Lords Sitting of 13 February 2002

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

The Lord Chancellor: Leave of Absence
The Lord Chancellor (Lord Irvine of Lairg): My Lords, before business begins, I take the opportunity to inform the House that I am to attend a meeting of the Cabinet tomorrow, Thursday, 14th February, when the House will sit. Accordingly, I trust that the House will grant me leave of absence.

Messages from the Queen
Lord Luce: My Lords, I have the honour to present to your Lordships two messages from Her Majesty the Queen signed by her own hand. The first message is as follows:
"I thank you sincerely for your expression of sympathy in the sad loss which I have sustained by the death of my dear sister, Her Royal Highness the Princess Margaret, Countess of Snowdon, and for your condolences to my mother, Her Majesty Queen Elizabeth. We are deeply moved by the warmth of your condolences, and your thoughts and prayers are a source of comfort to us at this time of personal sorrow".
The second message is as follows:
"I have received your Address praying that the draft Ministry of Agriculture, Fisheries and Foods (Dissolution) Order 2002 be made in the form of the draft laid before your House on 8th January.
"I will comply with your request".

Fluoridated School Milk
2.38 p.m.
Lord Beaumont of Whitley Lord Beaumont of Whitley asked Her Majesty's Government:
What steps they are taking to ensure that accurate and balanced information is provided to parents whose children are being offered fluoridated school milk, to help them make an informed choice.
The Parliamentary Under-Secretary of State, Department of Health (Lord Hunt of Kings Heath): My Lords, there are currently seven fluoridated milk schemes at schools in the North West and Yorkshire. When a scheme is under consideration, health service staff visit the school and explain the objectives of the scheme both to parents and staff. Leaflets and letters are then issued to parents, which indicate that children
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who are taking fluoride tablets or drops do not need fluoridated milk and that milk without the addition of fluoride will remain available.
Lord Beaumont of Whitley: My Lords, I thank the Minister for that reply. Is he aware that in Manchester, which is one of the areas concerned—I am sure that it is not an isolated example—although the chief dental officer is offering balanced information on the subject, the leader of the council has asked that so-called dental milk be positively marketed? Is the noble Lord aware that it is almost impossible to do those two things simultaneously? Is he further aware that little mention is made in the literature of the many scientific experiments throughout the world that show that fluoride, as well as being poisonous—as so many substances are—does not, in fact, reduce tooth decay?
Lord Hunt of Kings Heath: My Lords, that is a matter for the schools and the local authority. I have seen the leaflet that the NHS issued to parents, and I believe that it gives relevant and correct information. I am happy to place copies of it in the Library.
With regard to the wider question about the effects of fluoridation raised by the noble Lord, it is worth making the point that the Government asked York University to undertake a robust review of all the evidence available. In relation to the main assertions that have been made about fluoridation, the review found that there was no clear association between water fluoridation and incidence of or mortality from, for example, bone cancers and thyroid cancers. At the same time, because of the need for a robust evidence base, we have asked the Medical Research Council to consider whether more research should be undertaken.
Lord Tomlinson: My Lords, I declare a non-financial interest as president of the British Fluoridation Society. Can my noble friend confirm the British Dental Association view that targeted fluoridation is one of the best ways of ensuring that children grow up with strong, healthy teeth? The direct fluoridation of water particularly benefits people such as those whom my noble friend knows well in the city of Birmingham. Can my noble friend confirm the benefits to those who either have access to fluoridated milk or participate in the Government's "Brushing for life" scheme?
Lord Hunt of Kings Heath: My Lords. the most striking figures that I have are from a 1993–94 survey that, I believe, has been recently repeated, showing the same pattern. The survey shows that in the south of Birmingham, for instance, the average number of decayed, missing and filled teeth for a five year-old child is 0.92, compared to 3.45 in central Manchester, which is non-fluoridated. That shows the effect of fluoridation in the water supply and the other schemes mentioned by my noble friend.
Baroness Gardner of Parkes: My Lords, is it not true that many substances taken in excess are poisonous and that the statement made by the noble Lord, Lord

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Beaumont, in his response to the Minister's original Answer, that fluoride is poisonous would indicate a dosage entirely different from that used in any fluoridated water scheme? Is the Minister aware that in California a 1 per cent majority vote resulted in the introduction of fluoridated water, containing the properly controlled measure of fluoride for dental benefit and no disbenefit? However, many people declared that they would use only bottled water from then on. When an analysis was made of the bottled water, it showed much higher levels of fluoride in that water than would ever have been permitted in fluoridated water. Does he agree that, worldwide, the opinion is that fluoride is extremely beneficial and that in this country it would do much to narrow the gap between the more affluent and those in greater need, whose teeth are much worse?
Lord Hunt of Kings Heath: My Lords, I find the noble Baroness wholly persuasive on this matter.
Lord Clement-Jones: My Lords, many of us are broadly in favour of the fluoridation of both milk and water. The Minister mentioned the University of York report. Is he aware that it is now some 13 months since its publication in 2000? Is it not now high time that the MRC made its recommendations with regard to the high-quality research that needs to be done? Can the Minister state precisely what research will be entered into? After all, both the proponents and opponents of fluoridation badly need and want that research to be carried out.
Lord Hunt of Kings Heath: My Lords, the MRC has been asked to advise us on the current scientific evidence regarding the health effects of water fluoridation and to consider whether further research in this area is required to inform public health policy. No doubt the noble Lord will be reassured to learn that the MRC is due to report to the department in the spring.
The Countess of Mar: My Lords, should not the Government respect the very real concerns felt by some people about the effects of fluoridation? After all, in line with lead, fluoride is poisonous if taken in overdose. Its effects depend on dosage, thus if children use fluoridated toothpaste and drink fluoridated water and then perhaps drink fluoridated milk as well, then they are at risk of affecting their thyroid glands. A good deal of research has demonstrated low-level effects on the thyroid which are not good in the long term. This is an area in which further research needs to be undertaken. Should we not respect both sides of the argument and find out what is the truth?
Lord Hunt of Kings Heath: My Lords, of course we will listen with care to the advice given by the MRC concerning research. However, I have to say that I think that the noble Countess has rather exaggerated the potential ill-effects of fluoride. I think that the balance of evidence is quite clear. The University of
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York review, which was very robust, could find no evidence of the allegations that have frequently been made about fluoridation. I do believe that fluoridation could be one of the most effective health measures to be developed in this country.
Baroness Uddin: My Lords—
Baroness Trumpington: My Lords—
The Lord Privy Seal (Lord Williams of Mostyn): My Lords, I think that it is the turn of my noble friend Lady Uddin.
Baroness Uddin: My Lords, I am deeply grateful. In light of the debate held in the House on Monday evening on health matters among minority communities, does my noble friend recognise that a significant population in minority communities does not receive information on issues such as the one raised in this Question? Can he tell the House how he will ensure that sufficient accessible information and advocacy with regard to this matter are made available to citizens living in areas such as Manchester, Birmingham and Yorkshire?
Lord Hunt of Kings Heath: My Lords, my noble friend is right. I have evidence to show that, on average, Asian children have 2.9 decayed teeth, while white children have an average of 1.6 such teeth. A study in Birmingham showed that only 28 per cent of Asian children were registered with a dentist compared with 68 per cent of white children. I believe that those figures are replicated in other minority ethnic groups. It is clear that local health authorities need to develop strategies on oral health which ensure that disadvantaged groups are targeted.

Tenancy Deposit Scheme
2.47 p.m.
Lord Best Lord Best asked Her Majesty's Government:
Whether they will now extend the tenancy deposit scheme for a further period.
The Minister of State, Department for Transport, Local Government and the Regions (Lord Falconer of Thoroton): My Lords, for two years the Government have supported, as a pilot, a voluntary tenancy deposit scheme. Although more time is needed to prove that it could operate as a self-financing scheme, its slow take-up makes a strong case for legislation on tenancy deposits. We propose supporting the pilot for two more years to establish, first, the basis for a self-financing national voluntary scheme and, secondly, the extent to which membership of this or similar schemes would need to be backed up by legislation.
The Government will consult on what legislation might encompass. For example, it might prevent the use of tenancy deposits where they are not safeguarded by schemes like the pilot or by regulating them in some

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other way. Landlords are very strongly advised to lend their support to the pilot now, so that in advance of legislation there is a proven alternative to regulating the use of tenancy deposits.
Lord Best: My Lords, I thank the noble and learned Lord for that very positive response which will be greatly appreciated by organisations representing not only tenants, but landlords as well. Does he agree that, in order to protect those tenants where the landlord does not wish to join a voluntary scheme and receive the benefit of having disputes resolved by the Independent Housing Ombudsman service, it is likely that a mandatory scheme will become necessary in due course?
Lord Falconer of Thoroton: My Lords, we should see what are the effects of the coming two years. It is extremely important to encourage as many landlords as possible to join the scheme.
Baroness Maddock: My Lords, I concur with the comments made by the noble Lord, Lord Best. Many people working in the world of housing will welcome what the noble and learned Lord has said today. Is the noble and learned Lord familiar with a scheme operating in East Anglia? All noble Lords will know how difficult it is for students to find adequate accommodation. At the University of East Anglia, which falls into one of the pilot areas, students have been encouraged to go to landlords who are part of the scheme. What has happened is that, of course, other landlords have then joined the scheme. Will the Minister look closely at this result? It appears that not only would such an approach help the scheme to expand quickly, it would also be a great help to our students.
Lord Falconer of Thoroton: My Lords, I am aware of the East Anglian scheme, which has worked well. It is precisely the kind of scheme that makes life a lot easier between landlords and tenants.
The Earl of Caithness: My Lords, the noble and learned Lord's reply will certainly encourage many landlords to continue to participate in the scheme and encourage new ones to join. But, just as there are bad and rogue tenants, there are often bad and rogue landlords, and until we have legislation making the scheme compulsory there will always be someone on the margins who is not benefiting. Will the noble and learned Lord seek to introduce legislation at an earlier rather than later date?
Lord Falconer of Thoroton: My Lords, I note what the noble Earl said. It is a view shared by many people in the housing world. Extending the pilot for two years will give us a chance to see what is the appropriate course. As I said in the second part of my Answer, we will consult now on what the legislation might encompass.
Baroness Hanham: My Lords, do the Government believe that a national statutory scheme could be run
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without a requirement for the registration of landlords and agents? Does the Minister agree that agents who handle their tenants' money should he registered with the local authority?
Lord Falconer of Thoroton: My Lords, as to whether or not we would need to register landlords in order to have an effective compulsory deposit scheme. I do not know the answer. That is one of the issues that the consultation will encompass.
The Earl of Listowel: My Lords, is the Minister aware that the income generated by the custodial option scheme is likely to be more than is necessary to fund the scheme? Is he further aware that in New South Wales, for example, the surplus income is used to subsidise schemes such as the rent guarantee scheme, which enables homeless people or people on lower incomes to gain access to housing?
Lord Falconer of Thoroton: My Lords, I was not aware of the Australian example given by the noble Earl. As to whether there will be enough money from the custodial scheme, one of the findings that has emerged from the pilot is that it has not yet been proved that the schemes overall are sell-financing. We need to look more at that issue before decisions are made.
Lord Graham of Edmonton: My Lords, I am sure that the Minister appreciates the general welcome given to the idea that people who pay deposits should, in one way or another, receive protection. Will he continue with this and be very careful about abandoning further positive action because of slow take-up? The slow take-up could well be improved over time, particularly if there is some kind of campaign to draw the scheme to the attention of landlords and tenants.
Lord Falconer of Thoroton: My Lords, I referred to the slow take-up, but we are continuing with the scheme for another two years. There are signs that the slow start is now leading to a process where more people are taking up the scheme. I agree that giving more publicity to this kind of scheme— including to landlords, who get a real benefit from it—will increase the take-up still further.

Asylum Seekers: Detention
2.53 p.m.
Lord Chan Lord Chan asked Her Majesty's Government:
What their policy is towards holding asylum seekers in United Kingdom prisons.
The Minister of State, Home Office (Lord Rooker): My Lords, the Government have pursued a strategy of detaining those held solely under immigration powers in dedicated long-term Immigration Service facilities. Part of that strategy has been the opening of three new removal centres towards the end of last year. To this

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end, my right honourable friend the Home Secretary announced on 3rd October last year that he was committed to cease using Prison Service accommodation for holding immigration detainees beyond January 2002. I am pleased to say that that commitment has been met.
Lord Chan: My Lords, I thank the Minister for that Answer. However, no mention has been made of Walton prison in Liverpool, which I have visited. Can the Minister confirm that immigration detainees are today being held in dedicated prison establishments? Will he explain the difference between a prison and an Immigration Service removal centre where asylum seekers are detained, particularly in terms of the cost per prisoner or immigration detainee?
Lord Rooker: My Lords, it is important to get the facts right first. There are no immigration detainees being held solely under immigration rules in any prison at the present time. Whatever the date the noble Lord visited Walton, there are no immigration detainees being held there today. There have not been any detainees in any prison since the middle of January. There are five dedicated immigration removal centres—previously called detention centres. There are two former prisons—Haslar and Lindholme—which are now removal centres and have been legally such since 8th February. It will take time to get all the facilities organised on the scale of our new purpose-built removal centres, but for solely immigration purposes there are no asylum seekers or immigration detainees in prisons. There could be occasionally in Northern Ireland, where there are no dedicated immigration removal facilities, but anyone held there has the option of coming to the mainland and going to one of the Immigration Service establishments. That is not to say that there are no asylum seekers in prison, but if they are in prison they are there because of non-immigration related offences.
Lord Dholakia: My Lords, I welcome the discontinuation of holding asylum seekers in prisons, but who is responsible for making sure that the rules in detention and holding centres are adequately observed? Perhaps I may draw the Minister's attention to rule 4, which is a compact that allows the detainees to know their rights in detention, and to rule 9, which places a duty on the Home Secretary to ensure that the reasons for detention are adequately explained to the detainees every month. In many of the detention centres of which I know, these rules are not properly observed. Will the Minister ensure, particularly in relation to the Gatwick detention centre, that these rules are adequately observed and that such information is passed to the detainees at the earliest possible opportunity?
Lord Rooker: My Lords, I shall check into what the noble Lord has said. I am not aware—I stand to be corrected later—of any complaint about people in removal centres not being made aware of the rules. As to who is responsible, the Immigration Department is
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responsible. Even though HMPs Haslar and Lindholme are managed by the Prison Service, they are under the direct operational control of the Immigration Department. To that end, it is my department and the Immigration Department that are responsible. I am not aware of any difficulties at Tinsley House. I have visited all the dedicated removal centres and that matter has not been drawn to my attention. But I shall check on it.
Lord Elton: My Lords, when HMP Haslar moved from Prison Service to Home Office control, what changes took place among the staff, and what retraining took place if the same staff are still in the same establishment?
Lord Rooker: My Lords, re-training is on-going. The staff were not necessarily moved; they came under different control and a different set of rules. It is the facilities for the people being detained that have changed. The rules have changed from prison rules to detention rules. I appreciate that it is also a change for prison officers to move from operating under prison rules to operating under detention rules. Therefore retraining is taking place. It will necessarily take a short while before the culture at Haslar and Lindholme is the same as the culture at Harmondsworth, Tinsley, Dungavel and Yarl's wood, but the legal change took place on 8th February.
Lord Avebury: My Lords, is the Minister aware that there are difficulties in gaining access to the detention centre rules, particularly at Yarl's wood. While a copy of the rules may be lodged in the library there, there is not a notice on the publicly available notice board seen by the inmates that tells them how to access those rules in any language, even English.
Lord Rooker: My Lords, no one is detained in a removal centre without knowing why they are there. I must make it clear that they are not picked up and taken there without any knowledge of why they are there in the first place. As to the rules not being publicly available, I shall check on that matter. Yarl's wood is currently coming on stream. It is not fully operational in the sense that it is full to capacity and will not be so for a few months. It will have a large capacity, some 900. I visited the establishment during its early days when there were just over 100 people there and the rest of the facility was still being brought into operation. But, as I said, as far as I am aware, no one has made any complaint to my office about the rules not being made available. The noble Lord has done so on the Floor of the House and I shall check on the matter.
The Countess of Mar: My Lords, is the noble Lord aware that I recently visited Harmondsworth in my capacity as a member of the Immigration Appeal Tribunal? We were shown in very great detail all the procedures that are undertaken. It was extremely impressive. If all the centres are to be like Harmondsworth, then it is about time that the Home Office was congratulated on getting something right.
Lord Rooker: My Lords, on behalf of the staff and all those involved, I am grateful to the noble Countess for that vote of thanks. I, too, have visited Harmondsworth. It was built from scratch, from the signing of the contract to people being housed there, in about 10 months. It is an excellent example of what can be achieved as a result of partnership and cooperation. The facilities are excellent. It is necessarily a detention centre. It has been renamed a "removal" centre and that is what it is, not a prison but a removal centre. Therefore, people are not free to come and go. But we do our best to make people's stay there as fruitful and useful as possible and we try to make it less onerous. The centre is certainly a vast improvement on the previous arrangements.
Lord Stoddart of Swindon: My Lords, following the incident last week in which the brakes of a Eurostar train were tampered with, putting passengers in danger, is the Minister aware that many people believe that criminals such as those involved should be put in gaol? Is it not a fact that asylum seekers from eastern Europe cannot now be fleeing from political persecution? They may be economic migrants; but they may also be criminals who are escaping punishment in their own country. Will the Minister take that into account in future policy-making relating to asylum seekers?
Lord Rooker: Yes, my Lords, there are occasions when we return people to their own country on the basis that their main claim was fear of prosecution rather than persecution. Taking an axe to sever brake cables on a moving train is outrageous. It is a threat to everyone concerned—those on the train as well as the clandestines. The matter is being looked into and I shall be having discussions later this week with the transport Minister.

Zimbabwe: Presidential Election
3.2 p.m.
Lord Howell of Guildford Lord Howell of Guildford asked Her Majesty's Government:
What further steps they are taking to ensure that the forthcoming presidential elections in Zimbabwe are both free and fair.
The Minister for Trade (Baroness Symons of Vernham Dean): My Lords, Her Majesty's Government cannot ensure that the election in Zimbabwe is free and fair. However, we can, and are, doing our best to ensure maximum scrutiny of the election process, including the deployment of a European Union team on our terms. We remain determined that sanctions will be triggered if EU observers are refused entry or if they cannot work effectively. We shall continue to argue for Zimbabwe's suspension from the Commonwealth. We are working with regional and international partners, the EU, the United States, the Commonwealth and the South African Development Community.
Lord Howell of Guildford: My Lords, I am grateful to the Minister for that Answer. However, does. she agree that with all the murder and mayhem, the harassment, the breaking up of opposition rallies, the dubious registration procedures and the exclusion of the media, including the BBC, the concepts of freedom and fairness in the forthcoming election have gone out of the window? Does she accept that the Article 96 procedure which the EU has been trying to follow seems to be getting into increasing difficulties. and that the whole EU policy is in doubt and looks rather like a broken reed? Does the Minister share with other people the view that it is time for the coalition of willing democracies, including the United States and Australia and some members of the Commonwealth, if not all, to come together to take decisive action to target with sanctions those who are responsible for these horrors, to prevent this tragedy turning into a paralysis of the whole of southern Africa?
Baroness Symons of Vernham Dean: My Lords, I agree with a great deal of what the noble Lord has said. The situation is extremely grave. The noble Lord has pointed out the level of violence: there have indeed been 16 or 17 political murders in Zimbabwe since the beginning of the year. It is because the situation is so grave that I have given an unequivocal Answer on our determination over EU sanctions if our observers are not given access to carry out their work effectively. It is why I have given an unequivocal Answer about our continuing determination to argue for Zimbabwe's suspension from the Commonwealth. In the European Union, the COREPER is meeting this afternoon to discuss the latest moves by Zimbabwe over the exclusion of some EU observers. There will he a GAC next Monday, and we shall meet again prior to the Commonwealth Heads of Government meeting; namely, at a Commonwealth ministerial meeting on 1st March in Australia.
Baroness Williams of Crosby: My Lords, the Minister mentioned some of the recent atrocities in Zimbabwe, which include the torturing of three opposition MPs campaigning just before the weekend; the fishing out of the river of the body of the youth leader in Masvingo province who had, of course, been drowned; and most recently the petrol bombing of the one independent newspaper in Harare, the Daily News. In the light of all that, will the Minister reconsider the possibility of sanctions being directed not merely to protect EU monitors but at those who are attacking democratic opposition forces in Zimbabwe? In particular, is the Minister aware—as I understand from sources about which I have informed the Foreign Secretary—that President Mugabe's government now regard the threats from the EU and the Commonwealth as empty hot air? In the light of that, will she consider whether specific sanctions, such as the freezing of the assets of the administration, might be imposed now, before the election campaign is completed?
Baroness Symons of Vernham Dean: My Lords, as I indicated, I believe that these matters will be under discussion in the EU not only today but next Monday.

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They will be under discussion in the Commonwealth at the earliest possible opportunity, on 1st March, before the elections take place. Of course I agree with the noble Baroness about some of the disgraceful actions that have been perpetrated in Zimbabwe. What decent person could not agree with the forceful point that she has made? However, I believe that the sanctions being considered will not be targeted at Zimbabweans in general—I am sure that we all agree that the population of that country has suffered appallingly in terms of what has happened to its economy, the growth in unemployment and the spread of AIDS and other dreadful diseases. We hope that any sanctions are indeed, as the noble Baroness said, targeted at those who have perpetrated these wrongs.
Lord Acton: My Lords, for 14 years I was married to the Zimbabwean civil rights campaigner, Judith Todd. I must also declare that I have many Shona, Ndebele and other, white, friends in that country. Is my noble friend aware that, yesterday, my former wife's 93 year-old father, Sir Garfield Todd, former Prime Minister of Southern Rhodesia and a former Zimbabwean senator, issued a statement in which he announced that he had been informed that he had been deprived of his citizenship and his right to vote? Can my noble friend add anything to this?
Baroness Symons of Vernham Dean: My Lords, I am indeed aware of the statement issued yesterday by Sir Garfield Todd. After 67 years as a citizen of Zimbabwe, he has been told that he is no longer a citizen and that he has been disfranchised. It is a very moving statement. With your Lordships' permission, I think it right to place a copy in the Library so that your Lordships may read it for yourselves. I draw attention to the fact that Sir Garfield has said that, come what may, in March he will be going to the polling station to claim his right as a very senior citizen of Zimbabwe to cast his ballot for good against evil.
Baroness Park of Monmouth: My Lords, I understand that the Commonwealth is able to send only about 30 observers because it has no money to send more. Is there no way in which this country could pay for many more Commonwealth observers? Even at this late stage, from the point of view of the people, observers are extremely important.
Baroness Symons of Vernham Dean: My Lords, I agree that observers are enormously important. I point out to the noble Baroness that it is not only the Commonwealth which will be sending observers. There will also be observers from SADC, who I hope will have untrammelled access to the conduct of the elections. I am unaware of any restrictions on the numbers of Commonwealth observers. Therefore, I am surprised at the noble Baroness's remark. I shall make inquiries and write to the noble Baroness with any additional information that I can supply on the question of Commonwealth observers. I point out that these will not be the only observers of what is happening during the Zimbabwean presidential election.

HSBC Investment Banking Bill [H.L.]
3.10 p.m.
The Chairman of Committees (Lord Tordoff): My Lords, I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read a second time.— ( The Chairman of Committees.)
On Question, Bill read a second time, and referred to the Examiners.

Milford Haven Port Authority Bill [H.L.]
The Chairman of Committees: My Lords, I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read a second time.— (The Chairman of Committees.)
On Question, Bill read a second time, and committed to an Unopposed Bill Committee.

Business of the House: Debates this Day
Lord Williams of Mostyn: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the debates on the Motions in the names of the Baroness O'Cathain and the Lord Griffiths of Fforestfach set down for today shall each be limited to two-and-a-half hours.—(Lord Williams of Mostyn.)
On Question, Motion agreed to.

Consignia
3.11 p.m.
Baroness O'Cathain Baroness O'Cathain rose to call attention to the future of Consignia, its financial problems and the services it provides; and to move for Papers.
The noble Baroness said: My Lords, this is a highly topical debate. In fact, it is much more topical than I would ever have thought when I tabled the Motion. Consignia and several serious issues concerning that organisation are commanding headlines and many column inches in our daily dose of media. The organisation's main financial problem, of course, is that it is currently losing €1 million daily and that it is just about to announce, or so we are told, significant job losses. The main issue concerning the services that Consignia provides is the very recent publication by the Postal Services Commission—known as Postcomm—of proposals to liberalise and open up Consignia to competition.
The debate's additional topicality is due to the fact that the leaders of Britain's 145,000 postal workers are meeting today to decide whether to take action, which could take the form of anything from work to rule to a national strike, as part of a campaign to win a 5 per cent pay rise. Indeed, the announcement of how the Communication Workers Union intends to react to

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the overwhelming vote for industrial action is likely to be announced even as we take part in this debate. As I said, little did I know how topical the debate would be when I tabled the Motion.
Morale among Consignia's staff is said to be at rock bottom, as is manifest by the recent decision of postal workers. However, the decision is not due solely to the demand for £300 per week. There is also widespread frustration that Consignia seems to have reneged on proposals in the document Way Forward to introduce five-day per week working by the end of 2001. The latter point has resulted in resentment that major sorting offices operate a five-day work roster whereas staff in local post offices who organise the collection and delivery of mail are still on a six-day roster.
The users of the postal service are deeply concerned not only about the threat of industrial action, but also that the Postcomm proposals currently being introduced, but with a relatively tight time-frame for completion, will put the service's future in jeopardy.
Almost inevitably, having been a monopoly supplier in the public sector for longer than probably any other nationalised industry ever, Consignia has an overburdened cost structure, a reluctance to modernise its work practices and a general inertia leading to a wish to continue doing things as they have always been done. To the "concerned outsider", it seems that little importance is placed on producing a radical long-term strategy for the organisation.
The National Audit Office report entitled Opening the Post, published almost three weeks ago, is a brilliant exposé on the enormity of the risks posed when a monopoly nationalised industry is effectively opened up while remaining in the public sector. A daunting task awaits. However, try as I do to be positive about the opportunities facing Consignia my analysis of the National Audit Office report has left me believing that if the plan fails there will have to be state handouts for Consignia.
Are the Government sure that they want to go ahead along the lines proposed and within the suggested lime frame? Do the Government subscribe to the view that there might have to be a "universal service support fund", as mentioned in paragraph 2.39 of the NAO report? Indeed, do the Government have confidence that Postcomm's proposals will lead to Consignia's return to profit? I ask the Minister those questions not to score political points but because of a genuine concern that the proposed changes will neither improve service to customers nor return Consignia to profit.
The Postcomm proposals have caused much concern: first, among some of us who wonder whether the universal service will suffer and whether there will be a mad rush into cherry-picking, with the inevitable consequence that a residue of non-viable services is left with Consignia; secondly, among service users, particularly in rural areas; and, thirdly, among the elderly who rely on the local post office for pension and other benefits. In small villages, post offices are sometimes combined with small shops. The proposals therefore also concern non-car drivers in rural areas
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who rely effectively on their "corner shop" to obtain shopping items. Finally—although they are one of the most important group—the proposals concern Consignia staff.
Allan Leighton, the chairman of Consignia, who has an enviable track record as an astute and successful business leader, has described Postcomm's plans as,
"death by a thousand cuts".
Although that language may seem somewhat exaggerated, given its source, the comment must cause unease among all of us who rely on an efficient and effective postal service and particularly among those of us who have a responsibility to ensure, so far as we can, that proposed legislation meets its objectives.
My view may strike some of your Lordships as an attempt to stem the tide of progress by putting a small finger in the dike and as a display of antediluvian tendencies. Others will feel that I am ignoring the fact that much of the business that previously relied on the provision of a good postal service is now transacted at split-second speed through cyberspace. I yield to no one in my admiration for developments in electronic business, and I am a daily user of e-mails, faxes and telephones, both conventional and cell, but all those are adjuncts to daily use of the postal system, not a substitution for it.
Without an efficient postal system my personal productivity would be greatly impaired. Indeed, I think that it would be extremely difficult to find anyone who would say that they could do without the post. One has only to remember the inconvenience and upset caused by previous postal strikes to realise the importance of the issue. Sadly, one does not have to go far back in the recesses of one's memory to recall such times.
Postcomm has two main statutory duties under the Postal Services Act 2000: to ensure the provision of a universal postal system at an affordable and geographically uniform price; and to further the interests of postal users wherever appropriate by promoting effective competition. Although both aims are worthy and desirable, I worry whether they are achievable without enormous cost in terms of deteriorating service levels, particularly in relation to achieving the universal postal service obligation.
Sometimes I fear that we are guilty of seeing everything as a much hyped-up extension of' our own experience. Those who live in the big cities have the expectation that their mail will reach them early in the morning, and those in rural areas have the same expectation. However, neither group really analyses the practical consequences of that expectation.
I have some experience in the sphere of statutory obligation to provide a universal service throughout England and Wales, and I know that providing such a service is not easy. When I was managing director of the Milk Marketing Board of England and Wales—which is now defunct as it was ultra vires with the Treaty of Rome; I see that the noble Lord, Lord Stoddart, is not in his place—I had the responsibility

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of ensuring that every drop of milk produced by every cow in England and Wales was collected daily from each farm.
The milk had to be tested and sold on to the dairies and creameries to provide fresh milk on the table and the raw material for the producers or processors of cheese and butter. I refer to providing fresh milk on the table to 19 million households which was a logistic exercise in itself. There, I am afraid, the similarity ends in so far as there were only some 30,000 or so dairy farms, not 21 million establishments waiting eagerly for their mail. But that experience has given me some inkling of the highly complex nature of the logistics of postal collection and distribution.
Under the Postcomm proposals, opening up competition to the most profitable sectors of Consignia—namely, bulk mail above 4,000 items—from this year is probably just a matter of weeks away. Following that, the next most profitable part of the market—namely, bulk mail of smaller weight—will be opened up and then by 2006 the whole market will be free to all corners. It does not take the brain of a nuclear scientist to conclude that if an organisation is deprived of about 60 per cent of its most profitable market the remaining 40 per cent could be seriously non-viable financially.
I should like to ask the Minister with his great experience in issues of marginal costings whether he believes that it is possible to cream off the best revenue-producing services and still maintain a profitable universal service. Postcomm states that Consignia,
"should be able to withstand the introduction of competition".
But will it? Indeed, I do not feel terribly comforted by the word "should".
A desktop exercise shows that Consignia loses money and has a less efficient postal service than many other countries. It is a fact that it loses money, but is it correct that it is a less efficient postal service than that of many other countries. Are we in danger of comparing apples with pears? How many of the more efficient postal services have Saturday delivery? Certainly, I know that nowhere in North America or, indeed, in Ireland are there Saturday deliveries.
How many of those same efficient postal services have the added complication of providing both a first and second-class mail service? I should like to ask the Minister whether any assessment has been made of the financial implications of having a two-tier postal charge. Certainly my information, gleaned from people employed by Consignia, indicates that there is a massive on-cost associated with two-tier pricing. I refer to additional sorting, placing second-class stamped mail to one side, going out delivering the first-class mail, coming back and then going out later to deliver the second-class mail and retracing the same journeys. Why not have just one price stamp? I am sure that even I could come up with a suggested price which
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would result in similar revenue but involve much lower costs. It is interesting that the NAO report states at paragraph 24, on page 9:
"For most customers of postal services the quality of the service they receive is more important than the price".
I am sure that every single one of your Lordships has ideas about how the postal service should be and could be improved, but I wonder whether there are longstanding rules and regulations which hamper Consignia in its drive for greater efficiency. I give just one example. How is it that in every other major city in the developed world, apartment blocks have banks of individual post-boxes in the entrance area where residents pick up their post? In London I have just moved into a newly built apartment block which is divided into four cores on 12 floors. The postman has to deliver to each individual apartment in each of the cores. There is no cross access between the cores so he uses four lifts stopping at each of the 12 floors four times—he stops four times at floor one, etcetera—to finish his round. It is no wonder that my mail is not delivered until 10.30 a.m. at the earliest! Does the Minister know whether there are regulations prohibiting the installing of banks of individual postboxes in apartment blocks? If there are such regulations, does he think that they could be amended? It may seem a simple, stupid suggestion but it could make all the difference to the productivity of the service in large areas of major cities.
Of course, I am conscious that the individual customer is nothing like as vital as business customers, but with the commitment to the universal service they are important. The issue of rural post offices has been aired many times in your Lordships' House and I shall not prolong my speech by reiteration. There is just one aspect of the rural post office that is important and should not be overlooked. The post office in small hamlets, villages or towns provides a category of social service in addition to facilities covering benefits, pensions, TV licences, and so on. It can be the centre of a community. Lonely people catch up there on the local news. For example, action is taken if someone has not appeared for his or her pension. Could they be ill alone at home and need help?
For all kinds of reasons, many small communities are being turned into dormitory areas and second home enclaves. But there are many people living out their final years in fairly isolated circumstances for whom the local post office cum small store is a lifeline. I hope that that point will be taken into account in the headlong rush to introduce competition into the postal service.
I look forward to hearing all the contributions to the debate and thank in advance all those who are to speak. This is a very important subject as well as being very topical. I beg to move for Papers.
3.26 p.m.
Lord Sawyer: My Lords, I thank the noble Baroness, Lady O'Cathain, for initiating this debate. It is an important time for Consignia and it is right that we should discuss these matters at his juncture. I look

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forward to hearing the contributions of other noble Lords, particularly those of the noble Lord, Lord Dearing, and my noble friend Lord Clarke who had distinguished careers in the Post Office on the management and union sides respectively.
My brief contribution will be focused on a report produced last August by a body that I had the privilege of chairing with Mr Nicholas Underhill QC and Mr Ian Borket. The report examined the unstable state of industrial relations at the Royal Mail and the effects of that on service delivery. All those who take an interest in this industry are aware of its generally unstable industrial relations. Noble Lords may find one figure helpful in that regard. In the year to 2001, 66,000 employee days were lost to the business through unofficial industrial action. That is clearly unacceptable and something needed to be done about that.
We visited six mail centres, four of which were regarded as failing mail centres due to the high level of unofficial industrial action and two of which were regarded as operating satisfactorily with limited or no industrial action. We indicate in the report that an old-fashioned and outdated management style is adopted in the business. That style is authoritarian, directive and controlling. Many postmen and postwomen say that their managers and business leaders adopt a bullying attitude. "Bullying" is a strong word but it is often used to describe the management style in the Post Office. We found that the union response to that management style is as one would expect; that is, it is adversarial. The unions oppose that management style and want something different. Consequently, the unions often deploy restrictive practices. In general, an adversarial system of industrial relations exists in the business.
The issue that had the greatest impact on my colleagues and I conducting the independent inquiry was the complete collapse of trust between the management and the unions. That is a serious situation. Any organisation or business in which trust between the management, the workforce and the trade unions has collapsed is bound to encounter difficulties in trying to perform successfully. It seems to me that that is the biggest single issue in industrial relations terms that the business needs to resolve.
Our report contains two main recommendations. The first is to bring to an end unofficial industrial action. We consider that to be absolutely fundamental. If the business continues with high levels of industrial action business confidence and the ability of the business to be successful will continue to decline.
The second main recommendation was that management and unions should move away from adversarial or confrontational industrial relations and towards the partnership working that we see in many successful businesses and industries. We demanded big change from the management in our report, but we also demanded big change from the unions. What that boils down to is that we are looking for a new culture in the Post Office that values and respects people and
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which gives people, whatever the level they work at, an opportunity to make a significant contribution to the business.
Our report was received by both sides in August last year, and it was accepted by both sides. 'They immediately agreed to place a moratorium on all unofficial industrial action. Noble Lords might think that that was a matter only for the trade unions, but industrial action is often caused by authoritarian management attitudes. The moratorium was implemented by both sides and is now seven months old. Since the report's publication, there have been hardly any incidents of unofficial industrial action in the business.
Consequently, the service levels in the business have risen from 86 per cent to 90 per cent and the standards have stayed above 90 per cent since August last year. That is not clearly in the public domain because people are anxious that such success will not be maintained if we start to celebrate it prematurely, it might end and the celebrations would have been unwarranted. However, I say, "Well done, that is an important step forward and we need more".
Management and unions have also embarked on detailed work through working parties to try to implement the rest of the report. They are considering partnership boards, management training and behaviour, how to implement agreements and procedures in an employee-friendly way and how to improve communications in the business. All of that is being done below the line, as it were, and not in the public spotlight. However, all of those matters are essential if we are to make long-term improvements in the way in which the business is managed and run.
I have seen managers at training colleges learning to respect and manage postmen and postwomen in a different, more inclusive way and the so-called union militants sitting round the table trying to work out constructive ways of building a partnership with managers. I do not say that the business is anywhere near being problem-free, but some of what we asked for in the report has been attempted. The people who are doing that need to be encouraged and supported.
We have a long way to go—we shall no doubt hear more about that in this debate. I refer to the cuts of £1.2 billion that we heard about when the chairman attended the Select Committee, the pay dispute that has already been mentioned this afternoon and which I hope will go to mediation and be resolved without a strike—a strike over pay is the last thing that the business currently needs—and the consequences of last week's statement by the regulator. The opening of bulk mail to the market has not yet been pronounced on by management, but that is a serious blow to the business. When management and unions come to terms with all the problems, we shall have more pain rather than less. My message to both sides is, "Keep going, build trust and partnerships, work together and respect each other. You have got the future of this business in your hands. You will meet competition but you can beat it if you work together rather than against each other".
3.34 p.m.
Baroness Miller of Chilthorne Domer: My Lords, I shall discuss services to rural areas in particular. I congratulate the noble Baroness, Lady O'Cathain, on securing this debate. It allows me to expand a little on the comments that I made in relation to my Question last Wednesday in your Lordships' House. I was surprised by the Minister's Answer to my Question because it suggested that the Government now have sloping shoulders with regard to accepting responsibility. They should accept responsibility for the overall communications that rural areas—indeed, all areas—receive. However, my brief is rural areas and I live in a rural area. Rural areas are particular in that communications are more vital to them. People who live in rural areas either have to travel far or use a good communications system. When there are threats to that communications system, people in rural areas feel that particularly deeply.
I do not believe that the postal service we receive is a problem. It is of course difficult that my post sometimes does not arrive until midday but I greatly appreciate the fact that the service is reliable, secure and—the noble Baroness, Lady O'Cathain, touched on this—personal. That means much to the people in the village in which I live and to those in many rural areas.
When the regulator opened up the postal service to competition, I wonder whether he considered some of the services that the Royal Mail currently provides. I refer, for example, to the use of post buses. People use that service to travel round the countryside in places such as Exmoor. That service might disappear if the business was strictly commercial. I suspect that Postcomm has not considered that.
On the Post Office network, there was a moment when the Government could have seized the glory. Perhaps the Minister will reassure me that that moment has not passed. The rural White Paper contained some very good ideas about a pilot study, which has been conducted in Leicestershire. I remind the Minister, although I am sure that he does not need reminding of this, of some of the Government's aspirations for that pilot study. The White Paper stated:
"The pilot will give older people, families and children a specially tailored information and transactions service in their local post offices, not only by face to face access across the counter, but also using Internet kiosks, web phones, telephone links, help-lines and surgeries. These will provide new health services, and general community and educational information".
That was a good vision and I hope that the Leicestershire pilot is succeeding. I hope that the Minister will comment on it. The Government also said in the White Paper that they intend to roll out the pilot across the country if it is successful. We look forward to that. If it is not successful, I hope that the Government will pursue that worthy vision. It encapsulates the sort of thinking with which I hope the Government approach the whole issue of communications. They should secure a cohesive network that is not so divided.
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I have already raised with the Minister the issue of broadband access for people in rural areas. The service is very patchy and does not appear to be set to get much better. Indeed, in today's newspapers, noble Lords will read of the difficulties of NTL and Telewest—I refer to their huge debts and the problems that they face. That does not suggest that they will extend any more of their cabling into a commercially difficult area.
If we are to have a difficult postal service, in which we are regarded as second-class citizens compared with businesses and those in urban areas, we should be increasingly reliant on extremely good Internet access. That is where the future may lie. However, the Government are doing little to secure such broadband access. They passed on that responsibility to the regional development agencies. The Government should consult those agencies further on whether they feel that they have sufficient finance to progress cabling in those areas. The Minister will no doubt reply that that is a matter for the private sector. I remind him that unless there is sufficient start-up use of that network for it to make the business worth while for cable companies, it simply will not happen. To date, the Government have not put their backing behind the provision of such facilities through, for example, post offices.
Furthermore, I believe—I am sure that other noble Lords will he better placed to comment on this—that the Government should ask themselves what the role of the regulator is. Is it to take a narrow view of the service and see what can be done about it, or is it to take a broad view in consultation with government of how an entire service can be improved? I fear there is a long way to go.
3.40 p.m.
Lord Crickhowell: My Lords, first, I thank my noble friend Lady O'Cathain for raising this important topic. Should ownership of the Post Office be public or private? A perfectly good case can be made out either way. At present, we have an arrangement which seems to achieve the worst of both worlds—a private company with a single government shareholder and with Ministers in the background ready to interfere but not to accept responsibility.
The arguments for the privatised model include, among others, that it should enable the organisation to make maximum use of the markets so that it can provide the full range of new services that will be needed during the years ahead of fast-developing technologies; the reality of European liberalisation that will open Britain to outside competition; the fact that in other countries where full privatisation has been attempted, it seems to have been rather successful; and, perhaps above all, that competition is likely to force change in a stagnant and not very well managed business and force management to think of its customers' requirements rather than its own apparent convenience.
In that context I want to address the specific idea, which was reported in the Financial Times and which Consignia is said to be considering, of giving priority

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to business over residential customers. It is believed that most of the latter leave their homes by 8 a.m. and therefore do not care whether a letter arrives at 9 a.m. or 3 p.m.
What clearer indication could there be that Consignia's management has lost touch with the real world outside its own headquarters? Huge numbers of small businesses are run from home. A large number of businesses—I am chairman of one public company that does this——encourage some of their workforce to work from home using the new technologies rather than occupy large, expensive offices in the middle of town. A large number of people have multiple occupations; indeed, looking around the Benches in this House today, I suspect that I see a good many to whom that applies. And there are those who run, or raise money for, charities. One could go on; there is a host of such cases. In any event, what constitutes a business? Is it an individual earning a living, a public company, a private company or a partnership? I simply do riot know how one defines "a business".
The time at which mail reaches a home depends very often on the ability of the individual postman. For a long time, we had a remarkable postman in my own part of Battersea, who seldom failed to have the mail in my letter-box before 10 in the morning; and often it was earlier. For many months, his successor practically never delivered our mail before lunch. That caused a good deal of inconvenience, despite the marvellous geniality of his smile when he finally arrived. I suppose that it was also a useful experience for me to deliver so many other people's mail which had been delivered incorrectly through my letter-box. I believe that the fact that Consignia is considering the proposal to divide the mail in this way suggests that something is badly wrong with the company.
However, one aspect of the mail delivered to my door may be part of the problem; that is, the huge weight and bulk of wholly unwanted mail, 80 per cent of which swiftly goes into my rubbish bin and helps to create a major environmental problem. It takes many shapes: a huge number of often duplicated mail order catalogues; unwanted solicitations; several invitations a week for gold, platinum, diamond or other credit cards; and an extraordinary number of frequently repeated charitable appeals. One sometimes wonders whether charities realise that if they repeat their appeals very frequently to those who have just given, it may be a rather unproductive exercise.
I noted that my noble friend argued against having two classes of mail. But, if we are to split the mail service, I wonder whether it might be a good idea to have a second-class delivery of the bulk mail which we do not want and would not mind if it did not arrive until the afternoon. I want the mail which is important and which i want to read to reach me early in the morning before I leave home.
In Wales I do not necessarily expect my mail to arrive before 9.30 a.m. Certainly my neighbours who live in remote roads could not expect that. But the universal delivery to my neighbours and to all of us in the countryside is of immense importance. If that
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service were abandoned, it would be a further disastrous blow to an already hard-hit countryside. Therefore, if we are to have competition, I believe that it must be genuine competition that imposes similar obligations on all who provide the service. We have a regime in the independent television sector that imposes obligations, and it can be made to work. I believe that it would he a disaster to cherry-pick the very best and leave Consignia only with the obligations.
My noble friend Lady O'Cathain reminded us that Postcomm has responsibility for ensuring that the universal service remains. I wish that I had more confidence in the ability of financial regulators to get it right. Our experience in other industries has not been altogether encouraging. Therefore, I view the possibility that it will manage the affair by means of cherry-picking as a real threat.
My own conclusion is that we probably do need more competition, but it must be fair competition. That can only be achieved if one goes down the road of full privatisation combined with obligations. The worst option is a system in which the Government play an unhelpful role—they have not exactly been brilliant in replacing the chairman—but pretend to have no responsibility. I say to Ministers that if the universal service goes and the delivery service continues to decline, I believe they will learn that responsibilities exist. I believe that they will also learn that the electorate, not least in the countryside, feels fairly strongly about these issues. Those responsibilities cannot be dodged; if they are, they will pay a heavy political price.
3.48 p.m.
Lord Dearing: My Lords, I congratulate the noble Baroness on her exquisite timing for this debate. Britain has one of the leading post offices in the world. As a member of its superannuation scheme, I declare some interest in its future.
As we debate the Post Office today, its allure potential as one of the main players in a liberalised postal service in Europe is in the balance. I suggest that our shared concern should be that it emerges as one of the winners, providing benefit to the nation, to the workers and to the business. They must all perceive benefit. The Post Office is on the threshold of that new world following two years during which, by common consent, things have gone badly. And it is the custom of our nation to stand back and ask who is to blame.
I have it on very good authority from a Motion presented by the Conservative Party to the other place on 29th January that,
"the Government's total mismanagement … has created the crisis that is facing the Post Office today".
No less authoritatively, I have the Government's amendment to that Motion, which invited the Commons to condemn 18 years of Conservative misrule, citing in support a catalogue of misdemeanours. Do I look to my left or do I look to my right?

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What happened? Who went? It was the chairman. The chairman's lot is not a happy one. Dr Bain rendered a service and led the Post Office into its new plc status. We ought to thank him for his role.
I do not want to exaggerate the importance of the Government in seeing that we get our letters at a reasonable price and within a reasonable time. Responsibility for that lies essentially with the lads and lasses who deliver the letters and the managers who help it to happen. However, the Government have a significant role. I shall identify four areas in which I look to the Government to discharge their role effectively.
As the noble Lord, Lord Crickhowell, said when commenting on the chairmanship, the Government's first and overriding responsibility is to ensure that the Post Office has a strong board. Dr Bain has gone and we have an interregnum. That is not what one would have chosen and we are very fortunate that Allan Leighton has taken the job. The Government must get the long-term appointment right. They have no more important responsibility in that respect at the moment. For goodness sake, they must remember that if they want somebody world class, they will not get them for coppers. The Government have to face up to the reality that they must reward good performance. If they find—and if the new chairman agrees—that the board needs strengthening in some areas to enable it to be effective in a newly competitive world, they should be prepared to make another part-time appointment if need be. That is the Government's prime responsibility.
The Government's second responsibility is to make it their business to give a brisk response when they receive the proposals from the Post Office on its new strategic plan at the end of March. So often in my day, the proposals disappeared into Whitehall. The quickest that I ever got a decision on a major investment was one year.
In recent times the record has been much better, but there is an awful tendency for all the lads in Whitehall to gather round the corpse and get their pickings. This is not a time for that; this is a time for the Government to approach the issue as a merchant bank would harness resources to dispatch the business effectively and quickly.
My third point of concern, which has already cropped up in the debate, relates to Postcomm's proposals. The noble Baroness, Lady O'Cathain, referred to its duties: to ensure that there is a universal service, but to promote competition between postal operators in the interests of consumers wherever possible. The noble Baroness drew attention to the fact that Postcomm intends to get on with it. However, it intends to do so much more briskly than Europe as a whole. That is what worries me. We are opening up our markets to the Germans, the Dutch and the French. Look what happened with the water and electricity industries. It is right to open up the market to competition—it will be a wake-up call and will cause
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the business to be revisited and recreated—but, my goodness, we must not give the business away. There are risks.
If the statutory duties are not right, it is our fault because we passed the legislation. Unlike some previous statutes, it does not require Postcomm to have regard to the national interest in all respects. It says, "Go for competition, lads". That is not enough. There is a wider national interest and it is the Government's duty to see to that.
My final humble request to the Government is not to continue to treat the Post Office as a cash cow. Look what has happened to the Tube and the railways through the denial of investment. We all lose out. There may be battles to be fought with the Treasury on dividend policy and a capital structure, but Ministers must fight them if need be, because it is in the public interest that they do so.
Those are my requests to the Government. The essence of the battle has to be won not by the two sides in the Post Office fighting each other, but by fighting the competition. I agree so much with the noble Lord, Lord Sawyer, whose beneficent influence is found throughout the Post Office today. We needed a catalyst to tell those involved, "Come on, you silly b's, there are better games to be played than confrontation". They can only succeed by collaboration and looking for new ways.
The noble Lord was kind enough to refer to the "distinguished" contributions of the noble Lord, Lord Clarke of Hampstead, and myself. Happily they are now extinguished. As yesterday's men, we have something to look back on with pride. I do not have time to give the House the comparative figures for quality of service and price, but, particularly above the 30 gram cut-off point, our Post Office compares very well with most other post offices in the world. We have something that could become one of the winners in the continental game of competing post offices. We must stop arguing about yesterday and who is to blame. There is something to be won. Postal volumes per head in the United States are twice those per head in this country. It is not a business of yesterday; it is a business with a future, if only we can make it together. We must.
3.57 p.m.
Lord Skelmersdale: My Lords, in thanking—
Baroness Gibson of Market Rasen: My Lords, it is difficult to follow such a knowledgeable speech. I know that the whole House enjoyed it and I thank the noble Lord, Lord Dearing. I also thank the noble Baroness, Lady O'Cathain, for instigating the debate, which could not come at a better time.
My first point relates to rural and deprived urban areas. It is possible that the current proposals will result in a breakdown of the universal postal service, which would have an adverse effect on rural areas and on most deprived urban areas.
In rural areas, post offices are not just post offices; they are part of the way of life. The effects of closures have already been felt in many rural areas. I shall share

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a personal experience to illustrate that. For many years I lived in a small Suffolk village. We had two shops, one of which incorporated the post office, and we had one public house. They were meeting places, particularly the local village shop, which catered for all postal services, payment of welfare benefits, car licences and other matters. It was of particular importance to older villagers and to parents with children, who were unable to travel as easily as other folk.
The postmistress was a fount of wisdom. She helped her customers with filling in forms, advice about benefits and many other issues. When she retired, the shop was due to close, but luckily the couple who ran the public house agreed to carry on the post office element. That arrangement lasted for a number of years, until the brewery that owned the pub refurbished others close by and the one in our village closed. One by one, the places where we used to meet and exchange views and information on local and national issues disappeared, as did that part of our village life.
In rural areas, postmen and women are a big part of the community. They take verbal messages from neighbour to neighbour, as well as their postal deliveries. They know the local population. They watch out for the elderly in case they are ill and they know whom to contact if they are. They have a knowledge of the area and its inhabitants that is second to none. If the closing of rural post offices continues as it has done, there will be a fundamental change in an important part of rural life. Postcomm should know that already.
In its first annual report on the network of post offices 2000–01, research showed that customers placed particular value on the following services and side benefits of post offices: buying stamps; getting cash, pensions and benefits; paying bills; posting parcels; accessing general support and advice; supporting the local economy and having a community focal point. So, it is there for Postcomm to see in black and white.
I would urge the Minister to point out to those concerned the difficulties more closures would create and to suggest instead that there should be encouragement for post offices to diversify by, for example, becoming a general store and so provide valuable services for their customers, which include community value. But that is not the only diversification which could help. I shall give another example, which has already been touched on by the noble Baroness, Lady Miller of Chilthorne Domer.
At the end of last year I attended a briefing on the Government's transport policies. I particularly asked about rural areas. I was told that different forms of transport were being considered for rural areas, including post buses, which would carry not only post and parcels but people too. The villagers know the time that a post bus arrives in and returns to their village, and can plan their trip to the nearest small market town accordingly. That has been tried before successfully in East Anglia. I hope that the idea has not been shelved because of what I regard as ill-judged proposals.
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Another point occurred to me in the course of the debate. It was suggested by the noble Baroness that letters could be left communally in urban areas. That could happen also in rural areas. I have a house in France. There, I do not receive my letters through my door. There is a communal post-box area from which we all fetch our letters each day. The little post van comes in, makes one stop and goes out again. We do the leg work. There is nothing to stop that happening in our rural areas. I hope that in his reply my noble friend can tell me whether any such ideas can he considered.
Finally, I turn to one group of workers in Consignia and the difficulties they face; that is, the managers in the organisation. Here, I must declare an interest as a former national official of the union which organises the managers: Amicus. I was interested to hear the remarks of my noble friend Lord Sawyer in relation to the difficulties that he found in the Post Office. Perhaps I could add a little to that.
I have looked through a number of publications regarding the proposed changes and the consultation processes. I may have missed it, but I have not spotted the word "managers" once in relation to them being consulted. They are the people who will have to put any new proposals into practice. Consignia will need to rely heavily on them in future; perhaps even more so than now. I hope that they will not mind me describing them as "piggies in the middle". I am not referring to senior management but to middle management, which is taking the pressures from worried workers below and enthusiastic reformers above. Morale is low throughout the service. That can be seen also among managers.
Middle managers want the Post Office to work. However, as I found recently when, together with my noble friend Lord Hoyle, I met members of Amicus who are managers, they recognise the worries faced by all working in the Post Office. They want to be part of the solution to those worries but they are not being consulted as they should. They have a knowledge of how the postal system works, which they believe is not being recognised or used. Like all of us when we think we are under-valued, middle managers are becoming disillusioned and disaffected.
If Consignia is to be any kind of driving force in the future, the morale of that group of workers must be raised and its value truly recognised. Consignia must learn to be inclusive not exclusive in its future dealings with its workforce.
4.5 p.m.
Lord Skelmersdale: My Lords, I shall try again. In thanking my noble friend Lady O'Cathain for initiating this—as she said—most topical debate, I should declare my interest in the subject. For the past 30 years my family business has been that of a specialised mail order company. Orders have come in by post and are sent out by post. By and large over that period, I have been a fan of what is now called Consignia. I am, perhaps, what my noble friend Lord Crickhowell called, "a person in multiple occupation".

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It seems to me that Consignia today is rather like the little girl in the nursery rhyme:
"When she was good
She was very, very good,
But when she was bad she was horrid".
Perhaps I may start with letter post, in which I include bulk postage and so-called "junk mail". In passing, I should like to point out to the complainants of junk mail that one person's junk mail is another's purchasing opportunity.
That said, bulk mail, in my part of the West Country at least, is a very efficient operation indeed. Both the office and the collection staff are well-trained, courteous and co-operative. As long as items are uniform and post coded, experience shows that they are delivered well inside the contracted delivery period. Undelivered items are returned promptly—the first ones within two or three days—from as far away as East Anglia and the north of England, enabling us to keep our customer base up to date, thus saving both ourselves and—this is the important point today—Consignia time and money.
What of the day-to-day letter post? It arrives before 8.30 a.m. allowing it to be opened as or even before the office staff arrive. Although I accept that the Royal Mail must have targets, wearing my mail order hat I am not in the least fazed if letters are not delivered the next working day so far as concerns first-class post, or even the day after. It does not matter to me whether second-class mail takes more than three working days.
Speaking as an individual member of the public, however, I can get a little fractious from time to time but not overly so. Which of us, with our hand on our heart, can tell how long a letter has taken to arrive? We know the date which is on the top of the letter. We cannot read the postmark. We do not know when it was put in the post-box or when it was collected. We have to rely on published data. Be that as it may, the net result is that I would be more than happy with a single tariff, meaning that one could almost guarantee two working days' delivery. To reinforce one of the requests of my noble friend Lady O'Cathain, I should like to ask the Minister what work if any has been done on this by his department, Postcomm or, indeed, Consignia. What would be the average saving of time and cost of not having to pre-sort letters and packets into first and second-class and what would that mean to average delivery times?
It is regularly asked whether full competition would benefit the consumer. I used to be a promoter of that concept, but my worries have increased. By licensing other firms in specific areas, Postcomm has—wittingly, I presume—made it much more difficult and expensive for Consignia to fulfil the fundamental obligation in its licence; that of the universal service provision, which its competitors do not have. I echo the words of the noble Baroness, Lady Gibson, to whom I owe an apology for trying to speak out of turn.
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Your Lordships may be amused by a little ditty which I came across in my weekend reading, which is pertinent:
"The rain, it falleth on the just
And also on the unjust fella:
But chiefly on the just, because
The unjust … [nicked] the just's umbrella".
I know from previous experience that my noble friend Lady O'Cathain dislikes the expression "a level playing field", so let us call it "fairness". Is it fair that only Royal Mail has to deliver at a uniform price to any address in the country while its partial competitors do not? Is it fair that its competitors have to pay VAT, while Royal Mail does not? Do these two cancel each other out? I hope that the Minister will tell me. For myself, I have grave doubts.
So far as concerns competition, we have a model in Parcelforce Worldwide, which is outside the reserved area and, interestingly, has never made a profit. So why does it remain part of Consignia's portfolio of businesses? I was mystified by the chief executive's reply to this question, which I asked in connection with Sub-Committee B's inquiry into the EU draft directive on the further liberalisation of Community postal services. His answer, which is to be found on page 25 of the Select Committee's second report of last Session, is that he believes that the Post Office should be a complete distribution company. Only then will Consignia be able to compete in Europe. Although I do not claim to be a big business strategist, I find it very hard to swallow that the answer to Consignia's problems is to be a one-stop shop for everything that goes through a postal system.
To be fair, Consignia has tried hard to cure its problems with Parcelforce. One of those has been the collection on and delivery to the doorstep by directly employed drivers. In my experience, current staff often do not know the route they are to follow; and it is not unknown for them to omit leaving "failed to deliver" cards when the householder or other recipient is out. More and more mail order companies are being asked by their customers to put extra information on address labels—"If out, deliver to No. 36", or, "Put in garage", or, one I saw only the other day, "If out, leave under the hedge". That last is not something that I would do personally, but like the Minister, I appreciate the old trading adage, "The customer is always right".
I am told that Consignia has agreed with its unions that the answer to these problems is contracting out to owner drivers who would get to know their areas on pain of their contracts not being renewed.
Parcelforce has also built a vast new collection point at Coventry. It is, I understand, not functioning properly due to union problems. I find the 24-hour delivery service works quite well. However, the 72-hour one does not and can take well over seven working days. I only hope that Coventry will be up and running properly very soon and that this matter will be sorted out quickly.
I observe that I am about to run out of time and cannot cover any more issues. But I cannot forbear to point out that Consignia's interim results for the first half of this year—let alone last year—already show an

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operating loss of £100 million. That is five times its operating loss at the same point last year. To add insult to injury, the Government are asking for a dividend. If the Government want Consignia to succeed—and I genuinely believe that they do—at the very least they should not be demanding a dividend. Better still, they should pull out their wallet and pay for their share of the write-down of the assets of the Horizon project that they are responsible for, so that Consignia can invest to remain in the top four of European postal services. Otherwise, its future, as we all recognise, is grim indeed.
4.14 p.m.
Lord Clarke of Hampstead: My Lords, I add my thanks to the noble Baroness Lady O'Cathain for giving the House the opportunity to discuss the future of Consignia.
I declare my usual interest. I joined the Post Office at the age of 14 in 1946. For over 50 years I have been directly connected with our once great public service, both as an employee——as a telegraph boy and then a postman—before becoming a senior official of the Union of Post Office Workers, now known as the Communication Workers Union. I am also a former trustee of the Post Office Pension Scheme, which I can assure the noble Lord, Lord Dearing, is in a very healthy state. He has no need to express concern about his monthly cheque coming through.
Perhaps I may also, by way of introduction, thank my noble friend Lord Sawyer for the excellent job that was so desperately needed within the Post Office. His report was welcomed by both sides. It is already bearing fruit. If it was not for the muddied waters of the current pay claim, further progress would have been made.
During the Second Reading debate on the Postal Services Bill, I said that the Bill,
"signalled the beginning of the end for our world renowned Postal Service".—[Official Report, 2/5/00; col. 959.]
I said it clearly and deliberately. All that has happened since the Bill became an Act has done nothing to change my opinion. I said on that occasion that many people, both inside and outside of this House, welcomed the fact that the Post Office—as it was at that time—at long last was to be granted commercial freedom, a situation that both Post Office management and the employees had pressed for over a very long period.
In fact, during my maiden speech I said that,
"Commercial freedom will allow the Post Office to plan outside the Government's public expenditure cycle. It will give it freedom to borrow and invest, freedom to enter into acquisitions, joint ventures and strategic alliances, and freedom to allow the workforce to share in the success of the Post Office".—[0fficial Report, l/l2/98; col. 4101]
I am bound to say that those hopes for the future well-being of the Post Office have been dashed. How sad, as we witness today the further emasculation of a great public service. How sad that it is being sacrificed by the Government as they add further constraints on
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the management of Consignia as it struggles to meet the challenges that it faces with one hand tied behind its back.
I would have liked to make comment on the apparent slippage on the creation of a universal bank as envisaged in the PIU report. Equally I would have liked to spend some time on considering the future, if there is one, for the rural counter network. In the limited time available I should like to say one or two things about the recent proposals that have come from Postcomm that I believe place an unfair burden on the chief executive and the board of Consignia.
It may seem strange that I, as a former trade union official, should concern myself with the problems of the chief executive and the board. Consignia—what a name that we gave our wonderful Post Office! What nonsense. They said that it was to establish a corporate image here and abroad. What arrant nonsense. The British Post Office needed no rebadging. The Royal Mail thankfully retains its good name; a good name earned by centuries of efficient and reliable service to public and businesses alike. It is not really surprising that the public and business alike recognise the name Royal Mail; it has been with us since 1635. It came about when Charles I issued a proclamation which allowed the public to use his Royal Mail. Management and employees alike are proud that up until now that name has remained.
However, having listened to my former Post Office colleague, the noble Lord, Lord Dearing, perhaps all is not lost. Perhaps the Government will think again about the report Opening the Post: Postcomm and postal services and the proposals from Postcomm. Perhaps they will belatedly recognise that the Postal Services Act 2000 is flawed; and that Postcomm can make proposals in respect of operating licences that come into effect as early as 1st April this year. That is less than seven weeks away, a matter mentioned in the response to a question from the noble Baroness, Lady Miller of Chilthorne Domer. We were told last week that they have had since January. With regard to the question of landlords' registration they had about two or three years to consult. Here we are, with centuries of history, with another seven weeks left. No wonder the National Audit Office report commented in paragraph 1.30:
"While Postcomm's staff have considerable experience in economic regulation, none have direct experience of the postal business".
The interim chairman of Consignia—I have said it again—Allan Leighton, has been quoted as saying that markets should be opened up at a pace and in a way that enables customers to have more choice. while at the same time giving the Post Office—I know that I should say Consignia; I will try very hard not to slip too much but it still hurts when I say it—a realistic chance to compete effectively and maintain a universal service at a uniform price.
The proposals from Postcomm, which open up 30 per cent of the market in just a few weeks' time, threaten that universal service. There can be no doubt in anyone's mind that whatever is said from the Government Benches, it will threaten the universal

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service. To take away the profitable parts of an operation but maintain the responsibility for the universal service, having taken away some of its income in the first place, and then expect it to maintain a universal services is nonsense. It is about time that we started speaking some plain language.
There can be no doubt that those granted licences will cream off the profitable parts of the postal business—the very parts that enable the Royal Mail to meet its responsibilities. There can be no comfort in the fact that phases two and three of the Postcomm proposals are scheduled for 2004 and 2006. If the Government are to wring their hands and do nothing, precious little will be left of our great collection, distribution and delivery systems. That comes after all the successful years when the Post Office poured money into the Treasury—billions of pounds over many years—but was not allowed even to use its own money to reinvest but had to go cap-in-hand to try to get money for postal mechanisation, optical character recognition and so on. I could continue with a long list but time does not allow.
Is it not a little strange that the cost of a first-class letter posted in the UK is lower than that of the nearest of our European postal service colleagues by I 1p? A letter weighing between 50 and 60 grammes posted in Spain costs 38p compared to 27p in this country. In Portugal, it costs 42p; in Belgium, 63p; in France, 72p; in the Netherlands, 82p; in Italy, 87p; and in Germany, £1.08.
I hope that my noble friend the Minister will explain why the Postcomm proposals differ so much in form and timing from those of the European Commission. It must be said that in pushing through Postcomm the Government are going further than was ever required by the Commission. Perhaps my noble friend could also tell the House about the level of profitability of Swedish Post since liberalisation in that country. On the same subject, what has happened to the prices of Swedish Post since liberalisation?
I ask the Government to take heed of some of the warnings in the National Audit Office report that I mentioned earlier. My time is now running out. I prepared so much because last night when I went home we were to have 11 minutes in which to speak, so the Minister will be pleased to hear that he does not have to answer about another 14 questions. However, I should like to cite another quotation from Allan Leighton. He says that there is a real need for the Government, in their desire for increased competition, to demonstrate fairness. His report states:
"Regulation should support a competitive environment, not stifle it".
As a start, the Government should relax their requirement for a dividend totalling £70 million. That would provide some breathing space. Furthermore, 1p extra on our first and second-class letters would bring in £182 million in a full year.
Time has run out, and I am sorry if I have abused the House's time. In conclusion, I endorse every word spoken by the noble Lord, Lord Dearing. We have a
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Post Office of which to be proud. I ask the Government to give it fair treatment and not to allow the get-rich-quick carriers to cream off the profitable parts. In all television and radio interviews, our competitors have said one thing about the Postcomm proposals: they will have to charge more to do what the Post Office does now.
I ask my noble friend to assure your Lordships that the great British Post Office is not to be destroyed. Finally, what has happened since the Government were elected in 1997 is entirely their responsibility—there are no previous governments to blame.
4.23 p.m.
Lord Northbrook: My Lords, I recall well the words of the Minister on Second Reading of what became the Postal Services Act 2000. He said:
"The Bill will establish a modern Post Office that is able to develop its business and grow as a significant global player so that it can meet the enormous challenges and take advantage of the opportunities which now arise in the rapidly changing national and international markets … and a better deal for all consumers".—[Official Report, 02/5/00; col. 931.]
Those fine words were spoken in May 2000 but the actuality has turned out to be slightly different. From a group operating profit of £397 million in 1999, the rebranded Consignia sank to an operating loss of £271 million—the first in 24 years—in the year to March 2000. Another operating loss of £70 million followed in the year to March 2001 and, in the latest half-year report to September 2001, it increased again to £100 million. Clearly, the rosy scenario forecast by the Minister has not come to pass. Letter deliveries are now losing the group £1 million a day. Last December, it was announced that more than 62,000 working days had been lost in 2000–01.
What has gone wrong and where is the way forward? Our party wanted to privatise the Post Office but lacked the parliamentary majority to see it through. Various problems have conspired to weaken the position of the Post Office. They come under four different headings: first, change in nature of the business; secondly, lack of investment; thirdly, labour relations, productivity and efficiency; and, fourthly, competition. I shall examine each in detail.
First, I shall consider the change in nature of the business. It is clear that fewer letters are being sent due to the advent of e-mail and text messaging. As a result, the service is losing £1 million a day. The price of first-class and second-class post has not been raised in line with costs. There has also been less revenue from junk mail, due to the downturn in the advertising sector.
Lack of investment has been a long-term problem. Profits have not been reinvested in the modernisation of the business. One means of raising capital for investment would have been to privatise the Post Office. That would have enabled it to compete on the European stage rather than being overtaken by its continental rivals, which have spent more time courting business users and entering high-margin growth areas such as express delivery. The Dutch post office bought TNT; the German post office bought DHL; and the French post office a piece of FedEx.

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One needs only to visit a UK post office to realise the problems caused by lack of investment. Every transaction seems to be written down by hand and computerisation is unknown territory. Nor does Consignia seem to be at the forefront of e-commerce. The range of products on its website is unexciting. Management should consider investing much more in that part of the business. Perhaps, as other notable retailers have done, a reward or club card could be produced.
However, the Government appear to be taking money out of Consignia. I am most surprised to see in the accounts, under the heading "Future Dividends", £151 million for 2000 and £93 million for 2001, when the operating losses for those years were £275 million and £70 million respectively. Will the Minister explain why that dividend is being paid when the group is making losses?
Turning to labour relations, productivity and efficiency, it is unfortunate that higher wage levels have not led to higher productivity. As I mentioned, more than 60,000 days were lost in 2000–01, demonstrating the poor state of industrial relations. A national ballot on a 5 per cent wage claim has produced a yes verdict. That is a dangerous development for Consignia.
Management should share some of the blame. The chief executive's sudden admission to a Commons Select Committee of 30,000 job cuts was stated as necessary to reduce costs and dependence on labour. However, the timing, just before Christmas, was insensitive—coming out of the blue—and has undermined the well-meaning talk of partnership that emerged from the independent inquiry of the noble Lord, Lord Sawyer, into the state of the organisation's industrial relations last summer. To their credit, the unions had accepted that critical report and a wave of unofficial strikes that hit performance early last year was reduced to a handful.
As has been stated, the report of the noble Lord, Lord Sawyer, reflected a startling throwback to the 1970s. It painted a picture of bullying, inadequate managers and obstructive, suspicious unions. The noble Lord was clear that lasting productivity gains could come only from a massive shift in attitudes on both sides, with a transformation of the management culture matched by a wholehearted workforce commitment to customer service. Although the noble Lord saw some isolated pockets of good practice, there is little doubt that the future of the organisation depends on spreading them to the rest of the country. As I said, the method of disclosure of a large number of job cuts has made that task much more difficult. At 5 per cent, the size of the wage claim is completely unrealistic, especially when the group has admitted cost-cutting targets of £1.2 billion by 2003.
Turning to the fourth area, competition, Consignia faces particular difficulties due to its high labour costs. Wages are 70 per cent of costs. It has found it difficult to compete in other areas, for instance in the de-restricted area above £1. The future appears even worse. Postcomm has decided to end the Royal Mail's
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monopoly over letter delivery within four years. That seems a drastic move. But clearly the current system is not working in financial terms, so something had to be done. Critics would say that if we allow our competitors to cherry-pick the most profitable areas of Consignia's business, it will make the universal service obligation much more expensive. It means that, as the National Federation of Sub-Postmasters (NFSP) stated, profits used to subsidise rural consumers will instead be taken by competitors. The NFSP believes that competition should be introduced in gradual and controlled ways. NFSP is concerned that current proposals do not adequately cater for the maintenance of the socially crucial universal service and network of local post offices.
With regard to the future, Postcomm must tread carefully. As the Independent stated on 24th January,
"This is a company that is in serious trouble. It will be a real challenge for the regulators to open up competition without making Consignia's weaknesses much worse".
But I do not agree with the CWU's expression that, in effect, nothing should be done. Clearly the level of losses suffered by the Post Office is unacceptable.
Another major problem for the future of Consignia is the question of sub-post offices. I expressed concern at Second Reading of the Postal Services Bill that the proposed change to benefit payments meant the Post Office would lose approximately £400 million—onethird of Post Office Counters' annual revenue. We were then promised, following a report by the Performance and Innovation Unit, two separate initiatives. First, a new "universal bank" service would be aimed at finding new revenue streams lost as a result of a decision to bring in compulsory ACT by 2003. That promise has made stuttering progress. So far as I am aware there is still no alternative proposed to benefit payment income which could halt the massive closure of sub-post offices which has occurred under Labour.
The second initiative is the subsidy and investment package of £270 million. Can the Minister say how the allocation of that package will work in practice? Will each case be considered on its merits? Finally, can I ask the Minister two further questions? Is it the case, as stated in the Independent of 1st February, that Consignia,
"has asked the government for almost £2 billion in subsidy to keep the network financially viable over the next five years".
Secondly, what assurances can the Minister give against the threat to the morning delivery of the post or the curtailment of second deliveries?
In summary, the Government seem content to leave Consignia's problems to be sorted out by Postcomm. However, they have now become extremely serious.
4.30 p.m.
Lord Hoyle: My Lords, perhaps in rising I can make just two points. First, I am a member of Amicus. which organises the Communications Managers Association, as is my noble friend Lady Gibson. Secondly, I thank the noble Baroness, Lady O'Cathain, for introducing this debate. Her forceful speech set the tone for the whole debate.

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Before I get into my speech I should like to say that this is not a time for scoring party-political points. However, I must point out that many sub-post offices closed under the last Conservative Government, not just under Labour. I simply want to make that point for the record before I talk about the Post Office, Consignia, and where we go from here.
It is right, as has been said, that the Post Office is not only a public service but also a social service. It is particularly necessary in the urban and less fortunate areas where the postman is so welcome. In village areas postmen and postwomen not only deliver mail, but also act as sentinels who call attention if someone has not taken the mail in, as do the milkmen in such areas. Perhaps we are fortunate in our village of 5,000 to still have two post offices. But I wonder for how much longer under these proposals.
What has not been mentioned but which is important to the owner or manager of a sub-post office is that he will not be able to sell that business bearing in mind the uncertainty now surrounding it. That is a new factor entering the situation.
It is correct that the Post Office was profitable until two years ago. For 23 years it had made a profit. Unfortunately, in 1999–2000, it lost £264 million. But I have to say that during that time the Treasury still took a dividend of £151 million and tax of £98 million. That was from a business that was losing money.
I agree with the earlier comment that the present management is rigid. I do not understand some of the decisions it made. Why set up Parcelforce with the national delivery system and all the administrative and management costs that that entails? It does surprise me that to date it has not made a profit.
Of course morale is very low in the Post Office. It is bound to be. The uncertainty adds to the lowering of morale. Such uncertainty brings in militancy and makes life much more difficult. The managers that we represent are middle management. My noble friend Lady Gibson said a lot about them and the situation in which they find themselves. But why there is no consultation with the people who have spent a lifetime in the Post Office and know the business inside out I do not know.
I want to ask some questions about the power of the regulator. For instance, why are we moving faster and further than the rest of Europe and, indeed, faster than the Government originally intended? Why are we moving in the opposite direction to the Commission? That is a problem that faces us. I am sorry that the noble Lord, Lord Dearing, is not in his place but I must take issue with him. Postcomm has to comply with certain regulations under UK law. For instance, it is required to,
"give precedence to maintenance of universal service and may not introduce competition which would jeopardise this objective".
Today we are considering measures that could jeopardise that objective. As has been said by many earlier speakers, from 1st January to 31st March it has to face competition that affects 40 per cent of the bulk of its business. That is a real blow that it must face. That is
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only the first proposal. In phase two, in 2004–06, it will lose 70 per cents of its volume. If that carries on, in 2006 all restrictions on competition will be removed.
Why is it that any review will consider not the damaging effects on the Post Office, but how further competition can be introduced? Perhaps my noble friend, when he comes to reply, can answer some of those questions. Can he say what are the powers of the regulator? Can the Government overrule any of the proposals being made by Postcomm even though, as many have said, they threaten the "universal service" because of their cherry-picking nature. What kind of competition is it that performs part of the job? It sorts the mail and then puts it back for the postal service to take over its delivery. Nor can the Royal Mail lower its prices in order to meet competition; it will not be allowed by the regulator to do that.
So the competition is unfair and unjust. Let us look at the competitive effects in Sweden. Since 1993 there has been a reduction of 52 per cent in the number of post offices. The public letter price has gone up by 60 per cent in real terms at a time when, in this country, we have lowered the price in real terms by 15 per cent. In Sweden it has not exactly been a financial success. For instance, it lost 1 million krona in the first quarter of 2001. The people of the smaller towns in New Zealand are now waiting for one or two extra days for their mail. As has been said, in Spain the service has been fully liberalised since 1960 yet despite that, efficiency has not improved because less than 70 per cent of the mail is delivered to target.
These are the kinds of things that we are facing. I face the danger of losing the universal service. When my noble friend replies, can he define the powers of the regulator, particularly in relation to Government and their policy, and why we are moving faster than any of our European competitors and certainly faster than, but in a different direction from, the Commission? Can he also say what is happening to the universal bank? Finally, is the Treasury going to demand the dividend it has demanded in the past, which amounted to over £90 million last year? These questions need to be answered. Like most other noble Lords who have spoken today, I fear that we are in danger of losing something that is valued by all, the universal postal service delivering everywhere for the same price.
4.40 p.m.
Lord Brooke of Sutton Mandeville: My Lords, it is a pleasure to follow the noble Lord, Lord Hoyle, with whom I have common interests both in Bolton Wanderers and in cricket. Today he batted at No. 10 and I bat at No. 11. I have batted there often enough to know that by then the innings is generally almost over and that not much happens to change the game.
Edmund Burke began one of his greatest passages in Reflections on the French Revolution with a sentence redolent of an upmarket gossip column. He wrote,
"It is now sixteen or seventeen years since I last saw the Queen of France".
In the same spirit it is now nearly 50 years since, as an undergraduate auxiliary postman, I last delivered Christmas cards to the late Sir Ralph Richardson in

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Hampstead, the village from which the noble Lord, Lord Clarke, takes his title. Sir Ralph always entered into the spirit of the transaction by opening the door in a silk dressing gown. But that far-off duty is the only interest I can conceivably claim in this debate whose admirable, comprehensive and timely initiation by my noble friend Lady O'Cathain is most welcome. In the manual of the Royal Navy, there is a sentence that the first evidence of an approaching typhoon is a general sense on the part of the captain that all is not well.
Governments of both main colours are guilty of neglecting once great British institutions. They did so to the Tube allegedly because its management contained too many engineers, and Railtrack has recently been executed on the grounds that it has too few. There is no pleasing some people.
I do not know what view the present Government take of the management of Consignia, though perhaps we shall hear shortly. It was always said of it that its historic title "Royal Mail" was an amulet that served to protect it from interference. I apologise if, like some others who have spoken, I find Consignia an unmemorable alternative, but it is an easy read-across from the late Professor Parkinson's view that you should sell the shares of any company that builds a new headquarters block to one which changes its name by extravagant deed poll.
When this Government interfered with ACT in 1997, I said in a debate in another place that the Chancellor had reversed chaos theory under which the fluttering of a butterfly's wings in central America provokes the eruption of a volcano in Indonesia. He had hurled a boulder into the placid pool of pensions policy and in the process would cause old ladies in rural sub-post offices to pay more for their stamps so that the Post Office could repair the Chancellor's ravaging foray into their pension fund.
I had not at that stage worked out that it was doubly worse. The Chancellor defended his policy on the grounds that investment was more important than dividends. But in the case of the Post Office he had it both ways since the Government continued to collect post dividends and the Post Office was starved of investment.
Although I understand the concerns of earlier speakers, I am not as troubled about the state of rural post office services unless they should be further threatened by new developments. My late noble kinsman and my late noble relative, on their honeymoon in central Wales, came across a notice in a sub-post office window which said,
"Letters for the 5.30 post must be posted by six o'clock at the very latest".
That shows a consideration for human frailty which could be imitated by other commercial institutions. But as a former inner city MP, I did have exposure to the frailties of the Post Office itself. Mr Matthew Parris once called me a dinosaur because at Report stage of the Housing Act 1996 I had suggested that postmen should be included among those key workers eligible for affordable housing. However, I had myself noticed the difference in delivery performance between
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the W1 and the SW1 postal districts which met at Piccadilly in my former constituency. Both were a mix of residential and commercial customers; both important districts. But, by the chance of history, SW I did have affordable housing whereas W1 did not. Both in terms of delivery and of industrial relations, the difference showed. The cause of affordable housing has become more the vogue in the past five or six years so I shall continue to press the cause of postmen for it.
As my noble friend Lord Northbrook said, it is a commonplace that a handful of Conservative Back Benchers prevented the privatisation of the Post Office in the 1992 Parliament. That is now history, but because my party has always prided itself on learning from the past I am sorry that that small coterie of colleagues was unaware of how many of the advances in Post Office performance had been stimulated by private innovation.
Between 1526, when City Post was set up in Old Jewry in the City of London, and 1680 when the General Post was simply operating down six radial post roads from the capital, there was no local delivery at all until it was invented by William Docwra and his private penny post service in that latter year. The Duke of York, later James II, reacted to that infringement of the monopoly by taking him over. But Docwra was given a pension in 1689 for his achievement and was made controller of the Penny Post in 1697, the year Vanbrugh introduced a reference to it for the first time in one of his plays.
The renewal of Bath as a great city in the next century was the product of Beau Nash for fashion; of Wood, father and son, for architecture; and of Ralph Allen for entrepreneurship. Made postmaster of Bath at the age of 18, by intelligent pricing he revolutionised the delivery of mail between, on the one hand, the post road to Bristol and, on the other, the Plymouth road to the south and the Chester road to the north. With those yuppie profits he bought up all the quarries of Bath stone, which are the final climax of Bath's world heritage site reputation. It was likewise in Bath, a century later in 1780 and after Docwra's achievement, that John Palmer, the harbinger of DHL, created the special lightweight coaches which greatly accelerated delivery until the arrival of the trains.
I acknowledge Rowland Hill's first Penny Black adhesive stamp was the product of parliamentary initiatives in the 1830s. I suppose that the arrival of the new, self-adhesive stamp is an apposite place to end this catalogue, although I hope that it becomes easier for philatelists to purchase them in the old mode than it is at the moment.
My quotation from Burke about the Queen of France in due course went on,
"The age of chivalry is gone. That of sophisters, economists and calculators has succeeded but the glory of Europe is extinguished for ever".
I sense that economists and calculators, if not necessarily sophisters, will be needed to ensure Consignia's future. But the Royal Mail was a precious thing, a glory of Europe, and the Government will not be forgiven if it falls to pieces in our collective hands.
4.48 p.m.
Lord Desai: My Lords, as 12th man I should be bringing drinks rather than playing. I was afraid that I would have nothing to say. But luckily, I believe that very few noble Lords have said what I am going to say and most of them are not going to like it. The Post Office does not pay my pension. I have belonged to no trade union, either managerial or for workers, that has supported the Post Office. I do not often defend things because they are 350 years old. Stage coaches have gone as have canals and gas lighting. I believe that we may march on.
I was very pleased when I read what Postcomm had done because it seems to me that for the past 10 years, even longer, both political parties have made a total muddle of what was once a great postal service. However, it has not been a great postal service for the past 10 years. No one can tell me about profits and losses. Monopolies must make a profit: if they do not, who will? A monopoly that makes a loss really must be re-examined, to see what it is doing.
My noble friend Lord Sawyer wrote a very good report. It starts by saying, more or less, that, in the 1990s, there was endless trouble with industrial relations in the Royal Mail—or "Con", as we should call it, "Consignia" being too long a word. It really surprises me that we have tolerated the deterioration in the service and done nothing about it. There is too much sentimentality attached to a great service. Eventually, all great things decline, and we must reexamine whether they are worth having.
In the National Audit Office's report, there is a little diagram showing service since 1996. The target is 92.5 per cent delivery. That is already 7.5 per cent below what it should be: if it is a universal service, let it be a universal service. The service has not got there—or anywhere near it—for the past five years, and I doubt that 2002 will show anything different. The management has been appalling, as has been shown by its failure to tackle any problems, to innovate or to see any other problems coming forth. It was the management that asked for commercial freedom. It is about to get it, but it is complaining. Although it is good when one is a monopoly, when there is competition, one suffers—about time too, thank you very much.
I get my mail on time, and most of it is not worth reading, just throwing away. Obviously, the postal service is too cheap. If it doubled the price, people would send me fewer letters, and we would all be happy. However, I have a little indirect experience. To declare my interest, I must say that I am chairman of a very small business, a business of only two people—three since last Monday—that works in design and publicity, producing brochures and the like. Its experience has been dire. Many small businesses lose money because of the ghastly service offered by "Con". It is a serious matter for small businesses. Such businesses survive on thin margins and must pay costs when something is not delivered or has not been received. They pay a huge price, and a business can go under, because of the inefficiency of the Post Office.
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So far, no one has spoken on behalf of consumers, but perhaps I am wrong about that. I do not really have great sympathy for rural post offices. People choose to live far away from everybody, in the middle of nowhere, so they must pay the cost. Basically, we urban dwellers massively subsidise people who fancy living in rural areas. It costs me a lot to subsidise them. It is the same as with car drivers, who do not pay the full marginal cost of driving and pollute my lungs. People who live in rural areas should be willing to pay the proper marginal social cost of delivery. Unfortunately, they have been subsidised for centuries and are used to it.
What is good about what Postcomm has done is that we are about to get some competition and some efficiency into the system. Forty per cent of the business will, of course, be removed; that is sad. However, 40 per cent of costs will also, I presume, be removed. I suspect that, in a loss-making enterprise, more than 40 per cent of costs will be removed, if I have not forgotten elementary economics. It costs them more to deliver things than they charge for it.
People ask, "Why such speed?". There are two points to make. We have always been ahead of the European Union in liberalising and privatising. I remember the complaints about telephones, gas and electricity. Today, we have better gas, electricity and telephone services thanks to that. We may not have the service of the Royal Mail, or "Con", but we will have better delivery of our post. There are better ways of doing it than what the Post Office does. Over the past 10 years, it has proved itself not to be a good business, and I do not see why, as a consumer, I should have any sentimentality. I just want my post delivered efficiently and regularly, and I do not care who delivers it, as long as it is delivered properly. Perhaps we will discover hidden virtues in "Con", and it will start doing a good job. As Dr Johnson said, hanging concentrates the mind; I hope that it will concentrate the mind of Consignia.
I am glad that Postcomm has done its job. It is exactly the job for which it was appointed. Monopolies that want commercial freedom ought to be able to face competition.
4.56 p.m.
Lord Newby: My Lords, I am the thirteenth man—person—to speak. That is doubly unfortunate, given the unfortunate nature of the number and the fact that thirteenth man simply does not exist. However, I join other noble Lords in congratulating the noble Baroness, Lady O'Cathain, on initiating the debate.
It is conventional for a debate such as this to be on a Motion to call attention to an issue, but it is especially apt in this case. Most people do not recognise the current parlous state of Consignia, nor the dramatic plans for its future and that of the mail. There are already several areas of concern regarding the present position of the company.
First, without being too party political, I think that it would be widely accepted that two decades of raiding of the Post Office's profits by the Treasury, before this

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Government came to power, prevented the Post Office from investing in improved services to meet the growing competition from fax and e-mail. The noble Lords, Lord Clarke of Hampstead and Lord Northbrook, spoke about that, but it is worth repeating. On some estimates, the Treasury took 90 per cent of Post Office profits in that period, and the process has continued, despite clear signs of Consignia being in trouble. For example, in 2000–01, under new financial arrangements, the Treasury received a further £93 million dividend when the Post Office made a pre-tax profit of only £66 million. In 1999–2000, the Treasury took a £150 million dividend when there was a loss, before tax, of £171 million.
As described by the chairman of Consignia,
"Our current financial position is already unsustainable. We are losing more than £1 million a day and need to reduce our cost base by at least £1.2 billion by 2003".
We wish Mr Leighton well in making those cost reductions, but there must be serious questions about whether it is possible to do so without a reduction in service levels.
Secondly, I move from finances to the specific situation of sub-post offices. In rural and deprived urban areas, sub-post offices play a hugely important part. We have heard from several Members, including the noble Lord, Lord Hoyle, and the noble Baronesses, Lady Miller of Chilthorne Domer and Lady Gibson of Market Rasen, about the problems that sub-post offices face and about the opportunities that they could have, if given proper support, to become an increasingly important hub of community life.
In addition to the ongoing problem of reduction in numbers, we have been reminded of the doubts about the introduction of electronic payment of benefit and the financial consequences thereof for sub-post offices. The problem here, mentioned I believe by the noble Lord, Lord Hoyle, is how on earth is a sub-post office to be sold in those circumstances, given the long-term consequences either of an ageing management tier or those sub-post offices going out of business.
Thirdly, there are the current and long-standing problems with regard to poor industrial relations. I join noble Lords in paying tribute to the work of the noble Lord, Lord Sawyer, in that respect. It is absolutely clear, notwithstanding the current problems of imminent strike action, that a major sea change within Consignia will be required in terms of a partnership method of working, whatever the detailed arrangements for its future.
Against the background of a desperately weak financial situation, continuation of the contraction of the sub-post office network and continuing seepage of written communications into e-mails and text messaging, what has been the government response? We know that it has been a combination of competition and Postcomm. Before turning to the competition proposals themselves, and running the risk of incurring the annoyance of the noble Lord, Lord Clarke, on the subject of name changes, I should like to suggest that we change the name "Postcomm" to "OfPat". I make that suggestion because I think
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that "OfPat" would serve to remind us all, not least the regulator himself, of the world of the eponymous postman. In particular we shall be reminded of a rural world in which the universal service provision is a lifeline, not just an empty phrase.
More seriously, however, we know what has been proposed. Starting in a few weeks' time, some 30 per cent of the market is to be opened up. That phase is to be completed by 2004. Another 30 per cent is to be opened up by March 2006, and thereafter the remaining 40 per cent of the market will be opened. We are told that competition is necessary to improve efficiency and to foster innovation and flexibility. But, to quote Postcomm:
"We would expect an efficient Consignia to remain the largest provider of postal services".
That is one of the ironies of the whole business. No one believes that another company will come in to take over the difficult bits of what Consignia does now. That is a problem for the noble Lord, Lord Desai, because in reality there is no hangman's noose dangling in front of Consignia so far as concerns the bulk of the postal service. In no country which has experienced privatisation or liberalisation and competition have we seen two parallel postal services emerge. Nowhere else has another company come in to take over that element of what is done by the Post Office. Frankly, there is a great deal of misunderstanding about the likely consequences of increased competition.
Let us examine how increased competition is to be achieved and how we are to enter that brave new world. Postcomm believes that Consignia should be allowed,
"more commercial flexibility in terms of how it provides the universal service. This relates to service specification and the overall level and structure of prices".
What on earth does that mean? It has three specific meanings. First, it means that Postcomm is conducting a price review, to be completed by this summer. Inevitably that will mean a recommendation for price increases. Although there may be an argument for a modest level of price increase after a period of price freeze, I think it is relevant to bear in mind the example of Sweden, which has already been mentioned in the debate, where the introduction of competition resulted in an increase in prices amounting to some 90 per cent.
Secondly, we have the intriguing suggestion that, in the long run, competition will mean a subsidy. Postcomm states:
"In the long-run, Postcomm recognises that in certain circumstances it might be justifiable to contemplate the safeguard of external funding mechanisms, such as a universal service support fund".
I think that that means a subsidy. I would welcome the view of the Minister and the Government as regards whether they consider that to be a part of the longterm future of a competitive postal system.
Thirdly, Postcomm envisages a redefinition of the universal service provision. It has stated:
"Postcomm recognises that there is a need to set out more clearly which of Consignia's services should be considered universal services recognising that this will change over time in the

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light of market developments and changes in customer requirements … Postcomm believes that it should consider whether the range of Consignia's products that are classed as universal services should be narrowed".
So there we have it: price rises, a potential subsidy and a narrowing of the universal service provision. You do not need to look into a crystal ball because you can read it in the book.
The National Audit Office shares my concerns, along with those of many other noble Lords, about the future of the universal postal provision. It has stated:
"If it were to lose significant custom to its competitors, Consignia might find it hard to finance the provision of a universal service at current prices or service levels. Postcomm have been carrying out intensive research into this issue".
I think we can guess what that research will reveal. As the noble Baroness, Lady O'Cathain, mentioned in her opening remarks, the chairman of Consignia, Allan Leighton, has remarked:
"The Postcomm proposal to open up 30% of the market in just a few weeks time threatens the universal service. Competitors can now cherry-pick the profitable parts of our business, which substantially pay for the 'one-price-anywhere-in-the-country' promise of universal service. For Consignia, the regulator's approach represents death by a thousand cuts".
Mr Leighton is not exactly someone averse to competition, but he paints a very bleak picture. We agree with his view. While as a general principle noble Lords on these Benches support competition and open markets, we believe that there are some situations where the market will not work. We believe that the postal service is one such market, not least for the externalities which have been mentioned by a number of speakers in the debate.
The current plans for Consignia are, I believe, incompatible with the continuation of the universal service provision as we know it at acceptable price levels. The company is right to seek major efficiency savings but simply cannot be expected to survive major losses of profitable business. The Government should accept that, as with Railtrack, the wrong model has been chosen and should take action accordingly. At the very least, they should delay the implementation of the Postcomm proposals to give Consignia a chance to press ahead with its cost-cutting programme as well as to provide an opportunity for a fundamental rethink on the future structure and regulation of the postal service.
5.8 p.m.
Baroness Miller of Hendon: My Lords, I thank and congratulate my noble friend Lady O'Cathain for so excellently introducing this debate and, indeed, for encouraging other noble Lords to take part. We have heard many interesting and, perhaps I may say, occasionally surprising interventions.
The Labour Party became our Government almost five years ago. Since April 2000, when the Postal Services Act was passed, the Post Office has deteriorated from being the best of its kind in the world—it was efficient and it had an excellent delivery performance rated at the top of the international league table—to what now can only be described as a
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bit of a disaster. It has converted a substantial annual profit in 1999 of almost half a billion pounds into a loss in 2000 of £267 million, and pre-tax losses of £281 million in the first six months of 2001.
A small part of that loss arose from the purposeless waste of £2 million on changing the name of the Post Office to the meaningless word "Consignia", which the noble Lord. Lord Clarke, has mentioned. I have spent over 20 years in marketing and I can tell noble Lords that it is an elementary tenet that if you have an established brand name, you exploit it. You do not do what the Post Office did, and discard it. What was the reason for this piece of stupidity? I shall quote from Consignia's press release:
"The new name describes the full scope of what the Post Office does in the way that the words "post" and "office" cannot. 'To consign' means `to entrust to the care of" … The new name reflects Consignia's place in the global distribution market".
In every English-speaking country the name "Post Office" and what it does is well understood. In France, Germany, Italy and Holland, they use their linguistic equivalent. Furthermore, the tall building in central London is still known as the "Post Office Tower", despite BT having been hived off from the Post Office over a quarter of a century ago. Believe it or not, before "Consignia" was selected—I hope the noble Lord, Lord Clarke, will be satisfied with this— on the short list and the favourite for the new name was "Mailt rack".
I have just spoken of efficiency. Apart from completely losing about I million letters a week, Consignia rarely meets its own targets to deliver, as the noble Lord, Lord Desai, said, 92.5 per cent of first-class mail the next day. Instead, in 2001–02, it achieved only 89 per cent, with some black spots achieving only 80 per cent.
Instead of trying to improve this poor performance by increased productivity, it decided to move the goalposts. Consignia has recently announced the abandonment of the second-class post and, worse still, has said that its commitment to deliver to domestic customers before 9.30 a.m. will no longer be the norm. As my noble friend Lord Crickhowell said, many small businesses which work from home will be hit by this.
The competition already faced, and shortly to be faced, by the Post Office is absolutely ferocious. Indeed, the noble Lord, Lord Dearing, commented that our Post Office is being forced into stronger competition than the rest of Europe as a result of the recommendations of Postcomm. Until last March, the Post Office had a monopoly over collection and delivery of mail weighing less than 350 grams or costing less than £1. Above that weight and cost, the Post Office faces 4,000 courier and express services of varying kinds. However, at the end of last month, nearly one-third of the Post Office's business was opened up, and by next year EC directives mean that the entire market will be open to unrestricted competition.
Other national post offices have been preparing themselves for this for some time, either by privatisation or by the lifting of internal restrictions, and acquisitions of interests in commercial firms. The

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Dutch Post Office was the first to be privatised. It now has a majority stake in TNT and is the most profitable in Europe. It is rapidly growing as a result of a number of acquisitions that its commercial freedom and being quoted on the Stock Exchange permit. The German Post Office, now publicly quoted, is linked with DHL. It controls more than 25 per cent of the European express and parcel business, and it enjoys the largest revenues of any European postal group. Who is left among the world-class players that Consignia and Parcelforce could link up with to avoid being itself swallowed up by ever more powerful international competition?
The question is how the Post Office is preparing itself for the challenge of meeting the demands of the increasing market of e-commerce, where, despite the fact that goods can be ordered from your armchair, someone has to create the infrastructure and full distribution administration to provide express delivery to the customer's door.
When I began my own mail order business 30 years ago this week, it owed its success in no small measure to the Post Office and its dedicated staff, who could not then have been more helpful. That is why somewhere in the headquarters of the Union of Postal Workers, as the noble Lord, Lord Clarke of Hampstead knows, there is a silver salver that I presented 10 mark the dispatch of my 5 millionth parcel.
But what has happened to the innovative organisation and its formerly very co-operative staff? It has got bogged down by the dead hand of Whitehall and the Treasury. As long ago as 1992, the Conservative government announced a review of the structure of the Post Office. In 1994, the DTI published a consultation paper proposing the retention of post office counters in the public sector but with a greater degree of commercial freedom, and to sell 51 per cent of Royal Mail and Parcelforce to the public. However, that was not possible with the then government's wafer-thin majority and the implacable opposition of the Labour Party and at that time—indeed, even now—of the unions.
In 1999 the General Secretary of the Communication Workers Union, talking about privatisation, was reported in the Daily Telegraph as boasting:
"If they don't back off, they have got a fight on their hands, and they have got a fight they can't possibly win".
When Consignia recently announced a potential loss of 30,000 jobs over a period of 12 months, it was soon forced to backtrack under the threat of strike action—although, of course, one has to comment that this is no way for management sensitively to work together with its workforce. The CWU has said:
"Consignia has confirmed that the 30,000 jobs were speculative arithmetic"—
whatever that is supposed to mean.
Last year the Post Office clocked up 62,000 days lost through strikes—half the total number of industrial disputes in Britain. In its own interests, the Communication Workers Union will have to face up
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to one fact—namely, that its members are no longer employed by a monopoly. If its customers do not get the service they want at a price they are prepared to pay, there will be other providers and other means by which they can do so. I agree with the noble Lord, Lord Sawyer, that the two sides have simply got to work together better in order to find a proper way through this problem.
The forthcoming threatened strike will do nothing except drive customers further away. It was an earlier postal strike that resulted in the creation of the document exchange network, which now serves the legal profession so well all around the country.
So far I have spoken about the part that the Post Office itself and the unions have played in reducing the Post Office to its present parlous state, but the principal culprit is, as ever, the Government. On the Third Reading of the Postal Services Bill in the other place, the then Secretary of State said:
"This Bill guarantees a publicly owned Post Office. but with the commercial freedoms that will be needed to meet the challenges of the 21st Century … It will ensure a strong Post Office that is better able to serve all its customers in all parts of the country".—[Official Report, Commons, 18/4/00; cols. 939–940.]
None of that has come to be. What a broken promise.
But what has happened? The Post Office, which is supposed to be enjoying greater commercial freedom, suffers the disadvantage of being half in and half out of the public sector. The recent disastrous losses to which I have referred speak for themselves. Normally directors are answerable to the shareholders. In this case there is only one shareholder—the Government. Ministers have continued to interfere, and they must be answerable for that. In the words of Milton Friedman, what they do not understand is that,
"the Government has no business to he in business".
The Treasury, in the interests of saving £400 million, proposed to end the system of paying benefits through the Post Office and, more importantly, via the sub-post offices. The mere threat has severely diminished, if not destroyed, the capital value of hundreds of sub-post offices and has made small businesses, into which people have put their money, totally unviable. I agree with the noble Lord, Lord Hoyle, that sub-post offices closed under the Conservative government, but the numbers have escalated rapidly under this Government. Last year 547 closed, an absolute record.
The Government's failure to give the Post Office the full commercial freedom it needs and a clear mandate to go out into the market place, and the uncertainty that the present half-baked scheme has engendered, is undoubtedly a major cause of the lack of morale among all those involved in the Post Office.
I would say to the Government and to the unions that, with the total opening of the market to competition next year, the cosy monopoly that the Post Office has enjoyed for almost 350 years is coming to an end. The public will soon enjoy an unlimited choice. The commercial courier and parcel services, to say nothing of the German and Dutch Post Offices, are waiting to pounce. The vultures are circling around. Consignia and all connected with it must take note and try to do something at this late stage.
5.18 p.m.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): My Lords, today's debate has proved yet again the strength of feeling which Consignia and the Post Office network arouse in the House and throughout the country. I congratulate the noble Baroness on raising the issue at this time, although its topicality did not immediately endear it to me.
I totally agree with the noble Lord, Lord Dearing, that this is a critical moment for the Post Office, and I agree with three of his four points. It is essential that we have a strong board and it is important that we have a good chairman and pay him properly; it is enormously important that the DTI responds quickly to the corporate plan of the Post Office when it is provided; and it is equally essential that the Post Office is not used as a cash cow.
I do not agree with the noble Lord, or, indeed, the noble Lords, Lord Hoyle and Lord Desai, that we are in front of the rest of the world in opening up the postal market. As the noble Baroness, Lady Miller of Hendon, pointed out, far from Britain being in a leadership role, the rest of Europe has been liberalising its post offices much more rapidly and for some time. Sweden had full liberalisation in 1993; Finland in 1994; the Netherlands had partial liberalisation in 2000; and Germany had partial liberalisation in 1998. So we should not fool ourselves that we are leading the way on this issue.
The Government's goals are clear. We want a universal service that everyone can rely on. We want faster, more reliable mail deliveries; a strong network of modern post offices; an effective partnership between management and unions; and a better Post Office for people to work in. That is why we are delivering the investment and reform that Consignia needs.
Four key areas have been raised in the debate. Perhaps I may take them in turn. They are: the performance of the Post Office; the relationship between government and the Post Office; the Postcomm proposals; and the rural network. I turn first to performance. Consignia has a long history of relatively high performance compared with its international counterparts. It has high standards for its universal and other postal services. For example, the vast majority of first-class letters are delivered the next day to homes and businesses throughout the United Kingdom—some 89 per cent in 2000 and 2001. As the noble Lord, Lord Clarke, rightly pointed out, its prices are well below those charged for similar services by its international competitors. I say to the noble Lord, Lord Crickhowell, that, although junk mail may not be to everyone's taste, it has made a major contribution to the economics of the Post Office over the past 30 or 40 years. On that basis alone, it is an important issue.
However, compared with its main competitors, the Post Office has been slipping. Between 1992 and 1996, Deutsche Post's productivity increased by 35 per cent, overtaking the Post Office, whose productivity
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increased by only 13 per cent during the same period. The UK's postal service went from being a leader in the 1980s to being a laggard in the 1990s. Today, in the fast expanding European market for express mail services, the Dutch, the French and the Germans are all ahead. They have all diversified to a much greater extent than Consignia.
There are immense challenges ahead. The company is losing money; its costs are continuing to rise while growth in mail continues to be slow, not least because of e-mail. Above all, the company is not yet delivering consistently for its customers.
People in the company are working hard. We know that in many parts of the country they are meeting or exceeding their targets. But we know also that there still too many places in the country where customers cannot count on reliable mail delivery. That is largely because there are still too many industrial relations problems.
Industrial relations have over the years been nothing short of disastrous. Over 800,000 days were lost to strike action in 1996–97 alone—when according to the noble Baroness, Lady Miller, the Post Office was in a wonderful state before the Labour Government came to power. These are on-going, long-term problems which need to be solved. I congratulate the noble Lord, Lord Sawyer, on the helpful contribution that he is making and thank him for it. He is right to argue for partnership and that this will require a change of attitude on the part of both management and the workforce. As Allan Leighton commented in a recent letter:
"If we could stop fighting each other within the Post Office and fight the competition, we should have a much better chance of success".
I agree with the noble Baroness, Lady Gibson, about the importance in these situations of full consultation and the involvement of middle management.
Consignia needs to catch up. The management needs to seize the opportunities of commercial freedom given to it by this Government. I am afraid that a long and successful history will not ensure that the business continues to be relevant and efficient in the modern world.
I now turn to the relationship between government and the Post Office. The issue that we tackled when we came into office was that of enabling the Post Office to invest and move forward. For years, Post Office management and unions called for greater commercial freedom to allow them to respond to a changing market and changing customer needs. They were not granted that freedom. The previous administration was paralysed by indecision on this issue throughout all the years it was in power, and it used the Post Office as a cash cow by taking 80 per cent of profits back to the Treasury. The Post Office was unable to use its profits to invest in improving its operation and its services to customers. It was also prevented from making the strategic investment needed to expand its business in new directions.
Under our reform programme, we have given Consignia the commercial freedom long sought by management and unions—the freedom to borrow and

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invest—and we have reduced the dividend from 90 per cent under the Conservatives to 40 per cent, a more normal commercial return.
In answer to the point made by the noble Lord, Lord Hoyle, the £151 million in 1999–2000 was on profits of £470 million before the exceptional write-off. That would be a perfectly normal commercial position to be in when there is a paper write-off of that sort.
We have also put in place a regulatory framework to ensure the provision of universal postal services and to promote the interests of consumers of those services. I say to the noble Lord, Lord Skelmersdale, that the idea of being a regulator is that we have fair regulation. On the question that will arise of the dividend, a decision will be taken by the Government in the light of the five-year plan. Converting the Post Office into Consignia underlined the new commercialisation of the business.
We have also been strengthening the management of the company. We have appointed new non-executives to the board of Consignia, including Allan Leighton, now acting chairman; and we have supported new executive appointments, including a new finance director. We are continuing to strengthen the management of the company through the open recruitment of a new chairman and a new chief executive for the network business.
I have seen nothing since we introduced these measures to suggest that they do not provide Consignia with an excellent framework within which to operate its business. I cannot agree with the noble Lord, Lord Clarke of Hampstead. None of the current problems can be attributed to the new structure of the Post Office. I stand by what I said. I say to the noble Lord, Lord Northbrook, that all the problems that he raised are long-standing ones. He made no connection between any of them and the Postal Services Act.
The third issue I should like to discuss is Postcomm's proposals. World-wide, the postal industry has been challenged by competition from new technologies and from other service providers. To meet customer demand, postal operators throughout the world are having to upgrade and diversify their traditional services, developing added-value products and using new technologies. The value-added growth market in parcels, logistics and international businesses are highly competitive. Even in the traditional domestic letter market, where there has been relatively little competition from other service providers, there is increasing competition from new technology.
The noble Baroness, Lady O'Cathain, asked a number of questions about Postcomm's proposals. The Postal Services Act 2000 provides that it is Postcomm's primary duty to exercise its function in a manner best calculated to ensure the provision of a universal postal service. That is the legal requirement. Its responsibility to introduce competition is secondary to that primary legal duty.
Postcomm's document, Proposals for Effective Competition in UK postalServices, published on Thursday 31st January, is a public consultation. We fully expect concern about the universal service
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obligation to be thoroughly considered as part of that consultative process. We would not expect competition to be introduced until it was entirely compatible with the continued delivery of a universal postal service.
I should also stress that the business which is opened up to competition is not handed over to the competitor. Of the other countries that have liberalised, the Finnish Post Office still has 100 per cent of the letters market and the Swedish Post Office still has 94 per cent. It is not a question of the business being taken away. On marginal costs, the profitability of the business is not hugely affected unless unusually high or excessive profits were being taken on that part of the business. That is the issue in this case.
I must point out to the noble Baroness, Lady Miller of Chilthorne Domer, that the universal postal service is a fundamental duty of the Post Office. That is a different issue from the rural post office network. I cannot go into the question of broadband at this stage because it is very complicated, but we have given £30 million to the RDAs to experiment with other ways of achieving it in the regions where there is no broadband network. The huge cost involved could not be justified in a world in which only 1 per cent of the network that could use broadband is doing so.
The fourth key issue is the rural network. There is an understandable concern about the need to maintain the sub-post office network and ensure that it has a viable long-term future. The post office network plays a vital role in our society. Many of the vulnerable and elderly rely on it to deliver services to them. It is also a convenient place for the community as a whole to access government services, financial products and, of course, postal services.
However, the network has been in decline for years. The reality is that over the years the post office network has failed to respond to changes. Consequently, it has been contracting for many years. There were 3,500 closures between 1979 and 1997. not because the Post Office was actively closing outlets, but because no suitable replacements could be found to take over from the sub-postmasters who resigned or retired. Demographic changes in many rural areas, together with social and economic changes such as those in working and shopping habits and wider car ownership have combined to reduce the business on which many post offices have traditionally depended. Some 56 per cent of the rural offices that closed in 2000–01 operated for only limited hours and served fewer than 70 customers per week. Half of them had no associated shop or other retail business. It is also important to remember that of the 547 closures in 2000–01, only four were as a result of a Post Office decision. The others resulted from no one being found to take over the services.
As with the mail and parcel business, we inherited a declining post office network. Unlike the previous administration, who did nothing, we have not shrunk from the challenge of securing a viable future for the network. We contributed nearly £500 million to put back on track the Horizon project to computerise the

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whole post office network. That project, initiated in 1996 by the previous government, was running three years late, due to setbacks and delays. Computerisation of the network was completed on time in spring last year. The Horizon project remains the best means of enhancing the services offered by post offices by attracting new clients and services to strengthen the viability of the network in the longer term.
In answer to the noble Lord, Lord Skelmersdale, the Government contributed £480 million to the cost of the Horizon automation programme. The write down in the accounts was a paper loss resulting from compliance with accounting standard FRS11, because at that time the future revenues generated by Horizon were not sufficiently certain. To answer the noble Lord, Lord Northbrook, that £480 million was not a loss of income; it was a write-off. We contributed that money to the Horizon project. As regards introducing ACT, the original Horizon programme contemplated the automation of the whole system.
In response to the decline of rural post offices, we commissioned the Cabinet Office Performance and Innovation Unit to develop a strategy for the post office network. In June 2000, the PIU published its recommendations and we accepted them all. Not only that, we earmarked the £270 million necessary over three years to start the implementation.
A formal requirement was placed on Consignia in November 2000 to maintain the rural network and to prevent avoidable closures. In the first instance, that applies until 2006. To reinforce that, we have made available a fund to support community initiatives to sustain or reopen post offices in rural communities.
A number of other issues have been raised in the debate. It is difficult to make simple comparisons with Sweden. The significant rise in postal prices in Sweden since 1997 is due partly to a change in the VAT regime. The noble Lord, Lord Hoyle, referred to the powers of Postcomm. The role of Postcomm is to ensure the provision of a universal service. All Postcomm duties are subject to that requirement and it is independent from the Government. The noble Lord, Lord Newby, referred to the possibility that Postcomm might, in due course, consider it necessary to contemplate a universal service support fund—that is, a levy on other licence holders to support the services of the universal service provider. Any such arrangement would require changes to the current regulatory regime. That is not under active consideration.
The postal reforms brought in last year were designed to give the Post Office commercial freedom and freedom from political interference in micro management and to further the interests of consumers. Subject to the over-riding priority of ensuring the universal services, which we enshrined in legislation for the first time, we believe that greater competition should be contemplated as a way of providing customers with greater choice and even better service levels. We believe that the reforms that we have put in place will allow Consignia to respond to increased competition in postal service markets and changes in customer demands.
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We further believe that we have a reform programme for the post office network that will enable it to move forward and adapt to the changes that it has faced and continues to face.
Lord Hoyle: My Lords, before my noble friend sits down, will he answer one other question that I asked about banking facilities and services being offered by post offices? That is a very important issue.
Lord Sainsbury of Turville: My Lords, I am sorry that I have not dealt with that issue. We continue to have negotiations on that. We are on track to produce the service in 2003, which is the critical moment for its introduction.
As I said, we have a reform programme for the Post Office network that will enable it to move forward and adapt to the changes that it has faced and continues to face. A great deal of progress has already been made through investment and reform. Much remains to be done, but we believe that the management and workforce of Consignia will rise to the challenge and ensure that the company prospers and grows in the tough environment in which it finds itself.
5.38 p.m.
Baroness O'Cathain: My Lords, I have no time, but I thank everybody who has taken part in the debate. I hope that the Minister will write to us with the answers to the questions that he was not able to respond to in the time available. I beg leave to withdraw the Motion for Papers.
Motion for Papers, by leave, withdrawn.

Employment Bill
Brought from the Commons; read a first time, and to be printed.

Wales
5.39 p.m.
Lord Griffiths of Fforestfach Lord Griffiths of Fforestfach rose to call attention to the impact of devolution on the economic and social conditions in Wales; and to move for Papers.
The noble Lord said: My Lords, it is nearly two years since we had a debate in your Lordships' House devoted exclusively to Wales. Today was also the nearest date to St David's Day that I could obtain for this debate. From the number of noble Lords who have agreed to take part, I believe that there would be real value in having an annual debate on Wales, preferably as close as possible to 1st March, as happens in the other place.
This year marks the third anniversary of the establishment of the National Assembly for Wales. As we look back, it is remarkable how smoothly the process of devolution in Wales has gone. It is also

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remarkable how contrary that history is to the warnings of those who opposed devolution. Devolution has not led to the break-up of the UK; indeed, the demand for independence has waned. An extra tier of government has not meant greater uncertainty and delays for business: rather, the Assembly has provided a platform from which all sizes of business have been able to voice their concerns. The devolution process has also not resulted in power being taken away from individuals. The Government and supporters of devolution can look back with some pride at how much has been achieved.
Opinion polls on the issue of devolution have been taken regularly since 1997, and a number of clear trends have emerged. There is less demand for an independent Wales; the number of those opposed to the establishment of any type of assembly has decreased dramatically; and a majority now favour significant devolution.
I believe that it is helpful to distinguish the concept of devolution from the current working of the Assembly and its elected Members and civil servants. I also believe that the devolved government of Wales has grown in popularity because it is a symbol of an increasing national identity for Wales, reflecting growing self-confidence and self-belief, and because it is perceived as a way of giving Wales greater power within the United Kingdom. The same sentiment, alas, does not extend to the Assembly's effectiveness. The perceived haranguing over its name, its procedures and its building, the demand for more resources at a time when its budget is under-spent, and the turmoil that has afflicted each of the parties were all reflected in the poor turnout for last autumn's Swansea East by-election.
We should, however, also remember that the Assembly has faced enormous problems. Initially, there was a minority government; then came the electronics crisis, the fuel crisis, the flooding crisis, the Objective I problems, foot and mouth disease and the loss of jobs at Corus. I believe that the Assembly deserves credit for handling those problems. To begin with, the transition from minority government to an effective coalition was made smoothly. Moreover, the Assembly's management of the foot and mouth crisis—in which the Assembly's regional offices played a critical role, and which involved the Minister for Rural Affairs co-ordinating local government, the Army, the police, the Environment Agency, the vets and MAFF—showed the people of Wales that the Assembly was more than just a talking shop.
The new formula which has been developed to allocate the £3 billion grant to local authorities is a significant improvement on the old formula used by the old Welsh Office, largely because it recognises the extra cost of services in deprived areas and sparsely populated rural areas. Even if one disagrees with them, the Assembly's plans in spheres such as the economy, health and education are professional pieces of work and a basis for serious debate.
The Assembly is open and transparent in its deliberations. It is also an improvement on the Welsh Office in that it allows more effective debate in Wales by those who are closer to the subjects under discussion. Such debate has also proved to be a source of new ideas, such as proposals for the Children's Commissioner and NHS reform that places carers on local health bodies. In all of that, I believe that we should pay tribute to the work of the noble Lord, Lord Elis-Thomas, the Assembly Presiding Officer who has shown tremendous commitment and fair-mindedness in wanting to make the Assembly work as a body.
One issue that must be considered is the Assembly's current powers and the way in which it works. A number of problems have emerged. First, in the current Session of the Assembly, the Administration asked that four Welsh Bills be included in the Queen's Speech. None of them was successful. As if to add insult to injury, the debate on the Health Bill, which had sections relating to Wales, took place in Westminster before it had even been considered by the Assembly.
Secondly, although the subject committees of the Assembly have an explicit policy development role, they have no real way of ensuring that the results of that role are fed into Westminster policy. Having been involved in policy development for some time myself, I find it difficult to imagine the committees being truly effective in that role when the distinction between the executive and the legislature in the body corporate is far from clear.
Thirdly, new primary legislation passed at Westminster can reduce as well as increase the Assembly's powers. The extent of secondary legislation varies from Bill to Bill and is at the discretion of the department in London that sponsors the Bill. I could give other examples.
Of course I recognise that some will argue that the Government of Wales Act 1998 could be implemented more effectively if draft Bills were published, if there were improved procedures for influencing primary legislation and if Ministers gave more notice so that committees could scrutinise legislation more effectively. I have no doubt that all those steps would be helpful. In my experience, however, the sheer pressure of deadlines makes it practically difficult to implement such proposals. I have therefore reached the conclusion that—even if the proposals were partly implemented; I cannot see how they could ever effectively be fully implemented—there will remain a strong prima facie case for us at Westminster to revisit the issue and to amend the Act to give primary legislative powers to the Assembly in spheres that are currently devolved.
Devolution is here to stay. The referendum, however narrow the result, is irreversible. By granting the Assembly the powers of primary legislation, we could strengthen the process of devolution and allow the people of Wales greater input into their legislation. Timing also is important. It is far better that the change is made when the political colour of the governments in Cardiff and Westminster are the same.

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Most important of all, I believe that strengthening devolution is the best way of strengthening the ties that bind the United Kingdom together.
I shall now leave devolution and turn to economic and social conditions in Wales. Devolution is not an end in itself. Although the Assembly will be judged ultimately by its effectiveness in delivering public services—better schools and better hospitals—it will be judged also by the prosperity of the economy and job creation. It is far too early to judge the effect of devolution on economic and social conditions, as it is only now that policies are being drawn up for Wales that are distinct from those for England. However, let us not underestimate the challenge faced in increasing prosperity.
Wales is currently languishing relative to the rest of the mainland UK. It did well in adjusting to the momentous changes of the early 1980s, but it has not succeeded in solving its serious long-term problems. I shall give a few facts. Prosperity in Wales, measured by GDP per capita, is nearly 20 per cent below the UK average and has been in decline for the past 25 years. If the status quo continues, this situation can only get worse.
In the first half of the last decade, spending on research and development per head, as a proportion of output in Wales, averaged one third of the UK ratio. Employment in the public sector in Wales accounts for a higher proportion of GDP and jobs than in any other mainland UK region; and since 1984 the public sector created 22 times as many jobs as the manufacturing sector. Moreover, activity rates are as low in Wales as in the most depressed parts of the big cities of England and Scotland. By any standards, and party politics apart, this is a grim picture.
A great deal of debate on how to redress the situation has focused on help from outside Wales: reviewing the Barnett formula, securing Objective I funding and increasing foreign investment, all of which are important. But their significance should not disguise the fact that the first of those is a grant and the second a subsidy, both of which will decline as prosperity increases relative to the rest of the UK. Most inward investment has also involved government subsidies, a great deal, regrettably, being in routine low value-added manufacturing and now in call centres in the service sector, paying as a result relatively low wages.
I do not wish to denigrate the efforts of this or previous governments or the tireless work of the WDA in attracting foreign investment to Wales. Without it, we would be facing a catastrophe. Yet the clear picture which emerges is that for over 25 years the Welsh economy has languished. Against that background business as usual is not an option for Wales—I believe that it is a recipe for continued decline. The rest of the world is changing at such an extraordinary pace that simply to keep up it is necessary that much more is done than in the past. Wales cannot cut taxes or change interest rates, so its room for manoeuvre is limited. Therefore, there has to be a seismic shift in thinking and practice.
The WDA made a salutary point in its most recent corporate plan which states:
"Neither governments nor development agencies generate economic prosperity—only business can do that".
It is right. High value-added jobs paying attractive wages are created by private companies. If Wales is to become a knowledge driven economy with a thriving private sector, investing in innovation and R&D, the one area which is critical to its success is education. However, the challenge is again enormous. Professor Kevin Morgan of Cardiff University spelt it out with brutal clarity:
"One wonders if we have the skills to enter the knowledge economy, when one in four of the population is functionally illiterate and two in five functionally innumerate".
While I strongly support devolution I must confess that I have reservations about certain current policies. Education is critical to economic success. Yet the present ministerial proposals to scrap school league tables, abolish tests for seven year-olds, have more learning through play and fewer formal lessons in the early years, ruling out any reliance on the private sector and rejecting specialist schools place in jeopardy the chances of Wales making education the key to future prosperity.
The rejection of specialist schools is extraordinary as the one kind of specialist school which Wales does have—namely, Welsh language schools—have been a huge success. It seems odd therefore that in view of the overwhelming success of specialist schools in England they should be rejected in Wales. Only this morning I received a newsletter from one of the first city technology colleges which had hosted a visit from those developing the Welsh baccalaureate qualification. Meinir Richards stated after visiting the college in Birmingham:
"The standards of achievements, the superb facilities, the wealth of experiences offered, together with staff and student enthusiasm and commitment were all topics of conversation on our return journey. The general concluding theme was that we had a great deal to learn from the Kingshurst experience".
The Assembly and the Cabinet have a crucial role to play in the future of Wales. However, the danger is that they embrace so overwhelmingly the views of trade unions and local authorities that they fail to take those radical steps which are necessary to Wales becoming a world-class economy.
I wish to say something about the language. We on this side of the House have a proud record of supporting the Welsh language and Welsh culture, setting up S4C, S Pedwar Ec, passing the Welsh Language Act and extending the teaching of Welsh in schools. I have always felt that devolution was in the first place more about the preservation of language and culture and not economics. The Assembly more than any other body is responsible for creating a bilingual nation. We must be supportive of its efforts. The language must survive in an age of globalisation. The challenge it faces is to develop programmes and policies which will support and strengthen the growth of the language while at the same time being inclusive of those who do not speak it. I firmly believe it can be done. I beg to move for Papers.
5.55 p.m.
Lord Morgan: My Lords, it is fitting that this Motion was introduced by my friend, the noble Lord, Lord Griffiths of Fforestfach. He is, as it were, a good deed in a naughty world. He is that rarer axis, a Conservative who I believe spoke and voted in this House for Welsh devolution. He again spoke with enormous effect in supporting his view. It seems to me that his party has now, as it were, caught up with him and has recognised the value of devolution for Wales and, indeed, for the Conservative Party which has a constructive role in Welsh affairs in a way that perhaps it has not had since its heavy election defeat. I refer to that of 1868!
Devolution is a massive achievement for this Government. The Labour Government can take enormous pride in that. I refer in particular to my noble and learned friend the Lord Chancellor who evidently forced it through. The distinguished array of speakers in the debate—I believe that there are three former Secretaries of State, the presiding officer of the Assembly and other distinguished political figures—is testimony to the importance and, I believe, the success of devolution.
I agree very much with what the noble Lord said about the positive aspects of devolution as it seems to me that it has often had an unfair press. It has been unfairly criticised partly because of a kind of ignorant disrespect with which Wales is commonly treated—a kind of Anne Robinson syndrome that seems to have spread throughout the commentary on Wales—and partly because many commentators have unreal expectations. Devolution was bound to be asymmetrical. Wales is simply different from Scotland. Its history is different. It will take time for devolution to have an impact. It takes a long time to shift the effect of 1,000 years of centralised rule. Wales does not have the civic tradition of Scotland. It did not have a constitutional convention and so devolution is a learning process. However, as the noble Lord indicated, it is a learning process that is going well in many ways.
It will be generally agreed that the inheritance of the Welsh Assembly has been difficult, particularly in the economic sphere. The noble Lord indicated more clearly than I could how the indices of well-being and economic prosperity are disappointing in Wales and have been for a considerable time. But in a way that almost confirms the point about devolution; namely, that previous methods of decision-making, however distinguished the holders of the positions involved, have not been effective. Wales has lagged behind. Its indices of growth and its indices in terms of health and housing are inferior to those of the rest of the United Kingdom. We have heard that GDP in Wales still lags behind by up to 20 per cent and is not improving. There is a lesson, as it were, here for this side of the House. It was commonly believed that nationwide, centralised planning would produce equality. It has not. Wales is not equal. The regions of the north of England are not equal. The effect of such planning over recent decades has been to enhance disparities rather than to diminish them.
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As we have heard, the economic background to the National Assembly taking power in Wales in 1999 was difficult. Since then Wales has had the various economic features that the noble Lord mentioned such as foot and mouth disease and the problems with the Corus steelworks. Wales has its own social needs. Not long ago we discussed the Barnett formula. I believe that many of us feel that the particular needs of Wales are not now being met under the needs assessment within that formula. Nevertheless it seems to me that the noble Lord is absolutely right in taking the positive and relatively buoyant view that he did.
There are signs, particularly since the coalition took office under Rhodri Morgan, of a clear agenda emerging, particularly in the social area. There are many inadequacies—in no way do I dissent from the noble Lord's comments in that regard—but the Assembly is beginning to formulate a distinctive social agenda.
On health, we have a distinctive Welsh perspective that seeks to preserve the essence of the health service and to build a particular Welsh commitment to local healthcare, to community provision and to doing things differently from England. There are also specific benefits such as the freezing of prescription charges, which is highly beneficial.
On education, the record is mixed; I do not dissent from the comments of the noble Lord, Lord Griffiths, in that regard. There has been a strong commitment to cut class sizes and to increase the range of technical provision for secondary schools. We heard only a day or two ago the very welcome news that student maintenance grants will be restored to some degree in higher education in Wales. In that regard, we hope. as it were, that they bite some of our other generals in England.
In social terms, devolution has meant that a distinctive agenda is beginning to emerge, but not as strongly as in Scotland. In the economic sphere, that is less clearly the case. The Welsh Assembly has weaker powers than the Scottish Parliament, and the Welsh economy is more vulnerable than that of Scotland. There are signs of a proactive policy. I mention one in particular—there are signs that the Assembly, through developing IT and skills, is trying to create the new phenomenon of an entrepreneurial Wales. Wales has been rather good at producing university teachers and unproductive people of that kind, but it has not been very good at promoting business or the entrepreneurial concept. There are still a very small number of Welsh businesses on the London Stock Exchange—I believe that there are just over 20. That has been a very weak feature of Welsh life.
In connection with the loss of jobs at the Corus steelworks, there have been attempts to at least repair the damage. The rural recovery plan and the way in which Wales handled foot and mouth disease are signs of the virtue in devolution—they are signs of local decision-making being surprisingly effective. Out of the carnage and mayhem Wales has shown distinct signs of recovery.

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I take great pleasure in the fact that the Welsh economy is now viewed from an all-Wales perspective. That is a novelty in history. It is something that we have long needed and it is appropriate not merely for Wales but also for the era of globalisation, which the nation state has eroded—localised centres of decision-making are now appropriate. Wales is forming its own priorities and will, I hope, continue to do so. There is a Welsh perspective on the euro, the rate of sterling, Europe, enlargement, regional government in Europe and even on aspects of foreign policy—for example, on relations with the Republic of Ireland.
My conclusion is very much that which the noble Lord expressed so well; namely, that devolution should go much further. We cannot stay as we are; primary legislation must certainly be extended, along with powers of indicative economic planning. We have had only one measure of Welsh primary legislation, which I believe was improved in this House. I hope that that will be the precursor of other such legislation.
My final point is rather more critical and involves a point of detail. Wales has increasingly established its identity under devolution. It has not merely a cultural identity—in particular, those of us who are Welsh speakers are very strongly aware of that—spanning many decades but also a civic identity of a kind that it has not really previously had in its entire history. It is very important to preserve that by preserving institutions. My time is up. I add that I deeply regret the suggestion that the University of Wales should be undermined. I very much hope that what is otherwise a success story will not be marred by that proposal.
6.4 p.m.
Lord Hooson: My Lords, I join the noble Lord, Lord Morgan, in thanking the noble Lord, Lord Griffiths of Fforestfach, for initiating this debate. His was by far the most constructive and sympathetic voice on the Conservative Benches during the whole of the devolution debate. His standing in the academic world and as head of the Prime Minister's Policy Unit during the Thatcher era and his known concern for public morality lent great weight to his approach to the well being of this important experiment in devolution.
I am a lifetime supporter of the movement for a domestic Parliament for Wales. I introduced a 10-minute rule Bill in, I believe, 1966 that was drafted by my noble friend Lord Thomas of Gresford and which would have established a domestic Parliament for Wales with much wider powers than the Assembly has. I agree that it is a shame that the Welsh Assembly did not have greater powers.
We must face the fact that the Assembly, which is the first legitimate, democratically elected body to represent the whole of Wales, must be judged in the first instance by how well and how efficiently and sensitively its elected Members are discharging the duties that have been devolved to them. After all, before devolution, those duties were largely discharged by a Secretary of State and the staff at the Welsh Office.
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The first impact of devolution in Wales is that it has illustrated to many more people the geographical problems of Wales. I have always believed that one of Wales' problems is that, because of communications, the east-west division is almost more important than the north-south division. In our area, in east Wales—I refer to east mid-Wales, but I know that the same point is true of east north Wales and east south Wales—we hear far less about the Assembly's goings on because of the way in which television aerials are arranged, the role of the press and so on. Many of those people do not know what is going on. That great problem needs to be addressed. I am very sorry that the Welsh Assembly was not given some control over the media, particularly over television.
The greatest impact of devolution is that the people of Wales now appreciate more the economic, social and educational problems that beset them. That led in a relatively short time to the emergence of' an attitude that differs from that of the Assembly. We need an approach to Welsh problems that is more holistic than we have previously experienced. The guiding principles of the plan for Wales, which was set out by the Assembly in October 2001, were a clear indication of that holistic approach. The plan followed the report by the First Minister on Assembly approaches and achievements by the governing coalition.
On health, we should bear in mind the enormous problems revealed by Dr Ruth Hall, the chief medical officer in Wales, in her first report to the Assembly. Those problems include smoking levels in Wales, the high alcohol consumption rate, the considerable increase in drug abuse—especially of hard drugs—in Wales and soaring mental health problems, especially among young people in Wales.
Much of the Principality's population were found to be obese and overweight. In the light of those findings, I was particularly impressed by the health promotion action plan, which was evolved by the Assembly to deal with that enormous problem. That should involve the whole community, local health alliances, schools, universities, workplaces and, I hope, responsible help from the media. I live in a well integrated town in a rural area and in a very settled community. In a strange way, such involvement takes place naturally there. I believe that that type of approach is necessary. There is a sign of a different kind of approach to politics in the Assembly. Its Members are no longer fighting the battles of Westminster in a small way in Cardiff; they are evolving their own approach.
Perhaps I may mention one or two problems that worry me. The first is the failure of the Assembly to tackle in any way the problems of quangos. One of the main arguments in favour of devolution was that nominated bodies of favoured Conservative and Labour government nominees would be replaced by an elected body. We did not have an Assembly in order to perpetuate quangos, and I do not believe that the Assembly is by any means an over-worked body. I do not consider its hours of work and application to be as great as, for example, those of the House of Commons or this place. It is very easy for the Assembly's Members to fail to attack some of the problems of

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quangos. They might be too easily influenced by their officials and the approach of, "Let the status quo remain". I ask: where in the range of priorities of the Welsh Assembly does the replacement of quangos lie?
The success of the Assembly depends upon the ability, knowledge, dedication and application of its Members. It is up to each political party to ensure that its candidates for the Assembly want to make it work and that they are people who have a good deal to contribute to its success. It is not a training ground for Westminster. It would be a poor one in which to train for Westminster and it would not be good for the Assembly if it attracted that kind of person.
The Assembly should not try to mirror the party battles of Westminster. I believe that it should form its own agenda for Wales. So far as concerns the Cabinet in Wales, it would not worry me if it were formed of a coalition of Members of all parties. The Members could evolve the idea of filling the post of Minister with the best person for the job. After all, they are discharging administrative functions. Their other powers are very limited.
I agree with the noble Lord, Lord Griffiths of Fforestfach, that the Assembly has made a good start. I believe that its Members are evolving a greater sense of confidence and I hope that they will not settle for the second best in anything. They can have their own—that is, a different—approach. I was brought up with the old idea of party politics in which everyone attacked everyone else. I was in a profession which had an adversarial system, which I enjoyed enormously, as I do in politics. But I am not at all sure that the adversarial system taken to the extremes to which it has been taken in this country is the right approach for a Welsh Assembly. I want to say only that it has started well. Every year we should have at least one debate in this House in order to consider the evolving problems and evolving solutions of the Welsh Assembly.
6.14 p.m.
Lord Morris of Aberavon: My Lords, I, too am grateful to the noble Lord, Lord Griffiths of Fforestfach, for initiating this debate. Devolution is a field in which I have participated and is something which I have tried to achieve for nearly 50 years. The noble Lord, Lord Griffiths, has been a consistent supporter. He once confessed to me that when he was a boy at school he came to a Labour Party meeting in Swansea where I was the principal speaker. Such was my influence on him that he promptly went off and joined the Conservative Party. Had I known that at the time, I might well have curtailed my speaking engagements.
The National Assembly for Wales owes its powers to statute. I am pleased to report that in the exercise of its functions I believe it is making good progress. There should be a recognition of that. The Assembly had a very steep learning curve. There are not many bodies where the members are thrown in at the deep end and are expected to swim. For new bodies with wide powers. there is frequently a running-in period.
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I recently commented on the Assembly's disappointing record of law-making in the form of subordinate legislation in its first year. Long before I became Secretary of State, I was the first Welsh politician to embrace the concept of giving such lawmaking powers to a Welsh assembly. How were those powers being used? In the first year, of about 200 statutory instruments passed, only a handful differed from those of Westminster. Recently a robust defence has been made on behalf of the Assembly's performance in the following years. In 2001 the Assembly passed 230 pieces of subordinate legislation of which 81 orders, representing 35 per cent of the total, were unique to Wales or had significant differences in drafting. Others may want to analyse the differences. That is, indeed, a matter for congratulation.
I constantly hear plaintive cries that the Assembly is not able to fulfil the needs of Wales because it lacks the power to pass primary legislation. I should say two things. The dramatic increase in secondary legislation is indicative of the areas and extent to which the Assembly is able to act with effect. Against that background, it is incumbent on those who complain of the lack of powers to spell out precisely where the existing powers of the Assembly have proved to be significantly inadequate. What would they have done more, and substantially more? My attitude is sympathetic, even though I adopted and proposed the present system in the first devolution Bills.
The time will surely come when another look will have to be taken at the difference in the powers of each of our devolved legislatures. The machinery of government should be based on the needs of the present and the future and should not rely on the differing historical reasons for its particular form of creation.
The robust defence which has been made makes no response to my plea for wider powers in Westminster legislation to allow the Assembly to achieve even greater diversity and flexibility. I trust that the Assembly is seeking to persuade Westminster on that point.
Legislation is only a part of executive governing. Much, if not most, of my work for over 13 years as a Minister was in implementing policy and effecting non-statutory policy. That is where the Assembly is really coming into its own. Just published is a scholarly report on education and life learning by the Assembly's committee. There is not time to go into the details tonight—my noble friend Lord Morgan touched on one aspect—but I venture to say that only through the setting up of the Assembly could work of that kind be given a priority by parliamentarians,
Lastly, I turn to the problem of the Welsh language in its heartland, the very existence of which is denied by some. I endorsed the suggestion made by others for an independent inquiry. In its wisdom, the Assembly has decided to go down a different road and has entrusted the work to its culture committee. The problem remains the same. Welsh speaking in the Welsh heartlands is under great pressure. On the

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other hand, Welsh speaking, following enlightened education policies, is increasing in the urban areas. Is that enough or will we never be forgiven in Wales if we allow the traditional Welsh-speaking areas to decline any further?
There is a problem of inward migration from England, which is shared by attractive parts of England, too, such as the Lake District and Cornwall. Low-income families have problems in buying affordable homes and, indeed, in finding any employment. Perhaps I may contrast the place of birth of residents in our industrial communities.
In Blaenau Gwent, Merthyr, Rhondda Cynon Taff, and Neath Port Talbot, over 90 per cent were born in Wales. The proportion falls significantly in North and West Wales. In Conway it is only 53.5 per cent; Denbighshire, 57 per cent; Ceredigion, 64 per cent; Anglesey, 67.7 per cent; Pembrokeshire, nearly 70 per cent and Gwynedd nearly 72 per cent. Those are the figures from the Wales Year Book 2001. I have no reason to believe that they are inaccurate. They speak for themselves.
I believe that an authoritative view is needed. First, what kind of balanced communities, realising the present and inclusive make-up of those communities, should we aim for in the traditional areas? Secondly, are there human rights and European Union limitations on new policies? Thirdly, what should be done positively to encourage employment? Fourthly, what has been and will be the effect of current and proposed planning powers, in particular as regards house building? Fifthly, are our educational policies working in those areas to ensure the continuance of the Welsh language and to give significant help to encourage learners? Those are some of the problems and they bristle with difficulties.
I remember a Secretary of State, the leader of the then GLC, coming to me with a plan to export huge numbers of pensioners from London. I told him rather sharply that we had enough problems. I asked him who would provide the housing and the health services. Those are the problems which face what I believe to be the Welsh heartlands. I hope that whatever machinery is adopted, it will fulfil the tasks expected of it.
6.23 p.m.
Lord Walker of Worcester: My Lords, as a humble Englishman, I am honoured to take part in the debate. When I was appointed as an English Secretary of State for Wales, the only people who rejoiced were some in Glamorgan who thought that I used to play cricket for them. Alas, it was a different person.
As this is the first Welsh debate for some time, perhaps I may be forgiven for paying tribute to my former colleague at the Welsh Office, the Minister, Ian Grist, who, sadly, died a few weeks ago. I believe that Ian was liked by all parties. He was devoted to his constituents and to Wales and put in an enormous effort for them. It is a tragedy that at such a young age he was taken by a nasty illness and recently died. I pay tribute to him.
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I thought that 2001 was a sad and bad year for Wales to start this century. Matters such as the steel works, foot and mouth, which has been mentioned, and decreases in inward investment combined to make it a difficult year. It would be easy for Wales to go into depression. I believe that there are still enormous opportunities for Wales, which could enjoy a great expansion in the coming years. My noble friend Lord Griffiths said how supportive he was of devolution. Had I been a Welsh elector I would have joined the 49 per cent voting against it. However, once passed, it is the duty of all people in Wales to support it and hope that it succeeds. Once it is in place, I believe all of us hope that the Assembly has many successes.
The great advantage for Wales is what it can offer in terms of inward investment and other factors contributing to quality of life. The quality of life has improved enormously. Wales now has a fabulous capital city in Cardiff. The improvement in that city—always elegant and possessing much quality—is remarkable. A great deal is due to the actions of my noble friend Lord Crickhowell as Secretary of State. At a time of economic depression and great difficulty he had the vision to see the opportunities for developing right the way through to the sea. His decision to set up the Cardiff Bay Development Corporation and to go ahead with the barrage proved enormously successful. I tried to continue with that activity. My one opponent was the First Minister in Wales. I hope that if ever the Assembly buildings are completed, they will have outside them a large mud flat to remind him of what he wished to retain.
Cardiff is now one of the best cities in Europe. It has a fabulous stadium. In the future, I hope there will be a great arts centre. To have a capital city with all the facilities and quality of buildings that Cardiff enjoys is an enormous advantage to any country. There are also surrounding areas of great beauty. I believe that a combination of all that means that Wales can say to the world's business and commerce, "This is a remarkable place to come to". I hope they do.
The inward investment position is still serious. As someone who still reads the Welsh press and the press handouts of the Wales Office and the Assembly, I believe there is a slight complacency. One gets the impression that it is all going exceedingly well. However, I obtained from the Wales Office the current figures. For the year 2000–01, there were 75 new projects at a total capital investment of £491 million. Ten years previously there were 208 new projects and a capital investment of £1,115 million. That is a drop in both projects and capital investment of about 60 per cent, and a fairly steady drop.
The Welsh economy needs inward investment. It is easy for some people to say, as they did when I was there, that they are not high-quality jobs. However, they are much better than no jobs, and bring with them all the needs for servicing and other activities in the Welsh economy. That is an important theme. I hope that the Welsh Assembly will give great attention to what needs to be done to boost the figures of inward investment during this current period. People say that when there is a recession, that is much more difficult.

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Funnily enough, during periods of recession, many firms throughout the world look for a better place to produce their goods at lower cost and more effectively. Wales can offer that; not by paying low wages but through the availability of low-cost premises and a university system which is willing to collaborate.
I express my hope, too, that the Welsh universities will be carefully protected during this period. I hear suggestions, including from within the Assembly, for changes in Welsh universities. I believe that the Welsh university system has enormous quality and potential. In my lifetime, Cardiff University has enhanced its reputation nation-wide and worldwide. I believe that the other parts of the federal University of Wales also have enormous potential of great importance to the economic development of Wales. I hope that great care will be taken.
The other area of great depression, about which I disagree with my noble friend Lord Griffiths, is in the handling of foot and mouth. I do not believe that: that was handled well. I do not make this as a party political point. I believe that it was handled badly both in England and Wales. Speaking to leaders of the farming unions in Wales and elsewhere, there is general agreement on that. I am sorry that there is no agreement on an independent inquiry as to what happened. I believe there should be. As a former Minister of Agriculture, I obtained great benefit from the inquiry and report of 1967 when, after a very bad foot and mouth outbreak, a Labour government investigated in great depth what had happened and what should happen in the future. The one sadness of the recent foot and mouth outbreak is that that report, both in Wales and in England, was totally ignored. Measures were not taken that could have dramatically reduced the effect.
The effect on agriculture and tourism in Wales has been massive. It is very difficult to see how those sectors will revive. Confidence has been lost. The hill farmers of Wales have always had a lean time. I has never been—nor will be —-a prosperous industry. Producing sheep on the hills is a tough task which is not very remunerative. Many of those farmers are now bankrupt. They are deeply in debt and do not know how to start again.
There should be a clear plan for Welsh agriculture over the coming period. One rather wild suggestion could be examined. The Prime Minister, on his tour in Africa, made speeches about the importance of more aid and more food aid specifically. He said that the trouble was that when one gives food aid it reaches the wrong hands and is used by corrupt dealers and does not reach the people who are starving.
There is a great opportunity here for Wales. Irrespective of one's religion, the form of meat that all the world eats is sheepmeat. Wales could easily organise a programme of food aid world-wide using its sheep production resources. A five-year contract could be placed to do that. Of course, Europe would object. But when Europe objected, one could say, "You can join in the scheme", and, "Why don't you?" Europe
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has never organised aid programmes well. Here is a specific area for a food aid programme which could provide a firm contract.
There is a great deal of talk about "other alternatives". I read with great interest the report on agriculture produced by the Government last week. I thought that it was the most devastatingly bad report. The main enthusiastic argument was, "Let's get rid of the CAP subsidies so that farmers face reality". That is absurd. The hill farmers of Wales have faced reality in a very big way over this last period. They need to be able to sell their production and sell it well. Of course we can encourage organic farming and areas such as that. But so far as concerns the hills of Wales, sheep will remain a necessity. Programmes should be discovered to make sure that sheep farming is revived and has a tolerable time in the future. It is vital for the Welsh countryside that that takes place.
Several noble Lords have spoken about the importance of education. I very much agree with that. We must see that educational services are allied closely to businesses in Wales. Business needs a better educated and skilled force. The Welsh educational service can provide that. I wish it every success in doing so.
6.32 p.m.
Lord Elis-Thomas: My Lords, it is always a pleasure to follow the noble Lord, Lord Walker. In the relatively carefree days—from my point of view—when I was merely a party leader in the Commons, he was a Secretary of State. We were paired. That did not do either of our careers any harm and we were able to spend more time in Wales than otherwise we would have.
I thank the noble Lord for commemorating the late Ian Grist. He was a Minister who devoted much of his time to developing the health service in Wales. It is appropriate that we should commemorate him in this House.
I also thank the noble Lord, Lord Griffiths, for introducing the debate. In order to maintain the reputation of fair-mindedness which he kindly endowed upon me, I shall not get involved in the University of Wales, the Welsh language or the economy. I shall confine myself to the constitutional issues. I declare an interest as both presiding officer of the National Assembly and as the Member for Meirionnydd Nant Conwy who is about to face reselection.
Given the views of some people in my party about this House, this might not be the most appropriate platform from which to launch my reselection, but I shall do so none the less. Tonight I should have been in the Millennium Stadium supporting the Welsh football team against Argentina. I wish them well But my devotion to the noble Lord, Lord Griffiths, arid to this House is such that I felt that it was more important to be here.
Tomorrow in the National Assembly we shall be debating the report of the Assembly's review of procedures. It is the first opportunity that we have had

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to look at the way that we function. I should like to highlight some of the points that hopefully we shall be debating tomorrow.
The noble Lord, Lord Griffiths, has already made the point about the complex geometry of devolution: the relationship between the powers that are devolved to Cardiff and the powers that are with Parliament at Westminster. A point that has not been sufficiently understood is that Parliament is still defining devolution as it moves. In other words, by repealing legislation at Westminster under which executive functions have been conferred on the Assembly by previous legislation and by passing new primary legislation which gives functions to Whitehall Ministers, Parliament is reducing as well as increasing the Assembly's powers. Therefore, we need to look again at that relationship.
We were presented in our report on the review of procedures with a series of principles by Professor Richard Rawlings of the LSE. It is appropriate that I should highlight some of those principles. They are principles that apply to how government at Westminster can assist the process of devolution without in any sense establishing primary powers by default, about which some people have argued.
It is important, first of all, that the Assembly should acquire new powers in Bills which come from Westminster which relate to its existing responsibilities. That is a basic devolutionary principle. In other words, there should not be a retreat from the existing areas of responsibility.
Similarly, the tendency to give powers to a UK Minister covering Wales should be pursued only if there is a case for a single England and Wales or GB or UK basis of policy making. In other words, it should not be up to the parliamentary draftsmen who work for different departments to decide on the geometry of devolution.
We have four previous Secretaries of State, a previous Minister of State and a previous Parliamentary Under-Secretary of State in the Chamber. That is a good contingent from the "colonial" days, if I may put it that way. As much as I affectionately remember the Office of the Secretary of State when it was the main executive arm of government in Wales, it is not now appropriate in the post-devolutionary context to exercise functions through the Secretary of State and the Wales Office, as it is now called. Those functions are more appropriately conferred on the Assembly.
Likewise, where there are concurrent functions—such as those in the existing settlement—new parliamentary Bills should not reduce the Assembly's functions by giving functions to a UK Minister. Nor should there be a requirement to act jointly with the UK Government in dealing with matters which were previously the subject of subordinate legislation within the Assembly. That has happened in a number of policy fields recently.
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It is more controversial to argue for a broadening of the drafting of clauses at Westminster to provide for enabling subordinate legislation or for so-called Henry VIII powers. But I hope that when the Constitution Committee of this House under the noble Lord, Lord Norton, comes to deliberate on this matter—and certainly in the Assembly we warmly welcome the fact that a committee of this House is to look at the process of devolution—it will look again at a form of frame of legislation that enables the Assembly to exercise its powers of subordinate legislation more effectively.
Those are some of the issues which I believe need to be addressed by the UK Government. There are other issues which the noble Lord, Lord Griffiths, has kindly referred to which relate to the development of the Assembly as a constitutional body. I am anticipating what the noble Lord, Lord Carlile, may say. The noble Lord shakes his head. He is not going to say it tonight. I am grateful to him. In the previous debate on this subject he took a bit of a swipe at me—but that is par for the course, as it appears to me that speakers these days are not getting a very good press—in relation to the development of the constitutional structure of the Assembly. That has moved on. We now have a parliamentary body. We have—and I pay tribute to him—a Parliamentary Clerk in Mr Paul Silk. He was well trained in the Palace of Westminster, particularly in the Foreign Affairs Committee, before he joined us in the National Assembly.
The establishment of a government system—although I may not entirely approve of the name that it gives itself—and a parliamentary structure within the National Assembly is clear progress. The prospect of 2003, when there will be fixed-term assembly elections, is fascinating. As your Lordships well remember from the great days of the passage of the Government of Wales Act 1998, the National Assembly for Wales cannot dissolve itself. Whatever the political structure of the National Assembly in 2003, a government must be formed. I was intrigued by the suggestion that there should be a ministry of all the talents—I think that that was the extended proposal of the noble Lord, Lord Hooson, for the Assembly's future.
Finally, we have moved a long way from a certain divisive politics in Wales—this debate has been a sign of this—in which one or other party claimed a kind of monopoly on the Welsh political culture. The growth of the Welsh Conservative Party, the Welsh Liberal Democrats, Welsh Labour and of the Party of Wales, Plaid Cymru, indicates in each of their ways a greater maturity in Welsh politics. It is in that spirit that I congratulate the noble Lord, Lord Griffiths of Fforestfach, and look forward to his further contribution to the growth of an even more autonomous Welsh Conservative Party.
6.41 p.m.
Lord Carlile of Berriew: My Lords, I, too, congratulate the noble Lord, Lord Griffiths of Fforestfach, on securing this debate and introducing it so well. May I join the tributes to Ian Grist? When we

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were colleagues in the House of Commons, I always regarded him as the epitome of the meaning of the term "an honourable friend".
The noble Lord, Lord Elis-Thomas, has this evening been uncharacteristically over-sensitive. I criticised him on a previous occasion, but I do not intend to do so tonight. I entertained serious doubts about the functionality of the devolution settlement and institutions. but, apart from the natural maturing of the institutions, there has been one significant development: the formation of a government. Without seeking in any way to make a party-political point, the formation of the coalition government has demonstrated that Wales, like any other country, needed a government and that the political process works much better if a majority government is in being with a clear political programme—whether or not one agrees with the whole of that programme.
What pains me about devolution and the position of the Assembly is that while the process has matured so well—especially during the past year—the consciousness of that maturity is still weak among many members of the population. The Assembly itself must tackle that problem between now and the second Assembly election.
What also worries me is the asymmetrical nature of devolution. By that, I mean that the Assembly clearly has ownership of some issues for Wales. Yesterday, one came to the fore with the decision to introduce a measure of student grants for students from Wales—as I understand it, those studying both in and out of Wales. That is a welcome development and the signs today are that the Government have shown a real interest in developing what has happened in Wales to cover the whole country.
On the other hand, ownership of Welsh issues has not been shown in the recent announcement by the Secretary of State for Trade and Industry approving the development of a massive wind farm power station in Cardiganshire. That power station—upon which, I understand, the noble Lord, Lord Williams of Elvel, has secured a debate during the next two weeks—involves placing 300 foot high wind turbine masts on an attractive and extremely prominent Welsh hill. The proposal was approved by the local council on a split vote. The Assembly was asked to give its views, and gave them in a clear and objective manner on a number of issues. Those views can now be read in the Library, as the result of a helpful Answer to a Question that I tabled.
That decision was not made at a public inquiry in Wales; there was none. It was made not by a Minister in the Assembly; nor by the Secretary of State for Wales. It was not even made by a Minister with responsibility for the environment. The decision was made by the Secretary of State for Trade and Industry.
I confess to being one of those who opposed the proposed power station. It will be a terrible scar on the landscape of Wales and a wholly unacceptable precedent for Wales to be used as the dumping ground for supposedly environmentally friendly power schemes—about which I have some doubts that were
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clearly expressed during a previous inquiry of the Welsh Affairs Committee in the other place, of which I was a member.
As a matter of principle, if we are to have a government, for Wales and in Wales, with ownership of issues relating to Wales, such a crucial environmental issue should be decided by the Assembly. I regret that the Government have not even allowed a public inquiry in Wales at which we could all have made our views known.
I should also like to address another extremely important matter: child and adolescent mental health services. I declare an interest as the founder and trustee of a new charity in mid-Wales called Rekindle, which is dedicated to helping young people who are recovering from mental illness. In passing, I also declare an interest as the parent of a child who has recovered from extremely serious mental illness. No affliction affects any family—and I mean the whole family—more than the mental illness of a teenage boy or girl.
A committee was set up to review child and adolescent mental health strategy in Wales. It was chaired by a skilled psychiatrist, Dr Jennifer Lloyd, who has experience in clinical practice and in the public health sector. The advisory group on child and adolescent mental health services produced its report more than a year ago. It is entitled, Everybody's Business, and has the virtue of being short and clear and of setting out a strategy.
I realise—and I expect to be told by the Minister when she winds up the debate—that matters of priority in health spending are for the government in Cardiff and the Assembly. However, this is still the superior Parliament—in constitutional terms—and if the Assembly or government in Cardiff seem not to be giving resources to a crucial national interest, we have every right to raise the matter in this Parliament.
The report to which I referred found, for example, a lack of co-operation between those responsible for child mental health that leads to children being passed from pillar to post between agencies or neglected. Yesterday, I was told by the chief executive of an NHS trust of a case with which he recently had to deal. A 10 year-old boy was admitted who was extremely disturbed, quite violent and desperately needed serious psychiatric help. There was nowhere to send him. He ended up spending 17 days in an entirely inappropriate paediatric ward where staff did what they could for him. Eventually, after 17 days, a place was found for him in an appropriate hospital—in England, I believe.
It is extremely important when families and children are afflicted in that way that we should have proper mental health services in and for Wales. Of course, it is of great value to have people such as Dr Jennifer Lloyd producing a recipe to solve such problems. That has been done and accepted in principle. But it is absolutely unacceptable for the money not to be provided to put those solutions into practice.
I therefore hope that the Government, as part of their overall health strategy, will take the initiative to try to ensure that the social conditions of people in

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Wales include providing proper facilities for the treatment of mental illness among children and adolescents. They are so easy to forget and regard as a problem that does not really exist or may go away. To anyone who feels that way, I say, "Just wait until it happens to you, and you will begin to appreciate the reality and urgency of the problem".
The coalition government in Cardiff are now doing a very good job. They face all the usual brickbats of politics. Wales has always been very good at adversarial politics and I do not believe that the adversarial principle will ever leave politics in Wales. It is in the blood and it is on the tip of the tongue. However, bearing those factors in mind, the Assembly is doing well. I just hope that when it comes to the next Assembly election, the public in Wales will realise that they are now governed from Cardiff and will decide to participate in the political process that selects the form and nature of their government.
6.50 p.m.
Lord Prys-Davies: My Lords, I thank the noble Lord, Lord Griffiths of Fforestfach, for his thoughtful and important opening address. Noble Lords have spoken eloquently and properly about some of the pressing social, economic and health problems of Wales; about regional divisions; about employment, unemployment and the creation of new wealth; and about the possible need to amend the Government of Wales Act 1998.
But the Assembly is still in its infancy. Of course it is not without its weaknesses, nor is the Government of Wales Act 1998, which brought the Assembly into being, without its flaws as well. Some of those flaws, or deficiencies, are discussed by David Lambert, the legal adviser to the presiding officer, the noble Lord, Lord Elis-Thomas, in his chapter, "A voice for Wales", published in the volume, Legal Wales: Its past, Its future. I believe that some of Lambert's thoughts have been rehearsed this evening by the noble Lord, Lord Elis-Thomas. He, too, delivered an important speech. I have little doubt that this issue ought to be examined by the constitution committee.
However, as of now, the Government of Wales Act 1998 is the only foundation upon which the National Assembly has to build. I believe, with other noble Lords, that we can now say with considerable confidence that progress is being made. I, too, have read the address of 24th January by Winston Roddick, a Counsel General of the Assembly. He drew attention to the much-increased legislative activity of the National Assembly during the second year of its existence. My noble and learned friend Lord Morris referred to the fact that during its second year the Assembly passed 81 orders with a distinctly Welsh context in addition to the 149 orders mirroring those made by Westminster departments.
If we look in detail at those 81 orders passed by the Assembly with a distinctive Welsh context, we find that they affect a whole range of devolved subjects. Within the 81 orders there are nine for transport,
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planning and environment, 15 for education, six for health and food safety, 14 for social care, 10 for agriculture, fisheries and forestry, 26 for economic development, industry, local government and housing, and one for the Welsh language. I greatly welcome that increase in subordinate legislation with a Welsh context, because it signals that the National Assembly is settling down and designing subordinate legislation within the framework of England and Wales primary legislation to meet Welsh circumstances and, in time, to improve the living standards of the people of Wales. The legislation and the significant decisions of the Welsh Assembly are all subject to judicial review. But to the best of my knowledge there has been no great increase in judicial review proceedings in Wales.
After the contribution of so many speakers with their wide experience of Welsh affairs, I come to the only specific issue which I want to mention; that is, the deep anxieties of many Welsh people in relation to the future of the Welsh-speaking communities. I should like to reinforce—if that is the right word—what was said on this issue by my noble and learned friend Lord Morris of Aberavon. The Welsh-speaking rural communities are now facing a crisis which threatens the existence of the Welsh language as a community language and ultimately, I believe, as a living language.
The crisis is tied up with a number of complex problems and four in particular: the visible and depressing state of agriculture; lack of employment; outward migration of young Welsh speakers and the inward migration of non-Welsh speakers on a scale which threatens to change the whole character of communities in a quickening process.
Moreover, I feel that there may also be a further factor at work. Perhaps there is by now a festering resentment at the failure of successive governments to tackle the crisis. I accept, as I am bound to do, that on the world stage many languages are today facing a crisis of existence. And we may be able to draw on the experience of some other bi-lingual countries.
But in Wales this crisis has not come upon us with dramatic suddenness. Perhaps your Lordships will allow me to say that 12 years ago the noble Lord, Lord Hooson, and the noble Lords, Lord Thomas of Gwydir and Lord Trefgarne, will recall that we debated this very issue in your Lordships' House. I have no evidence that that debate had any effect at all. But I persevere.
I could almost make the same speech tonight as I made then, except that there are two significant differences. First, the crisis has deteriorated over the past 12 years. Secondly, I am addressing my remarks tonight primarily to the National Assembly for Wales, which is the custodian of our linguistic heritage. Of course there is clearly an urgent need for jobs and homes in the townships in north, west and mid-Wales, townships such as Caernarvon, Blaenau Ffestiniog, Machynlleth and Tregaron, so that they can once again see and believe that they have a future and can sustain their communities. No doubt we will be told that all that will be extremely difficult, if not impossible, to achieve because of this or that factor

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which cannot be altered. Others may even claim that the processes at work in the Welsh-speaking rural communities are irreversible. But in my view doing nothing is riot an option. If there is a determination and a will to succeed I believe that a great deal can yet be achieved. Perhaps I may quote the words of the Counsel General,
"The Assembly is in being to bring about change and it can do so in a number of ways".
I very much hope that the Welsh Assembly will think again about the crisis in the Welsh-speaking areas and think again about the future of higher education in Wales.
7 p.m.
Lord Crickhowell: My Lords, I join those who have paid tribute to my former Parliamentary Private Secretary, Ian Grist. Perhaps I may take the opportunity of also paying tribute to an old friend, a great and very brave Welshman, Lord Gibson-Watt, whose death has just been announced. He will be greatly missed. I also thank my noble friend Lord Griffiths of Fforestfach for introducing this debate.
I begin my remarks by expressing my concern about one particular feature of the present state of devolved government in Wales. Apathy among the electorate there is even greater than elsewhere in the United Kingdom. The work of the Assembly has created little interest except among the politically active minority. Media coverage is limited in its impact.
As the just-retired chairman of HTV, I want to draw the attention of noble Lords to the importance of, and my concerns about, the coming communications Bill. If regional broadcasting, so important for devolved democracy, is to survive, it is vital that the Government get right the legislation that affects it and that crucial decisions about such matters as media ownership, the switch over to digital and the introduction of broadband are not too long delayed.
I, and others involved, are very uneasy about the process being followed by the Government. There are worrying indications that Ministers cannot make up their minds about ownership issues on which the survival of effective regional broadcasting may depend. Those who believe that democracy and devolution depend on effective communication should not relax their efforts to see that the Government get it right, and speedily.
What has emerged from the Assembly, perhaps not surprisingly, has been pretty dull stuff so far involving a great deal of talking, but not much doing. Participation and consultation are important, but without follow-up action it becomes an expensive luxury. It is true that there are some good stories to tell which promise well for the future. Despite some of the failures which my noble friend Lord Walker has addressed about the management of foot-and-mouth, there was a good and positive reaction, more generous than in England, in the provision of help to rural communities. The 11 per cent increase in arts funding is welcome and there have been some positive messages in the 10-year plan for culture.
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I believe that Jane Hutt, the Minister for Health. has all the right intentions, but the record on health has been less successful. There have been rising waiting lists and there is a shortage of consultants. I am not entirely sure that the proposals for reform are heading in exactly the right direction.
But to return to my theme about making an impact, it is not always easy to discover exactly what the Assembly is doing. I sought information from the Assembly website. It was rather like drawing blood out of a stone. The January media briefing did lead me to two significant debates held on 22nd January. I shall take education first.
The first item that attracted my attention was headed "Creating a World Class Education Centre in Wales". That sounded promising. It turned out to be about a speech made by Jane Davidson, the Minister, in Cuba where she had signed what was described as high level Memorandum of Understanding with the Cuban Minister for Education. In the course of her speech, while she was signing it, she delivered what I can only describe as a eulogy about the Cuban education system.
It appears that some alarmingly centralist Cuban tendencies have already begun to take hold among Assembly Members, or so it appeared from remarks made in the debate on 22nd January about the review of higher education in Wales carried out by the Assembly Committee on Lifelong Learning. I believe that the noble Lord, Lord Morgan, wished that he had opportunities to say a little more about the subject.
I of course welcome the good news that was announced of an extra £6 million for the higher education sector to build on the successes achieved in the 2001 research assessment exercise. But although the Minister acknowledged that those successes owed nothing to the Assembly, both she and other Members seemed to indicate an intent to take a very high level of direct control over the university sector in Wales in a manner which I find alarming.
The committee wants to generate collaboration and networking between institutions and to create regional clusters both for research and teaching. It believes that the Higher Education Funding Council for Wales should promote and lead the way and that the Minister and the funding bodies should enter into a dialogue with the University of Wales,
"to review the appropriateness of the present University of Wales structure".
There were suggestions in the debate that the Minister should require every higher education institution in Wales fully to reflect the Assembly's vision and principles. Others made it clear that they saw it as an appropriate role for the Assembly not just to review, but actually to decide, the structure of the University of Wales. I cannot object to dialogues, but I would be concerned if the Assembly were to seek to dictate the structure of the University of Wales and the relationships between the component parts of the university and the other Welsh higher education institutions. Some Members seem to believe that the quality of research in particular places can be achieved by the imposition of political authority.

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Of course the funding council, with its control of the purse strings, can influence events. Of course, political leaders can encourage co-operation. But to believe that a Minister should dictate the policies of the university, let alone usefully influence research standards, is surely to misunderstand the nature of great and successful universities. Does the Assembly have the powers to do what it apparently wants to do? The universities and their colleges have charters: the Privy Council has an important role. But more important than the powers are the principles involved such as academic freedom and academic choice. Academic talent and academic achievement are not the plaything of politicians: they need to be defended and nurtured. I hope that the Assembly will he wise enough to encourage, but will draw back from following too closely the Cuban example.
Also on 22nd January there was a debate on the Wales Millennium Centre. I am delighted that the Assembly voted up to £37 million towards the total cost of the project of £104 million. I am delighted that contracts are expected to be signed within days. I am delighted that so many Assembly Members spoke with enthusiasm for the project. I only wish that they had spoken with equal enthusiasm in 1995 for the opera house project that would have provided almost identical facilities. I also cannot resist reminding the House that we now have a project that is more expensive than the one that was rejected, even taking account of inflation. We have had a hole in the ground for seven years.
Finally, I shall say a word about another strategy document A Winning Wales—the National Assembly's Economic Development Strategy. There is much that is good in it, but as the First Minister observes in the Preface:
"The test will be how well it is implemented".
It is not true, as the document suggests, that Wales needs to start the task of economic transformation. That ignores the huge steps taken over the past 30 years under the leadership of several noble Lords in this House today on both sides of the Chamber. However, there are some welcome statements about the crucial role of the private sector, about new technologies and about promoting innovation. The trouble is that, once again, it is just another plan, and a 10-year plan at that.
I finish as I began, by acknowledging that the Assembly has done some useful things and, to its credit, has not made any disastrous mistakes. However, if it is to fulfil its own high hopes—or even the much more modest hopes of the people of Wales—discussion and consultation must be turned into effective action and communication with the electorate much improved, or everything that the Assembly does will be lost, either in a mire of voter apathy or in a rising and dangerous tide of discontent.
7.10 p.m.
Lord Brookman: My Lords, as we move towards the end of the debate, I take great pleasure in following the noble Lord, Lord Crickhowell, who gives the Assembly in Wales such wonderful support. I share the general view of noble Lords and welcome the initiative of the noble Lord, Lord Griffiths of Fforestfach, in introducing the debate.
As someone who left south Wales 17 years ago, I thought for a while about participating. However, absence makes the heart grow fonder, as the saying goes. As someone who supported devolution as leader of the community union, the 1STC, the major union in the steel industry, I thought that I should join noble Lords in this important debate. I can assure noble Lords that I took no notice of a colleague of mine—another noble Lord—who said that I should speak because I would probably be the only one debating who had had a real job. Of course, I visit Wales often. As a keen supporter of Welsh rugby, I, like other noble Lords, feel the pain when our national team goes wrong.
From my perspective, as former leader of a trade union, devolution, following a somewhat shaky start. has brought benefits to people in Wales. It is not—nor was it meant to be—a path to independence, but one that gives a voice to previously silent communities. The opening remarks of the noble Lord, Lord Griffiths of Fforestfach, were music to my ears. In giving effective voice to a more participative form of democracy, the National Assembly is already providing improvements.
Noble Lords will be aware that the steel industry in Wales, which has been mentioned several times, has once again suffered horrendously over the past 12 months. More than half of the 6,000 job losses announced by Corus are in Wales. There are also many hundreds of redundancies among sub-contractors whose services will no longer be required. In that terrible situation, the Welsh Assembly and, in particular, Rhodri Morgan, the First Minister, strongly supported by the Secretary of State for Wales, put together an aid package of £66 million—£50 million from the Assembly and £16 million from the Government—to support those facing redundancy and the communities hit by the closures. That has been increased by a further £26 million from the Assembly Government. I am sure that noble Lords will agree that that should be applauded.
All that, together with a raft of wonderful announcements made by the First Minister on 31st January, will go some way to assist in the regeneration of the communities affected. As Rhodri Morgan said in his Cabinet statement of 31st January,
"There are no quick fixes to problems as entrenched as those of our long-neglected industrial communities, but I believe that this programme represents a new start and the strongest possible faith in the future of these communities".
Tribute should be paid to the Assembly and to the Wales TUC, the WDA and my union. They all came together to meet the Assembly Ministers and secured

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extremely large amounts of money for re-skilling redundant steelworkers, through the Wales union learning fund.
Solutions have emerged from the communities themselves, rather than being a one-size-fits-all Westminster policy. That is important, not in a parochial sense, but in the sense that empowering communities will mean that opportunities will be taken with a greater sense of ownership. In my home town, Ebbw Vale, the community has been calling for the re-opening of passenger rail transport. That has been agreed, with Assembly funding. It is good news for the people of Ebbw Vale.
The Assembly, being so relatively young, has much going for it. Being participative, transparent and accessible in the way in which it operates will bring it success and further endorsement from the people of Wales.
7.15 p.m.
Lord Trefgarne: My Lords, I am delighted to take part in the debate and add my thanks to my noble friend Lord. Griffiths of Fforestfach for making it possible. I hope that your Lordships will allow me to direct my remarks to the engineering industry in Wales and its role in the Welsh economy. However, I must begin by declaring my interest as chairman of the Engineering and Marine Training Authority, the national training organisation for engineering manufacture. I shall make another declaration: I was born in the Principality. It is for your Lordships to judge whether that fact adds any credibility to what I have to say.
I am proud of the fact that, although EMTA is a national organisation in a UK sense, we have employed a dedicated team in Wales for several years. We recognise that there are occasions when a different approach is necessary to suit the economy in a particular area. However, in the wider UK economy it is crucial for there to be an element of cohesion, particularly in training and skills. In many respects, devolution has created a more complex situation. Wales has pioneered training policy for the rest of the United Kingdom, under both Conservative and Labour administrations. Now, through the National Assembly, Wales has been leading the way in training, especially in engineering.
I shall give just two examples. The introduction of the modern apprenticeships enjoyed more prominence in Wales than in the rest of the United Kingdom and has proved. so far, to be at least as successful in the Principality. More recently, it was the approach taken in Wales towards equitable funding for training, across all sectors, that many, including EMTA, argued should be adopted in the rest of the United Kingdom. The abolition of training and enterprise councils and their replacement by learning and skills councils, which has brought a more equitable funding regime, is the result.
I am pleased that the vocational GCSE in engineering, about which your Lordships may have heard recently, will be introduced in Wales, as in
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England, in September this year. However, I have some concerns about the mixed messages that seem to come from the Secretary of State for Education and Skills about the value of vocational qualifications. On the one hand, she has said that the qualifications should be aimed at all young people, but then we had the headlines suggesting that bright pupils would be allowed to skip some part of the examination.
The position of the engineering industry on the matter is clear. We are keen to see the introduction of vocational GCSEs as another opportunity for young people to have hands-on experience of the industry. However, we must also be sure that all young people are offered the opportunity to take such qualifications and that they should not be seen as a second-class option for non-academic pupils. Recent experience with the part one GNVQ in engineering has shown that 14 to 19 year-olds from across the ability range can be attracted to the subject and, on completion of the course, may wish to continue working towards an engineering career via a work-based route. We hope that the new qualification will not only increase the flow of young people into engineering but will help to raise the profile of the modern apprenticeships to which I referred.
Of course, the engineering industry makes a significant contribution to the Welsh economy and will continue to do so. At 28 per cent of GDP, its contribution is already significantly higher than in the rest of the United Kingdom. Manufacturing employs about 198,000 people in Wales—about 23 per cent of the workforce, which compares with only 19 per cent in England and 18 per cent in Scotland.
An interesting fact that I recently came across is that over 500,000 kilometres of optic fibre is installed in Wales and Cardiff Bay has more fibre optic cable than San Francisco Bay. My noble friend Lord Crickhowell can take due credit for that.
The fundamental issue facing Wales is the prosperity gap. The target for increasing GDP, set out recently in a strategic document, is to reach 90 per cent of the UK average by 2010. To achieve that, a growth rate of 4 per cent would be required, compared with the forecast 2.7 per cent for the United Kingdom over the same period and against growth in Wales of under 1 per cent per annum over the last decade. The challenge is significant and it is not enough simply to choose policies and strategies that only establish an environment that will encourage growth. It will also be important to make some difficult choices and focus on selected wealth-creating sectors—sectors that surely would include engineering and manufacture.
It is therefore crucial that both the education and training policies of the National Assembly are aimed at supporting manufacturing. From research that my organisation has gathered, we are able to establish that strong links exist between investment in training and development with higher added value per employee.
In an earlier remark I made reference to the complex position that devolution sometimes creates in policy development. While the Government's plans for the establishment of sector skills councils are to be

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welcomed, various delays are causing funding to be withheld and this in turn is causing some important problems for training within the engineering sector. I hope that these changes can now be swiftly finalised.
7.21 p.m.
Lord Thomas of Gresford: My Lords, Wales has not always been the weakest link in the United Kingdom. At the end of the 19th century and the beginning of the 20th century, parts of Wales were boom areas which lived on coal in the same way as we have seen, in more recent decades, that Aberdeen has lived on oil. Certain areas in Wales attracted inward investment in coal, steel and heavy engineering.
When I first became involved in Welsh politics in the 1960s, in my area we still had collieries, steelworks, breweries and leatherworks. It was a reasonably thriving economy. Yet, in 1964 when I stood in my first election in Rhyl, I was calling for a Welsh parliament, for proportional representation and for the abolition of the House of Lords. We have made substantial strides in those directions. As my noble friend Lord Hooson remarked in the course of his speech, in 1967 I drafted a Parliament of Wales Bill, the main feature of which I can now recall was the resurrection of the grand court of Wales with a separate judicial system. In such a system, were it to be adopted, there seemed to be room for both my noble friend Lord Carlile and myself.
In the 1970s, I recall the late Professor Edward Nevin setting out his thesis that, in a period of transition, it would be quite wrong simply to pay compensation to overseas firms to come to Wales. It would not be right simply to pay them money. His thesis posited that the best way of spending public money was to invest in education, a point emphasised in the remarks of the noble Lord, Lord Trefgarne; to pioneer new ways of bringing skills to Wales; and to invest in communications through creating road and rail links—we used to discuss north-south rail links in Wales, but perhaps these days it is more crucial to establish ready movement towards markets in the European Union. He discussed the development of information technology. Professor Nevin also spoke of investing in the quality of life and, indeed, certain strides have been made in that direction.
There has been a severe transition in the economy of Wales over the period that I have been involved in Welsh affairs, ameliorated by the work of the Welsh Development Agency and by the work of successive Secretaries of State, whose contribution has been enormous and is very much recognised. As the noble Lord, Lord Crickhowell, said, the work involved in getting over the transition has not just started now that we have a Welsh Assembly; it is a continuation of what has taken place in the past.
What that means is that we must not underestimate the inheritance of the Welsh Assembly and the problems that the assembly has had to face. As has already been pointed out, prosperity is some 20 per cent below that of the United Kingdom average. That
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is not the case in Scotland, which has pulled itself up to reach United Kingdom averages. Inward investment, on which we have depended so heavily during the latter part of the 20th century, has weakened, a point made by the noble Lord, Lord Griffiths, himself. It is likely to continue to weaken, in particular if eastern European countries attach themselves to the European Union. Other areas of the European market will then become available offering even cheaper labour than has been the case in Wales.
Thus there are great problems which the assembly has inherited, as well as great problems for the future which it has to face. I believe that if we did not have the Welsh Assembly to face those problems, then the task of the future for Wales would be very bleak indeed. We now have people with hands-on experience of the day-to-day challenges and economic problems and I trust them to carry out their responsibilities.
As was said, in my view in the social field the assembly has tackled the task extremely well. The public perception is, unhappily, that the Welsh Assembly has not been a great success during its first stuttering years, but the media have reported the assembly in terms of personalities. That is not surprising because the personalities have certainly been vivid during the early years of the assembly. There have been problems. However, what the media and, as a consequence, the people of Wales have failed to realise is that in the field of policy formation, Wales really does lead the way. Those of us who are concerned with Welsh affairs in this House know that when a Bill is produced here, or when provisions relating to Wales come up in a United Kingdom Bill arriving with the blessing of the Welsh Assembly, then those provisions have been well thought out. There will have been full consultation.
In that regard I refer in particular to the Children's Commissioner for Wales Bill which we debated last year, where wide consultation had taken place and where debates had been held both in committee and on the Floor of the assembly. What then came to this House was the consensus view of all parties. Of course when it was put into the hands of the Westminster Parliament and the Westminster Government, noble Lords will recall that attempts were made immediately to weaken the agreed position, in particular in relation to Home Office affairs. Those were to be excluded. Were it not for the pressures applied in this House, then the agreed solution of the Welsh Assembly would not have been carried out.
Similarly, none of us who attended the meeting held last week with Jane Hutt could have failed to be impressed with the degree of effort that has gone into forming the provisions for the health Bill which is shortly to be debated before noble Lords. Again, widespread consultation has taken place on the structure of the provision of the National Health Service in Wales and an agreed solution has been brought forward.
Agreeing on policy is one thing, but translating it through legislation is another. I was pleased to note, when I visited the Library of Congress in Washington

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three weeks ago, to challenge the law librarian to produce a copy of the laws of Hywel Dda. He produced three copies and a portrait of the gentleman in question, which I found extremely impressive.
However. that is primary legislation. What the legislators in the Welsh Assembly have to do is to translate policy through half of the instruments that are available in Westminster. They can deal only with secondary legislation. They are now learning the skills, but no one, not even the noble Lord, Lord Elis-Thomas, would suggest that, as yet, there is a complete mastery of the way in which policy, through secondary legislation, can be turned to good effect.
I have always supported those who have called for an extension of powers for the Welsh Assembly to include the creation of primary legislation in certain fields. It is a learning process. Once the secondary legislation skills and techniques have been mastered—subject by subject and item by item—so primary legislative powers can be given to the Welsh Assembly.
It was drawn to my attention at the weekend, for example, that animal health is an area which ought to be devolved in its entirety. A lot of the problems caused by foot and mouth were notably absent in Scotland because there was not a long chain of command. They had full control over foot and mouth in Scotland and it was stamped on with efficiency and very quickly. In Wales we were not so successful because different departments were involved.
As the noble Lord, Lord Griffiths—to whom we are all grateful for raising the topic of devolution at this time—said, it is not acceptable that the Assembly should put forward four Bills for the Queen's Speech and every one of them rejected. It is not acceptable that there should be attempts in Westminster to alter the consensus view of the Welsh Assembly on primary legislation. We should at least have a constitutional convention that if the Welsh Assembly is agreed upon a solution and needs primary legislation, then, until it gets the powers to do so for itself, Westminster should put it into effect unless there is a very good and express reason for doing something else.
We are at the beginning of the process of devolution. I have been talking about it for getting on for 40 years; I hope that in the next 40 years we shall see it come to its full fruition.
7.32 p.m.
Lord Roberts of Conwy: My Lords, I, too, deeply regret the passing of Lord Gibson-Watt and the comparatively early death of Ian Grist. Each was a close friend and colleague and both were very capable Ministers at the Welsh Office at different times. Lord Gibson-Watt was, of course, an exceptionally brave soldier who won the MC and two Bars.
I compliment my noble friend on securing this timely and valuable debate. I hope that every Member of the National Assembly will read it. The approach of our saint's clay and the third anniversary of the National Assembly is an appropriate moment to inquire into the state of our nation. The speeches we
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have heard today present a unique picture gallery of Wales at this time. There have also been a number of inspiring new ideas.
Devolution has certainly had its impact on the economic and social life of the Principality, but so, too, have developments in the world outside—in the rest of Britain, Europe and elsewhere. It is not easy to separate the effects of external pressures and influences from those of indigenous initiatives. Wales is no island in the current dot.com doldrums.
I begin by commending the considerable work which has clearly gone on in the Assembly in preparing a variety of strategy documents for the devolved areas within its sphere of responsibility. Their titles—A Winning Wales for the economic: strategy, The Learning Country for educational aspirations, and Putting Patients First for future health plans—give a flavour of the high hopes, idealism and ambitions within those documents and others which flowed from them.
Some of these documents have been heavily criticised within the Assembly itself—and rightly so—but there is no doubt that a great deal of thinking and serious discussion have gone on, and I commend the Assembly on its efforts. But, of course, I bear in mind what my noble friend Lord Crickhowell said, that actions speak louder than words.
Some of the Assembly government's targets are widely optimistic and perhaps they should he reminded that targets are normally set up to be hit rather than missed. Setting targets impossibly high is to court disappointment in future. For example, the ambition to raise Welsh GDP per person from 80 per cent of the UK average to 90 per cent over 10 years falls into that category. As my noble friend Lord Trefgarne said, it would mean that economic growth in Wales must rise faster than in the rest of the United Kingdom by at least one percentage point a year. That is a very tall order and it is far from clear how it is to be achieved from the current economic base, which has been seriously weakened by the loss of valuable jobs in the steel industry and manufacturing, with possibly even more losses to come.
My noble friend Lord Walker referred to the poverty of farmers, especially in the hills. and the further threat to them posed by change in the system of financial support is well known. So is its impact on rural towns and communities, especially in the Welsh-speaking community. Tourism, too, is suffering from the foot-and-mouth outbreak and the threat of recession last year, capped by the events of 11th September.
The buffers of reality in Wales are often grim. In health, the numbers of people on waiting lists have more than doubled to 280,000 since 1997, in spite of increased spending and staffing. Postcode prescribing is rife, and that of course robs the NHS of its claim to be a national service.
It all prompts the question: are the additional resources being properly applied? Will restructuring make things better or worse, as many of us fear?

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Educational standards are improving but there are still too many youngsters leaving school with few or no qualifications. Again one wonders whether the proposed changes in the education system—especially the changes in higher education—will make a difference. I hope that Members of the Assembly will heed what I can only describe as the warning that has come from this debate.
The Assembly still has not debated and approved the Welsh provisions of the Education Bill, which has been through all its stages in another place and has had its First Reading in your Lordships' House. That cannot be right and is, in this case, deliberately wrong. The Assembly is being wilfully deprived of its right to discuss the substantial Welsh contents of the Bill by its Labour/Liberal government and I cannot understand what on earth they are afraid of.
I have raised a similar issue before in the context of the Health Bill and I make no apology for raising it again. It is as clear as daylight that the current method of handling primary legislation relating to Wales is very unsatisfactory from all points of view and should be corrected as soon as possible.
That brings me to the question of further powers for the Assembly. It is reported that the Welsh Minister for Agriculture has made a good case for the transfer of additional functions relating to animal welfare from DEFRA to his office. He is supported, I am told, by the farming unions. If so, we should see this proposal. Although such a transfer may not require primary legislation, it should surely be considered in this Parliament.
With due respect to my noble friend Lord Griffiths of Fforestfach, the case for a general transfer of primary legislative powers to the Assembly has not been made out—except in the letter columns of the Western Mail by writers who do not have experience of what is really involved. The noble and learned Lord, Lord Morris of Aberavon, generally agreed with that basic point. Neither is the Scottish experience particularly helpful. The Scottish Parliament has not made great use, I am told, of its legislative powers or of its limited taxation powers.
We on the Conservative Benches are pledged to assist the National Assembly to work properly and effectively in the governance of Wales. I believe that the relationship between Parliament and the Assembly is improving, but we need to know more about the Assembly's views and proceedings. We should not have to rely on spasmodic coverage in the media to know what is going on. It is in the interests of the Assembly as well as in our own interest that its proceedings and consultative documents should be readily available in the Printed Paper Office and in the Library. Ignorance and isolation are in no one's interest.
I hope to end by raising the hopes of the noble Lord, Lord Prys-Davies. The ability of the Welsh language to revitalise itself never ceases to amaze me. It has lost one nurturing ground after another—church, chapel, farm—but it keeps on finding new ways to flourish. It
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has the versatility of a stern cell and it is indeed a stem cell of Welsh culture and nationhood—as the Old Man of Pencader pointed out to King Henry 1, although not in these precise terms.
It was in your Lordships' House that the Welsh Language Act was introduced nearly 10 years ago. I am proud of the fact that my name is on it. I am sure that your Lordships will echo the words of the Welsh National Anthem:
"0 bydded i'r hen iaith barhau"—
"Let the old language endure".
7.42 p.m.
Baroness Farrington of Ribbleton: My Lords, I have listened with great care and interest to all the contributions to the debate. It is heartening for all of us to know that, whatever the differences between us, Wales still has eloquent spokespeople to argue her case with knowledge and humour.
Perhaps I may begin by endorsing the tribute of the noble Lord, Lord Crickhowell, to Mr Ian Grist and also the tribute by the noble Lord, Lord Roberts of Conwy, among others to Lord Gibson-Watt. It is sad news that we have received today, and I pay tribute to the work that they did on behalf of the people of the Principality.
On a happier note, I know that noble Lords will be pleased to share with me the superb reason why the noble Lord, Lord Geraint, withdrew his name from the list of speakers. He has become a grandfather again; his grandson was born early today. I am sure that we all accept his judgment and sense of priority in going to visit his new grandchild.
I shall pick up a number of particular points that have been made, but perhaps I may begin by summarising some of the real benefits which I believe have come to Wales with devolution. As the noble Lord, Lord Carlile, and the noble Lord, Lord Walker of Worcester. said, we must each work to make sure that devolution works—coming though they may have done from slightly different starting positions.
First and foremost, there is the self-confidence of a nation that now takes its proper place within the UK and the EU, proud of its past achievements, confident in its own strength and ready to play its full part. This, as so many speakers have recognised, is evident in the cultural richness and diversity of Wales and the continuing development of the arts.
The history which led to the development of devolution was nowhere more finely displayed than on the occasion of the Merlyn-Rees Lecture, given by my noble friend Lord Morris. I am grateful to him for the context in which he set the background to this debate.
The renaissance in Wales is founded on partnership between the Assembly and the Government on the one hand and the Assembly and the people of Wales on the other. For a country of the size of Wales to succeed and realise its full potential, it is vital that the energies and abilities of all its people are deployed to the full. I pay tribute in this respect to the ministerial team at the Wales Office and to their counterparts in the

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Assembly. I join among others the noble Lord, Lord Elis-Thomas, and the noble Lord, Lord Carlile, in paying tribute to those who have managed to create such a fruitful partnership.
The noble Lord, Lord Roberts of Conwy, sought to draw me onto the rocks of commenting on the internal procedures adopted by the Assembly. I can see from the noble Lord's smile that he does not expect me to be drawn onto those rocks. It is, as my noble and learned friend Lord Morris of Aberavon said, extremely important to remember that the Assembly is an entirely new body and for the UK an entirely new type of body. As noble Lords have recognised, it is three years old and is yet to hold its first regular elections. Yet it has been recognised by speaker after speaker that it is now unimaginable to think of Wales without an Assembly.
Careful work has been done to establish proper working relationships with the UK Government. Starting with the Joint Ministerial Committee and the Memorandum of Understanding which underpins it, there has been from the outset a very clear framework for relations between central government and the devolved administrations. That extends through the four overarching concordats and into the various bilateral concordats between the Assembly and individual departments.
My right honourable friend the Secretary of State is a doughty representative who can argue the case for Wales in Whitehall and Westminster. He works hard to provide Wales with its own voice around the Cabinet Table and, with his ministerial colleague, with a voice in over 20 of the Cabinet Committees. He ensures that Welsh interests are fully reflected in UK policy-making and that Westminster continues to be presented with the primary legislation that Wales needs.
My noble friend Lord Prys-Davies, among others, raised the issue of the ability of Wales to take primary legislative responsibility. I agree that there is the important process of the Assembly developing its own abilities during this formative period. At the moment, the Government have no plans to give the Assembly the power to make its own primary legislation. As the noble Lord, Lord Hooson, said, judgment on how well the Assembly is doing with its current powers may be the part of the process that will have to come first. We work together to ensure that Bills contain appropriate provision for Wales. For example, Jane Davidson said that the National Assembly can take great satisfaction in what appears on the face of the Education Bill.
The noble Lords, Lord Elis-Thomas and Lord Griffiths, expressed concern that primary legislation passed at Westminster can reduce Assembly powers. I stress that the Government always consult the Assembly on proposals affecting Assembly powers and the Secretary of State takes its views extremely seriously.
As my noble and learned friend Lord Morris of Aberavon said in relation to primary legislation powers, there are permissive powers in the Education
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Bill, for example, which will allow the Assembly considerable flexibility in designing Welsh policy. It is important to see how that is put into practice.
I welcome the observation from the noble Lord, Lord Elis-Thomas, that the Assembly will review its procedures. We shall look with interest at its conclusions tomorrow.
The current devolution settlement is working well to provide the statutory framework for the Assembly to take forward its policies. There has been a large amount of legislation covering specifically Welsh needs, sometimes in Wales-only Bills but often incorporated into England and Wales Bills. For example, it is often possible to incorporate specific Welsh provision in the legislative programme more rapidly than would otherwise have been the case. I know that my noble friend Lord Prys-Davies, among others, fully appreciated the speed with which we responded to the request for a children's commissioner for Wales by adapting legislation in order to deal with the matter as quickly and effectively as possible.
Wales continues to benefit from significant growth in public expenditure, as does the rest of the UK. In the 2000 spending review alone it gained by almost £2 billion. The subsequent Budget and Pre-Budget Reports have brought further increases. The expertise and local knowledge of Assembly Members will be available to ensure that the deployment of those funds precisely matches Welsh needs. The Objective 1 programme is a significant success story here. I remember having to answer some critical questions in your Lordships' House, when some noble Lords were doubting Thomases and feared that the Government would never match the funding and secure the Objective 1 money for the people of the Principality. They were wrong. We did not let Wales down. The programme is progressing well and I look forward to seeing the recommendations that the Commons Select Committee on Welsh Affairs will make shortly.
Passing reference has been made to the Barnett formula. I remind the House that since its introduction it has been a good friend to Wales. Over the 20 years of its operation, the Principality has benefited from significantly more spending per capita on the Welsh block than for comparable services in England.
My noble friend Lord Morgan referred to the economy in Wales. The Government and the Assembly recognise the value of fostering entrepreneurship. In addition to the fiscal policy that the Government have put in place to help SM Es, the Assembly has developed its entrepreneurship action plan which will play its part in engendering an entrepreneurial culture in Wales. The Government and the Assembly recognise the situation of the people of Wales with regard to prosperity. That is why Wales achieved its Objective 1 programme. The Assembly has published its national economic development strategy, A Winning Wales, which acknowledges problems and proposes a strategic approach to tackle them.

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The noble Lord, Lord Trefgarne, complimented the high-tech development that has taken place in Cardiff. We all want the Government and the Assembly to work together to make work pay and attract higher quality jobs. That extremely important point was raised by the noble Lords, Lord Griffiths of Fforestfach and Lord Roberts of Conwy. As the noble Lord, Lord Thomas of Gresford, said, it is extremely important that we work together. One good example of that is the Wales New Deal taskforce, which has played a key role in ensuring the success of programmes in Wales. The Employment Service and the Assembly have provided a joint secretariat to the taskforce. It has helped to streamline Assembly jobs for learning and skills with whole-country targets for getting people into jobs. Some 23,200 young Welsh people have secured jobs through the New Deal, 80 per cent of whom were still in work after 13 weeks. That is a good example of working together.
My noble friend Lord Brookman drew attention to the important work that the Assembly and the Government did together to assist and mitigate against the tragedy of the job losses at Corus. I am sure that, like me, he very much welcomes Corus' plan to spend £75 million rebuilding the No. 5 blast furnace at Port Talbot and recognises that that comes as a result of the tragedy there. In the package that was put together we have been able to demonstrate that economic regeneration in the interests of the people of Wales can come only when all parties work together. I recognise the importance of training and education in that context and the framework for setting up Education and Learning Wales, which the Assembly is using to transform post-16 education and lifelong learning in Wales. I am sure that everyone agrees with the noble Lord, Lord Trefgarne, about the importance of not downplaying areas such as engineering in the development of education.
My noble friend Lord Prys-Davies made some serious points and detailed observations about the threat to Welsh as a community language. As he said, this is primarily a matter for the Assembly to tackle, but we take a great interest in it. I hope that the optimism of the noble Lord, Lord Roberts of Conwy, is well founded in this case.
My noble and learned friend Lord Morris of Aberavon and my noble friend Lord Prys-Davies referred to the review of the problem with regard to the Welsh language. The Assembly has a special role in promoting the Welsh language generally. I understand that its culture committee has decided on a review. My noble and learned friend Lord Morris made some pertinent points. He may wish to draw his views to the attention of those conducting the review.
My noble and learned friend also raised the question of town and country planning in Wales. That responsibility has been devolved to the Assembly, which is using its sustainable development scheme to guide planning policy and has established a planning forum, which has produced a comprehensive policy,
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delivering a presumption against out-of-town shopping centres, for example. However, that is a matter for the Assembly.
I note the views of the noble Lord, Lord Griffiths of Fforestfach, on the policy of the Assembly on education in specialist schools. As he knows only too well, that is a devolved matter for the Assembly.
My noble friend Lord Morgan and the noble Lords, Lord Walker of Worcester and Lord Crickhowell, among others, asked about the Assembly committee's review of higher education. The committee has made various proposals, including, as noble Lords have said, proposals on the future of the University of Wales. Factually, the review does not represent the Assembly's final view, and there will be a consultation period. Some of the review's findings, for example on the future role of the University of Wales, have attracted wide interest. Achieving most of the proposals would be within the Assembly's powers.
I welcome the support of the noble Lords, Lord Morgan and Lord Carlile of Berriew, for the Assembly's initiatives on encouraging young people to stay on in school. I know that the noble Lord, Lord Thomas of Gresford, would not want me to be drawn any further into that matter.
In reply to the noble Lord, Lord Walker of Worcester, I should say that the major Welsh farming unions were represented on the Assembly's Farming Futures strategy group and fully endorsed the resulting document.
In reply to all noble Lords who raised the issue of the powers of the National Assembly for Wales, I should say that, following the foot and mouth outbreak, the Assembly has requested that further functions of animal health in Wales be transferred to it. The Government are considering the merits of the Assembly's request alongside other proposals emerging from foot and mouth inquiries. A decision will be made in due course. However, Farming Futures sets out the direction for agriculture in Wales. I shall write to the noble Lord, Lord Walker of Worcester, with details of the financial assistance being given to the rural community.
The noble Lord, Lord Carlile, raised the issue of energy policy. That is a reserved matter, although there is a national system of electricity generation. As he recognised, however, my noble friend Lord Williams of Elvel is having a debate in which it will be possible to answer his questions in greater detail.
I have the greatest sympathy for the points made by the noble Lord. Lord Carlile, on adolescent mental health problems. As he said, it is a matter devolved to the Assembly. I hope that the review will bear fruit for children in Wales who are in that most vulnerable position.
I must conclude because of time constraints. However, the Government's approach to the communications Bill will provide an opportunity for consultation with all interested parties. I am quite sure from his contribution, which was so knowledgeable, that the noble Lord, Lord Crickhowell, will wish to take part in that.

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I thank the noble Lord, Lord Griffiths, for selecting this topic for debate. With one exception, I have not been able to do full justice to the range, scope and depth of the debate, but I hope that your Lordships will accept that that is a matter for the usual channels. Nevertheless, this debate has been a pleasure which I hope will be repeated. I also agree with the noble Lord, Lord Hooson, that the people of Wales should never settle for second best. I believe that the foundation on which they are now building is capable of giving them the best, which is what they deserve.
8.4 p.m.
Lord Griffiths of Fforestfach: My Lords, it is my very great pleasure to thank everyone who has taken part in the debate, which I believe has been very good-humoured. I also think, without prejudice, that it has been an affirmation of devolution. The contributions
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have shown a wealth of experience. We have heard from three former Secretaries of State, a Minister of State, a Presiding Officer of the National Assembly, a distinguished academic and vice-chancellor of the University of Wales and the general-secretary of an important trade union, as well as from many distinguished lawyers.
I particularly liked the contribution of the noble Lord, Lord Walker of Worcester. Despite the challenges, he struck a note of optimism that is based not on sentiment but on current events in Cardiff, which gives us great hope for the future.
It only remains for me to wish each of you a very happy St David's Day and to beg leave to withdraw the Motion for Papers.
Motion for Papers, by leave, withdrawn.
House adjourned at five minutes past eight o'clock.