a service in bringing forward the debate today. It is timely because we need to consider and plan for what so recently was considered to be unthinkable.
I hesitate in rising to speak because when previously I dealt with governments I always said that although we might try to think of every eventuality they would consider in their treatment of my county, they would always put forward something else. And they always did. One of the lessons of 11th September is that bin Laden thought of something else. We should not assume that he does not have other original tricks up his sleeve.
However, considering the debate in the context of my noble friend's Motion dealing with weapons of mass destruction, conventionally they are nuclear, biological and chemical. The big point about nuclear weapons is that it will probably be difficult for a terrorist organisation to obtain a conventional nuclear bomb. On the other hand, it will probably be all too easy for them to obtain what is known as a "dirty bomb"; that is, a conventional explosive wrapped in highly radio-active material which is distributed over the area surrounding the explosion.
Not least of the problems which we face is that such weapons and materials are not difficult to transport and do not take up a huge amount of space. In accepting that some people are inclined to act improperly, we must bear in mind that the number of

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containers which daily enter our ports is vast and that the current rate of checking is less than 10 per cent. It is about 5 per cent. That is one issue about which we need to worry.
The next category of weapons is biological. They are unpredictable but we need to take notice of what my noble friend said about the increasing possibility of designer weapons. Biological weapons are, more than anything else, psychological weapons. Of course their use raises the possibility of a large number of deaths, but the purpose of bio-terrorism, using conventional diseases, is to disable society through terror—to disrupt society. Again, prevention is vitally important.
Chemical weapons are probably less of a problem. We saw what happened when the Falun Gong tried sarin gas on the underground in Japan. Although the effects were not as bad as we might have thought could be achieved, we should not in any way be complacent. Frankly, I have a daily fear that someone will do something terrible to London's Underground and cause immense damage in the process.
In order for terrorists to obtain any of those weapons, they must either purchase them from an illicit supplier or steal them from otherwise legitimate sources. We should all realise that the best way of limiting the possibility of such action is simply to prevent terrorists obtaining the weapons. Perhaps the Minister will say what steps the Government are taking in respect of security at all installations handling any of those substances—and not just in this country. Are we aiding Russia and some of the eastern European and central Asian republics in their huge task of dealing with large stocks of nuclear materials in particular? I understand that they are not always stored in the most secure installations. Their scientists, who have enormous expertise, are grossly underemployed and even more grossly under-rewarded and might be inclined to sell their services, if not their product, to someone who will pay them well. We need to pay particular attention to that aspect.
My noble friend Lord Lucas raised the question of how we would handle a biological attack. Will the Minister tell the House whether the Public Health Laboratory Service has been asked for advice? Are there resource implications for that service? Speed of foot when dealing with biological warfare is of fundamental and essential necessity. Initially, the possibility of treatment will depend on a rapid diagnosis of the disease—we may well have to deal with a novel disease—after which it will depend on having the facilities to continue the diagnosis. That will mean a steep learning curve for hospital laboratory services, at the end of which we shall need a high-tech industry to produce a cure in a short time. It would be interesting to know whether the Government have all that in the back of their mind.
Outside London, responsibility for major emergencies clearly rests with the major authorities. In my former county council, for instance, the emergency planning officer will have prepared plans to deal with everything from the catastrophic collapse of Bradwell nuclear power station downwards. The background
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behind that lies in the original civil defence legislation in which it was necessary to consider the possibilities of nuclear war. Nuclear war has been considered, and I dare say that if some of the old plans were dusted off we should find ourselves dealing with potential numbers of casualties greater than any of us have thought about tonight. Please God that that will never be a situation with which we have to deal.
The fact is that, outside the metropolitan areas, the planning responsibility is very clear. In London and, I suspect, in other metropolitan areas, the responsibility is rather more divided. Plans exist for everything that one can think of in this field. But the question that will always remain is: have we thought of everything? I suspect that we may not have done.
The plans involve all the emergency services—that is, police, fire, health, social services, and so on. I know that the plans are taken off the shelf, dusted off and rehearsed with great regularity. Again, I ask the Government whether, in the present environment, they are issuing additional guidance as to what the emergency planning authorities should be doing. I know that there has been what I would label a "wake-up call", and I was gratified to hear that.
I want to ask the Government another question. In the present situation, what guidance are they giving to the public utilities—the water companies, the energy companies and telecoms? Resilience—the ability to bounce back—is absolutely critical. Of course, security is also vitally important. There has been plenty of publicity about the possibility—again, I hope that it will never happen—of a 747 being flown into one of our nuclear power stations or, indeed, into Sellafield.
In fact, the worst-case scenarios for Sellafield are considerably worse than what happened at Chernobyl. That may or may not cause a problem because, if the wind was in the right direction, it might take all the contaminated material out over the Atlantic Ocean and dump it there. That would cause a subsequent problem, but we would not have the immediate difficulty of huge disruption and damage to health and society on land. I say that because, in fact, a great deal of the nuclear waste from Chernobyl went straight over Essex. However, it went over at about 4,000 metres and stayed at that height because it happened not to rain. We were extremely lucky.
All those industries need well considered recovery strategies. They must have those plans in place. Therefore, again, I must ask the Government whether they are working with the utilities to encourage them to develop recovery strategies. How quickly can those industries get back on their feet if their administrative headquarters are taken out? That is a question that must be asked.
It is also a question that must be asked of business and commerce because they also need to consider this type of issue. Of course, for the small commercial enterprise that is not a problem. If one happens to be involved in such an incident and one's business is destroyed, one must hope that the insurance cover will not "run". I sometimes think that having insurance

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cover is like having an umbrella which is taken away when it starts to rain. In fact, the insurance industry does a very good job. But major industries which operate on multiple sites should consider what they need to do in order to come back from a major disruption to their business. It is no good having a recovery centre in the street next to the main administrative centre because the odds are that both will go at the same time. There are certainly cases where that is the situation.
I am sure that the Minister will have some interesting comments to make in response to the debate. I am not too pessimistic about the present situation. I believe that British society is remarkably resilient. I offer one final thought. Every time any one of us alters our plans because we are afraid of what might happen as a result of the activities of Mr bin Laden and Al'Qaeda, we play his game. We really should know better.
7.35 p.m.
Lord Rooker: My Lords, the House should be grateful to the noble Lord, Lord Lucas, for introducing this short debate. In answer to one of the last points mentioned by the noble Lord, Lord Dixon-Smith, I begin by telling the House that I do not have anything interesting to say, and I have no comments to make on any of the scenarios that have been put before the House because that would cause more problems than it would solve.
However, I shall seek to deploy some points at greater length than I was able to do at Question Time on Monday when I answered a Question that related only to London. I shall also talk about the type of plans that we are making. However, I must say to anyone who is listening: switch off because there will be no detail, no examples and no free thinking. I shall stick fairly closely to the script that I have. That in no way short changes noble Lords who have spoken in the debate; it is the realistic position that I must take.
As I said on Monday, it is sad that in this country we have enormous experience of fighting terrorism. It has been present on our streets for many years and we deal with it as best we can. However, we have, at least, learnt from the experiences of the past three decades. Plans are always being adjusted and updated.
The issue of contingency planning is important. Pressure does not need to be applied to us on that matter as, indeed, it has not been necessary to apply it to previous governments. Planning continues in Whitehall departments on a day-in, day-out basis. I recall that, when I was at MAFF from 1997 to 1999, as a Minister I took part in, I believe, three planning exercises. I shall not explain what they involved, but they were genuine planning exercises, looking at events that might occur, at how well we were prepared to deal with such issues and how well we were prepared for recovery. There is a long-standing Home Office document that deals with the issue of disaster and civil protection. It has been printed and updated many times. We do not need to be persuaded to take part in and think about contingency planning.
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The Home Office's national counter-terrorist exercise programme is designed to test these plans in conjunction with police forces and other government departments and agencies. The national programme involves on average three full-scale, live counterterrorist exercises per year and a substantial number of table-top exercises which cover the full range of possible scenarios. The planners of that programme will have listened to what noble Lords have said tonight. They will check their lists against what has been suggested may happen to see whether any matters raised tonight have not already been considered. I can assure noble Lords of that.
Since 1989 we—that is, the government machine—have been working on managing the consequences of chemical, biological, radiological and nuclear incidents. As I mentioned on Monday, we held a large-scale, operational exercise—Trump Card—in London last year.
Our contingency plans for dealing with a crisis in London are well developed because of the preparations and precautions that we put in hand in response to the major public safety concerns surrounding the millennium; for example, in relation to the "bug", the central-London celebrations, and the fears of terrorist activity. I can tell the House, although not in any detail, that an enormous amount of contingency planning went into the millennium and the bug.
People say, "Well, it was not a problem", but we do not know that it was not a problem. There was a massive amount of preparation in government and the private sector in many areas, including this country's infrastructure and distribution systems in case there were difficulties. People tend to forget that. That expenditure was well spent. We learnt much from that important effort—the issue was taken extremely seriously. None of that makes the UK a risk-free zone; no one is arguing that. There can be no such thing. We should keep things in context.
However, before addressing our arrangements for responding to and recovering from a disaster of the kind that has been hypothesised by various noble Lords, it is important to stress that the Government's priority is to ensure that such terrible eventualities do not come to pass. Our first watchword is prevention and our first line of defence, as the Prime Minister demonstrated in his speech in Cardiff last week, is to continue to play a full part in the coalition's political, military, diplomatic and humanitarian effort to defeat Al'Qaeda and the Taliban so that they cannot commit further atrocities and add to the worst terrorist attacks that the world has ever seen.
It has been said before—it has been said in this House—but it is worth repeating that things have changed since 11th September. As my noble friend Lord Davies said, people have got to wise up to that; the sooner that they do so the better. We are certainly changing with regard to our preparedness.
I can now say that later this month, the Government will introduce into Parliament an emergency anti-terrorism, crime and security Bill. It will contain a

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range of proposals that noble Lords will debate at length with a view to obtaining Royal Assent, I hope, well before Christmas. We continue to organise our efforts in an evidence-led way, gathering and assessing intelligence in this country and abroad so that we can take preventive and protective measures in response to any terrorist threat.
The position continues to be that there remains no intelligence of any specific threat to the UK at present. That is monitored very closely. We remain vigilant, taking all the necessary precautions. We should bear in mind the need for prudence and for a measured and proportionate response that does not generate unnecessary public alarm.
Our first responsibility is the safety of the public. Since 11th September, the Government have been subjecting every one of our arrangements for securing that safety to the most careful scrutiny.
If the House will permit me, I shall run through the machinery for handling terrorist incidents. The Home Secretary has overall responsibility for UK counterterrorism. If an incident occurs, he uses the Cabinet Office Briefing Rooms—COBR—to co-ordinate the Government's response. There are well-established alert procedures for such a contingency, which have operated successfully in the past. We have experience in that area.
We also have well-established procedures for managing the consequences of any incidents. Lead responsibility for that also rests with the Home Secretary in his capacity as chair of the Civil Contingencies Committee, which has a dedicated secretariat. As chairman of the CCC, the Home Secretary has been leading a thorough and comprehensive review to improve the resilience of the UK at every level.
In the light of the terrorist attacks of 11th September and the fundamental challenge that they presented to the assumptions that underlay our existing contingency planning arrangements, the CCC decided to commission a set of specific reviews. They were to improve the resilience of London; to improve the resilience of services that are vital to the life of the nation; and to deal with the threat of chemical, biological, radiological and nuclear terrorism. The objective is to make sure that everything that can be done is done to enhance our resilience and protect our key facilities, utilities and essential services. The CCC draws together the key government departments, the devolved administrations and the police.
As I said on Monday—and as has been confirmed in the Answer that the Prime Minister gave to a Written Question—the sub-committees of the CCC have been carefully constituted to ensure that all the relevant organisations and stakeholders, including the private sector, the public sector and government bodies at all relevant levels, are involved. There are 10 working groups covering the key areas of the critical national infrastructure and they are carrying out detailed reviews. Their work feeds into the appropriate sub-committees. That means that all the necessary
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professional expertise and operational experience has been assembled to help us to review and renew our plans.
All of the committees have been and continue to be extremely active. They are making sure that our contingency plans are reviewed and renewed in the light of new threats. They are identifying areas that are vulnerable to major terrorist attacks. They are also reducing that vulnerability through improved preparedness and by making sure that we have a better understanding of the dependencies and inter-relationships that characterise a complex open society. As my noble friend Lord Davies said, we are a democratic, tolerant and liberal society, and we shall keep it that way. If that means upping our defences to keep the society for which we fought so hard, we shall do that. We have to balance the rights that we use and bestow on people against the ultimate right that people want—the right to live. That is the top right; the rest of them are subsidiary to it.
I return to the list of the committees' functions. They are making sure that all reasonable precautions are taken; that guidance is brought up to date; that we have good communication systems in place; that we are as well prepared as possible; and that everyone knows how they fit into the overall picture, whether they work in the emergency services or in central, local or devolved government. Sometimes the work of those committees results in documents that are released to practitioners in the field. For example, the CBRN sub-committee—that is, the chemical, biological, radiological and nuclear sub-committee—of the CCC oversaw the publication of co-ordinated guidance to local authorities, emergency services and the NHS on the response to the deliberate release of chemicals and biological agents.
However, by and large—and for obvious reasons—it is not sensible or helpful to elaborate on all the details of the work that is being done or on the arrangements that are being put in place. It has long been the practice of this country not to advertise its security and civil protection measures. I know that noble Lords will understand that that limits the extent to which I can be forthcoming with detailed answers to the questions that were raised in this debate. Of course, that in no way invalidates the questions; far from it. It is right that issues are raised. However, they need to be raised and answered in a way which is measured and proportionate and which keeps the public onside. That is not a question of Ministers saying, "I am a Minister. Trust me. We are doing what is necessary". There are teams of people working their socks off carrying through the processes in government, the utilities and the emergency services that I have listed. I assure the House that we will draw the Home Secretary's attention to the issues that have been raised this evening. Those issues will be put before the relevant committees to ensure that nothing has been overlooked.
I turn to the specific questions that were raised, although I cannot answer all of them. On London, I hope that on Monday I reinforced what was said by the noble Lord, Lord Tope. On communication, I

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went out of my way to emphasise that the key role of the Mayor in such circumstances is to communicate with the people of London. He was elected by the people of London, as the noble Lord rightly pointed out, and he is fully in the loop with his team. He has already been out on the stump talking about the situation in London. He will have a key role in the communication exercise, should such events arise.
The noble Lord also asked about money for the extra police—or, as he rightly said, for the extra police hours. They are visible to most people in central London. That matter must be addressed; I can say only that that will be done soon. We are not oblivious to the fact that, as he said, it is costing some £1 million extra a week, over and above the original budget.
I turn to the issue raised by the noble Lord, Lord Dixon-Smith, who discussed thinking about "something else". There are people thinking the things that they hope others have not thought about, which could be added to the list. However, it is not possible to list them; it would be counter-productive. There are people whose job it is to think the unthinkable, and then think the unthinkable on top of the unthinkable. As I said, things have changed since 11th September.
On the issue of the wake-up call, there have been communications with the emergency planning authorities around the country. As I have mentioned, in respect of London they have all been contacted individually so as to review everything from the centre and to ensure that all 33 authorities are on board and up to date.
I have covered as much as I dare cover in the hope that I have been able to provide some confidence that the issues raised by the noble Lord, Lord Lucas, and other noble Lords have been and continually will be addressed seriously by government in co-operation with all the emergency services and the utilities. I also hope that people feel assured about our being prepared, having emergency plans and taking proportionate precautions to ensure that such issues do not arise, but that if they do arise we can manage the situation.
7.50 p.m.
Lord Lucas: My Lords, I am grateful to all noble Lords who have spoken, particularly to the noble Lord, Lord Davies of Coity, the only volunteer this evening. Although I did not agree with much that he said, none the less I am grateful to him.
I am delighted for the noble Lord, Lord Tope. He almost appears to have acquired a promise that he will get his money. That does not happen often in this House. Even if the situation was not quite as clear as he would have liked, I believe he received some encouragement.
I am also grateful to the noble Lord, Lord Rooker, for what he felt he was able to say. I am encouraged that the Government are putting much effort into tackling the kind of problems that we have addressed. I am sorry that the Government feel that it is advantageous to be so secretive about things. I do not
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believe that terrorists are helped much by knowing the plans for dealing with the consequences of an attack on London. Terrorists are not generally people with the ability to frustrate such plans in any obvious way.
However, it helps ordinary people to know what is going on and it helps government committees. I remember from my days in MAFF, which has clearly improved since then, how many bad decisions were taken because MAFF committees never spoke to anyone outside their own little coterie. It helps to have the decisions, thoughts and conclusions of committees made open to the public when that can be done safely. I hope that the Government will give thought to whether that may be a better way to deal with the situation. At the end of the day, that may provide more reassurance and comfort to the public.
I am grateful to the Minister and I am grateful to all noble Lords who have spoken. My Lords, I beg leave to withdraw the Motion for Papers.
Motion for Papers, by leave, withdrawn.

Christmas Day (Trading) Bill [H.L.]
7.52 p.m.
Lord Davies of Coity: My Lords, I beg to move that the Bill be now read a second time. I am reminded that in the middle of the 19th century during Victorian times, Charles Dickens wrote A Christmas Carol. When Bob Cratchet wanted to finish work early on Christmas Eve, Ebenezer Scrooge said,
"Every idiot who goes about with 'Merry Christmas' on his lips should be boiled with his own pudding and buried with a stake of holly through his heart".
Mean words from a mean man. But even Ebenezer Scrooge allowed Bob Cratchet to have Christmas Day off to spend with his family.
Lord McIntosh of Haringey: My Lords, if my noble friend will allow me, Scrooge bought Bob Cratchet a turkey on Christmas Day morning!
Lord Davies of Coity: My Lords, that takes it a stage further.
I bring the Bill before the House in an attempt to correct an anomaly in the Sunday Trading Act 1994 and to protect Britain's shopworkers from being forced to work on Christmas Day. As a former general secretary of the shopworkers' union, USDAW, I have spent many years seeking to protect shopworkers from unlimited and often unnecessary extended shop opening hours.
That battle rumbled on throughout the 1980s and well into the 1990s. As many noble Lords will recall, in 1986 a coalition of organisations, including USDAW successfully campaigned against a proposal by the Government of the day to completely deregulate shop opening hours. That was a famous victory and one of the few that the noble Baroness, Lady Thatcher, suffered during her time as Prime Minister.

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In 1994 the debate on shop opening hours returned to Parliament with the issue of Sunday trading. Again, complete deregulation was defeated and so was the status quo. After much debate, Parliament arrived at a compromise which is known as the Sunday Trading Act 1994.
Earlier I referred to an anomaly in that Act. The 1994 Act does not allow trading by large shops on Christmas Day when it falls on a Sunday, but unfortunately, and unwittingly, it allows trading when Christmas Day falls on any other day of the week. That is not only illogical, but it also goes against the spirit of the 1994 Act. Protection for Christmas Day was inserted into the Act along with Easter Day, because both were recognised as important days in the Christian calendar. Yet, unlike Easter Day, which falls only on a Sunday, Christmas Day falls on all other days of the week and in 1994 few, if any, thought that Christmas Day trading would become commonplace. Regrettably, considerable changes have occurred in the past few years. That is why it is now necessary to correct that anomaly.
A further anomaly is the right of shopworkers to refuse to work on Christian holy days. One of the most important aspects of the Sunday Trading Act is that shopworkers are protected in law from discrimination for refusing to work on a Sunday. It is illegal for employers to dismiss or to deny promotion to anyone who refuses to work. However, shopworkers do not have the legal right to refuse to work on Christmas Day if it falls on a Monday, a Tuesday, a Wednesday, a Thursday, a Friday, or a Saturday. That is because there are, by error, no restrictions on trading on 25th December when it falls on any of those days. That cannot be right. In fact, shops can open for the full 24 hours when Christmas Day is on one of those days and shopworkers can be required to work on such days. That could never have been the intention.
I cannot believe that when the House passed the Sunday Trading Act noble Lords thought of Christmas Day as a less significant Christian event than all Sundays throughout the year or Easter Day. Yet, that is exactly the basis on which the current trading laws can be operated. For that reason the law needs to be changed. It also needs to take account of new developments.
Shopworkers have seen a continual drive towards longer trading hours over the past 20 years. The days of a five-day working week, with a half-day on Wednesday and Saturday morning only, are now a distant memory. Since then we have seen the introduction of all-day Saturday opening, Sunday trading, Bank Holiday shopping, late-night or 24-hour supermarkets and now even Christmas Day opening is on the increase.
Year on year, more and more shops are opening their doors on Christmas Day. At first small convenience stores opened. In the main they were corner shops staffed by their owners, offering a range of small facilities in a local neighbourhood. Then a chain of convenience stores began to open on Christmas Day, Spar shops selling mostly groceries.
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Unfortunately, that example was soon followed by larger chains. For the first time, in 1999, J Sainsbury and, regrettably, many Co-op shops opened on Christmas Day. Last Christmas Day more large chains opened. J Sainsbury and the Co-op opened more shops than before and they were joined by some Woolworths and Budgens stores. Once some of the chains begin to open, it becomes difficult for all the chains not to open. We saw that happen with illegal Sunday trading in the 1980s.
As regards Christmas Day, this Bill will go some way to create a level playing field. There is no doubt that the vast majority of retailers do not want to open on Christmas Day, but they will consider opening if their competitors open. Such is the nature of the severe competition in retailing, particularly among the supermarkets.
Members of the Union of Shop, Distributive and Allied Workers (USDAW) believe that they were forced to work last Christmas Day. I choose my words carefully. Every store manager in the county would deny that he forces his employees to work on Christmas Day, but there is no doubt that coercion takes place. The only way to stop it is to prevent large shops opening on 25th December, as on Easter Day, in the first place.
The Bill is not just for shopworkers but also for families. Christmas is a very special time for families and no parent should miss it. It cannot be much good, and certainly not right, if when children at home open their presents and pull Christmas crackers mum is behind the check-out at a supermarket down the road.
For shopworkers Christmas Day should be the one day during the retail industry's busiest time of the year when they are guaranteed a day off. Retailers' gross income rises by up to 40 per cent in the run-up to Christmas and to achieve those sales shopworkers must work very hard. Most shopworkers are not allowed to take any holidays in December or January. I do not believe that it is too much to ask that they be guaranteed one day off during that period.
This Bill proposes a modest change in the law and applies only to large stores above 280 square metres, not small shops. It is not intended to bring about a dramatic change in the present law. This means that small shops that can be staffed by their owners can continue to open as and when they like. That is the case today. However, shops over 280 square metres need more than one member of staff. We then end up in a situation where shopworkers are required, or even forced, to work a day that they would much rather spend at home with their families. I believe that they should have the right to do just that.
This Bill was first promoted in another place during the previous Session of Parliament. It was given a Second Reading and completed its Committee stage during which the Government proposed seven technical amendments. All of those amendments were accepted, and the Bill now before the House is as the Government amended it. On that basis, I do not expect any further amendments from the Government.

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This is a simple measure that will make a real difference to hundreds of thousands of shopworkers. The Bill addresses an anomaly in existing legislation. This measure is popular not only with shopworkers but the general public. It will ensure that Christmas Day—one of the most important days in the Christian calendar—remains special and is treated in exactly the same way as Easter Day at the moment.
In conclusion, the anomaly in the current legislation occurs in paragraph 2(4) of Schedule 1 to the Sunday Trading Act 1994. This morning I have discussed the matter with the noble Lord, Lord Alton. Not only does he support this Bill but he confirms that when the Sunday Trading Bill was before the other place he together with Sir Ray Powell tabled an amendment to prevent large shops opening on Easter Day and Christmas Day. That was the clear intention. However, paragraph 2(4) of Schedule 1 provides:
The exemption conferred by sub-paragraph (3) above does not apply where the Sunday is Easter Day or Christmas Day".
That cannot be logical because Easter Day never falls on a day other than Sunday. The conclusion is that there was a drafting error which came to light only when some large shops found a loophole and started to trade on Christmas Day when it did not fall on a Sunday. That is the long and the short of it. I commend the Bill to the House.
Moved, That the Bill be now read a second time. —(Lord Davies of Coity.)
8.7 p.m.
The Lord Bishop of Wakefield: My Lords, I entirely agree with the noble Lord, Lord Davies of Coity, that this is a straightforward Bill to deal with an obvious anomaly. I know that I am by no means alone in being grateful to the noble Lord for promoting the Bill and introducing pertinent issues so helpfully in this debate. Quite apart from the earlier progress in another place which the noble Lord mentioned, the matter which this Bill addresses was raised by my friend the right reverend Prelate the Bishop of Oxford when he put a question to the Minister concerned in 1999. He reminded your Lordships that Christmas Day was,
"a day of value in the life of the nation, both as the celebration of the birth of Christ and as a shared day of rest". —[Official Report, 2/12/99; col. 907.]
The Ethical Investment Advisory Group supports the evidence which has been presented tonight by the noble Lord. In its 1999 report, it noted the growth of shop opening from small stores to larger stores. That growth has now escalated, as the noble Lord indicated, to Sainsbury, Budgen, Woolworths and others. This was immediately a matter of great concern to the Church of England. After pressure from our Ethical Investment Advisory Group and other shareholders, Sainsbury agreed not to open in 2000. I understand that it has indicated that it does not intend to open this year.
The Ethical Investment Advisory Group is currently in correspondence with other companies, most of which have confirmed their intention to remain closed
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on Christmas Day this year. Some do so out of a firmly held and fundamental opposition to the opening of larger stores on that unique festival day. Unfortunately, I understand that Woolworths has indicated to us that it plans to open again on 25th December. Allders and Debenhams have said that although they do not like opening on that day they may do so if they believe that that is necessary for them to retain market share. That is the nub of the issue.
As the noble Lord indicated, if one store opens others begin to feel that they must follow, albeit reluctantly. If the matter is not dealt with in the decisive way proposed by the Bill, it will get out of hand and the trend will become impossible to reverse.
My support for the Bill is prompted by two concerns. First, as I am sure noble Lords will readily understand, Christmas Day is a festival of fundamental importance to all Christians. Attendances at worship over Christmas are invariably higher than at any other time of the year. It appears to be anomalous that under current legislation Christmas Day not only is less protected than Easter Day but also is less protected than any other Sunday. Like the noble Lord, Lord Davies, I do not believe that that was intended by those who drafted the Act, but that is how it is. It will not surprise your Lordships that from these Benches I support the argument of the noble Lord that from the point of view of large store trading, Christmas Day should be given the same status under the law as Easter Day and the other 51 Sundays.
My second concern is for those who will be required—the noble Lord used the word "forced", and I agree with him—to work if their store opens on Christmas Day. Whatever may be said by employers about protecting workers' rights and not forcing them to work, the truth is that since Sunday trading began many people have very little option other than to work on a Sunday, or, as is increasingly the case, Christmas Day, if they want to keep their jobs. The anecdotal evidence for that in my diocese is so overwhelming as to be, at least in part, very persuasive. It really seems to be the case that those who, out of religious conviction or a desire to be with their family, ask not to work on a Sunday often face losing their jobs. That is totally unacceptable. The strain that that kind of pressure puts on family relationships, especially where there are children, is wrong, and all the more so when it happens at Christmas.
Furthermore, as I have already mentioned, the concept of a shared day of rest is very important for the health of society. That is a view shared not only by Christians but by people of other faiths and of none. Research has convincingly shown that Christmas is a time when family and marriage relationships come under especially heavy strain. Invariably when that strain gets to breaking point, the relationship itself breaks down. That is in part because at that time of the year there is already extra tiredness, strain and stress. It is no exaggeration to say that if we allow Christmas Day store opening to get out of hand, we may find ourselves paying the high price of even more broken homes and separated families. Those statistics for this country are already far too high.

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I support the view of the shopworkers' union that there should be at least one day off for shopworkers over the Christmas period and that there should be a day of rest, upheld by law.
Several large stores have indicated privately to us in the Churches that they would like to remove the six-hour opening on Sundays and to be relieved of that pressure to be trading on that day. We need to hear that. Certainly I strongly believe that we should take the opportunity now before us to place shopping restrictions on Christmas Day, on whatever day of the week it may fall.
On 2nd December 1999, the then Minister told your Lordships:
"I believe most people accept that Sunday is a special day and Christmas Day especially so … I shall play my part to ensure that it is protected in a way that fits with the traditions of our country". —[Official Report, 2/12/1999; col. 909.]
I very much hope that remains the Government's view. I pray that the Bill will be able to proceed.
8.12 p.m.
Lord Graham of Edmonton: My Lords, it is a pleasure to take part in this debate. I start by saying tritely that everything that can be said has already been said. But I shall then go on to make my own speech.
Certainly from the point of view of the shop workers and from a religious point of view the case has been well stated by the previous two speakers. The record will show that they have taken a great deal of care in putting forward their arguments. I sat here and listened to both speeches with appreciation. I smiled when the right reverend Prelate told us that Church authorities had been told privately by some of the larger stores that if they could they would undo the 1994 legislation.
That is the story of our lives. Before that Act was passed many of us argued, especially from the shop workers' point of view, that the Act would be rued. My noble friend Lord Davies, a dear friend and colleague over many years, will recall the exultation that he and his colleagues felt when I played a little part in defeating in 1986 the shops Bill. I saw Garfield in a photograph with members of the executive. They were drinking to the success of having stopped the machinations by the large stores to trade illegally, as they were. Times have changed.
We have now reached a situation where a union which I very much respect can recognise what I recognised—as was recognised before 1986: give them an inch and they will take a mile. You have to stand firm and not be persuaded pragmatically that there is an advantage in one year and one time. We all have principles. One of my principles throughout my life has been against Sunday trading. In all the arguments, for the life of me I could never see why people and stores, with the opportunity of trading all hours—they were not stopped from trading all hours—said, "In addition to that, we also want to trade on a Sunday".
Our family, which in a week might eat six loaves of bread, could go out on a Sunday and get more bread, or more coal, or buy more clothes. The opportunity to
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meet one's needs was already there. But I say quite bluntly and crudely, the greed of the large stores and chains to maximise their profit drove them to fight for the right to open. My noble friend Lord Davies says that the six hours was a compromise. It was not very long before we saw moves to change from six to eight, because the argument was that people wanted exemptions from the six hours—traditionally say 10 o'clock to 4 o'clock. They wanted to open at 8 o'clock but they wanted to trade until 4 o'clock. It is a battle all the time.
One of my great memories here was forming a triumvirate with Harold Macmillan and Tom Denning. In 1986, as the Bill was before us, Harold Macmillan stood up from that Bench there and said that he did not join the Conservative Party to deprive shopworkers of their rights. He was not going to be a party to it. He would vote against the amendments that we were dealing with. On that occasion we lost an amendment by one vote. As I went out into the lobby, Tom Denning said to me, "Ted, come and sit here with Harold. We must have another try". Harold Macmillan said, "Yes". It was a four-clause Bill. Instead of a clause which said:
"Shop workers' rights shall cease".
The amendment took out the word "cease" and put in the word "continue". It then stated:
"Shop workers' rights shall continue".
When the point came up at Report stage we won by one vote. That one defeat caused the Bill to be delayed long enough for the Churches in the country to get to work on the constituency MPs. It was delayed for about three months. When the Bill went to another place, we won. That is where Garfield and his colleagues said, "Hallelujah" for many other people.
We now have the situation—and I am distressed to learn this—that some of the people who are trying to use the loophole are co-operative societies. I stand here with my Co-op tie. My allegiance is to the Co-op movement. I say, "Shame on those co-operative societies and everyone else who cannot be content with making an honest living out of the trading conditions but feel that they must with other people do this". Tesco's, Alders and Sainsbury's were mentioned. Sainsbury's has resiled from its attitude.
I subscribe to the view that there are many people who work on a Sunday now but who would rather not. At one time we talked about people who worked on a Sunday as getting a premium rate of pay. One of the reasons why the large shops decided they wanted to make Sunday like an ordinary day was so they could pay ordinary wages. The idea of paying premium rates has virtually disappeared.
I understand the procedure for private measures. USDAW is doing a good job for its members, but it is a pity that five years ago the union decided for pragmatic reasons that it would support the breach made in the dyke. We are now facing one of the consequences of that breach.
I hope that the Bill succeeds. The right reverend Prelate said that Sunday added value to the life of the nation. Overwhelmingly, I think that people would

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support that view. Sadly, however, when it comes to wringing the last penny of profit out of running a store, some will listen to the argument but then proceed to try to get at that last penny. I understand the nature of competition and the pressure to pursue profits, but unless people stand up to it, the tide will rise ever higher.
My noble friend Lord Davies has done the House a service with the Bill, as has Mrs Gwyneth Dunwoody, who took the measure down at the other end. I hope that all those forces ranged against Sunday trading will continue to express their views. Indeed, I hope that the good sense of those who were in favour of Sunday trading will be brought to bear and that they recognise that the path down which Christmas Day trading will lead us is a path that is not in the interests of the life of the nation. I wholeheartedly support the Bill.
8.21 p.m.
Lord Tope: My Lords, I have read the report of the debate on Second Reading in another place. It was clear that most, but not all, of the speakers in that debate were opponents of the original Sunday Trading Act 1994. I strongly suspect that that is also the view of the speakers in our debate so far. However, I have to say that I was a supporter of the Sunday Trading Act. I did not agree with complete deregulation, but I supported the measures proposed in the final legislation. I know that that will not make me popular tonight and I do not wish to reopen the debates held seven or more years ago as regards Sunday trading.
Perhaps it is more significant that I am happy to support this Bill. The points in support of it have been made very well. I shall not repeat them except to say that I do not know whether it was by accident or an anomaly that, in the earlier measure, Easter Day was included but Christmas Day, as distinct from Christmas Sunday, was not. Clearly, that was illogical and I believe that it should be changed.
The Bill specifically exempts smaller shops. That is absolutely right. Most of those shops are neighbourhood retailers, often run by a family, and often by those not of the Christian faith. For them, it is a reasonable way to earn a living and they provide what is for some in their areas an extremely valuable service. It is right that that should be allowed to continue.
However, I am worried about the trend which began in 1999 for the bigger stores to open on Christmas Day. I know that once one major store starts doing it, the pressure and the force of competition—the noble Lord, Lord Graham of Edmonton, called it greed—on others to do the same is compelling.
The noble Lord, Lord Graham, also pointed out that there was nothing new to say on the subject but that all noble Lords would repeat their arguments. However, I should like to make one point which has not been made and which I can put forward from personal experience. I am a councillor for a town centre area, a position I have held for many years. Over the past 11 years, I have represented the council on our
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town centre management committee. I lived through the period when the pressure to allow Sunday trading was building, and then when the new trading laws were introduced. Incidentally, during that period we also decided to open our central library on Sundays. For the library, Sunday is now the second most popular day of the week after Saturday.
I believe that the benefits brought by Sunday trading outweigh the undeniable disbenefits. However, speaking as a town centre councillor, the people who have experienced the greatest disbenefit are those who live in or near a town centre. Even now I have to explain and apologise to my constituents for the disturbance. Whereas Sunday used to be the one quiet day of the week for those residents, now for at least six hours, and probably eight hours, that is no longer the case. The thought that they would be disturbed on Christmas Day, on whatever day of the week it fell, is indefensible. That is the one new point that I can bring to the debate.
For the reasons already outlined, I am pleased to give support from these Benches to the Second Reading of the Bill. I wait to hear whether the Government have amended it as much as they wish—I shall believe it when it happens. I hope that the Bill has every success in this House and, in particular but perhaps not so likely, every success in the other place.
8.25 p.m.
Baroness Miller of Hendon: My Lords, I have enjoyed all the contributions this evening and I too should like to thank the noble Lord, Lord Davies of Coity, for introducing what I believe is a very necessary Bill. However, I rise to my feet with some diffidence. Noble Lords will know that I am Jewish. I feel that commenting on the Bill is difficult because the religious implications of Christmas Day do not apply to me personally. The same can be said for other members of the population who are not Christian. However, they are of great importance to followers of the main religion of this country, the Christian faith. It is absolutely right that Parliament should pay full attention to their concerns.
Along with many Members of both Houses, I believe that in general businesses should be given the freedom to trade whenever it suits them, but equally we accept, and I believe, that it is absolutely necessary to protect the interests of those employees who do not want to have to work on Christmas Day. For all Christians, the Christmas festival marks an important day. Even for non-observant Christians, it is very much a family day, one which parents and children wish to spend together—and they should be able to do so.
I note that the provisions of the Bill are limited to large shops. Far be it from me to wish to intervene between the Minister and his noble friend who introduced the Bill—I would not wish to say anything that might upset the Minister—but when he mentioned that Scrooge went out on Christmas Day to buy a turkey, I have it in my notes that he went out to

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buy a goose. Whatever it was, the fact is that there were no large shops in those days, so the small shops must have opened even then.
My honourable friends in the other place had a free vote and many spoke in favour of the Bill. I was most impressed with the argument raised by several honourable Members that the omission of Christmas Day alongside Easter Sunday from the Sunday Trading Act 1994 was clearly an oversight. Had the anomaly been noticed when the Bill was first introduced, it would not have been permitted. The noble Lord who introduced this Bill made that point clearly.
As my honourable friend the Member for Hexham said in the debate on the Bill's Second Reading in another place:
"I voted for liberalisation in 1994, and I thought at the time that we were protecting Easter Day and Christmas Day". —[Official Report, Commons, 16/3/01; col. 1323.]
If we allow transport workers and all but the most essential workers in the utilities and emergency services to have Christmas Day off, I do not see why those who work in shops larger than 3,000 square feet cannot do so as well.
I believe that this is very much a matter of conscience. I assume—I do not know if I am correct—that political parties would probably be neutral on the matter, leaving it to individuals to express their view. As I have said, when the Bill was introduced in another place my party allowed its Members a free vote. Although it is not the custom of this House to vote on the Second Reading of a Bill, I would vote in support of this measure. I very much hope that it has an easy passage and eventually becomes law.
8.29 p.m.
Lord McIntosh of Haringey: My Lords, may I start by congratulating the noble Lord, Lord Davies, on the way in which he introduced the Bill and on the support that he achieved in all parts of the House? He will not be surprised when I say that the Government are neutral on the Bill. Indeed, it is fair to say that we are doubly neutral on it. Not only are the Government neutral on all Private Member's Bills but, as the noble Baroness, Lady Miller, reminded us, the Sunday Trading Bill was a matter of conscience and was dealt with on the basis of a free vote. That was the case when the Bill came forward for the Opposition, and I am sure that it would be the case on any subsequent proceedings now. Anything that I say about this Bill must be read in the light of that double neutrality.
I want to comment first on the history of the legislation; secondly, on the experience of what has happened since the 1994 Act was introduced; and, thirdly, on employee protection, which is so important to the Bill's promoters. Finally, I want to speak very diffidently about religion and tradition.
As I cannot conceal it from my noble friend Lord Graham, it is only right that I should declare my own interest and personal point of view. He knows that, although I have agreed with him on almost everything throughout our political careers, I disagree with him
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profoundly in respect of Sunday trading. I do not happen to be a Christian or to have any religious faith, but I do not think that that is the issue. I am deeply prejudiced in favour of deregulation, of not telling people what they cannot do and, as far as possible, of allowing them to do what they wish to do with their lives, as long as they do not do it in the street and frighten the horses, as Mrs. Patrick Campbell said. That is my view. It does not influence the way in which the Government think about the Bill, and it can be put on one side by any Members who wish to do so.
Let me say a word about the history of the legislation. It has to be remembered that, before the 1994 Act and the aborted 1986 Bill, the prevalent legislation was the Shops Act 1950, which was nonsensical. Everybody who was involved in the earlier legislation will remember that the Shops Act discriminated on the grounds of what could be bought. One could buy a pornographic magazine, but not the Bible. There were many other examples, but the main thing was that it did not restrict trading on Christmas Day in any way. Although the 1994 Act was removing restrictions in other respects, it was imposing them in this area. Parliament took the view that trading should be restricted only when Christmas Day fell on Sundays, but not when it fell on weekdays. That was not an omission or error; it was the case because the provision was contained in the Sunday Trading Bill, so any attempt to restrict trading on Christmas Days that were not Sundays would have fallen outside the title. The approach of the 1994 Act was partial deregulation. People were allowed greater freedom to shop, but there were still provisions maintaining that Sunday could be different from other days of the week. The distinction was based on an area of 280 square metres, as I prefer to say, or 3,000 square feet, as some other people prefer to say. As has been said, there is a restriction on larger shops and it is reflected in the Bill.
The Bill would go beyond the Sunday Trading Act and introduce new regulation where none exists. The point that we must consider in the light of the arguments that have been advanced today is how that squares with our determination in every area that we can think of to reduce regulatory burdens. The Bill would certainly be a new regulatory burden.
The right reverend prelate the Bishop of Wakefield and the noble Lord, Lord Davies, have referred to the experience since the 1994 Act was introduced. When the Act took effect, many people thought that the compromise would be unworkable. I thought so, but I was wrong. On the whole, it has worked pretty well. Shops have abided by the Act and there have not been many complaints. I take the point made by the noble Lord, Lord Tope, about his town-centre constituents. A Budgens lorry drives past our quiet street early every weekday morning, so we have been rather grateful for the provision in the Act stating that lorries cannot deliver to their shops before 9 o'clock in the morning. More than half of people in this country shop at some time on a Sunday, but the effect is very marginal and represents an increase of only about 3.4 percent in sales and of 0.6 percent in profitability. Sunday

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trading is done because of convenience to shoppers, and not really, I suggest to my noble friend Lord Graham, done out of greed.
Let us consider what happened last Christmas. Asda did not open any of its stores. Sainsbury's opened three stores, which was fewer than were opened in 1999, but they were all small. They were less than 3,000 square feet in area and would not be affected by the Bill. Safeway did not open any large stores. It opened 50 small shops out of 480, and they were attached to petrol stations. Budgens opened 91 out of 207 stores, but they were all 3,000 square feet or less in size. The Co-opopened 85 of its 4,500 stores. Only three of them were more than 3,000 square feet in size. Woolworths opened three stores in Southall, Birmingham and Slough, where one might think that the argument about serving people who are not Christian would be relevant. All those three stores were more than 3,000 square feet in size. The lesson that I draw from that is this: yes, there are ups and downs, but it is not a plague or an epidemic. It is happening in a few places, especially non-Christian ones, but it does not seem to be growing significantly.
On employee protection, the noble Lord, Lord Davies, is right to say that the rights that are available for shopworkers who work on Sundays or who ask not to do so do not apply on Christmas Day when it is not a Sunday. Indeed, that applies to any bank holiday. But those rights must be a matter for negotiation between employers and employees. Employees who do not wish to work on Christmas day would generally be entitled to complain against employers if their contracts were varied without their consent. For example, they could do so if they were required to work on Christmas Day when they had not been required to do so before. Anybody who was dismissed for refusing to accept a contractual change would be entitled to complain of unfair dismissal to an employment tribunal. The Bill would legislate for the right of one sector of workers—only shopworkers—not to have to work on a particular public holiday. Whether or not one thinks that that is a good thing, it is not consistent with the way in which other workers are treated.
I shall tread very warily in talking about religion and tradition, because they are not my subject. None the less, I must say that my family observes Christmas Day. We do all the trimmings, as I think the saying goes. I am sure that the noble Baroness, Lady Miller, is right, and that Scrooge bought a goose, not a turkey. We also tend to have a goose on Christmas Day.
It is common ground that those providing essential services have to work on Christmas Day. Priests of the Church of England have to do so. A couple of years ago, I had the pleasure of visiting Great Ormond Street hospital with my wife, who was chairman of trustees, and with the Archbishop of Canterbury and his wife. He was working on a Christmas Day, although he was paid for it and I was not. It makes a difference. He was very noble about it, because he hates visiting hospitals. Clearly, however, some people have to work, but it is not new to suggest that there should be absence of
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regulation, that we should take things in our stride and that we should recognise that there are people of different religions in this country. There are many people—and, whether one likes it or not, their number is increasing—who not only do not observe any religion, but do not believe in one either.
Personally, I admire the spirit of the Bill, but I think that it is in many ways inconsistent with some of the other things that we try to do. So, as I say, I have my own reservations, which people can take or leave as they wish. The Government are neutral about the Bill. We believe that it is properly drafted after the amendments introduced in the House of Commons. We do not believe that it will require significant amendment.
Lord Norton of Louth: My Lords, I am grateful to the Minister for giving way. I wanted to intervene before he concluded his remarks because I wish to make an important point. He mentioned the religious element, but is there not also a social dimension? The emphasis so far has been one way. Workers should have an absolute right to be protected against having to work on Christmas Day—there must be absolute protection—and, as the right reverend Prelate said, there is also a social case for it in terms of the family.
But is there not also a social case on the other side? For some people, Christmas is an extremely lonely period and for them the opportunity to work is a way of social interaction. I do not think that the dimension that some people may want to work should be lost. It may be a small number, but one has to see both sides of the argument.
Lord McIntosh of Haringey: My Lords, I take the noble Lord's point. The Bill refers only to stores of 280 square metres and above, which is a small minority of the retail trade and an even smaller minority of work as a whole. That argument cuts both ways as well, as the noble Lord, Lord Norton, will recognise.
However, the Bill is properly drafted and we would not wish to introduce amendments to it. We shall not oppose Second Reading or further proceedings in this House if your Lordships' wish it.
8.41 p.m.
Lord Davies of Coity: My Lords, I am extremely grateful to all noble Lords who have participated in the debate, particularly the right reverend Prelate the Bishop of Wakefield, and my very good friend the noble Lord, Lord Graham of Edmonton. I am also pleased with the contributions from all the Front Benches. One or two things have been said which require comment, but I shall not take up too much of the time of the House.
It is true that in 1994 there was a free vote on the Sunday Trading Act. Noble Lords will remember that the situation was somewhat unique because, for the first time, three options were placed before Parliament, from which a choice could be made. My noble friend Lord McIntosh of Haringey said that the Shops Act 1950 was in place until 1994. He is right. However,

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between 1950 and 1986, more than two dozen Private Member's Bills were laid before Parliament in an attempt to change the Shops Act 1950. Every Bill was defeated. Although there was a free vote in 1994, there certainly was not a free vote in 1986. Noble Lords may recall that that was a time when the Conservative government had a majority of 140. It was only the fact that 68 Conservative MPs defied a three-line Whip that enabled the Bill to be defeated in 1986.
My noble friend Lord McIntosh listed a great number of stores which had opened, some of them small stores. That is true. However, it strikes me that this is the prising of the floodgates. If it continues, what we are warning against will come to pass.
The noble Lord, Lord Tope, referred to Sunday trading and pointed out some of its benefits. However, there are downsides. When we were campaigning against Sunday trading in the 1980s and 1990s, we made it very clear that, in the long term, overall trade would not be increased. Merely spreading trading hours over a larger number of days and hours would not necessarily increase trade. Subsequent reports have shown that to be precisely the case. Volume has not been increased or generated as a result of extending trading hours and spreading them over a longer period in the week.
However, we also said that in such cases—this has now proved to be the case—the costs of operation would be increased because you would be paying more but not necessarily achieving a greater turnover and greater volume of sales. That would mean that the
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increased costs would have to be paid for. We said, nearly 20 years ago, that those increased costs would be met either by increased prices or, alternatively, by reduced wages, or a little bit of both. Whereas when Sunday trading was first introduced workers were attracting premium payments of as much as treble time, we now find that in most instances payments are back down to single time. Indeed, in some cases, Sunday workers only are being employed on a Sunday.
This Bill is primarily about removing an anomaly, protecting shopworkers and recognising Christian values in the festive season and Christmas Day. I have drifted into Sunday trading and extended hours in general because I have, if you like, bitten the bullet as a result of comments that have been made.
A point was made—it may be seen as a bit of a downside to my Bill—about whether some people want to work on Christmas Day as a result of being lonely. This is the first time that I have ever heard that argument. I do not know what evidence there is to support that view. I do not know whether the situation even exists. Lonely people will find pursuits other than going to work. Sometimes their loneliness is not taken away even if they are in a crowd.
By and large, I am very pleased with the response I have received to my Private Member's Bill. I therefore request the House to give it a Second Reading.
On Question, Bill read a second time, and committed to a Committee of the Whole House.
House adjourned at thirteen minutes before nine o'clock.