Lords Sitting of 20 March 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 Oxford.

Hospitals: Alcohol-related Violence
Baroness Masham of Iltonasked Her Majesty's Government:
In view of the number of alcohol-related attendances at accident and emergency departments, when they will publish their national alcohol strategy.
The Parliamentary Under-Secretary of State, Department of Health (Lord Hunt of Kings Heath): My Lords, the Government are determined to make life safer for National Health Service employees. We have already set targets to reduce violent incidents. Alcohol can contribute to violent incidents and the Government will be implementing our national strategy to tackle alcohol misuse by 2004.
Baroness Masham of Ilton: My Lords, I thank the Minister for that reply. It is a pity that the date is not sooner. Is he aware that at peak periods in some accident and emergency departments as many as eight out of 10 people may have abused alcohol? Crisis teams can be called upon by A&E departments to help with mentally ill patients. Could they be provided for those suffering from alcohol abuse?
Lord Hunt of Kings Heath: My Lords, the noble Baroness is right to point out the serious impact of people attending A&E departments with alcohol-related injuries or problems. It is impossible to say exactly how many A&E attendances are alcohol related, but a Health Education Authority study found that one in six people attending A&E for treatment had alcohol-related injuries or problems, rising to eight out of 10 at peak times. That makes life difficult for dedicated NHS staff working in incredibly difficult circumstances. We have launched a zero tolerance strategy to communicate to the public and staff that violence towards NHS staff will not be tolerated.
A number of good initiatives, such as the one mentioned by the noble Baroness, have been implemented. I especially commend the co-operation that has taken place between NHS authorities and the police, enabling the NHS to call on the police where necessary.
Lord Clement-Jones: My Lords, in June last year, I think, the Prime Minister announced plans to crack down on violence in hospitals. Guidance was promised later in the year. Has that guidance now been
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produced? The baseline measurement of offences of violence in hospitals continually shifts. Have the Government now got a grip on the problem? Is it beginning to decline?
Lord Hunt of Kings Heath: My Lords, the figure I have for the number of violent incidents in 1998–99 is about 65,000. The department now has figures for financial year 2000–01, which are currently being analysed but are not yet finalised. They will form the baseline against which we set targets for reduction in violent incidents.
The work announced by my right honourable friend the Prime Minister has been taken forward. Campaign materials—posters and distance learning packages—have been made available. There is an award scheme and the NHS is setting up safety awareness teams and making support available to staff when violent incidents occur. So an enormous amount of activity is taking place. I am satisfied that each individual NHS organisation is taking the matter seriously.
Lord Tomlinson: My Lords, does my noble friend agree that if we know that there are 65,000 violent incidents—a horrifying figure—the baseline for reduction does not need much calculation? It should be 65,000.
Lord Hunt of Kings Heath: No, my Lords, I do not entirely agree. There is a feeling that the figure of 65,000 violent incidents may well have been an underestimate because previously the NHS did not collect figures in a robust way. That shows the importance of establishing a proper baseline, which will be done through careful analysis of the figures for 2000–01. It is much better that we establish a robust baseline and then deliver improvements rather than base improvements on a baseline that may not be as accurate as we would like.
Baroness Gardner of Parkes: My Lords, is the Minister aware that Westminster council is most concerned about the huge numbers of people on Friday and Saturday nights who have to go to University College Hospital with broken bottle injuries and so on? The council feels that the police are needed to control the situation. Does the Minister agree that it is not only the staff but other patients in the hospital who can be attacked or seriously upset by violent people around them? What provision exists for segregation of violent patients from others awaiting treatment?
Lord Hunt of Kings Heath: My Lords, I well understand the local authority's concern, although I do not know of the specific details of University College Hospital. The noble Baroness is absolutely right. Violence in A&E departments is disturbing not only for staff but for other, law-abiding members of the public who have to attend A&E. Attending A&E is in any case a stressful situation for most of us.
The National Health Service has introduced a number of initiatives, including the provision of security staff, closed circuit television and

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programmes that advise staff on how to deal with such incidents. There is also great potential in closer co-operation with the police. Joint working has helped to deal with the problem in a number of schemes. For instance, at Mid Cheshire Hospitals NHS Trust, a police base has been established in the hospital grounds immediately adjacent to the A&E department. In other examples, the police have opened sub-stations near A&E departments, which have proved effective.
Baroness Masham of Ilton: My Lords, is the Minister aware that many of the patients coming into A&E departments are young people and children? Is health education good enough and will public health provision in the new NHS be effective enough?
Lord Hunt of Kings Heath: My Lords, we will see a strengthened public health role in the NHS reorganisation that will come into effect on 1st April. The principal public health authority will be at primary care trust level. I would expect primary care trusts to take a vigorous approach to health promotion. In addition, the alcohol strategy to be introduced in 2004 will place some emphasis on young people and the kind of message that we must get over to them.
Baroness Massey of Darwen: My Lords, I declare an interest as the chair of the national treatment agency for drug misuse. Does the Minister think that having a national drugs strategy with targets and a national treatment agency will help to support the treatment of drug misuse? Would it be applicable to the treatment of the misuse of other substances, including alcohol?
Lord Hunt of Kings Heath: My Lords, my noble friend is right to point out the potential of the strategy and the targets. The question of whether the NTA's remit should include alcohol treatment services has been discussed by the NTA with Ministers. We hope to make an announcement about that shortly.

Amateur Sports Clubs
2.43 p.m.
Baroness Anelay of St Johnsasked Her Majesty's Government:
Whether they intend to confer charitable status on amateur sports clubs.
The Minister of State, Department for Culture, Media and Sport (Baroness Blackstone): My Lords, it is for the Charity Commission to decide whether amateur sports clubs may successfully apply for charitable status under the revised criteria that were announced last November.
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The Government's proper role is to ensure that clubs that may consider applying have access to clear guidance and advice. The Minister for Sport is working to that end with the Charity Commission, Sport England and other interested parties.
Baroness Anelay of St Johns: My Lords, I thank the Minister for that Answer. Is she aware that the vast majority of sports clubs would be dismayed at being able to go down only the charity route? Even the Charity Commission has made it clear that, in addition to the administrative burden, only about 5 per cent of clubs would qualify. Is the Minister also aware that the vast majority of clubs would much prefer the policy published by the Treasury last November; namely, a tax relief package, including 80 per cent mandatory rate relief? Will the Government reconsider that issue?
Baroness Blackstone: My Lords, the Government are aware that some amateur sports clubs would prefer a new tax regime to charitable status. However, if clubs seek charitable status and are designated as charities, they will benefit from 80 per cent mandatory business rate relief, as well as other smaller benefits. It would be a pity if amateur sports clubs did not take up that option, when it becomes available, and I would encourage them all to do so. The benefits would be substantial.
Lord Greenway: My Lords, does the Minister agree that charitable status is not a real option, in view of the complexities of the process? A great many yacht clubs could be involved in the process, and the adoption of the CASC tax relief scheme would discriminate against the larger clubs, which, arguably, are of more benefit to their local community. It would discourage them from growing and developing, in stark contrast to the encouragement given by the Ministers for health, education and sport.
Baroness Blackstone: My Lords, I do not know that there would be a particular problem for yachting clubs. To obtain charitable status, amateur sports clubs must have open membership, must be organised on a permanent, non-commercial basis and must have as their primary purpose the promotion of participation in an activity that promotes healthy recreation.
The procedure for obtaining charitable status will not be as difficult as has been suggested. My right honourable friend the Minister for Sport is working with the Charity Commissioners to devise a relatively simple procedure for amateur sports clubs that make an application. The Charity Commissioners are committed to trying to process applications quickly. Once that is done, the clubs concerned should have no difficulty in obtaining the benefits.
Lord Phillips of Sudbury: My Lords, in pursuing the answer that she has just given, can the Minister say whether it is likely that extra resources will be made available for that purpose? The number of community amateur sports clubs that may seek charitable status if

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they are forced down that route will run to tens of thousands. There is serious concern that the delay and obfuscation that might result from that deluge of applications could impede the registration process and, generally, be expensive and time-consuming for small clubs.
Baroness Blackstone: My Lords, extra resources will be provided, so that clear, simple guidance is available to the smaller amateur sports clubs that wish to seek charitable status on how to go about doing so.
Lord Moynihan: My Lords, pursuant to the Minister's Answer, do the Government agree with the policy objective of parity with charity for all voluntary sports organisations?
Baroness Blackstone: My Lords, I am not sure that I entirely understand the basis of that question, unless it is about whether clubs involved in activities for which the criterion of healthy recreation may be more difficult to demonstrate may be left out. That may be behind the noble Lord's question.
The Performance and Innovation Unit is considering the case for sport becoming a charitable purpose in its own right. That review will be completed before the summer. The PIU is addressing that central issue.
Lord Addington: My Lords, can the Minister assure the House that the ability of amateur sports clubs to work effectively and to function competitively, even if on a comparatively low level, will not be impeded by the introduction of any criteria attached to acquiring charitable status?
Baroness Blackstone: My Lords, yes, I can give the House that assurance.

Chlamydia
2.50 p.m.
Baroness Gould of Potternewtonasked Her Majesty's Government:
What action they propose to take to stem the rise in chlamydia infections.
Lord Hunt of Kings Heath: My Lords, we will start to phase in a national chlamydia screening programme later this year to reduce undiagnosed infections. In addition, to improve awareness of sexually transmitted infections and how to avoid them, a new mass media safer sex campaign is planned for the autumn.
Baroness Gould of Potternewton: My Lords, I thank my noble friend for that encouraging news and welcome the fact that some action is now to be taken. However, when does my noble friend think a national screening programme will be made available for all women, in particular in light of the fact that Chlamydia
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is a non-identifiable disease in sufferers and can have very serious consequences, including the risk of infertility? In the meantime, will resources be made available for a sustained, high-profile national education campaign to increase awareness among women of the seriousness of this problem?
Lord Hunt of Kings Heath: My Lords, in response to my noble friend's question about a national campaign, the answer is yes. As a part of the roll-out of our sexual health strategy, on which consultation has just been completed, an educational campaign will begin in the autumn. Also in the autumn we intend to introduce a screening programme in around 10 areas of the country. Obviously, we shall learn from that experience and hope to introduce programmes in other parts of the country as soon as possible thereafter. However, I cannot yet confirm when the whole country will be covered.
Lord Clement-Jones: My Lords, are the Minister and his department demonstrating a proper sense of urgency? The national strategy was published last July. As we know, chlamydia can have the health consequences described by the noble Baroness, Lady Gould, but we arc promised a national awareness information campaign only later this year, over a year after the national strategy was published.
Lord Hunt of Kings Heath: My Lords, the national strategy opened with consultation over a six-month period which finished towards the end of last year. We are now carefully considering the document covering the results of that consultation. We shall publish an action plan in the late spring. Furthermore, as part of the roll-out of the action plan, we shall introduce a major awareness campaign in the autumn. Large campaigns of this kind need to be planned well in advance and in the light of comments received as a result of the consultation process.
With regard to the screening programme, two pilot studies have been undertaken, one in Portsmouth and the other in the Wirral. We need to analyse carefully the results of those pilots. That is now being done. It is then proposed to run further pilot schemes in 10 other parts of the country, commencing this autumn. That represents careful planning and careful analysis and, I believe, reflects the fact that the Government remain exercised about the matter.
Lord Glenarthur: My Lords, can the noble Lord confirm whether the national strategy in this regard proposed for England will be introduced in parallel in the National Health Service in Scotland?
Lord Hunt of Kings Heath: My Lords, I cannot speak for the health service in Scotland, but we do work very well together. Obviously, officials in the Scottish Parliament and the Scottish health service will be made aware of our proposed campaign. I shall seek to ensure that everything possible is done to coordinate our activities.
Lord Turnberg: My Lords, does my noble friend agree that this infection, chlamydia, is the single most

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common cause of infertility in women, as well as being a prime cause of pelvic inflammatory disease and ectopic pregnancies? Incidence of the infection is rising. In the pilot studies referred to by my noble friend, infection was found in around 8 per cent of young women of sexually active age. Given that, does my noble friend further agree that a national screening programme, which would go a long way towards detecting the disease, followed by treatment which is both simple and effective, is now essential?
Lord Hunt of Kings Heath: Yes, my Lords, I agree with my noble friend. Evidence gathered from the pilot studies indicates that the prevalence of disease among females in the target age range was 8.5 per cent in Portsmouth and 8.7 per cent in the Wirral. The studies also showed that almost 20,000 people were tested during the one-year programme, which covered 50 per cent of the Portsmouth female age range of 16 to 24 years and 38 per cent of the same age range in the Wirral. Those figures indicate both the prevalence of the disease and the issues that need to be tackled in order to deal with it, such as the need for effective screening programmes. Most important, however, is that the pilot studies have demonstrated the practicality of introducing a general screening programme.
Baroness Masham of Ilton: My Lords, is the Minister aware that men can also catch chlamydia? Will they be included in the screening programmes? Furthermore, can men also become sterile as a result of this infection?
Lord Hunt of Kings Heath: My Lords, men are not affected by chlamydia, but the consequence of infection is that the disease can be passed on to partners. That is why it is important to take men into account in the programmes. I understand that in the pilot studies undertaken in Portsmouth and the Wirral, some men did attend for screening. In addition, although inevitably the health promotion programme will focus on women, we shall also encourage men to take advantage of the services that will be offered.

Rail Performance
2.56 p.m.
Viscount Astorasked Her Majesty's Government:
Why three trains in every 10 ran late in the last quarter of 2001; and whether sufficient ministerial attention is being given to this problem.
The Minister of State, Department for Transport, Local Government and the Regions (Lord Falconer of Thoroton): My Lords, rail performance is subject to strong seasonal variations. The drop in performance last autumn was in line with the usual seasonal decline, but it is clear that the performance last autumn simply was not good enough. My right honourable friend the
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Secretary of State for Transport, Local Government and the Regions has made it clear that improving train performance and reliability is a priority.
Viscount Astor: My Lords, does the noble and learned Lord agree that nothing has changed and that we are still being given the old autumn excuse of "leaves on the line"? Given that, what progress has been made in determining the future of Railtrack? While Railtrack is in its present situation, it is obviously difficult for it to move ahead. Can the Minister also tell the House what funding the administrator has received so far in order to complete the process of the sale of Railtrack? Will he give an assurance that sufficient funding will be made available to complete that process?
Lord Falconer of Thoroton: My Lords, progress made in relation to administration is obviously in part a matter for the administrator. He shares the Government's hope that the process will be completed as quickly as possible. As my right honourable friend has said, the Strategic Rail Authority is sponsoring a bid team assembled under the leadership of Ian McAllister to develop a bid based on the concept of a "company limited by guarantee". Interest has also been shown by other bodies.
With regard to the financial issues, upon making the administration order, Her Majesty's Treasury agreed to make a loan of £2.1 billion to Railtrack. It was provided to enable the administrator to discharge the administration creditors and to keep the rail network operational. This funding agreement was designated to keep Railtrack both liquid and functioning in administration, and business went on on the usual basis. It was always envisaged that the loan would be repaid once the Government had secured state aid, which they did in February. Railtrack and the administrator are currently in discussions with the banking community to arrange the refinancing of the loan. The Government will get their money—taxpayers' money—back with interest.
Lord Faulkner of Worcester: My Lords, reverting to the noble Viscount's original Question, does my noble and learned friend recall that one of the main virtues of the privatisation promoted and put through by the party opposite was that it would entirely remove ministerial involvement in the management of the railways? Given that, perhaps this is a rather odd question for the noble Viscount to ask today. Is he aware that many noble Lords on these Benches feel that the most important contribution that Ministers can make towards getting the trains to run on time is to choose the right people to run the industry? The appointments of Richard Bowker as chairman of the Strategic Rail Authority and John Armitt as chief executive of Railtrack have been universally welcomed in the industry.
Lord Falconer of Thoroton: My Lords, on the second part of my noble friend's question, I too very much welcome the appointments of Mr Armitt and

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Mr Bowker and I agree that those appointments have been widely welcomed throughout the industry. The effect of administration has been to compel Railtrack to focus on its core activity; that is, to work for the good of rail users. Perhaps I may quote from Nigel Harris, the managing director of the publication entitled Rail. In the edition of 6–19th March he stated that:
"Administration has finally both compelled and allowed Railtrack to prioritise on its core job".
With regard to the first part of my noble friend's question, I shall not be tempted to join with him in describing the noble Viscount's question as "odd".
Lord Greaves: My Lords, I declare an interest in that this morning I was a passenger on the Yorkshire Pullman, which nowadays is the 6.40 a.m. train from Skipton to King's Cross. From Leeds and Wakefield and then on to King's Cross, the train ran almost one hour late. Apparently the delay was due to the train not having left the depot on time; it was not clear whether it was the train that had not woken up or whether it was the driver.
Will the Minister join me, first, in congratulating Great North Eastern Railways—perhaps not on this morning's Yorkshire Pullman—but on its proposal to introduce in its new timetable a half-hourly service for much of the day between Leeds and King's Cross? However, would he also agree that there is no point in having the most visionary timetable in the world if the trains then in fact run an hour late?
Lord Falconer of Thoroton: My Lords, I agree that one of the important objectives for which we should aim is reliability—that is, consistency with a timetable. It would be unwise for me to comment on what the right timetable would be for the Great North Eastern Railway.
Lord Roberts of Conwy: My Lords, has any estimate been made of the economic cost to the country of these horrendous delays? If not, is it not time that we had such an estimate? While the Government are making that estimate, should they not also make an estimate of the economic cost of delays on the motorways?
Lord Falconer of Thoroton: My Lords, I do not know whether or not such an economic estimate has been made in relation to either the railways or the motorways. I do know, however, that it should be—and is—a priority of the Government to ensure that those delays are eradicated as quickly as possible.
Lord Marsh: My Lords, does the Minister agree that if politicians spent less time intervening in the day-to-day management of the railways, that might give the management of the railways more time to solve some of the problems?
Lord Falconer of Thoroton: My Lords, the Government have placed Mr Bowker at the head of the
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SRA and Mr Armitt at the head of Railtrack and left them to get on with the task of making the trains run reliably.
Lord Berkeley: My Lords, can my noble and learned friend confirm that the reliability figures for the last period show that Railtrack's share of delays has gone down? Does he agree that that is probably because Railtrack plc and Group have been separated and that the plc people can now concentrate on running the railway? Is he aware—I declare an interest as chairman of the Rail Freight Group—that the most reliable service on the network is operated by Consignia Royal Mail trains?
Lord Falconer of Thoroton: My Lords, I do not know the answer to the last part of the noble Lord's question. I shall write to him about that. The share of performance delays between Railtrack and the train operating companies remained little changed. There was a 2 per cent rise in Railtrack's share during the quarter, but that is typical of the autumn period.
Viscount Bledisloe: My Lords, is the noble and learned Lord aware that the only government who have had any success in making trains run on time was that of Benito Mussolini? Is it the policy of either his party or the party opposite to induce a dictatorship such as that of Benito Mussolini?
Lord Falconer of Thoroton: My Lords, it is certainly not the policy of this Government. The noble Viscount will have to ask the Opposition for their view on that.
Lord Skelmersdale: My Lords, many Members of the House will have noted the noble and learned Lord's difficulty in keeping a straight face when, in his original Answer, he spoke about the normal lessening of services in the autumn. Can he explain to the House the difference between the figures for this last autumn and, say, the previous two autumns?
Lord Falconer of Thoroton: My Lords, I am very sorry that my cheery disposition caused offence to the noble Lord. I shall seek to look suitably more serious from now on in relation to the Questions that I am asked. As to the figures for the autumn before and the autumn before that, the autumn before was the period immediately after Hatfield and so the performance during that autumn was probably worse than this autumn.
Lord Pearson of Rannoch: My Lords, is the Minister convinced that it was entirely sensible for the ownership of the trains to be separated From the ownership of the tracks? If so, why?
Lord Falconer of Thoroton: My Lords, the noble Lord, in a spirit of inquiry, draws attention to the decision made by his party to separate the two. Obviously the administrator is looking at the next

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stage of the process. As to whether or not it was sensible to separate trains and track, there are differing views on that issue.
Baroness Strange: My Lords, is the noble and learned Lord aware that, about 25 years ago, my father wrote a short poem on this subject? The poem was:
"Do you remember in 1908,
Long, long ago, long ago,
When the post was on time and the trains never late,
Long, long ago, long ago".
Lord Falconer of Thoroton: My Lords, I was not aware that the noble Baroness's father had written a poem.
Earl Attlee: My Lords, can the Minister say what capacity restraints, such as those imposed on the Welwyn viaduct, have been recently eliminated? What plans are there for further elimination of capacity restraints?
Lord Falconer of Thoroton: My Lords, I am not in a position to answer that question. I shall write to the noble Earl.

Business
Lord Carter: My Lords, it may be for the convenience of the House to know that later today my noble friend Lady Symons of Vernham Dean will table a Motion on Afghanistan to be debated in the House next week on Monday, 25th March. The Motion will ask the House to take note of developments in Afghanistan and the war on global terrorism. The debate will follow the Second Reading of the Proceeds of Crime Bill. It will not be time limited and a speakers' list has been placed in the Government Whips' Office.

Business of the House: Debates this Day
The Lord Privy Seal (Lord Williams of Mostyn): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the debate on the Motion in the name of the Lord Brennan set down for today shall be limited to two-and-a-half hours and that in the name of the Lord Parekh to three hours.—(Lord Williams of Mostyn.)
On Question, Motion agreed to.

Corporate Regulation
3.6 p.m.
Lord Brennanrose to call attention to recent corporate failures and to the case for regulatory and other action to maintain public confidence in business and accountancy; and to move for Papers.
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The noble Lord said: My Lords, the heart of this debate is the human vice of greed. The levels of greed in the corporate sector have led to very severe hardship for ordinary people and to the loss of jobs, savings, homes and pensions. Such excesses in the corporate system can and should be dealt with by regulatory or other action.
What is the nature of the problem? Enron collapsed in probably the greatest corporate failure of our times leaving debt of 60 billion US dollars. It has put paid to one of the big five accounting firms employing more than 200,000 people world-wide. It is not an understatement to say that this is a seminal moment in the history of modern capitalism.
In the 1980s and 1990s we moved from an historical approach to business, where corporate effort was directed at firm structures, a steady hand on the tiller and a reasonable interest—but not obsessive interest—in profit. As we came towards the end of the century, we entered an era where the sole objective of much of business was ever-increasing annual profit. That difference in the ethos of business is the real explanation for the disaster of Enron.
This profit mania was worked under the rubric of shareholder value. The very objectives of decent shareholders—to make a reasonable return on their investment—became the millstone that the corporate structure in the case of Enron hung around its neck. It is simply impossible, year by year, evermore to increase your profit regardless of the world around you. But, by the turn of the century, many thought otherwise. Such a belief leads to failure. Enron was that failure.
It is not only an American failure. ICI has lost more than £400 million; Andersens employs 6,000 to 7,000 people in this country. The international ramifications of what has happened are very serious indeed. Asked by me, a friend in the financial world tried to explain what has happened in human terms in this way.
The executive, imbued with market fever, intent on making ever greater profits, becomes addicted to the task. The addiction is fed, perfectly reasonably, by the banks, which expect a return on their investment, and in this case the accountant—the "GP", who is there regularly to check on the presence or absence of serious symptoms—completely missed the problem, or chose not to diagnose it. So, in the end, the community—the "family", the "relatives" in the metaphor of the addict—entirely without expecting it, with no preparation at all, find that the addict has exploited his money and theirs to satisfy his addiction. So the problem can be translated into community terms. That is the aspect about which I propose to speak.
The first, and obvious, question to ask in this House is: could such a thing happen in our country? I regret to say that it already has. Within the last year or two, an independent insurance company collapsed in a sector of the financial world which is supposed to be the most heavily regulated in auditing terms. In response to the question, "Could it happen here?", Sir

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Howard Davies, chairman of the Financial Services Authority, in an article in the Guardian on 2nd February, frankly stated:
"The only honest answer is yes".
How could it happen here? The Government, very sensibly, are intent on investigating, having set up in February a review of the role of auditors and an investigation of the independence and effectiveness of non-executive directors, helped as they will he by the new Financial Accounting Foundation, the independent regulator for accountants.
If it could happen here, how can we reform corporate systems in an attempt to ensure that it does not happen; and, if it does, that the impact is reduced to the bare minimum? I turn to the issue of company systems. Cadbury in 1992, Greenbury in 1995, Hampel in 1998, and the Government in 2002 have all investigated the same basic question: how can we make companies work honestly and fairly in the interests of the community?
I shall not anticipate many of your Lordships' contributions to the debate, but here are some of the obvious topics for debate. The audit committees of a company must be made to work. Off balance sheet accounting, the absence of employee share options and their value in accounts, the deep complexity of derivatives not fully explained, and an inconsistent treatment of revenue are all obvious factors which an audit committee could, and should, examine, along with company auditors.
Secondly, if it is felt that local authorities should have their auditors independently appointed by the Audit Commission—as now happens throughout the country—is it not reasonable that some similar system should operate in the private sector? I put the proposition forward. If it is wrong, I eagerly await the reasons why; but I hope that the concept behind it will not be ignored by those who seek to deal with this. The intent is that the auditing function can be separated from executive influence by the company.
I am pleased to note that Sir Howard Davies has set in progress this year several schemes or reviews to assist better control of company systems. There is already a very strict control of the auditors of financial institutions under the FSA. They propose to review their listing rules and I imagine that, in due course, they will establish appropriate disclosure rules, especially for the complexities of accounting which I have described. Above all, in company systems, let us ensure that the concept which I now understand to be commonly used in the City of "financial engineering" is never just that step ahead of the law, the regulator and the tax system.
If companies are to be audited, how can we make the auditors more effective in what they should do? Under our present statutory system, they are a watchdog for investors only in the sense that they determine, vis-à-vis the company and themselves, whether they can issue an auditing certificate of good accounting. But they have no separate duty, no separate obligation to individual shareholders, creditors or employees. That is a serious deficiency in the system.
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What should happen with auditors and the companies that they audit? Is it acceptable that you audit on Monday as an independent accountant and advise the company on Tuesday, as an accountant to that company, on its investment strategy? Most ordinary people would conclude that the conflict of interest is so obvious that it could hardly occur in the business world—and yet it does.
What should we think about the rotation of auditors? What should we think about auditors leaving their accounting firm to become a consultant or employee of a company, and their previous accounting firm continuing as the auditors? I invite the House to note with particular care the following stark reality. Out of the 250,000 accountants that we presently have—ever-increasing, always present in times past—no firm of auditors of any size has ever detected a corporate failure of any size by its auditing activity. That is simply amazing.
If we are to have effective auditors, the key principle upon which they must act in the future is surely the interests of the community affected by the affairs of the company that they are auditing, and not the interests of the company with which they are dealing.
Lastly, and most importantly, if such problems continue to occur—and human nature makes it inevitable—how can we seek to influence those in corporate life better to appreciate, and more enthusiastically to seek to avoid, the damage that they can cause to the community by their activities if reasonable activity descends, or ascends as the case may be, to excess? The answer to my rhetorical question must be better corporate governance, with responsible corporate behaviour in the community.
I put forward three propositions. Every company should be ethically governed and act responsibly towards the community in which it operates, whether nationally or internationally. We are not hidebound by a company law system created in the 19th century that treated the only relevant relationship as that between a company, its shareholders and its auditors. We have gone far beyond that in our multinational world.
The second proposition is to have the International Accounting Standards Board and its American counterpart seek to reach agreement.
Thirdly, many companies seek to act responsibly. I endorse their efforts and hope that feature will evermore be present in our national corporate life.
Milton Friedman, with remarkable and unacceptable candour, once answered a question about the basis of business thus: "What kind of society is not structured on greed?" I answer, not my kind of society. I adopt the wisdom of Lord Weinstock when in charge of the General Electric Company. He observed that profit was not a target but a residual—the end result of doing the right things in the right way. That is the expectation that we should have as a society of corporate activity serving the community. My Lords, I beg to move for Papers.
3.21 p.m.
Lord Freeman: My Lords, I am sure the House is grateful to the noble Lord, Lord Brennan, for raising this issue. I congratulate him on his success in bringing it to your Lordships' attention. I declare an interest as a member of audit committees of a number of companies and a former partner, now consultant, of PricewaterhouseCoopers.
I wish to address my remarks to the responsibilities of directors—in particular, members of the audit committees of boards—in ensuring proper financial control and regulation of the companies they serve in the interests not just of shareholders but of society as a whole. I agree with the noble Lord, Lord Brennan, when he identifies the importance of the role of directors and audit committees in particular.
On 27th February the Secretary of State for Trade and Industry, Patricia Hewitt, announced the setting up of an independent review of the role and effectiveness of non-executive directors in the United Kingdom. That review is important and has been a long time coming. I am sure that your Lordships welcome the Secretary of State's announcement and hope that she will name the chairman of the committee as soon as possible, so that it can get under way.
The Secretary of State said that the independent review will examine the role and effectiveness of non-executive directors in the UK and will report to the Chancellor of the Exchequer and to the Secretary of State. The review will consider in particular strengthening the UK framework for how companies operate. I take that to mean that the review will look at how best to prevent a collapse such as that of Enron happening in this country. Sir Howard Davies asked whether that might possibly happen. The answer is, yes it could. Is it likely to happen? We can take steps by legislating and following the initial work of the Cadbury committee in 1992 for ensuring best practice to make certain that such a collapse is unlikely to happen.
The term "non-executive director" is misleading and I hope that we shall stop using it in this country. It creates the impression that the so-called non-executive director is a second-class director of a company; that he or she has fewer responsibilities than other members of the board. That is not true. A non-executive director is as much a director as the chairman, executive chairman or chief executive officer.
The term "non-executive director" conjures up a comfortable perk—as it was sometimes known to be a decade or more ago. In today's world, that is not the case. In our largest companies, the role of the so-called non-executive director is arduous and needs to be defined more clearly. The days when ex-politicians—let alone ex-accountants or distinguished members of the Bar Council such as the noble Lord, Lord Brennan—could be expected to join companies easily in the role of a non-executive director have gone. It is a demanding job and there is a shortage of competent people willing to take on the responsibilities involved.
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I hope that the review will recommend increased training and guidance for all directors but particularly members of board audit committees. That follows the lines of the excellent Myners report of last year. Its recommendations concerning the pension fund industry and the role and responsibilities of trustees have been accepted by the Government.
I am grateful to Paul Myners for reminding me that a recent poll showed that one-third of pension fund trustees in this country were unclear whether a fall in interest rates meant that bond values rose or fell—a disturbing fact but true.
As to the key aspects of training that will help to improve the climate of financial regulation, directors—particularly those who are independent of full-time management—should ask the right questions at the appropriate time. Directors should have explained to them their responsibilities under corporate law and the fact that they have a direct responsibility to shareholders—as do auditors. I am sure that the noble Lord, Lord Brennan, did not mean to imply that auditors are accountable only to the management of a company. By statute law, they report to the members of a company—the shareholders.
I pay tribute to the Institute of Directors, the Confederation of British Industry, the Institute of Chartered Accountants in England of Wales and many others for the steps they have taken to improve the training of directors. But there is a long way to go.
When the Secretary of State made her announcement on 27th February, she expressed the hope that the review's focus would be primarily on improving best practice. I hope that the review will consider changing our statute law—specifically, the basis of operation of audit committees. An audit committee is a sub-committee of a board and has responsibility for dealing directly with the auditors and internal auditors of a company. It must also satisfy itself on behalf of the board that the audit is independent and that proper steps have been taken by the auditors to ensure that a fair picture of the company's results is presented.
The auditors look retrospectively, not prospectively, which is one reason for it not being surprising that it is difficult to find examples of auditors identifying the imminent or possible collapse of a company. Auditors often look at three, six or nine months of historical perspective—not into the future, which is the job of others.
We should encourage the independent committee to consider proposing in statute the responsibility of boards of directors, certainly of listed companies, to appoint a sub-committee—the audit committee—to discharge the responsibilities of financial regulation and oversight over the audit. That ought to be a statutory responsibility. At the moment, it is best practice. The code followed in recent years by listed companies in this country states that the annual report must include a statement if an audit committee has not been appointed. I believe that that should be a universal requirement.

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I believe that audit committees should have a majority of independent directors and a statutory right of independent access to the auditor of the company so that they can not only challenge but support the auditor when misgivings, wrongdoings or concerns are expressed or alleged.
I believe that the audit committee itself should have a responsibility to report in the company accounts directly to shareholders, and therefore directly to the wider community, about whether it is satisfied that the audit is independent. The noble Lord, Lord Brennan, drew attention to the fact that some auditors perform non-audit services and argued that that could in some ways impede independence because of the pressure that companies could bring to bear on the auditor. I believe that it should be the responsibility of the audit committee so to report. I also very much agree with the opinion of the Association of British Insurers, which has been circulated to some noble Lords, on that point.
We should be realistic in our expectations of boards of directors, audit committees, auditors and lawyers. We can, however, take steps in a future review of company law to place clearer and more specific responsibilities on audit committees.
Lord Brightman: My Lords, can the noble Lord tell the House when the office of non-executive director came into existence? When I took my examinations some 70 years ago, there was no such office as non-executive director.
Lord Freeman: My Lords, I very much agree with the thought that lies behind that intervention. The arrangement is not enshrined in company law, but it has become common currency to refer to directors who are not in full-time management as "non-executives". I believe that that is wrong and that it should cease.
3.31 p.m.
Lord Sharman: My Lords, before beginning, I must first declare my interests. My business interests are as set out in the Register of Members' Interests, but my most relevant interest in relation to this topic is the fact that I am a former chairman of KPMG—one of the so-called big five—and continue as a paid adviser to that firm.
I must confess that I approach this Motion with a great deal of sadness. When I joined the accountancy profession 40 years ago, it was a profession held in high esteem. In those days, my girlfriends' mothers were quite keen on having a prospective chartered accountant as a son-in-law. That is not the case today; it is certainly not the case for Lady Sharman. Today, the accountancy profession faces the greatest crisis in its history. The reputation of Arthur Andersen, which has taken 90 years to build, lies in tatters, destroyed in 90 days. The indictment of a firm of accountants for obstructing the course of justice in the USA will, if sustained, leave a stain on the global accounting profession that will take many years to remove.
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As the noble Lord, Lord Brennan, said, the key factor in all this has been the collapse of Enron—the largest corporate failure in the history of the USA, if not the world, resulting in the loss of livelihood and pension for many thousands of people. I do not have the time to engage in a detailed analysis of how Enron developed, nor of how it failed. Suffice it to say that it was an unusual set of circumstances and that, as early as March 2001, Fortune magazine was pointing out the organisation's frailty. Clearly, however, it was a failure in corporate management—a house that is built on sand will not survive once the foundations start to move—which was compounded by a failure in corporate governance. Clearly the Enron board did not ask enough questions nor exercise enough control over the management.
Noble Lords who have sufficient time to look at Enron's financial statements—about six weeks should do—will see buried in the notes all sorts of disclosures. Although the situation could by no stretch of the imagination be said to have been hidden, it was very difficult to interpret. That was made possible by an auditing failure. At a minimum, the circumstances leading to the massive restatement of reported earnings, in late 2001, should have been identified and prevented. I believe that that was all made possible by poor regulation and inadequate accounting rules. This series of failures was compounded by what is alleged to be the wholesale destruction of evidence—the shredding—by the auditors, the very people who are supposed to be, as the noble Lord, Lord Brennan, said, the watchdogs. They are supposed to be the ones who exemplify independence, objectivity and probity. It is therefore little wonder that public confidence in them has taken a knock.
It is very convenient to remind ourselves that all this happened in the USA. However, that begs a question to which, as the noble Lord, Lord Brennan, said, Sir Howard Davies has given an honest answer: "Yes, it could happen here". There are, however, two key factors in the Enron affair that I do not think could he present here. First, our approach to accounting principles is highly beneficial, entailing principles based on substance rather than mere form and detailed rules. When one devises a set of rules, the first thing that others do is start spending a lot of time figuring out how to get round those rules.
The second factor—a key one in Enron's collapse—is companies' use of their own shares as security for borrowings and to fund their retirement programmes. The use of own shares as debt security is relatively uncommon in the USA, but it is almost unknown in this country. Moreover, in the United Kingdom, the use of own shares to fund retirement programmes is of course controlled by the MFR—minimum funding requirement—and is limited to 5 per cent of any pension plan.
As I said, however, let us make no mistake about the situation. When the Financial Times calls in a leader, as it did on 13th March 2002, for the potential "Fat Four"—a new term for your Lordships—to spin off their consultancy businesses and to be banned from doing non-audit work for audit clients, we have a deep

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crisis in public confidence. The issue is what we should be doing about it. Management is the first point. I know of no process other than good training to make incompetent management competent. I also know of no means other than counselling to make corrupt management not corrupt. So we have to rely on governance.
Many have said that the UK's corporate governance system, as it has developed, is thorough and should be seen as a role model for the rest of the world. I join those who have said that we probably have about reached the overdose level on corporate governance reviews—from Cadbury, through Hampel and Greenbury, to Turnbull. However, I agree with the noble Lord, Lord Freeman, that we really do have to examine the issue of the so-called non-executive director. We have to consider how many such appointments people can sensibly handle. We have to examine whether full-time executives can take more than one or two non- executive appointments, as they are called. We have to examine the desirability, or otherwise, of cross-directorships. I should also hope that the review will come up with something approaching a better definition and understanding of the role and responsibilities of so-called non-executive directors who do not spend all their time on a board.
We clearly need to look at auditor independence and regulation. I hope that the major firms and their professional bodies will understand the depth of this crisis. There needs to be much more transparency in their affairs. I am deeply disappointed that other major firms did not follow the example of KPMG and Ernst & Young in publishing audited financial statements. It is transparency that generates public confidence and an understanding of what these people are about. These firms each employ upwards of 10,000 people in the UK and have a significant role in our economy. Why should their financial statements not be audited and published to the same standard required of the public companies on which they report? There would he one benefit aside from the rest, which is that proper financial disclosure and segmental reporting would once and for all resolve the issue of whether auditing is used as a loss leader.
Progress has been made on regulation. Although I find it complex, with all the bodies involved, I think that there is a further step to consider. The key body is funded by the accounting companies themselves, but I think that the Government should consider taking over that funding which would get us away from the notion that he who pays the piper calls the tune.
A further step in transparency that should be considered is that the quality control reports carried out by the joint monitoring unit on those firms that audit public companies should he made public. I recommended that in my report, Holding to Account for the C&AG last year. There is no reason why that could not be extended to those firms that have a role in public companies.
I do not have time to comment on other issues such as the rotation of auditors. All our knowledge and experience leads us to believe that that will not work.
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It is better to focus on the rotation of audit personnel. Clearly we need to look at arrangements for former audit partners joining their clients, and to consider the role of the audit committee in determining what fees should be paid to accountants and auditors for other than audit services.
Before concluding, I wish to make the observation that it is difficult to be prescriptive because in regulated industries, in particular, large amounts of work flow from the audit function itself, such as reports for regulators and so on. They are not audit fees and are not disclosed as such.
In conclusion, it is clear that the auditing profession needs to take a very close look at itself in the light of the Enron affair. Let us not forget that it was not only the board of directors, management and auditors who were involved in that shambles. Investment bankers, lawyers and other advisers were clearly involved as well. We must not over-concentrate on any one of the villains in that piece. There is quite a large cast of characters to look at.
Lord Grocott: My Lords, I gently remind the House that there are three minutes in the gap. This is absolutely no criticism of anyone, but unless everyone keeps fairly close to the nine-minute limit, we shall have very little time for the wind-up speeches.
3.42 p.m.
The Lord Bishop of Oxford: My Lords. I am grateful to the noble Lord, Lord Brennan, for this debate because it highlights certain crucial principles, which I believe are essential to the healthy functioning of our society. I would not presume to go into the detail of what kinds of regulatory and other action is necessary to maintain confidence in business and accounting, but there are a few fundamental points that are relevant to the issue.
First, there is the value of business and the business community to society as a whole. There was once an anti-business mood in this country. People believed that it was best to be born with a large estate, but if one did not have that good fortune, the second best thing was to make a lot of money quickly in order to buy one and then get out of business. In recent years attitudes to business have, quite rightly, been much more positive. It is vital that society feels good about its core activity. If people who work in business, or the rest of the community feel ill at ease with the work on which society depends, it sets up a tension that cannot be healthy. It matters that there is public confidence in business and accountancy.
I do not believe, any more than the noble Lord, Lord Brennan, does, that the business of business is simply to make money. Of course a business must be profitable, but I think that the mission statement of Dayton Hudson, the American retailing firm, is right when it says:
"The business of business is serving society, not just making money. Profit is our reward for serving society well. Indeed, profit is a means and measure of our service—not an end in itself".

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The work of Charles Handy highlights the fact that most people who work in business do not want to work simply for the bottom line. They want to do something that they regard as worth while and which has meaning. Business is a worthwhile activity in principle. I always very much enjoy talking to groups of business people. There is a note of reality in the air, for if they do not succeed the company goes bust. That is very salutary for a mere talker.
If the first point is the value of business, the second is its values. Just because business has value, it is all the more important to ensure that its activities reflect and are permeated by its core values. One of the encouraging features of business over recent decades is the number of companies that have adopted mission statements, ethical codes and statements of best practice. Of course, no doubt some are simply there to reassure shareholders when they look on the inside of the glossy front cover of the annual report. But even that is better than nothing, for as the Duc de Rochefoucauld said:
"Hypocrisy is the tribute that the vice pays to virtue".
Other businesses, some of which are our most profitable, take these themes extremely seriously. They have not just been jotted down on the back of an envelope by the chairman during a boring part of a meeting, but are the result of a process of long consultation throughout the company and are subject to regular monitoring. My questions in relation to recent scandals would be as follows. What publicly stated principles did those companies have? How were those principles drawn up in the first place, and what steps were in place for monitoring them? I do not know the answers; I should be interested to hear them. My guess is that companies with such codes, agreed on after extensive consultation and subject to monitoring, need very little, if any, exterior regulation. My guess is also that such companies are among our most successful.
Clearly, however, some companies need regulation. Greed, compliance with a culture of conformity and cowardice are part of us all. In an article in the Telegraph last month, the most reverend Primate the Archbishop of Canterbury, pointed to the excesses of particular forms of capitalism and businesses that are less devoted to the production of goods and services that people need and want than to speculative buying and selling of things that no one can touch and which few understand. We need to be reminded of the danger that the pursuit of wealth turns into an end in itself as the need to see profits rise and rise becomes a temptation to excess and selfish irresponsibility. In relation to that temptation and perennial danger, regulation will always be necessary.
A few years ago the noble Lord, Lord Laing, and I co-operated to produce a booklet entitled The value of business and its values. As I have tried to suggest, the two halves of this sentence go together. They are integrally related and reinforce one another. Business has value and therefore it will want to be shaped and permeated by a set of values; and, vice versa, being shaped by a set of values will enhance a sense of the value of the work as a worthwhile human endeavour.
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The more perceptive were those who in the 1980s argued in favour of a market economy—some of whom came from all sides of this House. They argued that in order for a market economy to work properly it depends on, and is underpinned by, a set of values. Therefore, it is not just individual companies that need such values. To function appropriately, the whole market economy does so, too. For example, markets depend on contracts, but the efficacy of contracts depends on the assumption that they will he honoured. As the social thinker Durkheim said:
"Not everything in the contract is contractual".
In short, if one makes a business agreement concerned with the exchange of goods or services, there is an unspoken moral assumption behind that agreement—agreements should be honoured.
Regulation, whether internal or external, is necessary, for two reasons. First, it stops rogue companies. The drive to excess will always take some people and some institutions close to the line and over it. Secondly, it reinforces good corporate practice. Regulation is necessary and more, or different regulation, may be needed to prevent the recurrence of recent scandals.
My main point is that, in the end, it is the ethos of a company more than anything else that matters. In this life, virtue does not always result in prosperity, but in the field of commerce it is more likely to do so. It will certainly help to avoid some of the financial collapses that we have seen recently.
3.50 p.m.
Lord Haskel: My Lords, corporate failures have always been with us. They are part of an enterprise culture. Competition in the market sorts out the good from the bad.
My noble friend Lord Brennan is right to look at this matter rather more deeply and ask why some firms fail; not because they cannot compete in the market, but because of fraud or other unacceptable practices. As he said, it is a serious matter affecting people's jobs, pensions, savings and livelihoods. It is that kind of failure which affects the relationship between business and the public. The spectacular failures have usually led to some kind of inquiry. As other noble Lords have said, after Maxwell we had Cadbury, then Greenbury followed by Hampel.
All those inquiries concentrated on the role of the non-executive director. Certainly, non-executive directors are expected to watch out for and be alert to any situation which could endanger the business. But they are also expected to set and maintain the strong values referred to by the right reverend Prelate and to set high standards of corporate governance in all areas of the business. Some fulfil that role well, but obviously many do not. I am not sure what the forthcoming review by the DTI of the roles and responsibilities of non-executive directors will add, but, like the noble Lord, Lord Freeman, I hope that it will do something to provide non-executive directors with the skills and encouragement to do the job of governance better, especially on audit committees.

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The difficulty is that non-executive directors are largely dependent upon management for information about the business. If two or three executives decide to hide, distort or falsify information, there is little that a non-executive director can do except to use his or her intuition and then conduct an inquiry. Inquiries are impossible if auditors shred the records. Like the noble Lord, Lord Sharman, I found the shredding of documents by the auditors perhaps the most disturbing aspect of the whole Enron affair.
Auditors are in much the same position of dependence. If there is collusion in a business to hide or falsify information, it requires a lot more than a traditional audit to detect it. That explains the point made by the noble Lord, Lord Brennan, about major frauds not being detected by auditors. Indeed, the auditors may turn a blind eye to some irregularities. Although legally appointed by the shareholders, the auditors are selected by the directors with whom they want to maintain a good relationship, especially as the directors and managers can also retain them for other work, or even give them a job, as noble Lords have said. Recently, some accountancy firms have taken steps to avoid those conflicts of interest. Like other noble Lords, I welcome that.
What about more detailed accounting rules? Along with the rest of the European Union, we in Britain are committed to adopting international accounting standards fully by 2005, but that still leaves many jurisdictions where sloppy accounting and disclosure rules will apply.
If accountants and non-executive directors cannot stop these corporate failures, what about the regulators? We live in a complex economy and there are limits to regulation. I was in the United States when Enron went bust and was amazed to read in the newspapers that Enron was not really an energy company but a trading company, trading in the futures of 1,200 different products, many of which were totally unrelated to energy and a lot more risky. Yet Enron was regulated by the energy regulator, and those greater risks should probably have been better regulated by the banking regulator.
But if regulation is too tough, so-called investors can always operate outside the disclosure rules by spread betting, which in practice avoids both regulation and tax. So there are limits to regulation. Meanwhile, the banks have to ensure that their share analysts in the assets management arm do not promote the shares of companies with which their banking arm is doing business.
What is it about our business life in this country that has brought all this about? What is it that has created these difficult conflicts of interest? I put it down to the single-minded insistence on shareholder value and its narrow interpretation, as expressed in the share price. My noble friend Lord Brennan called it greed, yet most financial institutions, businessmen, managers and executives insist that the primary purpose of an enterprise is to deliver that narrow version of shareholder value. That takes precedence over
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everything. That is what justifies the dodgy deal that violates the code of practice; drives the cosy relationship between the auditors and directors with valuable share options; and makes it difficult for the non-executive director to argue for social responsibility if it stands in the way of the share price. I do not think that new rules for regulators, auditors, and non-executive directors will do a lot to change that. No, the solution lies in changing the culture of a company. The right reverend Prelate mentioned that.
There is nothing new here. As long ago as 1993, the RSA started an inquiry into Tomorrow's Company. It realised that the narrow view of shareholder interest brought only short-term success. The RSA stated:
"Only through deepened relationships with and between employees, customers, suppliers, investors and the community will companies anticipate, innovate and adapt fast enough, while maintaining public confidence."
It defined a new kind of leadership to be put at the centre of all this, acknowledging that it takes entrepreneurship to start a business but adding that inclusive leadership and clear direction prolongs the success of a business by giving it lasting values. Slowly, companies are adopting that approach successfully. That is why some companies, such as Shell, are now auditing their environmental performance and their people performance as well as their financial performance.
Each company needs to develop its own inclusive approach; one which fits its needs. For some years, the centre for Tomorrow's Company has been quietly helping companies to do that. I welcome that. I believe that that bottom-up change of culture is the most practical way to raise public confidence in business and to avoid dramatic business failures.
3.58 p.m.
Lord Hodgson of Astley Abbotts: My Lords, I, too, add my thanks to the noble Lord, Lord Brennan, for giving us the opportunity to discuss this important topic today. As one would expect from a distinguished lawyer, there was a powerfully argued case. He rightly drew our attention to the appalling personal consequences inter alia of these major collapses. However, rather than retread the Enron ground, I hope he will forgive me if I come at the issue from a slightly different angle.
I begin by declaring interests present and past. I am currently chairman of an investment bank in the City, and what is called a non-executive director—for the reasons referred to by my noble friend Lord Freeman I prefer to call myself an independent director—of three companies, one of which is listed on the Stock Exchange. Historically, I was a founder director of the Securities and Investment Board, the first City-wide regulatory authority, set up under the Financial Services Act, and until last December was director of the Securities and Futures Authority until it was swept away in the new structure.
I mention those organisations because I want to make clear that I am no Luddite as regards corporate governance. Indeed, a good many of my years within the City have been devoted, in a voluntary capacity, to

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raising standards and nailing popular misconceptions. For example, when I first went to work in the City 25 years ago, there used to be a widespread view that insider dealing was a victimless crime. That is far from being the case. Although perpetrator and victim never meet, and will never even know each other, the one has robbed the other as surely as if he had hit his victim over the head and taken his wallet—not as obvious and not as bloody, but just as certain.
Therefore, when people talk about the need to root out fraud, I am there with them. Fraud too, after all, is theft. But in making, and while making, such a condemnation we must be careful to distinguish between fraud and risk. We live in a litigious age. Every night on the television there are advertisements by legal firms inviting one to contact them if one wishes to make a claim.
Too often a risk that goes wrong can be seen as a fraud. None of us likes to believe that our judgment is fallible, so we seek someone to blame. That cannot be right. In commercial dealings there has to be what bankers like to call "the moral hazard", without which people do not take the trouble properly to assess what they are being offered and their own self-interests in accepting the offer.
I talked about popular misconceptions that have been nailed. One that has not been nailed is that regulation comes for free. Probably people feel that, because in many cases there is no charge to the taxpayer, there is no cost. But there is a cost.
I give a brief example from the City concerning the Financial Services Authority. The FSA is the top regulatory body that now controls every aspect of those of us who work in the City. Its budget will be £180 million. It will be paid for by the industry. But the external costs are not the whole cost. There are huge internal costs of complying with the regulations laid down by the FSA. The extent of these have been the subject of learned treatises by the London Business School, Warwick Business School and others. But they work out at roughly two to four times the cost of the external authorisation.
If we take the mid point, it is a cost to the City of around £720 million every year for the present regulatory structure—a short £0·75 billion. Who pays for that? Investors, pensioners, and savers pay, and maybe in the long run UK plc will pay if the sum becomes large enough. A balance has to be struck between too little regulation which drives people away because they fear malpractice in the market and too much regulation which drives them away because of the cost of doing business. If your Lordships feel that the City's position is unassailable I invite you to visit Frankfurt to see the German Government's plans for Finanzplatz Deutschland.
When I previously raised such uncomfortable questions the Minister in his response, quite fairly and properly said to me, "What about Barings bank?" That was 10 years ago. It was before the present regulation. But for the purposes of today's argument let me accept it as a "fair cop". But, interestingly, the total liabilities of Barings at the time of implosion were about £800 million.
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We are spending nearly that sum every year on regulation. Are we stopping a Barings a year? We shall never know. The trouble with the comment made by the noble Lord, Lord Brennan, about not stopping fraud is that the fraud you stop is never a fraud. That is one of the difficulties.
There are two much more significant points arising out of that comment about Barings. First, we must remember that in the end not a depositor, saver, creditor nor a customer lost a penny. ING bought the business—the market worked. The losers were the shareholders—the moral hazard again.
Secondly, with great respect to the noble Lord, Lord Brennan, and other noble Lords who have talked about the need for increased legal statutory regulation, we must not expect that the law will automatically provide a remedy to all these matters.
I was a member of the SFA's enforcement committee which considered the Barings case. It seemed to us on the committee that greed had clearly outrun judgment. Moreover, there was considerable public anger over the way jobs had been saved and, above all, the way that bonuses had been paid. We found our hands tied, not by the old pals act, but by the law. I had never heard of the legal doctrine of "vicarious liability". That principle states that if one asks a subordinate member of staff a question which one has reason to believe he will answer honestly, one is entitled to rely on his answer. However, it became clear that, despite the best legal advice, our powers to proceed and pursue were limited. Our sentences were seen to be inadequate. But even then one senior member of the Barings team was able successfully to attack his sentence and get it expunged, and even force us to pay his costs.
In this country we are in the process of settling down a huge volume of legal and quasi legal codes—the Financial Services and Markets Act and statutory instruments aplenty. There are the voluntary codes of Cadbury, Greenbury and Hampel to which many noble Lords have referred. The weight of responsibility on non-executive directors has already become very heavy. They are in danger of reacting by becoming box-tickers rather than by using their judgment, which should be their proper function, as was pointed out a few minutes ago by the noble Lord, Lord Haskel. Unfortunately, one can never be proved wrong as a box-ticker but one can be proved wrong in one's judgment.
Of course there is no room to be complacent. The recent collapse of Enron has clearly raised issues. The implications of that need to be considered carefully. That is why I welcome the noble Lord's debate today. But if every large corporate failure is to be accompanied by an unthinking legislative banging of stable doors behind apparently bolted horses we shall be doing no service to the UK economy or to our competitive position in the world.
Lord Brennan: My Lords, before the noble Lord sits down I shall use his last minute. I should be grateful if

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he could answer a simple question: what is the total size of the funds in the financial system against which £720 million has been spent to regulate it?
Lord Hodgson of Astley Abbotts: My Lords, it is minuscule. It is impossible to measure. Probably one-tenth of 1 per cent, depending of course on how one measures it and what one is including; for example, whether one is including foreign exchange transactions. It is hard to get the whole sum. It is an infinitesimal sum, but it is still a large sum.
4.8 p.m.
Viscount Bledisloe: My Lords, I, too, thank the noble Lord, Lord Brennan, for initiating the debate. I speak in the debate because as a barrister I have been involved in a number of cases dealing with corporate collapses and with the attribution of responsibility. In particular, I have detailed knowledge of the Barings bank disaster, to which the noble Lord, Lord Hodgson, has just referred.
I agree almost entirely with the noble Lord's diagnosis of what went wrong at Barings. However, I must correct him on one point. It was the bondholders who suffered a grave loss and not the charity shareholders. I do not think that they can be dismissed as people who ought to have known when taking the risk.
The debate has been somewhat dominated by the Enron affair. So far we know little about the matter. However, it must be regarded as a somewhat unusual case. I think that the noble Lord, Lord Sharman, would agree that there are not many cases where auditors are found shredding documents. We must not extrapolate from Enron to the generality of business.
I have three particular points. First, we should not assume that whenever a company goes bust someone must be legally and morally at fault. As the noble Lord, Lord Haskel, said, it is in the nature of business that some enterprises will fail and that investment involves some degree of risk. Unfortunately, we in this country are now rapidly acquiring a culture of blame that says that because something undesirable has happened, someone must be held liable. That culture and concept is fundamentally misconceived and profoundly damaging. But that perhaps is a wider topic for another day.
My second point relates to the position of what are normally called non-executive directors. It may well be that "independent" is a better term, but there is a real distinction between those who are just directors and those who are also the leading managers of the company and involved in day-to-day management.
In many of the collapses, and certainly in the Barings case, the action or inaction of non-executive directors is wholly irrelevant. Barings was the result of failures of management. If management had applied to its business a reasonable understanding and an ordinary appreciation of risk and return, there would not have been that collapse. But there was nothing in
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the Barings case which a board of independent directors, or indeed an audit committee, should have seen or done.
Of course, it is desirable to have good non-executive directors or good independent directors, who have real independence, have an inquiring mind and an understanding of the business. But there is and must be a clear limit as to the extent of their role. Nothing in life can be successfully run by a committee on a day-to-day basis, whether it is a ship of the Royal Navy, an Arctic exploration or a commercial enterprise. If management is subjected to constant supervision and interference by non-executives, or if the auditors are second guessed by an audit committee, not only will enterprises of great pith and moment be sicklied o'er by the pale cloud of debate, but also responsibility will be diffused. Everyone will comfort himself by the fact that others are thinking about it whereas what is needed is a clear allocation of managerial responsibility so that someone knows that the buck stops with him and that it is his job to know whether the facts and figures of his department make commercial sense.
Thirdly, I refer to regulation. There may be, of course, some instances where a specific regulation would prevent a particular abuse, although as the noble Lord, Lord Sharman, said, one must remember that the ingenious and improper mind will rapidly find a way of avoiding or evading almost any regulation. However, on a much more general point, we must resist the siren call which says, "Something went wrong. We must make rules that ensure that it never happens again". "It must never happen again" is a sound but hopeless cry. One hears it after every rail disaster. Noble Lords stand at the Dispatch Box and say, "We must ensure that it never happens again", but we know as sure as eggs is eggs that it will because one cannot have rapidly moving vehicles, aeroplanes or trains without them occasionally crashing. One cannot have successful entrepreneurial businesses without occasionally a rogue or a fool making them go wrong. To go round saying that it must never happen again is to kid oneself and the public.
There are two great dangers in regulation and particularly in over-regulation. First, those involved in complying with the regulations spend their time ensuring that they have complied with the rules, filling in forms to ensure that the ratios tally with the requirements in the regulations. What they ought to be doing is looking at the fundamentals of the business and considering whether the reports and figures are consistent with the basic principles of commerce. Barings would never have happened if the fools on that board had ever said to themselves, "There is no such thing as a high rate of profit with no risk". Regulations will not teach them that simple lesson.
Secondly, the existence and the role of regulators creates a dangerous and false feeling of security. Time and again the managers in the Barings case have said, "Oh, we know that Singapore, and in particular the financial markets in Singapore, have very strict regulation by very strong regulators. Those regulators are happy and therefore we know that there could not

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be anything seriously wrong". Thus insidiously, regulation diffuses and dilutes responsibility from management where the buck should be and should stop.
In all these debates we must never forget the fundamental principle that a good business depends on proper control by a sound and sensible management, which understands the essential rules of sound commerce and applies them to its particular enterprise with a proper understanding of its risk. Pace the noble Lord, Lord Sharman, no rules or regulations can make the incompetent or dishonest into beings who are competent and honest.
I do not have time to deal with audits, but I venture to suggest to the noble Lord, Lord Brennan, that it is certainly not true that auditors never detect frauds and irregularities. When they detect them they are put right and one does not see that. It may be that when they are detected before they have got too far they cease to happen. The cases which emerge where auditors have not seen something are the rarity and not the regularity. The problem that auditors have when things go wrong is not that the audit rules are wrong, but that the relatively junior people who are, for reasons of cost, inevitably doing the donkey work, just fail to read the message which is inherent in the fact, perhaps because they have not the experience or the time within the cost to do so.
4.17 p.m.
Lord Clinton-Davis: My Lords, the whole House will he tremendously indebted to my noble friend for initiating this important debate. We have heard from the world of business, of accountancy, of the clergy even, and from bankers and barristers, and I am the first solicitor to open my mouth. I believe that there will be another soon.
It is very important that the questions posed by the noble Lord, Lord Brennan, govern our attention this afternoon. Of course, we have been blighted by the Enron scandal. It is important that that should occupy our thoughts. But it is not the only issue, as the noble Lord and others have pointed out, that should be important to us. For example, the issue of auditor independence has been cited, and that is very important. The Law Society has given its full attention to the issue and it has also addressed the European Commission Competition Directorate. As a result of those activities the big eight were reduced to the big five as regards the world of accountancy.
It was considered at that time that conflicts of interest could arise, which could have deleterious effects on the issue of competition. Who is to say that the Law Society was wrong then? Is this not still a highly germane issue in the light of the Enron affair?
Solicitors, in particular, have to be conscious of the requirement for independence just as much as auditors do, but independence is viewed in different ways. It is vital that auditors should be able to provide objectivity in viewing the financial position of a client and, for that reason alone, the auditor should not enjoy—or be
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seen to be enjoying—a fiduciary duty to the client. As I understand it, this is not always the case in the United States.
A solicitor, on the other hand, has a very different relationship with a client, and I speak here of solicitors who have served on audit committees. Confidentiality to the client is a prime necessity. In other words, the auditor should never get into bed with the company, but the situation may be totally different for the solicitor, although I must stress that adherence to the law remains essential from his or her point of view.
The Enron affair has established a strong case for ensuring that auditors comply fully with a much stricter regulatory regime. They should play no part in misleading shareholders, nor, in my view, should they impair their independence by offering consultancy services that could have that effect.
The problem of consumers being vulnerable to unqualified advisers and fraudulent management companies is vitally important, and the Law Society is not alone in this regard. The National Association of Citizens Advice Bureaux has reported an increased number of inquiries from people who have simply failed to understand the terms of the agreements that they have signed with management companies dealing with accident claims. The Blackwell Committee and the Leggatt report have also covered vital matters.
What is especially wrong with accident claim companies is the way in which many of them go about their business. No one has referred to this tonight. For such organisations, the lay client is a burdensome necessity. They are often extremely aggressive, and frequently persuade the client to settle the case on terms that are distinctly disadvantageous to the client. That they do this is, in my submission, entirely beyond doubt.
I turn to the question of tribunals. Unqualified advisers frequently provide inadequate advice and representation in these circumstances, and the client is often persuaded to settle on terms that could, frankly, be considerably improved. I hope that the Government will soon confront these, and other, issues, which are central to the way in which tribunals on personal injury cases are dealt with.
I shall conclude by asking my right honourable friend what I hope are some relevant questions. Will the Government take steps to ensure that qualified lawyers can carry out advice work in contemplation of proceedings before courts or tribunals? As an alternative to that, will the Government require claims management companies and unqualified advisers to stick to a code which would stop sharp practice? I hope that the Government will do their best to ensure that the customer should approve only those who adhere to such basic standards.
The elements of a standards code might well include: a cooling-off period; some indemnity insurance; suitable consumer redress when appropriate; transparency about what the consumer has to pay: a ban on doorstepping potential clients; and a ban on paying claims management staff only on a commission basis. I hope that these questions have been relevant to

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the debate. I regret that no one seems to have tackled these important issues. This debate is not only about auditors, or about the Enron affair. It is about a wide variety of matters that are equally important.
4.26 p.m.
Lord Clement-Jones: My Lords, I would like to declare an interest as a solicitor, and also as the former company secretary of a major FTSE 100 company. I congratulate the noble Lord, Lord Brennan on instituting a timely debate, and on a thoughtful, if rather bleak, speech.
I am tempted, unusually, into this area because I believe that, following the events of this year, we have reached a watershed in corporate governance. We have had crises of confidence in corporate governance in the past—I remember particularly well the Robert Maxwell case. I am sure that the Mirror pension scheme is engraved on the hearts not only of many professionals but of many of those affected by the case. There have been attempts to deal with corporate governance in a voluntary way. Many of your Lordships have talked about Cadbury, Greenbury, Hampel, Turnbull—the mantra goes on—and the combined code. There has been a succession of governance and risk management tools to give investors assurance about the governance and risk management of their companies.
Those attempts were worthy, and it is only with some reluctance that I have concluded that the current role of the non-executive director is no longer viable for major PLCs. In the past, we have relied on the non-executive director—sometimes a retired professional or executive, often a busy current full-time executive—to fulfil the role of watchdog on behalf of the shareholders. In reality, however, despite attempts to boost their role through the various codes, that is a quite impossible task, except, perhaps, after a crisis has happened. We have audit committees and remuneration committees, the membership of which is often entirely made up of non-executives, yet abuses have occurred. In fact, it is noticeable how newsworthy it is when a remuneration committee really works and takes a robust line on remuneration, as it has in the Vodafone case, with Penny Hughes in charge of the remuneration committee.
The other frequently cited role of non-executive directors is that of their relationship to shareholders and investors. Chief executives, however, regard that as a major part of their role, as the share price is key to the perception of a company, to the measurement of performance and, indeed, to the chief executive's bonus. Non-executives can and do have a major impact on the social responsibility aspects of a company. But the question that needs to be asked is whether that is more than skin deep.
The fact is, as the noble Lord, Lord Haskel, pointed out, that executive directors are far better informed than non-executives will ever be. It is no longer tenable that non-executives should have the same legal duties as executive directors. I agreed with a great deal of
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what the noble Lord, Lord Freeman, had to say, but on that aspect I part company with him. Someone being paid to do, say, one day a month for a major company is hardly in a position to argue with the full-time executives of that major company. Often they are appointed precisely because they will not do so. However, companies get the professional advisers that they deserve.
Though I am happy to discuss future governance of the accounting profession, I do not believe that that is at the root of this problem. Unless the governance of a company is strong, the professional advisers will inevitably see their main route to retaining influence as serving the interests of the executive management team of the company. That is professional and human nature.
How many auditors will actually spill any beans at all to the non-executive audit committee when the executive directors are asked to leave the boardroom, or express doubts about any aspect of the company's financial controls? Therefore I welcome in particular the Secretary of State's announcement on reviewing the role of the non-executive director. I am pleased also that the Secretary of State wants to see more active institutional shareholders following the Myners review.
We already have two types of director who should have different legal duties. We should rapidly move towards a fully effective two-tier board system for our major companies. A supervisory board should be charged with the duty of ethical and financial quality control and governance. That board should be accountable to shareholders for that aspect of the company. The members of the board should be properly remunerated; they should be serviced by staff; and they should he fully supported by legal and financial expertise. There is a good case to have the internal audit function reporting to that supervisory board.
On the other hand, the management board should be responsible for commercial strategy, trading and financial performance. In the words of Patience Wheatcroft, the City editor of The Times, who conducted an effective, sceptical campaign about the role of non-executive directors, the executive directors should walk the plank if they do not perform.
I am a reluctant convert to that structure for a company. I believe that currently non-executives can play a valuable strategic advisory role to boards. But that is as far as it goes. I do not believe that the appointment even of a designated senior non-executive director will do the trick in governance terms.
In summary, I do not believe that we can carry on tinkering about with a bit more corporate governance here and a bit more corporate governance there. If we are genuine about ensuring proper governance, protecting shareholders' interests, managing risks and so on, we need to think more radically. A two-tier governance system deriving inspiration from continental models, but being far more proactive and with responsibilities far more carefully defined, is the best way forward.
4.33 p.m.
Lord Barnett: My Lords, I begin by declaring an interest as an accountant and, some time ago, being the chairman of a moderately sized accountancy body of the kind that was eaten for breakfast, or morning tea, by KPMG. I admit willingly that I have never shredded a single paper. I should also declare an interest in that I am a non-executive chairman of two companies and have been a non-executive chairman and director of others in the past.
I thank my noble friend Lord Brennan for introducing this important debate at this time. We all know that the Enron affair damaged both company boards and the accountancy profession rather more than many of the other failures and serious problems did in the past, for reasons of which we are all aware.
Many major investigations have already taken place by the DTI and the US Congress, and Paul Volcker was brought in by Andersens a bit late to look at what could be done for them. I noted what my noble friend Lord Brennan called "profit mania". I am not too sure about that. Greed certainly could have been one of the causes of the Enron disaster—money is often the root of all evil and that was certainly a problem in which the directors and indeed the auditors seemed to be involved.
That said, it would be nice if, as the right reverend Prelate the Bishop of Oxford said, we could have a moral value on the boards of companies. However, the code of most of the companies with which I have been involved has been to increase their profits. I do not apologise for that; I understand that that is one of their major functions. I would love it if we could all have moral values, not only boards of companies, but we do not.
I hope, as a member of a company board, that boards take proper account of what is legally sensible and right and what is good corporate governance. But I do not know enough yet about the causes of the Enron affair to be able to advocate more regulation of a statutory kind. It is far too early to say and we should not rush into that kind of legislation. And I do not necessarily go along with the noble Viscount, Lord Bledisloe, that regulation is positively damaging to corporate bodies. Some action will be needed, not necessarily with statutory regulation, but such action could be taken now before we need to take legal action.
It should be recognised, and I hope it is, that directors of most companies—certainly the ones of which I am aware—and most accountants are perfectly honourable men and women who should not be condemned along with what happened to Enron or Andersens. I am sure that all the accountants in Andersens, other than those directly involved in the issue, are perfectly decent, honourable people. So we have to be careful about who we find guilty in these affairs. We must not allow the Enron affair to besmirch the whole of the accounting profession. Many companies I know would not be happy to have the name of Andersens as their auditors—they may
like KPMG, but I shall come to that.
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Clearly, changes are needed. Some FTSE 100 companies and even more, have already appointed internal audit bodies. Those bodies need to be truly independent of the board and the auditors of the company. That is crucial. Otherwise neither the directors nor non-executive directors would know, as somebody said, how to deal with the problems that arise. It may not stop all the fraud and corruption that takes place, but I like to think that it would go a long way towards dealing with some of it. If there is, as there seems to have been in the Enron affair, collusion between a chief executive and the auditors, enormous problems could be created even for a properly appointed internal audit committee.
Much has been said in this debate about non-executive directors. Somebody even referred to them as "so-called" non-executive directors. I can say that a non-executive director is someone who is not an executive. That certainly applied in my case and applies in most. But much attention has been focused on them. The very first question a non-executive director should ask on being appointed is: "Do we have a properly appointed independent internal audit system?". That is crucial because they cannot do the job if they do not have such a body.
After asking that question—and asking if there is proper insurance for directors, of course—we need to know how non-executives are appointed. The noble Lord, Lord Freeman—I have a lot of regard for him℄said that he did not believe that they were now appointed in the way that they were in the past. Again I declare an interest; most of my appointments as non-executive director arose from contacts and connections I had, some no doubt because I was a Peer of the realm and a former Cabinet Minister. It could be that I was appointed on every occasion precisely because I am such a wholly competent person. I would like to think so, but I doubt if that was the reason—at the start anyway. Later, that may have been found to be so. There is no doubt that Peers and former Cabinet Ministers are appointed because of their connections and are not always the most competent of people.
Another person often appointed is the senior auditor of a practice who retires, perhaps early, to take a non-executive directorship. That kind of conflict of interest is clearly serious and it needs to be examined very carefully. There has been talk of a one-year delay between retirement and appointment. Though many of them will do an excellent job, I am not sure about that; it needs to be looked at. We have to ask ourselves whether statutory regulation would help at present. I doubt it.
The other point that has been made throughout the debate, and elsewhere, is whether auditors should do non-audit work. The definition of consultancy is a somewhat difficult one. Much of it stems from the audit work done by a sensible partner who is doing a good job. Should due diligence on an acquisition be given out to someone else to do? There are all kinds of other areas, such as tax work and investment decisions, that are required by a partner and by the company. They will invariably arise in talking with the

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partner: a perfectly decent, objective, serious partner. All of that could not be cut out, and we need to look very carefully at what is done in that direction.
The problem of accountancy is the sheer size of it. They are now called the "fat four"—and I am not making any comment about the size of the noble Lord, Lord Sharman, but the "fat four" practices of which he is now, I understand, only a consultant. The problem has grown with the size of private companies, mergers, and so on.
It has happened and is happening in the accountancy profession. I checked with someone who was the senior partner of a modest-sized accountancy practice in the UK which merged with Andersen some years ago. They were a so-called alliance of separate partnerships. I asked him today what kind of a partnership it was, because it does vary. To my amazement, he said, "a federal partnership". We spoke about that at Question Time yesterday, and so I will not go into it again. I understand that Andersen itself is an alliance of small partnerships. We should not rush into statutory regulation before we know exactly where we are going and what has happened.
The Association of British Insurers represents, it is said, some 20 per cent of the stock market and so is not a small organisation. The investment fund managers, instead of writing letters to the Prime Minister and printing them in The Times, should think more carefully about what they are doing in their job as investment managers.
With that, I leave it, my Lords, as my time seems to be more than up.
4.43 p.m.
Lord Griffiths of Fforestfach: My Lords, I thank, as others have done, the noble Lord, Lord Brennan, for introducing this subject, which is very timely. I also declare my interests which are set out in the register. In particular, the membership of the boards of two companies in America, boards of which I have been a member for 10 years and both of which have been audited by Andersen over that period. I must say that the service we have had from them has been of the highest possible standard of integrity.
The subject of today's debate is of enormous importance to anyone who values the market economy. The collapse of Enron, as has been said, especially by the noble Lord, Lord Sharman, is different from the collapse of almost any other company that I can think of. Its failure on such a massive scale, with such repercussions, casts a cloud over all of us who have any association with business. It has undermined the credibility of the business world. The notion of one of the major five auditing firms in the world shredding documents when in difficulty is so appalling, and so impossible to justify on any ethical basis, that it calls integrity into question on a massive scale. Accountants, lawyers, independent directors, regulators—we all stand indicted because of that.
There are three questions that I find myself asking. First, the numbers which are being thrown up and which reflect the value of a company are being called
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into question. Secondly, the validation of those numbers by an external firm is being called into question. Thirdly, the competence of independent directors is being called into question.
I have no desire whatever to be complacent. I agree with what the noble Lord, Lord Barnett, has said about increased regulation. Perhaps I may say one or two things, however, before making some positive suggestions.
First, an economy which had no failures would, in my judgment, be an economy which was inefficient. It would not be an economy in which companies were taking risks and innovating. What seems to have happened at Enron is a disgrace. Nevertheless, when it started and for the first 10 or 12 years, it made tremendous innovations which have benefited consumers. Secondly, there is no regulatory system in the world which can ever outlaw fraud. If there was fraud in the Enron situation, it is something which, however much we try to change regulations, we shall never outlaw. Thirdly, Enron is not typical of corporations in either this country or in the United States. The remarkable thing is that it is such an exception. There are so many companies, as has been said by the noble Lord, Lord Barnett, in which the non-executive directors and the management are very decent, honourable people, who have very high ideals in business.
It has been said that we should think twice before embarking on regulation. Every extra piece of regulation that we impose on a company will involve a cost. The question we have to ask is: do the benefits justify the cost that we will be imposing?
Lord Clinton-Davis: My Lords, the Labour Government in particular caused a number of reports to be made on the aberrant activities of companies and, in that regard, every report had a recommendation.
Does the noble Lord totally ignore that? Is that something which counts for nothing?
Lord Griffiths of Fforestfach: My Lords, I am not suggesting that such a report is not valuable. What I am suggesting is that we already have, as has been said by the noble Lord, Lord Hodgson, an enormous amount of regulation with which companies have to comply. Before we increase regulation as a result of Enron, we would do ourselves well to ask what benefits we can realistically expect from such regulation. That is the simple point that I was making.
The other point I make is in relation to what was said, initially by the noble Lord, Lord Brennan, and then by the noble Lord, Lord Haskel; namely, that we live in a society which is entirely driven by greed and that, as a result, the concept of shareholder value is not a good one. From my perspective of sitting on company boards, shareholder value is necessary as an objective simply in order to survive. When a country the size of China is entering the WTO and exporting their products here, shareholder value is necessary. If we do not pay attention to shareholder value, we will not be in business tomorrow.

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In order to achieve that shareholder value, one has to do much more than simply go after profit. Profit is the result of producing a service or a product which people want. It is that which is the value.
I turn to the subject of accountancy and also non-executive directors. In relation to accountancy, many have mentioned possible reforms of the auditing process in order to make it more effective. Mention has also been made of re-tendering of audit work; audit firms not doing consulting; companies not hiring finance staff who were formerly employed by their audit company; non-executive directors appointing auditors, and so on. However, a number of speakers have said, "Let's go easy in this respect".
I believe that Enron has created a crisis of great proportion. In such a crisis, we need very simple rules. The last thing we want is a lot of complexity. If we want to rest ore public confidence, first—this is where I would be in favour of increased regulation—we must have simple rules stating: that every board must have a beauty contest every so many years in order to look at its audit work; and that an audit company cannot undertake consulting for that company. If you start trying to trim, it seems to me that you cannot restore public confidence.
Secondly, when it comes to financial reporting, transparency in terms of the numbers is absolutely critical. I am no accountant, but, although they may be legal, certain current practices also seem to me to be misleading. Let us take, for example, the question of off-balance sheet liabilities. This is really a call to the accounting profession. I believe myself to be reasonably intelligent, but I find the footnotes to some accounts totally impenetrable. In my view, the annual accounts of a company should be providing not just the professional investor but also the average investor with sufficient information to make an informed decision. Financial reporting has a long way to go in that respect.
A few years ago, Warren Buffett said that three questions should be asked by an audit committee of its auditor. First, if the auditors had prepared the accounts, would they basically be different from the way that the company prepared them? Secondly, if the auditors were an investor, would the information provided have been sufficient to make an informed judgment about that company? Thirdly, if the auditor were the CEO, would the internal audit system of the company, as suggested by the noble Lord, Lord Barnett, be something that was up to scratch? There is a further problem for the audit profession; namely, where do you find good auditors? If it is more attractive to be proactive running companies, or to operate in other areas—investment banking, and so on—there is a real problem about getting high quality
people who can examine others, such as the directors of a company like Enron.
Finally, although there is little time in which to say anything, I should like to make one comment. We have seen many reforms of corporate governance in this country. It seems to me that we could have more of those reforms. The Government could play more of a
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role in the process and we could limit the role of non-executive directors, but the values of non-executive directors lie at the heart of the issue. You need a CEO and a chairman who have integrity; management that has integrity; and, indeed, a board that has integrity. You cannot regulate in that respect, but you can try to create an ethos within the business community that those are the shared values that apply. If we go down that route, I believe that that will prove to be the way to inspire public confidence.
4.53 p.m.
Lord Newby: My Lords, like other noble Lords, I congratulate the noble Lord, Lord Brennan, on introducing this extremely timely debate. In speaking this afternoon, I declare an interest as chairman of a company that seeks to advise other companies about how they should exercise their corporate social responsibility.
The noble Lord, Lord Brennan, talked about the basic human emotion of greed, which drove many of the people at Enron, and in many of the other companies to which he referred, to disaster. I should like to add two other basic human emotions; namely, ambition and pride, which, when mixed with greed, produce a particularly heavy cocktail at the heart of running a big company.
I should like to begin by discussing the role of the accountancy profession. This role is especially important because it is central to the management of all businesses. The effect of Enron has been to undermine confidence in the profession not only in the United States but more generally. Certainly, with allegations of the shredding of documents in the United Kingdom, the industry in this country cannot afford to be complacent; nor will the fact that accountants in this country have to form an overall judgment about the state of a company, rather than simply following set rules, be completely reassuring to many investors.
Post-Enron, things simply cannot continue as before. I share the view of the industry that a knee-jerk response that simply accepted all the possible areas of reform would be inappropriate. But during the course of this afternoon's debate we have heard a number of suggestions that should now be seriously considered. Let us start with the role of the auditor. A number of suggestions have been made in terms of a rotation of auditors. I would not wish to go as far as to have a formal shift or change in the audit company on a regular basis; indeed, where that has been tried in Brazil and Italy, it has not worked. However, there is an argument for having a more frequent rotation of audit staff.
I certainly agree with those speakers who made the point that the practice of former audit partners joining companies that they previously audited—and doing so within a short period of their working in the audit company—either as members of the board or in an advisory capacity, must stop. There is a question over how long a moratorium might be; for example, should it be a year or two years? In my view, it should be at

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least two years and there may be an argument for a longer period. Clearly there is an issue about the extent to which non-audit work should be undertaken by auditors. However, I agree here with my noble friend Lord Sharman. It is very difficult to prescribe in the area. It is necessary for the audit committee to keep a very close watch on the process, rather than setting very precise limits. I also agree with my noble friend's suggestion that government should take over the funding of the Accountancy Foundation.
We also had a long discussion on the role of non-executives. Like other noble Lords, I welcome the setting up of the Hewitt review. The suggestion of my noble friend Lord Clement-Jones of a two-tier board for large companies needs to be considered. That is one dramatic way of being able to shift current practice. However, even with that structure in place, it would be very difficult for those on the supervisory board, unless they are very assiduous, always to get underneath exactly what the executive board is doing. I certainly agree with the suggestion that there should be a limitation on the number of cross-directorships that arise, and on the number of non-executive directorships that any individual should hold.
Enron has demonstrated the need for many such changes. It also demonstrated the fact that complicated, sophisticated companies look to areas of weakness in order to undertake areas of corporate practice that they could not manage at home. The partnerships in Enron that caused many of the problems were undertaken offshore because those concerned could not have got away with those activities in the United States. Therefore, the whole question of extending best practice in terms of accountancy, tax rules and international standards to countries that do not currently adopt such standards should remain high on the agenda of this Government, and on that of international bodies.
Although today's debate has naturally concentrated on the accountancy profession post-Enron, I hope that the House will forgive me if I refer briefly to another area where public confidence in business is currently taking a battering. I refer to the split capital investment trust sector. This sector has grown over the past decade and a half—from nothing to a series of over 120 funds with assets of over £13 billion. However, in recent weeks a dozen splits announced that they were in default of their banking covenants. It is estimated that between 20 and 40 other funds are at risk, with possible assets between them ranging from £4 billion to £5 billion.
The sector has been characterised by a high degree of cross-holdings between one firm and another, creating a pyramid of values that was bound to collapse given a significant market downturn. That downturn has now occurred, leading to a systemic collapse of at least part of the sector. Those who are losing out are not only institutional investors, but tens of thousands of small investors who invested in splits believing them to be low-risk vehicles for long-term savings. They did so in part because the funds were
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marketed as low risk and recommended by their managers as a means for saving for school fees or retirement, for example.
I hope that your Lordships will forgive me for quoting from a letter that I received yesterday from a couple who invested their life savings in a split trust that has now defaulted. They write:
"Our investment was made in the knowledge that there was a risk of a fall in capital commensurate with such a higher than market dividend, but the thought of a total loss was never thought of, and our perusal of the literature received from the management Co. never suggested such a possibility".
A number of serious allegations have been made against the sector that need a quick and authoritative answer. First, did the pervasive extent of cross-holdings amount to collusion and a reckless disregard for investors' funds? Secondly, were directors in breach of their Companies Act duties to act in the interests of shareholders by putting their own interest first as recipients of extremely high bonuses based on fees earned by their companies? Thirdly, how extensive was the mis-selling of splits to small investors, some of whom have now lost their entire investment? Fourthly, is there a case for compensation for those investors? Finally, will the splits now waive all their fees while the crisis is sorted out?
The Financial Services Authority is currently undertaking an investigation into the management of split level trusts. Given that they are publicly listed companies quoted on the Stock Exchange, with boards of directors at least nominally independent of the fund managers, there is a major question about the responsibility of the Department of Trade and Industry. I should be most grateful if the Minister would say whether the DTI intends to launch its own investigation or to leave the whole issue to the FSA.
Turning from that specific area back to the main issue, several noble Lords have discussed the need for the development of a more ethical corporate culture and practice, in which some of the practices undertaken by Enron and its accountants would simply never have been contemplated by the board or executives. I strongly agree, but I fear that to rely solely on the good nature of senior executives in every case to see off the triple vices of greed, ambition and pride is to wish for the moon.
Our current regulatory framework, complex and expensive though it may often appear, is necessary to keep those three vices at bay. It must be kept under constant review. To take the point made by the noble Viscount, Lord Bledisloe, it may not be possible to stop every financial or other man-made disaster happening, but it is surely only sensible to try.
5.3 p.m.
Baroness Noakes: My Lords, perhaps I may first declare some interests. I am a chartered accountant and a member of the council of the Institute of Chartered Accountants in England and Wales—indeed, I am a former president of the institute. I was a partner of KPMG until 2000 but have no on-going interest to declare in that regard. However, I should say that I have a number of friends who are currently

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partners in KPMG or other members of the "fat four". I am also what I am learning to call an independent director of a number of companies and in that capacity am a member or chairman of audit committees.
Like other noble Lords, I thank the noble Lord, Lord Brennan, for introducing this important debate. Noble Lords who have spoken today have contributed much wisdom and practical experience and we have had an excellent debate. In particular, I welcomed hearing the right reverend Prelate the Bishop of Oxford contributing to a debate on business affairs, and I agree with him about the importance of the issue of values. I sincerely hope that they can exist within a framework of shareholder value.
The issue of Enron has clearly been the driver for this debate—it was the largest corporate failure in the history of the United States. We may never know the truth behind what led to the Enron collapse. Some strands, including inadequate accounting rules and action or inaction by auditors, are identifiable, but it seems certain that behind those failures were directors determined to flout the rules for their own purposes.
Indeed, if we consider major corporate failures the world over, directors must be first in the firing line. The most notorious cases in this country in recent years, such as Maxwell and Polly Peck, involved one or more directors—executive directors, management—set on breaking the rules. Those directors have often been dominant personalities whose apparent commercial success made it more difficult to challenge them.
But not all corporate failures are linked to fraud in the boardroom. If I think back to my first year of accounting training, the biggest corporate failure, which shocked the business community in 1971 was that of Rolls-Royce. That did not involve overbearing or fraudulent directors but directors making a major commercial misjudgement.
I mention that not to diminish the importance of the collapse of Enron but to remind your Lordships—as have other noble Lords—that corporate failure is a natural consequence of the capitalist system on which our economy is based. Capitalism has fuelled our economic growth and that of other Western economies. Global economic prosperity rests on it. But capitalism involves risk taking. Capital markets, shareholders and management all accept that risks sometimes turn out badly. Some business enterprises will fail. Last year alone, there were more than 30,000 liquidations and bankruptcies in this country. Business failure is an unfortunate fact of business life.
One reason that our economy has been successful has been its relatively light regulatory burdens. Of course, our business community always complains about the level of regulatory burdens—and rightly so. Especially since 1977, regulatory burdens have been rising—the British Chambers of Commerce estimates their total cost at £15 billion. But our economy is still relatively flexible, which has meant that we have a greater ability to withstand global slowdown.
It is important to remember the underlying virtue of the flexibility of our economy when we consider what responses are needed to corporate failure. It may be
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tempting to think of ratcheting up regulatory systems as a response to Enron, but I sound a note of caution. Increasing regulatory burdens could drive business out of this country or prevent inward investment from coming here. As my noble friend Lord Hodgson pointed out, regulation carries costs for business.
We know that other regulatory burdens on business in this country are coming. There is the so-called enterprise Bill, which will increase regulatory burdens, and at some point during the life of this Parliament, the company law review will increase the regulatory framework for companies.
Today is not the time to debate the substance of those issues, but it is time to debate how we approach the regulation of business. We must be careful that we do not simply respond to corporate failure by massively increasing the rules and regulations surrounding business. We must ensure that the benefits of any additional regulation outweigh the costs. We must ensure that we do not strangle the spirit of entrepreneurship, which is important to our economic success.
We should also remember that major corporate failures can result as much from government action as from the actions of directors or auditors. The most shocking corporate failure in this country in recent months was the assassination of Railtrack by Mr Stephen Byers, who is, remarkably, still Secretary of State for Transport, Local Government and the Regions. When the Government address the issue of corporate failure, they should consider carefully whether they come to the task with clean hands.
The Government have announced several actions in specific response to the Enron case. First, there is the review of non-executive directors announced by the Secretary of State for Trade and Industry, which has been welcomed by many noble Lords. On these Benches, we welcome such a review in principle. Although the announcement of the review made it sound as if some action was involved, there is still, I understand, no chairman or person to take forward the review. The person whose name was mooted in the newspapers, Sir Peter Davis, appears not to have wanted to take up the challenge. Perhaps, that is not surprising, given the succession of reviews—Cadbury, Hampel, Greenbury and the like—that have already covered the area. What is the status of the review of non-executive directors? Who will lead it? What are the terms of reference? When will it report back?
The second review announced by the Secretary of State for Trade and Industry was a review of audit and accounting issues. It is to be taken forward with the various regulators in the field. What are the terms of reference for that review? When will it report? I would also like the Minister to say whether the proceedings of both reviews will be open to the public. Will they take evidence in public? Will they cast far and wide for contributions? Will the reviews be open and transparent?
The reviews will touch on issues that are central to business life and the existence of a successful business community in this country. Their recommendations

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could have far-reaching implications for business. It must be made clear that a broad spectrum of business interests can contribute to it fully and openly.
The accountancy firm at the heart of the Enron scandal, Andersen, has close links with the Government. It worked closely with the Labour Party before the 1997 election and was rewarded with the rapid settlement of long-running litigation undertaken by the previous Government against it over the quality of its work on De Lorean, another corporate failure, albeit less spectacular than Enron. The Secretary of State was director of research for what was then Andersen's consulting arm.
What are the Government doing about Andersen's Enron role in the UK? I am aware that the majority of the issues relate to the US offices of Enron and Andersen, but Andersen's UK office was singled out for special mention by the US authorities when the US firm was recently charged with criminal acts relating to the destruction of evidence. What is the Government's current approach to work done by Andersen? Are there any contracts in progress or any contracts for work for which Andersen are bidding? What do the Government intend to do if there are any such contracts?
Many issues are raised by the Enron failure. I hope that the Government will be prepared to face all those issues, even those close to home. I hope also that the Government will not fall into the trap of creating more regulatory burdens on business—that includes auditors—without being sure that those burdens are outweighed by the benefits to our economy.
5.14 p.m.
Lord McIntosh of Haringey: My Lords, my noble friend Lord Brennan is to be congratulated on the timeliness and importance of the Motion and on having attracted such a range of expert contributions. As has been suggested by several speakers, that has happened because, although Enron is not mentioned in the Motion, attention has been wonderfully concentrated by the largest, most serious corporate failure in the history of capitalism. Perhaps it is going a little too far to call it that; but certainly several speakers have questioned things that should have been questioned before but may not have been.
We start in the knowledge that company failures, as has been said, are a normal part of business life. They can result from misjudgments in corporate strategy, from an inability to adapt to changing market conditions, or from simple bad luck. They can also result from weak systems of control within companies, from failure to apply those controls rigorously, from human weakness—greed, ambition and pride—and, in a significant number of cases, from dishonesty and fraud on the part of the employees and managers of a company.
As has been made clear by the Enron case, they can arise also from failures in accountancy, Whether they are failings in external or internal audit, all those things can and do happen. I doubt whether the noble
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Lord, Lord Brennan, was right to say that no company was ever saved by its auditors. I suspect that the companies that are saved by their auditors do not come to public notice, and the fraud does not bring the company down. The poet said:
"Treason doth never prosper, what's the reason?
For if it prosper, none dare call it treason".
We must accept that no amount of regulation by Government could prevent all failures occurring. On that, if on little else, I agree with the noble Baroness, Lady Noakes. Certainly, we could not expect to provide benefits to consumers or the economy by propping up failing companies. As has been said, taking risks, with all the rewards that it brings, is at the heart of the free market. However, we take seriously the failures that raise issues relating to regulation or public confidence, and I shall set out some of the things that have been done in the past 10 years or so and some of the things that are being done now and will be done in the future.
We must get the balance right between regulation and encouraging enterprise. We must make the United Kingdom an attractive place in which to do business, and we must consider the issue in the wider sense. The noble Lord, Lord Hodgson of Astley Abbotts, gave some importance to the cost to business of regulation, although even he admitted, under questioning, that the cost was infinitesimal in the context of the turnover of the financial services business.
Lord Hodgson of Astley Abbotts: Will the Minister give way?
Lord McIntosh of Haringey: My Lords, I shall do so now, but I shall not give way again.
Lord Hodgson of Astley Abbotts: My Lords, the question is whether other markets charge the same. If not, there is a competitive disadvantage. If the Minister deals in shares, he will see that there is £5 compliance charge on each of his contract notes. That is a considerable sum.
Lord McIntosh of Haringey: My Lords, that is not the question. The question is what is necessary to make this country a safe and successful financial market. I shall not give way to any other interventions; I simply do not have the time.
What has been done in the past 10 years? We have improved accounting and auditing requirements. The Companies Act 1989 paved the way for the creation of the Financial Reporting Council and the Accounting Standards Board. There is a stronger requirement to consolidate special purpose vehicles. There is the use of substance over form to determine the extent of consolidated accounts, which makes it more difficult than it may be in some other countries to keep liabilities off the balance sheet. That was certainly the issue at Enron. The Financial Reporting Review Panel, chaired until a couple of years ago by the present Attorney-General, has played a role in this.

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As my noble friend Lord Brennan pointed out, of course it is important that the United Kingdom and the United States should reach agreement on accounting standards. However, as we move towards international accounting standards by 2005, it is also important to ensure that we should move to the best accounting standards and not sacrifice any of the virtues that we have now.
Financial services regulation has been addressed with the establishment of the Financial Services Authority, which took on its full powers last December. We now enjoy the benefits of a single regulator which sees the importance of market confidence at its core. Furthermore, we now have an opportunity, if not to eliminate the risk of failure—that cannot be done—at least to probe more fully and penalise more harshly any contraventions of the standards now being put into place by the FSA.
Improvements have been made in corporate governance, perhaps less dramatic than in some other areas. The combined code has proved a valuable account of best practice. Its influence has been recognised outside this country. We have also had the Turnbull report which addressed the subject of risk assessment. As I shall make clear, there is still a great deal more to be done on corporate governance and, indeed, on the issue of audit committee responsibilities, a matter raised by my noble friend Lord Brennan. However, we have not been entirely idle in this area.
In terms of accounting regulation, a commitment was made in 1997 in our business manifesto that new arrangements should be introduced for oversight of the self-regulatory functions of leading accountancy bodies. The new Accountancy Foundation, chaired by my noble friend Lord Borrie, and the various bodies related to it, are now active and are asking many or the questions which have been put in our debate this afternoon.
I turn now to what is being done and what will be done in the future to address these concerns. I refer first to the Company Law Review, whose final report after a three-year exercise was published in an enormous volume last July. The review looked at the whole framework of company law and corporate governance and made wide-ranging recommendations. However, it did not go as far as some of the views that have been expressed in our debate. It recommended that there should he a statutory statement of directors' general duties, to provide greater clarity about the rules governing directors' decision-making. It also made recommendations about transparency, including a statutory operating and financial review for large companies, and improved arrangements for company disclosure and shareholder voting.
Many of those recommendations will require legislation. We are consulting on that now and we are actively preparing major draft legislation in response. It will be published for consultation purposes. We are determined that our company law should be fit for the demands of the 21st century.
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Questions were asked about what is being clone about concerns raised by the accountancy profession and the role of the Accountancy Foundation. In this area, too, progress is being made. The Ethics Standards Board is looking at the professional rules on auditor independence, while the Auditing Practices Board is considering the relationship between auditors, audit committees, company management and shareholders. We shall have to see whether the role of the audit committee should be strengthened, as well as enhanced independence for that committee.
The noble Lords, Lord Sharman and Lord Newby, have suggested that the Government should fund the Accountancy Foundation. In due course we shall be carrying out a review, probably after five years. Certainly the question of government funding has not been ruled out, although as far as I am aware, it has not particularly been asked for.
Both the noble Lord, Lord Griffiths, and my noble friend Lord Barnett referred to the issue of auditors and non-audit work. I think that there is a distinction to be made with regard to non-audit 'work which falls naturally to auditors and thus does not raise any issues of auditor independence. However, over the years there has certainly been a history of non-audit work presently undertaken by auditors which could raise reasonable concerns about independence. In particular, it raises concerns about whether the profitability of non-audit work can affect the independence of the audit work itself. That, after all, is what we are concerned with here; this is a debate about corporate governance rather than consultancy.
I shall interrupt myself to say a few words about offshore financial centres, a point raised by the noble Lord, Lord Newby. This is an ongoing problem and has been so for many years. However, we are working closely with the Crown dependencies and the overseas territories, putting considerable pressure on them with regard to the issue of money laundering. All the UK dependent territories have sent letters of commitment to the OECD Harmful Tax Competition Initiative and we are continuing to hold talks on that.
Perhaps I may turn to the developing role of the Financial Services Authority. An issue which has been raised is that of the review of the listing rules, which will give an opportunity to consult on the issues raised by the collapse of Enron as they affect listed companies. However, I do not think that we should prejudge the outcome of that review. It may be sensible for the FSA to take the opportunity to address the issue of auditor rotation or the employment by major companies of senior staff from their auditors before a form of "cooling off" period has elapsed. That suggestion received a mixed response this afternoon.
Two issues which are the responsibility of the Financial Services Authority are ones of which I have become aware only by reading the press today. The first is the news of what I believe is called the "Plumber" case, concerning the use of spread betting in flotations, which clearly raises issues of market abuse. Since the provisions covering market abuse came into effect only last December, it will be interesting to see how they work out in practice.

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The second issue is that of split level investment trusts, raised by the noble Lord, Lord Newby. I have to say that I think that this is a matter for the FSA rather than for company law reform. Even if the business vehicle used is corporate, it would still come within the remit of the FSA. However, if having concluded its investigations the FSA was to make recommendations to the Government, we would take those recommendations very seriously indeed.
The noble Lord, Lord Hodgson of Astley Abbotts, was right to say that insider dealing, which undoubtedly is still going on, is not a victimless crime. That is why the Financial Services and Markets Act 2000 introduced the civil market abuse regime, to which I have already referred. That regime complements existing insider dealing and other criminal legislation, so that the market abuse offences of misuse of inside information, giving false or misleading impressions or market distortion can now be tackled in ways that were not possible in the past. The FSA can also investigate and prosecute insider dealing offences under the Criminal Justice Act 1993.
Questions were asked about what is being done about corporate governance and non-executive directors. A number of speakers, including the noble Lords, Lord Freeman and Lord Clement-Jones, and even the noble Baroness, Lady Noakes, have welcomed the announcement of a review of the role and effectiveness of non-executive directors. Clearly they have an enormously important part to play.
I am afraid that I do not agree with the noble Lord, Lord Freeman, who suggested that what had been a comfortable perk in the past is in many cases not a comfortable perk now.
I am not saying that it ought to be a comfortable perk—I agree with the noble Lord, Lord Clement-Jones, that being a non-executive director and doing the job properly can be, in many ways, an impossible task—but if you look at the lists which have been published, with mugshots and all, in the Sunday press recently, you realise that all the old abuses are still going on. There are still far too many people who are serving on 10, 12, 15 boards, to which they clearly cannot do justice; there are still far too many people serving on each other's remuneration committees, and no doubt helping each other out when they get into difficulty; and there are far too many examples of what is far less than best practice in the appointment of non-executive directors. The review will look at best practice and ask whether best practice works—because if best practice does not work, something more serious will have to be done.
The noble Lord, Lord Barnett, among others, raised the issue of the role of institutional shareholders. The Myners review, on which we are still consulting, was enormously helpful in that regard. But there is still a good way to go in establishing the role of non-executive directors. We should be cautious about thinking that non-executive directors—even if much more effective than they are at present—are a simple way of reducing corporate failure.
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Over the past 10 years I have found great difficulty in debating these matters. The difficulty I find is that whenever something goes badly wrong, the business community—particularly, the financial services community—says, "Oh well, this was a one-off. It will not happen again. Surely we have procedures in place to make sure that this kind of thing cannot go wrong. You cannot find a way to deal with fraud". People said it about Maxwell; they said it about Barings; they have said it about so many examples. No doubt there are people who are starting to say it about Enron—although they are being a little more cautious now than they were.
On the other hand, it is true that much of what I have said about government action to deal with corporate failure is, to an extent, shutting the stable door after the horse has escaped. You have to attack the abuses that you see—the ones which have identified themselves. It is difficult to find a pattern of failure behind them and to attack that pattern.
That is the value of Patricia Hewitt's recent announcement about the setting up of the group within government which will be chaired by Melanie Johnson and Ruth Kelly. The group will ensure that the relevant questions are being addressed in a coherent and considered way and that the overall response is adequate.
Some of the things that have happened before will happen again, and some things that have not yet happened will happen for the first time. Reading articles in this morning's papers about split capital investment trusts and the use of spread betting in flotations made me think that we shall have to run very fast to keep up with those who are determined to distort markets.
I should love to agree with the noble Lord, Lord Griffiths, that what we need is simplicity of rules. I wish I thought it were true. But the combination of the many important measures I have described in the course of the previous 19 minutes are relevant and will be helpful in dealing with the problem. I am grateful to all those who have taken part in the debate.
5.34 p.m.
Lord Brennan: My Lords, there are three short messages. The first is that we must maintain public confidence in business and accountancy. I am sure that the honest-to-goodness businessmen and accountants, who are the vast majority, will seek to do that. The public want just profit, not profit mania, which I carefully define as a disease first diagnosed during the "South Sea bubble" episode—that is, the expectation of ever-increasing profits wholly unrelated to reality.
The second message is that values instilled into corporate life will support the public confidence that we think is so important. I thank the right reverend Prelate for emphasising that.
The last message is that the objective of all this is to make people in our society feel that the financial system is safe in so far as it can reasonably be made to be so.

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I thank all noble Lords—in particular the noble Lord. Lord Clement-Jones, for encouraging me to hone my forensic skills so as to make the unpalatable appear anything other than bleak—for their diverse and informed contributions, which I hope have produced a worthwhile debate. I beg leave to withdraw the Motion for papers.
Motion for Papers, by leave, withdrawn.

Multi-ethnicity and Multi-culturalism
5.35 p.m.
Lord Parekhrose to call attention to the benefits of multi-ethnicity and multi-culturalism to Britain and to British society; and to move for Papers.
The noble Lord said: My Lords, over the centuries, different ethnic and cultural communities from different parts of Europe came and settled in our midst and have made Britain a multi-ethnic and multicultural society. Although these cultures interacted and created a composite collective culture, their traces still remain in the names of our villages, personal names, surnames, language, institutions and customs. Additionally, we have Scottish, Welsh and Irish cultures, as well as those based on class, gender, region and religion.
The arrival of blacks and Asians after the Second World War intensified, and rendered physically visible, our multi-ethnic and multi-cultural character, but they did not introduce a radically new element. It is vitally important to stress this point because it is sometimes argued that we were for centuries a culturally homogeneous society and that the arrival of Asians and Afro-Caribbeans represented a fall from that idyllic state. Such a lapsarian view of history is totally false. We have always been multicultural, and would remain so even if all the ethnic minorities were to leave the country—heaven forbid—or assimilate into the so-called mainstream.
We are not only multi-cultural but are bound to become even more so with the passage of time. Citizens of the rest of the European Union are free to settle here. We will continue to need immigrants from other parts of the world, numbering about 2 million in the next 15 years according to the Cabinet Office. In this age of globalisation, cultural influences from other parts of the world, especially the United States, freely flow into our country and shape us. As a result, our society is bound to display an even greater range of ethnic and cultural diversity.
This cultural diversity is not only inescapable but is also a valuable resource. The strengths that the ethnic minorities have brought to Britain are considerable. Their forebears died in their thousands to defend Britain and its civilisation during the dark days of the Second World War. Their net annual contribution to the economy today runs into hundreds of millions of pounds. They have kept many of our industries going and our NHS would be in an even greater crisis without its 26 per cent medical staff, 16 per cent dental staff and nearly 30 per cent non-medical staff, all drawn from the ethnic minorities.
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South Asians, who amount to barely 4 per cent of the population, run 50 per cent of our cash and carry shops, 55 per cent of the independent retail trade and 70 per cent of independently-owned neighbourhood shops. In London alone, their just more than 15.,000 businesses have created full or part-time work for more than 200,000 people. Afro-Caribbean sportsmen and athletes have brought us great honours and others among them have brought us great pleasure and profit in the areas of music, entertainment and the arts. Asians have so profoundly transformed our cuisine that many in your Lordships' House would experience withdrawal symptoms without the curry, and even perhaps the chicken tikka masala, once or twice a week.
Our ethnic minorities provide just over 13 per cent of our undergraduates, many of them specialising in vitally necessary economic disciplines, and some of them contribute more than their share to the fundamental scientific research in which Nobel prizes are won and commercially profitable discoveries are patented. They have also enriched our literature. They have added a new range of idioms and images to the English language; provided new sources of humour; offered new insights into the British way of life and thought; and deepened our critical self-consciousness. All this has made Britain an immensely lively and resourceful country—a great tribute both to its own generosity and openness and to the talents and self-confidence of the ethnic minorities.
Perhaps I may quote the words of my noble friend Lord Puttnam—who wanted to participate in the debate but was called away elsewhere. He states:
"the past 40 years have seen the emergence of what is, in every respect, a new and very different nation—one that has absorbed its multi-cultural future with a degree of confidence that must have left the early apostles of racial doom almost speechless".
It is sometimes argued that the riots last summer in Bradford, Oldham and Burnley demonstrated the failure of multi-culturalism. Nothing could he further from the truth. They were products of long-term, short-term and precipitating causes. The long-term causes involved the closure of textile mills, prolonged periods of unemployment, and segregated housing and education. The short-term causes involved increasing alienation among Muslim youth not only from the wider social culture but also from their own, a sense of powerlessness, and an ineffective and self-serving community leadership. The precipitating causes involved the intervention of the BNP and some police misjudgments.
In short, the riots had social, economic and other origins, and were little to do with the great multicultural experiment in which Britain is engaged. Had that experiment been a failure, as some Right-wing people argue, the white population would not have responded to the deplorable violence of the rioters with sympathy, understanding, compassion and a sense of solidarity. Whenever our multi-cultural experiment has gone hand-in-hand with economic and social justice, and has been conducted in a spirit of goodwill and self-confidence—as in London and Leicester—it has been a remarkable success.

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Britain is a fine country—tolerant, playful, decent, and endowed with the great resources of imagination, creativity and moderation acquired during its long and fascinating history. I say this in all sincerity, and with great pride, in spite of having been a critical child of the British Empire. I suggest that, in spite of some recent and past setbacks, we can create a rich, lively and vibrant multi-cultural Britain and be a beacon to the world if we pay attention to the following points.
We need to tackle large pockets of unemployment in many parts of our country. The rate of unemployment among men is about 7 per cent within the white population, but it is 15 per cent among the Pakistanis and 20 per cent among Bangladeshis. To tackle such unemployment, we need well-considered strategies, as well as such policy tools as contract compliance—which we have tended to neglect—and a rigorous system of monitoring and targets in the private sector.
We also need to reduce economic inequality between the white population and the ethnic minorities. About 28 per cent of the white population live in households with less than half the national average income. The figure is as high as 65 per cent among Pakistanis and Bangladeshis. Such inequalities generate anger and a sense of injustice, and they create a society in which different communities lead parallel lives with no shared experiences and aspirations to bind them together. Fairness and equal opportunity are not enough, because they pre-suppose level playing fields and an equal ability to take advantage of opportunities—and, sadly, that is not the case. Rather, our concern should be to remove self-reproducing structural disadvantages, so that all our citizens acquire the ability and the resources to benefit from the opportunities available to them and compete as equals.
There are glass ceilings in many areas of life. Hardly any of our large companies have blacks and Asians as chief executive officers, or in any of the most senior positions. That is true also of our Civil Service, the Judiciary, the public sector and—dare I say?ߞthe Cabinet. That is in stark contrast to the United States, where five out of 20 top corporations have blacks and Asians, including recently arrived Indians, as chief executive officers, and where blacks occupy high cabinet and ambassadorial positions and other high public positions. The Government can do much in this area by setting an example and by exerting pressure on the private and public sectors.
We need to cultivate a common sense of belonging among our citizens and in our communities. By that, I mean a basic feeling that we all belong together, share a common fate, and are bound by the ties of loyalty to each other and to certain common institutions and values. This has nothing to do with a common British identity or what is called "Britishness". It is a glory of this country that we can be British in many different ways—"Britishness" is a language which is spoken in different accents—and we do not have to conform to a single mould as in France or in the United States. We
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can take different views of our history and of our political and economic institutions, and yet remain as British as the next man.
Ethnic minorities themselves need to do much to put their houses in order. Some of their religious institutions leave much to be desired. Some of their leaders are unrepresentative and self-serving, and have done little to promote the long-term interests of their community. Drug taking is increasing in some communities, and so are crimes, prostitution and intra- and inter-ethnic violence. Some of their youth are understandably alienated from their community. There can be no excuse for disloyalty to a country which has given them a home and a decent life. If minority communities expect the wider society to live up to certain norms and criticise it when it fails to do so, they are, in turn, expected to abide by certain norms of loyalty and good behaviour.
Since the point of our debate is to stimulate new policies, I shall conclude by asking the following six questions. First, while rightly condemning unacceptable minority practices without worrying about political correctness, what are the Government planning to do to present a positive picture of multicultural Britain and to give a lead to the country in appreciating great minority contributions?
Secondly, since our national curriculum does not fully reflect the great sacrifices of ethnic minorities in defending Britain and its civilisation 60 years ago and their great contributions towards making this country rich and prosperous, what are the Government doing to set the record straight and suitably to revise the national curriculum?
Thirdly, while some areas of our private sector have introduced ethnic monitoring and targets, others leave much to be desired. What are the Government planning to do to ensure the appointment of fully qualified blacks and Asians to the highest positions and to promote diversity in the boardrooms and in senior executive posts? Would they consider giving those members of the private sector, say, a year or two to put their houses in order, and extend to them the Race Relations (Amendment) Act 2000 if they fail to do so?
Fourthly, what steps are the Government planning to take to ensure that suitably qualified ethnic minority people are appointed to the highest positions in the Civil Service and the Judiciary? I insist on the importance of qualifications, but when qualified people are available why does there still seem to exist some form of glass ceiling? What do the Government intend to do to encourage political parties to select suitably qualified Asians and Afro-Caribbeans in winnable seats and increase their representation in the House of Commons, as they have done in the House of Lords? The presence in the House of Commons is very important. Not only does it have symbolic significance: it is important in terms of power. If the ethnic minorities do not see themselves reflected in seats of power and symbols of our identity, they are bound not to develop a sense of common belonging.

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Fifthly, the Prime Minister and the Chancellor of the Exchequer—for both of whom I have the highest Admiration—have frequently convened high-powered national seminars on topics of public concern. These seminars have brought together eminent thinkers and practitioners and have generated sensible policy recommendations. They are badly needed in the field of race. When does the Home Office intend to hold such seminars, as the previous Home Secretary indicated that he would consider doing?
Finally, the Home Office is rightly concerned about national cohesion and is putting together a high-powered cohesion panel. How will the panel be composed, and what criteria govern its membership? Do the Government plan to include not just civil servants and men and women drawn from different social services, but also individuals and organisations with a long track record in this area, able to take a national and long-term perspective?
I am in no doubt that the Government mean well and that they have done much to tackle racial inequality and injustice. I salute their courage and confidence. However, as I am sure they will readily agree, much still remains to be done. I am confident that this debate will throw up interesting ideas concerning what more needs to be done, and why this is a matter of great urgency.
My Lords, I beg to move for Papers.
5.49 p.m.
Lord Greaves: My Lords, I congratulate the noble Lord, Lord Parekh, on initiating this debate. Having seen the list of speakers, I look forward immensely to hearing what people have to say. I wondered whether to talk at length about my own direct experience of living in an area of old textile towns of the kind that the noble Lord described, with a significant ethnic minority population—mainly from south Asian countries. My nearest big town is Burnley. I live in Pendle, where 12 per cent of the population is of south Asian origin—mainly families who originated in Pakistan and Kashmir and are therefore mostly Muslim. They are concentrated in the towns of Nelson and Brierfield. In one particular ward, they are no longer an ethnic minority but comprise 65 per cent of the electorate.
I could talk at a personal level about my many Asian friends and contacts in local politics—although no doubt I have some enemies as well. However, as I have the privilege of speaking immediately following the noble Lord, Lord Parekh, I will consider instead what has happened since your Lordships last discussed the topic, in the form of an Unstarred Question on the Parekh report tabled last summer by the noble Baroness, Lady Uddin.
The report's executive summary stated that building and sustaining a community of citizens and communities would involve, inter alia, developing a balance between cohesion, equality and difference. Since then a substantial number of reports have been produced and the balance of the debate has moved towards cohesion and away from difference and
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diversity. In last summer's debate, the key word was "diversity". Now it is "cohesion", which represents a great shift and is partly—but only partly—beneficial.
Since last summer, there has been the report of the Burnley task force chaired by the noble Lord, Lord Clarke of Hampstead. That magnum opus or tour de force was produced by local people about their own town. Also published was the Oldham independent review, the Ritchie report, and the Cantle report and the Home Office response to it, entitled Building Cohesive Communities. John Denham, Minister of State for the Home Department, visited Pendle recently and announced that, in future, local authorities would have to produce community cohesion strategies alongside all the others that they have to produce.
When those reports were published, the talk was about parallel lives and parallel communities—people who lived their own lives in their communities, not communicating much with the ethnic majority. The problem has been seen as one of residential separation in particular. The Cantle report refers to building on one kind of separation—at home—to separation at school, of religion and so on. Multiple separation leads to people not knowing people from other communities. I think that claim is exaggerated but there is some truth in it.
The publicity that those reports generated, particularly in the national tabloid press and on television, was not very beneficial. The impression was given that members of the ethnic minorities themselves, particularly from the south Asian subcontinent, were the problem. The Home Office Command Paper that was published in February was unfortunately entitled Secure Borders, Safe Haven. That is not what much of that White Paper is about. When I read it in detail, I found to my surprise that I could agree with much of its contents. The White Paper's subtitle was "Integration with Diversity in Modern Britain". Regardless of its contents, that gets it right. The media give the impression that the problem is that hoards of people are still entering this country. Almost every day we see television images of scenes such as those at the railway sidings at Calais at Christmas.
There is confusion about migration and asylum. The importance of an oath of allegiance has been pinpointed, with its implication that people are disloyal because they do not have to take an oath of allegiance at present. There has also been some concentration on the importance of learning English, as though large numbers of the people who have come to live in this country have not taken any great steps to learn English and that the boys and girls from ethnic minority families who attend local schools do not learn English. There has been a blurring of the distinction between arranged marriages and forced marriages.
The implication is that if the ethnic minorities did not exist, problems would not exist and everything would be okay. If one talks to white people in the street, one often hears comments such as "If they want to live here, they should do what we do and live how

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we live". The balance of the debate has shifted and it is right that the noble Lord has raised today the positive side of living in multi-cultural communities.
I am concerned about the emphasis on housing segregation. The media assume that such segregation is all about council estates but in fact it relates to private sector housing. Changes cannot and will not happen quickly. Communities with substantial residential segregation will exist for a long time to come. In many towns, such segregation will increase. We ought to concentrate on all the other aspects of people leading separate and parallel lives, rather than on residential segregation—which we cannot do much about in the short term and perhaps not in the medium term.
We should communicate with people, help to build communities and create public services that make provision for the whole community, not just parts of it. Renovation and improvement schemes should be done in such a way as to be seen locally to be racially fair.
Cohesion and diversity are not opposites. Voluntary integration through incentives, motivation, opportunity and personal example is the way forward. It is not for the Government to come along with a lot of money and tell people how to achieve integration. The towns themselves must take control of their own destinies. All the communities and individuals in the towns in question must begin to take responsibility for their towns as a whole—not just for their part of it, their families or their ethnic or religious community. Only when that happens will we see real progress. As politicians, we have a duty to get involved in that progress.
5.59 p.m.
The Lord Bishop of Bradford: My Lords, I am particularly pleased to contribute to a debate on a Motion moved by the noble Lord, Lord Parekh, because his reputation is quite outstanding. No one has done more to enable constructive debate of religious, cultural and ethnic diversity. The report that bears the noble Lord's name embodies his characteristic blend of wisdom, compassion and readability.
I shall, if I may, speak personally because I perceive a fair bit of criticism from here and there about spending far too much time bothering with these Muslims, and would I not be better spending my time elsewhere? Such, at least, was the graffiti chalked on to my gatepost last Sunday.
When I came to Bradford 10 years ago, I had never knowingly spoke to a Muslim, Hindu or Sikh in my life. In the past 10 years, my life has been enriched beyond all anticipation, and that has not been at the expense of my own self-understanding of who I am and where I belong. My respect for people of other faiths has grown considerably, and yet I remain even more strongly a person of Christian conviction. Insights into the culture of other Bradfordians has brought a richness to my experience of life which I find hard to describe fully enough. Yet in no way am I
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required to deny the culture in which I was born and bred. Learning to live alongside people of other races has increased both my understanding and my tolerance of those who are different, without in any way diminishing my pride and pleasure—if I am allowed to say so—in being English and having a surname like Smith.
To live in a multi-ethnic, multi-cultural and multi-faith society does not in my experience involve any denial of what I hold dear; it places it in an even richer context. However, if I were asked for a strategy to achieve a multi-ethnic, multi-cultural, multi-faith society, I would find it hard to provide one. The way ahead, as I see it, is to deal with the practical issues that impede growth in mutual understanding, tolerance and respect, and then to sec how progress can be made. So the experience of Bradford—and I entirely agree with the noble Lord, Lord Parekh, in his assessment of what happened last summer—may help to identify practical problems that need to be resolved. The Cantle report also is very helpful in this respect. It states:
"Separate educational arrangements, community and voluntary bodies, employment, places of worship, language, social and cultural networks, mean that many communities operate on the basis of a series of parallel lives. These lives do not seem to touch at any point".
I believe that that is true, and I should like to make several points. First, it is clear that public funds must not be used to consolidate any such separatism. Secondly, disadvantaged communities, both white and Asian, must not be played off against one another through competitive bidding for urban renewal resources. It is distressing in the extreme to hear various communities vying with each other for money that comes in this category. Such competition is most unhelpful.
Thirdly, we have begun to use the word "Asian" very much more carefully, as minority communities often differ more from each other than from the majority community. That is clear from a recent Cabinet Office paper, produced by the Performance and Innovation Unit, entitled Miproving Labour Market Achievements for Ethnic Minorities. The paper noted the dramatic differentials in achievement levels for distinct communities. Between 1992 and 2000, for example, the white community jumped from 37 per cent to 50 per cent in securing the benchmark 5 or more GSCE A* to C grades in year 11, whereas for Indian communities the comparable figure was 38 per cent to 62 per cent, and for black communities it was 23 per cent to 37 per cent. For Pakistani communities, however, the figure was 26 per cent to only 30 per cent.
There are real issues behind those figures. They indicate that minority communities should not be construed as passive victims of exclusion—racial, cultural, religious or economic—but rather as social actors who can draw on a range of resources within their communities to circumvent such exclusion. I should add that those resources would be the envy of many on our white council estates.

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Fourthly, there is a recognition that the type of plastic, anti-racist rhetoric that had been used to prevent honest discussion has now been discarded and issues are honestly on the table for consideration. Transcontinental marriage remains an issue that needs to be addressed. Underachievement in education also needs to be dealt with. I should add, although I can speak for nowhere but Bradford, that faith schools are not part of the problem. Nevertheless, our situation is precisely reflected in the local education authority's problems. Although we work together closely and would all like to improve the balance, we find that the matter is decided largely by where people live and where they choose to send their children. It is quite a delusion to suggest that faith schools, in Bradford at least, play any part in that.
In Bradford, we also have the double whammy of deindustrialisation plus population increase. Therefore, improving the opportunities of work and training for work are major issues that will either help or begin to destroy all efforts towards social cohesion. Nevertheless, it is not all woe and despair. Last week, I convened and chaired a meeting of people in Bradford who work in housing, education, commerce, business, the police and elsewhere. The question at our meeting was this: what has happened since the riots in July? Everyone spoke about considerable progress, and all sorts of steps are being taken. People are taking initiatives here, there and everywhere, not least, and perhaps most importantly, with the young and disaffected. It is not all woe and despair; there is good news. This July, we hope and intend to put on a presentation of what is good about Bradford, to celebrate and rejoice what multi-cultural, multi-racial and multi-faith communities can and are doing.
I appeal to anyone who can do this to say, it is a good thing to work towards a multi-cultural, multiracial and multi-faith community. That would enrich all of our lives. It is the future to which we should all commit ourselves.
6.7 p.m.
Lord Ahnned: My Lords, I, too, thank the noble Lord, Lord Parekh, for introducing this debate. I am sure that noble Lords will agree that he is rightly recognised for his work in relation to multicultural Britain. I should also like to apologise now for the fact that, due to a longstanding commitment, I shall have to be absent for the winding up.
I recall a discussion last year in which the right honourable Robin Cook not only spoke of how multicultural we have become, but described chicken tikka masala as a national dish. Needless to say, since then, much has happened that has directly affected the relationship between the various cultures in our society. Essentially, however, the underlying issues remain the same. Chicken tikka masala is a wonderful dish which is the product of eastern and western influences. Its interaction of flavours is perhaps the result of mutual appreciation and the interaction of the many cultures residing in Britain. However, although additional cultural seasoning is tolerated to an extent, should we not strive to instil acceptance in our
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pluralistic nation, as opposed to seeking the homogenization process summed up in the term "melting pot"? Britain should be proud that our country is a rich banquet with culturally distinct and complex ingredients.
Exotic cuisine is just one of the many ways in which ethnic minorities have contributed to Britain for several generations, and yet many of those minorities are still regarded as recently arrived refugees. Although my own family are now fourth-generation British citizens, they are still labelled as different when people think in terms of "them and us". My father and his family contributed to rebuilding this country after the Second World War. As with many immigrants at that time, they were cheap labour for the textile and steel industries. When I entered the working world, I worked 16 hours a day to match the income of my indigenous counterparts who worked only eight hours a day. Such inequality was experienced by many ethnic minorities.
We have all heard about the contribution made by the ethnic minority community in matters such as health, transport, business, arts, and so on. The list continues. Rather than there being a growing acknowledgement for ethnic minority communities, recent events encourage a growing resentment in Britain. A re-education of society is required at all levels to move away from the Powellite opinion that there are dangers lurking in the multi-cultural society. We should be moving towards realising the potential for lucrative symbiotic relationships with common interests for achieving common goals.
Taking an oath of allegiance is all very well in theory, but we must recognise that if we cannot reach the hearts and minds of our citizens, then it is a mere formality of indoctrination. The inherent inclination towards one's own culture is undoubtedly adapted by one's environment, but it is not a loyalty test. An example of that is a common language.
I support the need to ensure that everyone can speak English, which immediately allows us to belong to a nationwide community. But surely we should encourage regional accents within this broad community. I should have thought that to establish a dialogue between cultures, we must be open to learning from others. That does not mean, for example, that the odd phrase of Punjabi is necessary, but we must accept that there are communities with an additional language and identity.
I remind your Lordships of the example of the former Yugoslavia where the lack of integration over 400ߝ500 years led not only to the external break-up of Yugoslavia but to genocide and crimes against humanity in that country. The reality in Britain is that there are distinct clusters of cultures that reel increasingly vulnerable. Ironically, the cause of the isolation is not necessarily a consequence of culture; it is economic and, subsequently, social factors that are strengthening this segregation.
I do not agree with the chairman of the CR E that if people are forced to live in certain areas, that will somehow lead to integration. During my 10 years on

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the housing policy board in Rotherham, I witnessed the resentment and fear in areas of poverty. Housing allocation for ethnic minorities on the relatively affluent side was tolerated, but those who were on the deprived side were on the receiving end of violence. Their windows were smashed and even the practice of fire-bombing was carried out.
What leads a group of supposedly civilised people to threaten innocent lives? It is not the differences in wardrobes but an on-going economic struggle that drives people to despair. That has been exploited by the BNP who have distorted and entangled race and class. Since devolution, there are increasing numbers of people who openly confess that they do not share a common loyalty. Yet, perhaps because of their self-sufficient status, they are not the prime concern of racist groups who try to justify that their abusive actions are for the sanctity of this country.
Your Lordships have already heard about racial tensions last year in Bradford, Burnley and Oldham. There is a vicious circle, in which the Pakistani and Bangladeshi, in particular, score poorly on all the main socio-economic indicators, with low levels of fluency in English. This leads to a further drifting away from mainstream ideology and opportunities, while becoming increasingly visible targets for instigators of racial hatred.
I am pleased that Diane Abbott organised a conference last weekend to ensure that black children could achieve higher standards of education. I hope to see similar efforts for British Pakistani and Bangladeshi children who achieve the lowest GCSE passes in the UK today, as we heard from the right reverend Prelate the Bishop of Bradford. They are in serious need of support, and a good education lays the foundations not only for opportunity and mobility, but it instils consciousness and optimism.
For this reason, I support the Government's plans for introducing more faith-based state secondary schools. Critics of such institutions are anxious that society will become increasingly fragmented but these so-called "comfort zones" are already established. Rather than allowing them to go unnoticed and flourish either positively or negatively, they must be recognised. For example, in Oldham, there are six secondary schools where ethnic minority students make up less than 5 per cent of the school population and two schools where they make up 97 per cent and 77 per cent. However, there are no faith-based secondary schools as such.
One would infer from that that faith-based segregation already exists and that the parents have different expectations. Identifying that and adapting the education system will be more welcomed than treating the practice with suspicion and failing to provide the additional support that such schools require. This will be a positive step towards a harmonious multi-cultural Britain, not only because of the increasing fairness to all communities, but because it also appears that faith-based schools have on average better results and moral standards.
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I am running out of time. I shall say finally that we should learn from the example of the Canadian Government whose refugee literature formerly said, "Welcome to our home", but was changed to, "Welcome to your home". It is my hope that that will happen here in the not so distant future, but I fear that that sentiment is a long way yet.
6.16 p.m.
Baroness Prashar: My Lords, multi-ethnicity does not normally receive the thoughtful and considered attention that it deserves. I am, therefore, grateful to the noble Lord, Lord Parekh, for initiating this debate.
To date, debate and policies in this area have been marred by ambivalence and a lack of deeper and comprehensive analysis and thinking. In our attempts to respond to challenges of multi-ethnicity in the past 40 years, we have been grappling with different approaches, based on assumptions of assimilation, integration, diversity within the framework of equality of opportunity, and more recently, community cohesion and citizenship. Furthermore, policy initiatives have been a response either to fear of immigration or crises, such as disturbances in our urban areas.
There was one notable exception in 1976 when an attempt was made by the then Home Secretary, now the noble Lord, Lord Jenkins of Hillhead, under a Labour government, when he tried to fashion a "coherent and long-term strategy". Unfortunately, for a variety of reasons those aims and ambitions have never been fully realised.
A piecemeal response to events or crises inevitably leads to a distorted picture, distorted understanding and, consequently, to ineffective and flawed initiatives. Such responses do not lead to necessary structural and institutional changes; nor do they even influence the broader changes in society that may have implications for minorities. I would go even further and suggest that some of those initiatives have led to the separation of issues facing ethnic minorities from the mainstream and have contributed to the disengagement of minorities from some crucial spheres of life.
We have been slow to recognise that this minimal approach will not make much difference in our fast-transforming political, social and economic context. We have seen great disparities opening up as economic and social changes have unfolded. Some groups are prospering while others face multi-generational disadvantage. It is also evident that discrimination and ethnicity are not the only variables. We need to consider gender, age, class, location, condition, social and economic status and progress.
There have been a number of reports in recent years which have all attempted to deal with different aspects. The Macpherson report focused on inequitable institutional practices. The Hepple report on equality reviewed the enforcement of anti-discrimination legislation and what was wrong with existing laws. The Parekh report analysed the current state of multiethnic Britain and proposed ways of countering

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discrimination, disadvantage and making Britain a confident and vibrant multicultural society. The Ousley and Cantle reports made recommendations to promote community cohesion. More recently the Home Office published a White Paper, Secure Borders, Sale Haven: Integration with Diversity in Modern Britain, recommending the promotion of citizenship, civic renewal and engagement, and policy towards skilled and unskilled immigration and asylum policy. We have also seen the growing role of the European Union in such areas as labour market policy, social policy, migration and anti-discrimination.
Those reports, important as they are, deal with partial aspects of multi-ethnicity and discrimination and in some cases even cut across each other. But I believe we need to go further. We not only need to make the necessary connections between the issues raised by those different reports; we need to fill a gap which has been graphically illustrated by the recent report published by the Performance and Innovation Unit of the Cabinet Office. That interim analytical report, entitled, Ethnic Minorities and the Labour Market, does not make any policy recommendations, but its analysis clearly points to a need for a more considered approach—not one based on traditional assumptions and notions of multi-culturalism, but one which is rooted in deeper understanding of the complexities and evidence before us.
The report's analysis highlights that many of the current assumptions and policy initiatives are at odds with a complex and multi-faceted situation on the ground. The report shows that the idea of integration has been applied mainly to broad social and cultural aspects and, to a lesser extent, to civil and political domains, and not so much to economic structures, labour markets and class patterns. It rightly suggests:
"that the outcomes that accrue to greater economic integration (particularly in the labour markets) are closely related to social and political integration".
To encourage civic engagement, social cohesion and better interaction between communities, we need to develop effective strategies which will encourage economic integration. In other words, it is a virtuous circle; if we want full participation, we need to engage people in the labour market.
In the White Paper, Secure Borders, Safe Haven, the Home Secretary said that the reports into last summer's disturbances in Bradford, Oldham and Burnley painted a vivid picture of fractured and divided communities, lacking a sense of common values or shared civic identities to unite around. He said that the reports signalled the need to foster and review the social future of our communities and to rebuild a sense of common citizenship which embraces the different and diverse experiences of today's Britain.
Civic renewal and community cohesion cannot be built merely by teaching citizenship or by enforced integration. We need to take seriously the messages which are emerging from the Performance and Innovation Unit and shift the paradigm within which we debate the issues of multi-ethnicity. We need a
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strategy where various policy initiatives not only complement each other but are pulling in the same direction.
It would be helpful for me to get an assurance tonight that the analysis of that report will be taken on board; that it will be followed by an approach which is well thought through to ensure that we can truly realise the benefits of multi-ethnicity and rebuild a sense of common citizenship, and that the Government will show leadership in helping to create a new climate in which to think and define policies which are based on analysis, evidence and fresh thinking.
6.23 p.m.
Lord Hunt of Chesterton: My Lords, we are doubly grateful to the noble Lord, Lord Parekh; first for this valuable debate and secondly for his extremely interesting and valuable report, which was published last year. I regret that I am unable to stay until the end of the debate. The noble Lord, Lord Parekh, twisted my arm, and I appreciate being able to be here.
My views, like everyone else's, are affected by experiences. As an engineering student, I gave little thought to the issues of multi-ethnicity and problems of relations between ethnic groups until I went to the United States in the 1960s and found myself in a race riot in New York. It was frightening but also terrible to see ethnic groups so enraged that they could injure themselves and damage their own streets and houses. Sadly, we saw the same thing last year in England.
My second experience was when I saw the marked level of racial prejudice in England. My wife and I tried to rent a private flat in London in the 1960s. I put down that I was born in Ootacamund, India, which is, indeed, where I was born. Curiously, all the flats were taken until I appeared in person and, lo and behold, a flat was available. I assumed that a country such as the UK—albeit with much prejudice—with the continuation of its wider provisions of housing, education and health to all sections of society and less unemployment of the poorest groups, would never experience the United States' levels of inter-ethnic dislocation. Partly, that has been true, but there are many worrying trends, as other noble Lords have described.
I welcome the debate as one way forward to improve the comprehension and appreciation between different ethnic elements of society. That must be part of the action plan by every organisation and group in the UK from government to local communities.
The Parekh report issued last year provided useful guidelines and recommendations, which the Government and their agencies could do much more to follow up. That fact and other reports have been an example of the long-standing tradition in the UK. of governments to analyse social problems. But there is now an American or social science approach—perhaps the noble Lord, Lord Desai, will comment on that—as in the management of large organisations, of trying to seek problems, to identify attitudes and ideas, and using those as a basis for policy. The difficulty of that approach is that not everyone agrees with the analysis or the conclusions.

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There is still a huge amount to do in that respect, perhaps more by education and the media than by government, to explain and appreciate how the UK population is made up of different social, ethnic and regional groups. I believe that the regionalisation of government is an important step in that direction. It is particularly important for us to understand that we are made up of those groups. Perhaps even in south-east England we need to appreciate that we are a distinct cultural group. I appreciated that strongly when I gave the Penguin Book of Jokes to a Philippine friend. Noble Lords will know the kind of thing: "Knock, knock". "Who's there?" "Isabel". "Isabel who?" "Is a bell necessary on a bicycle?". "Ah", she said, "a book of ethnic jokes".
More seriously, the critical, philosophical issue of our society is whether our ethnic groups can live together more successfully without the rather heavy policies of the US Government and their strongly conformist culture, including a highly self-censored media. In the United States in the 1960s and 1970s it used to be necessary to listen to Radio Moscow and the BBC to find out what was going on.
However, I believe that it is essential for the UK to move further to introduce positive discrimination—we are learning something from the United States—but without adopting the hectoring and excessively patriotic style of the recent US leaders. The recent speeches by the Home Secretary have emphasised the advantages of greater cohesion, and even conformity. That is obviously controversial, as the noble Lord, Lord Greaves, reminded us. The noble Lord, Lord Parekh, rightly emphasised in his report and in his speech that more could be done by governments to ensure higher-level opportunities for minority ethnic groups.
When I was chief executive of a government agency in the middle nineties I received a circular from the Ministry of Defence to widen the representation of women and ethnic minorities on our advisory board. Being a dutiful civil servant I did just that and was extremely pleased with the results. That is one way, but organisations should not have to wait for a circular from the MoD. They should realise that appreciating the great value of multi-culturalism will enrich all organisations and the lives of everyone in the community.
There is steady progress by many organisations, but it should he faster. Recently a House of Lords committee visited a government laboratory. We were extremely pleased and interested to see an excellent presentation by the technical director, who was a distinguished British Asian. Government agencies employ many more people than Whitehall, as the noble Baroness, Lady Prashar, is aware. However, in my experience they tend to be forgotten by the people in Whitehall dealing with policy. There are many more civil servants out there and the possibility of being able to use this important instrument of government needs not to be overlooked. Last week I discussed with the noble Lord, Lord Macdonald, the new developments there will be in the Civil Service. The message given by
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the noble Lord, Lord Parekh, should be taken seriously. I am sure that the role of the Civil Service Commission, led by the noble Baroness, Lady Prashar, will be in the lead.
6.30 p.m.
Lord Bhatia: My Lords, I start by thanking the noble Lord, Lord Parekh, for introducing this subject. I should also like to record my interest in the subject as chairman of the Ethnic Minority Foundation. It is one of the major national organisations working with and for ethnic minority communities in Britain.
Much has been said over the years about ethnic and minority issues in Britain. Some of those discussions have been framed in negative terms with prejudice, bigotry and ignorance. But today we are talking about the benefits to Britain in becoming a multi-cultural society. I believe that there is a lot to celebrate, but there is also a need to recognise that much has yet to be done.
When we talk about multi-cultural Britain we must set the context in which we became so. The history goes back about 200 years when Britain started to build its colonial and imperial empire. It was a multi-cultural empire. After the famous "wind of change" speech by Prime Minister Macmillan in the 1950s we started to move to a multi-cultural Commonwealth. It now has over 30 countries as sovereign independent states working together on common issues and concerns. It is a space created by common consent, where differences are debated and discussed, agreed to or disagreed with between equal partners.
Is not Britain a microcosm of the Commonwealth? Our population has about 4 million people from different nationalities, cultures, colours, faiths and languages. Just as the Commonwealth works—and there are many success stories and benefits—so does multi-cultural Britain work and bring benefits to all.
To identify a few highlights of the success stories and contributions of Britain's ethnic communities one has only to look at the sports, media, television and arts sectors for a start. Last week's success by England's cricket team, lead by Nasser Hussein, in New Zealand must be something to talk about. The contributions of a large number of ethnic professionals working in our National Health Service is largely acknowledged but not sufficiently recognised. In business, the ethnic minorities are strong in the retail and small business sectors. There are large manufacturing companies owned or controlled by ethnic minorities which employ thousands of people and contribute to the national exchequer by way of taxes and export earnings. The ethnic communities have introduced their cuisine to our daily diets in our homes and through Indian restaurants across the country. There are ethnic minority professionals in our financial institutions and in professions such as accountancy, law, education and many others.
However, much remains to be done. To build a truly multi-cultural society is a long-term project. There are no quick fixes by the Government or by the people themselves. Everyone has to come together to build the

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type of society we want, which is at ease with itself and with the world. It means the education of a huge number of peoples of different cultures over a long period of time. We must recognise that when many cultures come together, enough time and resources must be made available in order to make that possible.
Different cultures have different perceptions on any given issue. There are also generational issues. The people who came here in the 1960s have a different outlook from their children and grandchildren who were horn and go to school here and who are growing up in a multi-cultural society. Out there inter-marriages take place and partnerships in personal lives and in businesses are constantly being forged. That is all against the background of a shrinking world created by information technology.
I believe that Britain is on the right path to becoming a plural, multi-ethnic country. It could be best described as a mosaic society where each colour is a part of one whole nation. We have most of the laws we need. I believe that the lines have been drawn about what is and what is not acceptable behaviour and conduct, and that the law is there to protect everyone, including the minorities. What we now need is time to consolidate and to build on the progress we have so far made.
Having said all that, there are some issues which need to be dealt with in order to enable ethnic minorities to become fully involved in the civic society of Britain. Through my work in the Ethnic Minority Foundation I have come to realise that there is a great need to build up the capacities of ethnic minority communities and their voluntary sector. Our research indicates that one of the major pathways into ethnic minority communities is through their 10,000 community voluntary organisations. Those groups need long-term core funding, support and help to build themselves and their communities so that they can participate in the civic society.
We find that in employment, education, health, housing, crime and prison population ethnic minorities are at the wrong end of the spectrum. Some of these issues are due to discrimination, ignorance and prejudice. They must be tackled on a long-term basis with resources, understanding and patience. I am pleased to report that some government departments are responding to these needs. I hope that that will continue on a long-term basis. The investments that are being made today must not be lost because of a short-term mindset.
It is a great pity that the Parekh report, published in 2000, got side-tracked, although many accept that it is a landmark and a serious piece of work. I urge the Government to look at it seriously and to take matters forward on some of the important issues that it raises. I believe that racism in Britain could undermine Britain's moral authority in the Commonwealth and in the rest of the world.
Let me share with your Lordships the recent experience I had during a Foreign Office-led mission to Morocco and Tunisia. The politicians and the people that we talked to were pleasantly surprised that
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there are 2 million Muslims in Britain; that we can practise our faith without any fear; and that we have 1,500 mosques in the United Kingdom. They were also quite surprised to hear that there are six Muslim parliamentarians and many more from oilier ethnic minority communities sitting in both Houses of Parliament. We were able to talk about the same issues of identity. We were told that the Tunisians saw themselves as Muslims, Tunisians, Mediterraneans and Africans. They were also surprised when we said that we saw no conflict in being Muslims and being British at the same time, and that we had full rights under the law.
I wish to refer to sensitive issues such as the "sus" laws, arranged marriages, asylum law and related matters. I beg the Government to look at these issues with a great deal of caution, patience and understanding. A bull in the china shop syndrome must be avoided. A great deal of discussion, and consultation must precede any change in law and its small print. An understanding of how the law will translate into action on the ground by police and other law enforcement agencies must be looked at in order to avoid damaging what has been built up over many years.
I want to end by quoting Robert Frost. He said:
"Nothing to look back to with pride and nothing to look forward to with hope".
That is not where we want to go. Britain in this millennium should be able to look back with pride and with hope for the future.
6.37 p.m.
Lord Morgan: My Lords, like other speakers, I should like to thank very much the noble Lord, Lord Parekh, both for his speech and for his wonderful report. In both he drew attention to the fact that the British, like Nelson Mandela's South Africa, have always been a rainbow people. We have been multiethnic and multi-national since the dawn of our history.
Britain has gone through many changes. The word "British" has gone through many changes. The term "British Empire" was actually invented by a Welshman in the court of Queen Elizabeth I, meaning that Britain was linked to Brutus of Troy and to King Arthur. He meant, if you like, the Welsh empire. Certainly, there is very little link between that and the Britishness of "Rule Britannia" two centuries later. It shows how ideas and words about culture and language can change.
In Victorian times this country was increasingly seen as being multi-ethnic and multi-cultural. Many of the factors that are thought to have promoted integration in fact promoted diversity. Industrialisation created regional economies, local pride and local civic values. Literacy, which is commonly thought to have bound the country together, again intensified local cultures. In my own part of Britain it was the great age of Welsh language newspapers and the golden age of Welsh language poetry. So we have always been a culturally diverse, distinctly plural country. What has made

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people see our history differently is the rather special experience of the 20th century, which brought two world wars, a sense of union and shared patriotism combined with the unemployment of the inter-war years, which led to a phase of our history that I believe is now over. I believe that in so many ways Britain is now returning to its multi-cultural and multi-ethnic origins. By supporting devolution, my own party, the Labour Party, is in a way going back to its roots. It was an anti-centralist party, which supported home rule for Wales and Scotland and local government. It did not believe in the domination of Whitehall or that the gentlemen of Whitehall know best.
I wish to say something which no other speakers have said about the multi-ethnic and multicultural varieties that we had before Commonwealth immigration. Scotland and Wales I see as a very interesting contrast to the black and Asian communities which other speakers have knowledgeably and brilliantly discussed. In Scotland and Wales we have an example of cultural pluralism, which is moving towards the civic. Scotland, Wales and Northern Ireland have had their cultures recognised for a very long time and very beneficially so. I believe that we still have some way to go in relation to the Welsh language. We still have, as it were, the Anne Robinson syndrome abroad in the land, but on the whole the advance of the Welsh language is enormously enriching, particularly in Britain in a multi-cultural and multi-lingual Europe. Devolution will add to this process. It will add civic pluralism to cultural pluralism, which is very important, particularly in Wales whose culture has been recognised, but not in a civic sense. It has not had a sense of patriotism and citizenship in a political context which devolution is now providing.
It seems to me that as regards black and Asian citizens that experience is very different. Their civic recognition is leading to cultural recognition. We have had civic recognition of black and Asian citizens in Britain for a considerable time going back to the race relations legislation of the 1960s. But the problem is that it has not meant very much. We have created institutions which have had a beneficial effect and yet, as speaker after speaker has shown, we have clear inequality and discrimination. We have institutions like the BBC and the police accusing themselves of institutional racism. We have a criminal justice system that is weighted heavily in key respects including in sentencing policy against black and Asian immigrants. We have the civic recognition, but the implications of it have not been borne out.
I believe that some of the aspects of discrimination are economic, as other speakers have said. Reference was made by the noble Lord, Lord Bhatia, to sport. I passionately support the Arsenal Football Club—
Noble Lords: Hear, hear!
Lord Morgan: My Lords, there are also other supporters including, I believe, the most reverend Primate the Archbishop of Canterbury and Osama bin
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Laden—make of that what one will. Arsenal Football Club is a team of almost entirely black players except the goalkeeper. But they play before white supporters, not because the club practises discrimination, but because black people simply cannot afford the tickets. In many ways we have a kind of tokenism as regards black participation in sport.
On a somewhat more controversial note—I suspect that there might not be so many "hear, hears" on this point—I worry greatly about education. It seems to me vital that education should be a way of promoting multi-ethnic pluralism and getting our children to know each other. I went to a school in north London with very large numbers of Jewish boys. I had not met Jews before. I found it deeply enriching and the most educative part of my schooling. I worry very much about the divisiveness of schools, including faith schools, which were criticised on both sides of the House last week, not in the sense that they are run by religious communities, but in the sense that they tend to promote division, mono-culturalism and to divide children one from another. We have heard of alienation in terms of residence. I would be deeply worried if that were reinforced by alienation in terms of education. In my opinion we do not want to encourage this development more than we need.
Fundamentalism is a great problem in many ways. It seems to me as an historian that it is a more worrying problem in the world than communism ever was. After all, communism was a philosophy of inclusion. In my younger days I used to sing "The Internationale unites the human race". That was a very long time ago and noble Lords will be glad to know that I do not intend to sing now. It is deeply worrying if we promote institutions of divisiveness.
Like all other speakers, I am optimistic. I believe that things are improving and that being British means something; that our country is flexible and tolerant. We have not had a Le Pen or a Haider in this country to inflame race relations. Our view of citizenship is relaxed. We do not have a citizenship test and, with respect to a distinguished Member of this House, we do not have a cricket test and I hope we never will. Britishness means something to the Welsh, the Scots and, increasingly, to black British, Asians and Afro-Caribbeans.
My final point is this: what does Britishness mean to the English? After all, the English are 80 per cent of this island. It worries me deeply that the English, a tolerant, talented, wonderful people, have no particular articulation of themselves. England has been described, I believe, by Richard Rose as a state of mind or perhaps a geographical expression in the way that Metternich described Italy in the 19th century. England is difficult to define and difficult to govern in the sense that we have no regional system for England. Without articulating the English identity of 80 per cent of the people of this island, I believe that a stable, multi-cultural Britain will not yet have arrived.
Lord Hylton: My Lords, before the noble Lord sits down may I invite him to visit one or two Roman

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Catholic state schools and assess whether or not they have a strong concern with social justice and a global dimension.
Lord Morgan: My Lords, that is a very interesting. I do not object at all to the fact that they are Roman Catholic. My worry—intensified by what I know of Northern Ireland—is what a mono-cultural, mono-religious background can produce. That is increasing. I believe that the important thing is to bring children together at the youngest possible age to get them to know each other in terms of culture and religion and, in Wales, in terms of language.
6.47 p.m.
Lord Dahrendorf: My Lords, on seeing the list of speakers in this important debate, a friend of mine remarked, "Ah! You are going to insert into a string of distinguished speakers with some connection to the sub-Continent the view of the Continent". I believe that the Continent is making some contribution to multi-cultural Britain, indeed, even to the Arsenal Football Club, if I may say so, where the continental players are quite indispensable.
I am an immigrant. I came to this country and decided to settle here because it is a country of liberty. It is a kind of liberty which is rarely found anywhere else in the world. It is a tradition which has managed to resist the two great totalitarian temptations of the last century. It managed to resist them more effectively than almost any other country I can think of. It is a mixture of respect for others, of leaving space for individual initiative, of trust, and of being able to rely on certain bonds of tradition—breathing the air of freedom. Yes, diversity of cultures enriches a society.
The reason why I am speaking is my great respect for the noble Lord, Lord Parekh, and what he stands for, which he has explained so well again this afternoon. There are not any really homogeneous societies, but those which think they are tend to be narrow minded, intolerant within and quite often aggressive without. The experience of having to live together—and wanting to live together—with people from different cultures helps civilised behaviour. There are, however, two conditions. One is that all must have equal opportunities to take part in economic, social and political life. Citizenship must be real. Several of your Lordships have spoken about this, beginning with my noble friend Lord Greaves.
The other condition is a more delicate and complicated one, and I want to spend a minute or two on it. It is that all must accept certain fundamentals of the society in which they live. On this there is, perhaps, no full agreement. I have read with great interest the report by the commission chaired by the noble Lord, Lord Parekh, entitled The Future of Multi-Ethnic Britain. I offer your Lordships a quotation from it, which is almost the sentence before the quotation that my noble friend Lord Greaves offered:
"Britain is both a community of citizens and a community of communities, both a liberal and a multicultural society, and needs to reconcile their sometimes conflicting requirements."
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I am not sure that I would put it in quite that way. I would probably prefer to say that Britain is a society in which a diversity of cultures can flourish to the benefit of all, but they do so only if the principles of its liberal order are accepted by all.
Those principles include the freedoms given under the constitutional traditions of the country—freedoms that are evolving, but always under the rule of law. In my understanding, however, they also include an enlightened attitude to state and society. I use the word "enlightened" deliberately, because enlightenment is a part of British liberty. All free societies have pockets of fundamentalism, but the open advocacy of and insistence on pre-Enlightenment views seems to me to be unacceptable.
One of the great questions is: how exactly do we define these common fundamentals if one wishes to live in a country of enlightened liberty? I was quite impressed when the noble Viscount, Lord Astor, said in yesterday's debate:
"Some in this country disapprove of the religious slaughter of animals but it does not follow that that practice, central to the life of Jews and Muslims, should be banned".—[Official Report, 19/3/ 02; col. 1331.]
I agree, but that is not accepted in all countries. Indeed, it is a highly controversial subject in a number of continental countries. On one side, however, it is acceptable. I have greater difficulty—although I take the point about arranged and forced marriages—with the treatment of women in different groups. Not all groups in our society automatically treat women in the way in which I would like to see them treated in this civilised, liberal order.
The most difficult point is, perhaps, one that has to do with the law. I was greatly impressed by what the noble Lord, Lord Bhatia, said. The separation of faith and law is one of the essential features of an enlightened order. There are, therefore, real problems with Sharia law, Rabbinical law and Catholic fundamentalism. There are real problems whenever law is made part of faith and, therefore, non-negotiable and not part of civil society and its institutions. I would hope that it is recognised that we can live together in a multi-cultural, multi-ethnic society if we accept that the law is common to all and that it is made here in Parliament by the institutions designed to provide it.
I agree very much with another statement made in the Parekh report, which perhaps—at least, by implication—recognises this insistence on the commonness of the law:
"Every society needs to be cohesive as well as respectful of diversity, and must find ways of nurturing diversity while fostering a common sense of belonging and a shared identity among its constituent members"—
that is, an identity under the law.
6.55 p.m.
Lord Desai: My Lords, it is a great pleasure to follow the noble Lord, Lord Dahrendorf. Like me, he is a first-generation immigrant. However, although he is an immigrant, I am sure that he does not get asked the kind of questions that I get asked, such as "Where do

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you come from? Do you go back there often?" Perhaps he does. I bet that the noble Lord, Lord Weidenfeld, does not get asked such questions. I do, however, and I have great difficulty with it.
I also have great difficulty with the topic of this debate because from childhood onwards I tried to escape the identity of being Indian. I wanted to be part of the world, and to be myself. If someone points a gun at me in the middle of the night and asks, "What are you?", I will say that I am an economist. Indeed, until I came to your Lordships' House, I was never thought of as south Asian; I did not think of myself as south Asian. I am an economist, I am middle class, I live in a middle-class area, and I have a good middle-class job. Although I was obviously liberal and anti-racist, and in no way denying where I was born, I never thought of myself as belonging to an ethnic minority. When I came here, however, I was "outed". People started thinking of me as representing a community, but I do not. I am not here as a representative of any ethnic minority.
I hope that I can explain that I have great difficulty with the whole notion of multi-culturalism. As my noble friend Lord Parekh knows, I have expressed my reservations in a review that I wrote of his book on multi-culturalism. I want to argue that creating a multi-cultural, multi-ethnic society is not necessarily the great thing that it is said to be. I am not saying that we should not be tolerant or that we should not recognise the value of different languages, cultures, practices and cuisines. I am saying that we ought to distinguish between the public space and the private space. One great difficulty created by many of the policies followed over the last 50 years is that we have confused that distinction.
People from ethnic minorities, and other people as well, find themselves trapped by certain labels which inhibit their mobility out of where they are starting from. This leads to the perpetuation of poverty in certain groups. After all, when we talk about ethnic minorities we are now talking about third and fourth generation people. There are persistent imbalances between the educational achievement of Pakistani and Bangladeshi people, compared with other minorities. We labelled people, from the best possible motives, and insisted that their passport to certain public goods depended upon their producing that identity— housing, schools, their ability to find employment. It was done in order to help people. But once we have done that, we do not allow them to escape that labelling and become ordinary citizens.
Some noble Lords present may remember Lord Pitt. He was a distinguished Member of your Lordships' House. There is a story that, as he was going about his business in Hampstead High Street, a little boy was heard to say to his mother, "Mother, mother, there is a black man", and his mother said, "Hush child, that is not a black man. That is a doctor". I wish we could all become like that. I wish I did not have to carry my religion and my ethnicity on my lapel. That is not to
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say I want to deny those matters. I am not schizophrenic. But we labelled people with the best of intentions.
Originally people came from other countries to sustain industries which should have been shut down—the cotton and textile industries in the North of England—in any proper market conditions. But those people were brought in because they could be paid less than white people. Of course, since those industries were doomed to fail, those people were trapped in those regions and those regions are where they are trapped still. All the things they can get by way of public goods depend upon their identity and where they are located.
We have this horrendously depressed area across the Pennines. Both the economics and the politics are depressed. It is no good saying, "We are going to be multi-cultural", because the way to make Bradford better is to take a lot of Bradford people out of Bradford—just taking Bradford as an example.
The problem is that we are not following an egalitarian strategy; we are following a multi-cultural strategy. There is a difference. We do not see people in the way that my noble friend Lord Morgan described. It is true that we only formally recognise the civic nature of those groups, but none of their entitlements arose out of their colour. Although labelling arose out of a sense of helpfulness, it turned out to be a great immobilising strategy. And we must get out of that.
People do not appreciate how good a model the United States is for assimilation. Except in terms of Afro-Americans, it successfully integrated many people. The reason why they recently allowed Indians to head top US corporations is that they do not label people. Even for Afro-American blacks, their progress has been tremendous. We have not made that progress and we ought to ask why not.
7.3 p.m
The Lord Bishop of Chester: My Lords, I was grateful to read, in preparation for this debate, the report, The Future of Multi-Ethnic Britain, produced under the chairmanship of the noble Lord, Parekh. In particular, like the noble Lord, Lord Morgan, I was struck by the way in which the report reveals that Britain has been always an evolving "community of communities". Perhaps that is changing more rapidly now than at some times in the past, but multi-ethnicity and multi-culturalism are not entirely new phenomena for our country to face. Perhaps it is a wider and better appreciation of that would draw the sting of the very proper and eloquent complaint of the noble Lord, Lord Desai.
Among the many recommendations of the report, it requested a new commission on religion in public life to attend especially to legal and constitutional questions. Perhaps a new commission will be needed in due course. There is little doubt that we are in a period of quite rapid evolutionary change in the relation of faith communities to our society, and also at a more fundamental constitutional level.

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I should like this evening to contribute a few comments from the perspective of the Church of England and its historic establishment. The "establishment" of the Church of England refers to a complex, multi-faceted and rather unique set of relationships between Church and state and Church and nation which go back well over 1,000 years into Saxon times. It is not, as is sometimes imagined, a phenomenon with roots in the 16th century; it goes back much further. And Anglicans have always traced their spiritual lineage to those earlier times.
The particular form and evolution of the English establishment has taken its place among other relationships between Church and state in these islands, and also on a wider European canvas. The very notion of Europe itself is in one sense a Christian concept. Europe denotes that area of the Asian land mass where the Christian civilisation took root. Prior to the 18th century the area which is now normally labelled "Europe" would usually have been called, "Christendom". So Europe is more a religious than a geographical concept.
Many of the distinguishing features of European civilisation have inevitably been deeply shaped by the Christian faith—the freedom and uniqueness of the individual with his or her rights; the characteristic moral emphases of our culture; even science itself, perhaps the most potent force in our society. Modern science was born in Christian Europe in the 16th century. Historians of science have often pointed out that it was Christian notions of creation coming to the fore in that century which were a necessary prerequisite for the scientific enterprise to emerge.
Perhaps the commonly recognised distinguishing characteristics of our country—our reputation for justice, fair play and so forth—which the report of the noble Lord, Lord Parekh, acknowledged and to which several Members of this House referred this evening, partly emerged because of the long and distinguished emphases upon the spiritual basis of monarchy and Parliament alike—warm beer and ladies cycling to evensong indeed, even if we do now have to add chicken tikka masala, whatever that is.
I should like to say a further word at this point about the monarchy itself. It is a subject which the report of the noble Lord, Lord Parekh, largely ignored. But it is relevant to how we attempt to hold together an increasingly pluralist and multi-ethnic "community of communities".
Why has the British monarchy survived and flourished while so many of its continental counterparts have died and diminished? Clearly we have been blessed with some fine individual monarchs. But the particular way in which the spiritual and sacred character of the monarchy has been nurtured and expressed has enabled our monarchy to relinquish political power without losing its fundamental raison d'être.
The transcendent rooting of the monarchy, vividly expressed at the coronation itself, has been vital to its grace and dignity. That feature of our constitutional monarchy has been mediated through a particular
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relationship with the Church of England. Cut that relationship and perhaps the Royal Family would be much more vulnerable to being seen as just another rich and privileged family (if I may use that phrase). Most of our citizens will continue to prefer our constitutional monarchy, with its sacred and spiritual basis, to the alternative symbols of flags, national anthems and myths of national destiny, which tend to fill the vacuum elsewhere, as the noble Lord, Lord Hunt, described.
But if the establishment of the Church of England is to survive, it will need to evolve; to take account of the new dimensions of multi-ethnicity and multi-culturalism in our midst. The precise character of the next coronation, I imagine, will need to be significantly different from the last. The Sovereign, I believe, can appropriately be described as a "defender of faith", as well as a "defender of the faith". I do not believe the two are in fundamental contradiction. Indeed, the Sovereign needs to be a defender equally of those who are agnostic or atheists. Authentic Christianity seeks to coerce no one against their God-given freedom and respects the dignity and rights of all.
However, just as one cannot really be religious without a religion, I do not think that we can recognise a spiritual basis to life in the structures of our society without mediating that through a particular faith community. That will bring new obligations and opportunities to that faith community. There is scope here, I believe, for the Church of England to be much more generous to the other faith communities in our midst, in relation, for example, to our buildings, but in many other ways as well. We have been slow out of the blocks in this matter and we are still lagging behind where we need to be.
We need to learn from the experience of other parts of the world. It has always struck me as significant that the mother house of Mother Theresa's Sisters of Charity in Calcutta is set in the precincts of a Hindu temple—or so I am told.
A more generous hospitality to other faith communities in various ways need not compromise our integrity at all, as the right reverend Prelate the Bishop of Bradford explained. Indeed, properly understood, it is part of that very integrity. At this point, I believe that the report of the noble Lord, Lord Parekh, was absolutely right to say that better relationships between faith communities is a crucial part of the strategy to combat racism. I do not believe that the mainstream churches in this country—and let me speak here specifically of the Church of England—have yet fully grasped that challenge.
Some will say that it would be better to disestablish the Church of England and build a new order of society on secular and multi-faith foundations. Perhaps, but I doubt whether that is what our people, including most members of the minority faith communities, want. The Chief Rabbi articulated that very well in his Reith Lectures a few years ago.
From the perspective of the different faith communities, it was secular materialism which largely made the running in the second part of the

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20th century and has left us a social, moral and artistic legacy which hardly seems to inspire. Statistics of suicide, especially among the young, mental illness, family breakdown, and crime, reinforce the point. The challenge in the 21st century is to establish more clearly, on a renewed basis, the sacred dignity of life and of our obligations to each other in society. I believe that the new communities will richly contribute to that process.
I remain unpersuaded that disestablishment of the Church of England is the best way to facilitate this, but neither do I underestimate the challenge of changes of attitude which are still required in many quarters, and which the distinguished contributions to this debate so far have very clearly identified.
Lord Morgan: My Lords, as one who comes from Wales where the kirk has been happily disestablished, perhaps I may ask the right reverend Prelate a question.
In his account of disestablishment, the right reverend Prelate quoted the views, as I am sure he rightly saw them, of the various faiths, who number 19 per cent of the population. Eighty-one per cent of the population would not have been included in his sample.
The Lord Bishop of Chester: My Lords, it depends entirely on who you count and which survey you use to get the particular proportions.
I gladly acknowledge, however, that there is a rich diversity of Christian expression in this country, to which the Church in Wales has made its contribution over the past 80 years. I am happy to acknowledge that and to include a dialogue with the other Christian denominations in the question of the future of church-state relationships.
7.13 p.m.
Baroness Rendell of Babergh: My Lords, among the benefits to this country of multi-ethnicity I would like particularly to draw your Lordships' attention to the contribution made by writers, as alluded to by my noble friend Lord Parekh. To him I am grateful for opening this debate with such an excellent and enlightening speech.
As a novelist myself, a reviewer and former judge in the Booker and Whitbread Prizes among others, I have noted with intense pleasure and a growing sense of wonderment the works, mostly of a very high standard indeed, that have come to us from writers of Caribbean origin, those from Turkey, Egypt, the Middle East in general, from Africa and from the Far East. It is not to disparage these novelists—many of them giants, whose work will endure—when I say that in my opinion the most remarkable phenomenon has been the fiction output of those whose roots are in the Asian sub-continent. On them I shall concentrate this evening. I hope that noble Lords who share their provenance will forgive me if I mispronounce names. I can only assure them that, without much guidance, I will do my best.
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Paramount among these writers must be Salman Rushdie, who made waves early on in this Asian tide of literature with Midnight's Children, which won the Booker Prize. Since then he has three times been short-listed for that prize and was awarded the "Booker of Bookers" for coming top in a general contest of contributions over 25 years of the prize.
I think next of Amitav Ghosh and his masterpiece Shadow Lines, and of course of Arundati Roy, another Booker winner, with The God of Small Things. Of the Desais, Anita, with her prize-winning novels, and her daughter Kiran, making her debut with her tale of a guru, Hullabaloo in the Guava Orchard. Several other Asian novelists figure in the short lists which span three decades.
In case it may seem—though I think this would be a false conclusion to draw—that these novels are too intellectual and highbrow to reach a wide audience, I mention here the internationally renowned A Suitable Boy by Vikram Seth. In the best sense, this huge epic novel is accessible to everyone who enjoys reading and loves a good story. Essentially a serious book about India after independence and partition, it is also intimately concerned with family life and a mother's search for a suitable husband for her daughter. It is currently being serialised on BBC Radio 4.
All these novels—and I have described very few of the number published here each year—provide what fiction essentially should, that is, entertainment, excitement and suspense in the best sense of those words, as well as examining the human condition. They possess a freshness and originality sometimes lacking in the product of indigenous writers. They do much more than that, however, and this is where the true benefit they confer on our society makes its mark.
Whereas overseas publishers have for generations bought rights in books of British origin and published them alongside their own national works—often when doing so has necessitated translation—the number of foreign language books accepted by publishers here has always been small. Only the principal writers in their own countries, or the most popular and saleable, have found a market here.
The result of this has been that those of us who are not academics or who have never made a particular study of, say, Nigerian or Turkish literature, or works from Syria or Malaysia, have not only failed to appreciate that these countries too have a rich treasure of literature of their own but have learned nothing of the manner of living of the people who are these countries' nationals. This applies, or did recently, even to those who are our neighbours in Europe who are physically and geographically close to us.
It is the business of the novelist, if he or she writes of contemporary events, to present a picture of life as it is lived at the moment; of the houses people live in, the food they eat, the schools they go to, the faith they practise, their political situation, their tastes, their clothes and their customs. If we return to the Asian sub-continent, however, what have we known of the ways of the diverse peoples of this huge area except what we have read in geography books and in the

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works of Kipling, for instance, or E.M. Forster and Paul Scott? All of them, according to one's taste, are fine writers, but all of them British—indigenous British, even if domiciled or paying a long visit to India. Theirs have been the eyes and the ears of strangers in a strange land.
In the novels of those Asian writers I have spoken of, and in those of many of their fellows and contemporaries, we get the true picture. We derive from them insights into lives we never dreamed of; and we need not doubt their accuracy, for these are people writing about what they have known from infancy, what they grew up with and what their ancestors lived with.
I believe that this is an area of multi-ethnic contribution which has been neglected, few commenting on what has almost amounted to a literary revolution. I will not say "renaissance", for this talent and occasional genius were no doubt always there but untapped and unrealised. It has brought to die general reader, the woman or man on the Underground, if you like—how many people have I seen reading A Suitable Boy in the Tube? —a unique and otherwise unreachable source of knowledge of a group who live among us.
Knowledge of a society must help to bring about understanding. And understanding, even if it is a perception of the bad side of a way of life as well as the good, must lead to the sympathy and tolerance so essential when people from very different cultures are obliged to live side by side. After direct experience, something not open to all of us by any means, fiction is the best way of learning about our neighbours' religious beliefs and rituals, their marriage customs, their domestic habits, their ambitions and their aspirations.
Writers of fiction have been the ambassadors of those who have settled here in the United Kingdom, presenting their own rich civilisation and saying, "This is what we are like and this is what you must know if we are to live together successfully".
7.21 p.m.
Lord Chan: My Lords, I add my congratulations to the noble Lord, Lord Parekh, on securing this timely debate on important national issues that have tended to receive negative reports in the media. Our neighbours in Western Europe are also grappling with multi-ethnicity and multi-culturalism. Some are keen to foster immigration of people from outside Europe, because demographic trends predict a reduction of 100 million people in Europe by the year 2050 if no immigration were to take place. That prediction comes from the United Nations population projections of 1998. The critical result of such a population decline will be the contraction of the workforce available to support the pensions of older retired people, a growing part of our population.
Germany has begun to feel the effects of this demographic change. In 1999, the German Government began offering full citizenship to non-European people for the first time in their national
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history. A seminar took place in the British Embassy in Berlin in November 2000, when German government officials met key representatives from Britain's multiethnic population to discuss issues of multiculturalism. The noble Lord, Lord Dholakia, and I were present, as was the noble Baroness, Lady Scotland.
Our Government are well aware of the benefits of a multi-ethnic, multi-cultural population that provides skills in short supply, such as doctors and other health professionals in the National Health Service. Since April 2001, immigration rules have been relaxed to allow foreign students graduating in our universities to obtain employment immediately, instead of having to leave Britain. According to Department of Health statistics for 2000, one in four of our doctors and one in six of our dentists is black or Asian, and we continue to look for more health professionals to work in the NHS.
The Performance and Innovation Unit of the Cabinet Office published a report last month on Ethnic Minorities and the Labour Market, from which the right reverend Prelate the Bishop of Bradford quoted statistics. It shows that many ethnic minority men and women in Britain have higher rates of unemployment than white people. For those in employment, their salary is lower than their white counterparts in similar jobs.
Those issues are not new; they were reviewed by the Commission on the Future of Multi-Ethnic Britain. Here, I declare an interest as a member of that independent commission chaired by the noble Lord, Lord Parekh, and supported by the Runnymede Trust. The commission's carefully researched publication was the most comprehensive work on this subject for 30 years. Yet, when the report was launched in October 2000, it received the most negative and biased reviews by both tabloid and broadsheet newspapers that I can remember, because it mentioned the need for making the term "Britishness" more inclusive for ethnic minority people. Even government distanced themselves from the commission's report.
The report focused on cohesion, equality and difference. It asked searching questions such as,
"What values and loyalties must be shared by communities and individuals in One Nation?",
and,
"How should disputes and incompatible values between different communities be handled?",
and.
"How is a balance to be struck between the need to treat people equally, the need to treat people differently, and the need to maintain shared values and social cohesion?".
The Commission on the Future of Multi-Ethnic Britain argued that Britain should develop both as a community of citizens and as a community of communities. Although belonging to different ethnic groups and having different cultural practices, all Britons would share common values of justice, abide by our laws, and have respect for individuals' dignity.

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In the past 18 months, it is evident that government have adopted some of the recommendations of the commission, particularly its emphasis on cohesion and common values. But it is regrettable that government have not given credit where it is due; namely, to the commission for its excellent and valuable contributions to the making of a multi-ethnic, multi-cultural and cohesive Britain.
Our vision of a cohesive and successful Britain where cultural diversity is valued cannot be built just on a set of common values. Our citizens from diverse backgrounds need to be convinced that they are valued by the way they are treated in their daily experience of life in Britain. Being treated fairly by employers, colleagues in the workplace, the police, the criminal justice system, and all public authorities, including the health service, is the proof that we all subscribe to common values of the equal worth of all our citizens irrespective of ethnic, cultural and religious backgrounds. This is the way that ethnic minority people and communities can develop a sense of belonging to Britain.
Last summer's disturbances in Blackburn, Burnley and Oldham reminded us that our vision is still to be achieved. People from different cultural backgrounds cannot be isolated from each other to live "parallel lives". In 1995, when I was director of the NHS Ethnic Health Unit, I gave a small grant to people living in Glodwick, an inner-city district of Oldham. The grant administered by Oldham NHS Community Trust paid for the rental of a terraced house in the centre of where people lived. This house became a one-stop shop for health, social services, and the police for the residents of Glodwick, most of whom were Pakistanis needing bilingual interpreters. Local authorities did not continue the support and allowed this very helpful facility to close after two years, even though local residents and public authorities valued it and wanted its continuation.
Therefore, I was not surprised by the troubles in Oldham last summer; and I told the review team from Oldham so when it sought my views by coming to your Lordships' House. Local and public authorities have a significant role to play, in addition to their duties to provide services. It is to help people to meet and to live together in harmony in imaginative housing schemes.
Finally, I believe that central government need to give a lead by declaring the benefits of a multi-ethnic, multi-cultural Britain and encouraging good practice. Beginning from your Lordships' House, the Government's support should be seen to influence for good the lives of people in our inner cities.
7.29 p.m.
Baroness Uddin: My Lords, I thank my noble friend Lord Parekh for introducing this Motion and especially for listing the eminent achievements of much of our community. Multi-culturalism and the issue of multi-ethnicity are both complex and exciting; and, indeed, most challenging. The process of change in our efforts to create a plural modern Britain has no room
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for complacency or stagnation. But there remains a lot of space and the need for honesty and candour. If any discourse on community relations is to be meaningful, it has to start from a point of introspection: a complete overhaul of all our theoretical assumptions, intellectual orthodoxies, practical experiments and the policies arising out of the 1980s and 1990s race relations industry.
The benefits of multi-ethnicity and multi-culturalism to Britain and Britishness of are beyond debate. They are manifest in all walks of life in modern Britain, from the curries on our table to the hip-hop on our hi-fis and the shalwar kamiz on Mrs Blair's elegant shoulders. Discussion on multi-ethnic and multi-cultural Britain needs to be broader and more sophisticated than the narrow, exotic picture that I have just described. We must liberate that crucial agenda from its entirely secular fundamentalist understanding, because without the context, change will be slow—as it has been—and the result will be what we saw in Bradford, Burnley and Oldham.
As a Muslim woman of Bengali descent and a Peer on the Labour Benches, I must admit that I am often deeply unhappy and frustrated by the current application and understanding of both Britishness and multi-culturalism at the highest level. I agree with much of what my noble friend, my good friend and mentor, Lord Desai said. Also as a Muslim, I can only touch on the pain, anger and helplessness that I feel at the way in which current debate has managed to marginalise and alienate much of our communities. The almost total denial for decades of our identity based on our faith has been devastating psychologically, socially and culturally and its economic impact has been well demonstrated. For years Britain's 2 million or so Muslims—the largest group within the country's visible minorities—have been totally bypassed even by the best-intentioned community and race relations initiatives because they have failed to take on board the fact that a major component of their identity is their faith.
Such an identity demanded more than just the stereotypical and lazy imposition of simple cultural labels based on race categorisations. British Muslims, consisting of more than 56 nationalities and speaking more than 100 languages, have never been and shall never be happy about an existence and understanding that rarely goes beyond somosas, Bollywood and bhangra. The fact that the wholeness of my identity as a British Muslim is not accepted even among the champions of multi-culturalism is deeply depressing, but the situation is worse when compounded by the negation of my experience as a woman. In response to the description of the noble Lord, Lord Dahrendorf, of the equality of women in numerous cultures and faiths, I would add that no society has a monopoly on equity to its women and none of us—including those of us on these Benches—can be deeply proud of what we have contributed thus far. The pain is all the more unbearable when I see the Government, formed from my party, lose significant sense and direction over policies aimed at facilitating the emergence of a genuinely plural society.

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The Motion will be useful only if we have the magnanimity and wisdom to embrace the nature and blessings of the contributions that multiple faiths can make to our society. But to do that we must understand, appreciate and respect the fact that a large number of people in our society have much passion and aspiration to religious values. To ignore religion and the values for which it stands is therefore to ignore their innermost desire and fundamental human right to exist in the way they perceive to be right.
For me, the benefits of multi-ethnicity and multiculturalism to Britain and British society can be invaluable only if they include the nuances of our multi-faith communities. From Scarman onwards, too many reports have missed the opportunity to address that important facet of Britishness. I am therefore deeply grateful to the most reverend Primate the Archbishop of Canterbury for his recent contribution by setting up a listening group to consider the issue of Muslims and Christians living together. No doubt the findings will be reported hack to the right place.
I long for the day when a shalwar kamiz-wearing mother of two—or of four or five—walking in my neighbourhood in East London is identified not only with oppression, curries or terrorism but with the love and spiritual beauty that built the Taj Mahal, the Sultan Ahmed Mosque in Istanbul and the hanging gardens of Baghdad—I could continue with that list.
We have come of age. Our contribution to Britain cannot be overstated. Our children cannot continually be asked to prove their loyalty. If integration were to be assured by living together, speaking English and marrying in Britain, Stephen Lawrence would still be here, not where he is, and Kuddrus Ali would not be in a wheelchair. We have a grand track record of contribution to Britain. We now need institutions to do their job. The noble Lord, Lord Parekh, states that eminently in his report.
If we are serious about the future of multi-ethnic, multi-cultural, multi-faith Britain, it is time for us to own up and invest now.
7.36 p.m.
Lord Patel: My Lords, I, too, should like to thank the noble Lord, Lord Parekh, for initiating this debate. I must tell the noble Lord, Lord Desai, that the name Patel is as British as one can get. No other name is more common in Britain.
Does the United Kingdom benefit from being a multi-ethnic, multi-cultural society? Can anyone possibly argue that we do not? Yes, it may create problems, tension and a need to understand each other's cultures and values. That requires compromise from all of us and legislation to accommodate our being members of such a society. But there can be no doubt about whether multi-ethnic society benefits the United Kingdom.
I know a little personally about what multi-ethnic and multi-cultural society means. I am of Indian origin, born in Tanzania. My wife is English, born in Sheffield, but has lived nearly all her life in Scotland and thinks that she is now a Scot. I, too, have lived in
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Scotland for the past 42 years. I have a French son-in-law. That is a wonderful mix. If France beat England at rugby—unexpectedly—we join the celebrations. If Scotland wins the Five Nations Cup once, we remember it for ever. I hope that England will win the Test Match series in New Zealand.
Many noble Lords have spoken about the benefits of multi-ethnic society, but we have also heard how some of the ethnic minority citizens of our country feel undervalued and unfairly treated. The noble Lords, Lord Parekh and Lord Chan, both referred to the contributions of ethnic minority doctors and nurses. Our health service would collapse if it did not have a large number of doctors and nurses working in primary care and in hospitals, mostly from the so-called developing world.
Many of those doctors work in inner-city areas and, in the case of general practitioners, often single-handed and poorly supported. Most have been here for nearly all their lives. In hospitals, they mostly work in non-consultant career grades, despite their experience and competence, and in unpopular specialties. Many feel discriminated against and are unable to fight the culture of paternalism and the old boy network. Somehow, rules and regulations imposed either by government or professional bodies end up disadvantaging them. That problem needs to be recognised and something needs to be done if we are to continue to value those doctors and nurses and they are to feel that they are fairly treated. In the context of today's debate, I must say that those doctors and nurses bring immense benefits to our country.
The health of people from the ethnic minorities—particularly inequalities in health —is another issue that must be addressed. We must consider the relevance of evidence-based medicine, the translation of knowledge of ethnic minority health into NHS practice and the impact of public health policy on minority ethnic communities. Diseases such as coronary heart disease, strokes and cancer and mental ill health affect ethnic groups differently. Culture, biology and environment affect the incidence of disease, but it is important that we make sure that healthcare delivery does not produce inequalities. Currently, there is a great deal of inequality in the care of people from minorities who suffer from ill health. We need better ethnic monitoring of NHS databases to quantify service use accurately, and we must study the quality of the care offered to ethnic minorities.
The hour is late, and much has already been said. I shall not prolong the debate. Most members of ethnic minorities regard themselves as citizens of this country and wish to play a full role in its development. However, they also wish for fair treatment.
7.41 p.m.
Lord Clarke of Hampstead: My Lords, I join other noble Lords in thanking my noble friend Lord Parekh for giving us such a good opportunity to discuss and call attention to the benefits of multi-ethnicity and multi-culturalism to Britain.

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Last summer, we witnessed civil disturbances in several towns in the North of England. One of the towns affected was Burnley, which has been mentioned once or twice. Noble Lords may be aware that I had the privilege of heading the task force set up to look into what happened in Burnley last June and make recommendations that could help to prevent a re-occurrence. Unlike other reports, the report of the Burnley task force was the creation of Burnley people, through the local authority. I was approached to be the independent, voluntary chair of the task force. When I took on the job, I did not realise how long it would take or the amount of work that it would entail. The report is lengthy and contains numerous recommendations.
During those three days in June, young people from the white and Asian communities confronted each other in violent clashes. It is a little surprising, when we think about the event in the early hours of the morning that started it all. An Asian cab driver, who was going home, was dragged out of his cab and bludgeoned with a hammer. He was left bleeding on the road. We can all deplore what happened, but we must try to understand the motivations that led to those clashes.
The report of the task force was published just before Christmas. In the limited time that I have, I shall say a few words about some of the issues addressed by the task force that are relevant to this evening's discussions. The noble Lord, Lord Greaves, used the keynote words "cohesion" and "integration". As a task force, our key word was "listening". We listened to the people of Burnley, who had experienced the dreadful occurrences.
A questionnaire was sent to 45,000 households in the borough—every household. The report is in the Library, and noble Lords can find the questions in it. The significant thing is that we had a 10 per cent response rate, so the task force's conclusions can be seen as representing the views of the people who took the trouble to respond. There were public meetings and parish meetings. The task force met almost every councillor, including the leaders of all the political parties represented on the local authority. Almost 250 letters and e-mails were received from individuals, and there were detailed submissions from many voluntary and statutory organisations.
The consultation exercise has been described as a model for finding out what people thought—rather than what we, as politicians and civic leaders thought—and what issues needed to be addressed. Among the 84 recommendations in the report were a number that dealt with community relations. The consultation showed clearly that there was much more work to be done if we were properly to enjoy the benefits of multi-culturalism that we have heard about during the debate. I speak about Burnley, but I am confident that what we discovered can be found in other parts of the country.
Progress towards better understanding between our differing cultures is obstructed by the racist and grossly offensive activities of far Right organisations.
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I make no apology for bringing that into the debate. Such organisations are active in Burnley and, no doubt, in other places. An examination of the appalling leaflets and comments that are widely circulated in Burnley—circulated this very week—by such organisations will show that they are deliberately framed in inflammatory language. They seek to make minority ethnic groups the scapegoats for the economic and social deprivation that is evident in parts of Burnley. Such activity is not confined to the Daneshouse/Stoneyholme area of Burnley, it is also evident in south-west Burnley. People's fears are being stoked up by the stuff that is coming through the door. When my noble friend the Minister replies, I hope that he will confirm that local police forces are encouraged to use all their powers to enforce the parts of the Race Relations Act 1976 that are in place to deal with those responsible for the production and distribution of such dreadful publications.
Our consultation showed that local authorities and statutory organisations must improve their communication with the public, especially with regard to providing the reasons and conditions for funding neighbourhood renewal. In particular, when that form of funding is allocated to areas with significant numbers of families from ethnic minorities, such bodies must make it clear why the money is going in that direction. They must not leave it to the Right-wing groups to say that it is unfair distribution of the nation's wealth. That need was illustrated time and time again. The propaganda and distortions of the far Right had, in many instances, fallen on fertile ground. Votes of 20 per cent were recorded for what I would describe as neo-fascist organisations in local and other elections. We must heed the warning, if we are to stop such things recurring.
I hope that I have not given the impression that the people of Burnley are despondent. Overwhelmingly, they are full of hope and determination to overcome what happened. I wish that there was more time to speak about the wonderful people who served on the task force. There were five youngsters—three from the Asian community—the Bishop of Burnley, the Right Reverend John Goddard, and an imam, Jihan Ali. They made sterling efforts to draw people together and were with me at each public meeting, where we were able to counter some of the terrible stuff that people were reading from leaflets that had been circulated by far Right groups. The imam and the bishop are now organising regular meetings between the churches and mosques to further the ideal of multi-racial harmony in Burnley.
I met schoolchildren, some of whom have since visited the House. They were receptive to my suggestion for exchanges between schools—maybe a day's exchange, to start with, or maybe for a week or a term—so that people can learn about one another's culture and the way in which other people live. They were very receptive to that. It is essential that we do something of that kind to remove ignorance and fear. Our young people must be given help to do what they

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want to do. I shall quote from a programme drawn up as a result of the work of the task force. Under "Other things we want", they list,
"Burnley Youth Theatre to create a performing arts project involving young Asian and white men … more integrated/ residential youth work … more visits to each other's Youth Clubs … more training to help Youth Workers to help them tackle racist issues … the employment of more minority ethnic Youth Workers".
There is a list of things that young people have suggested should be done. The House would be well advised to take note of what is being said by young people in places such as Burnley, learn from it and do our utmost to ensure that what they ask for becomes a reality.
7.50 p.m.
Lord Dholakia: My Lords, we have come to the concluding part of this debate. Perhaps I may say first how much I welcome the opportunity to participate in a debate initiated by the noble Lord, Lord Parekh. It is certainly timely.
I shall listen very carefully to what the Minister has to say in his response, but suffice it to say at this stage that those of us who participated in the Commission on the Future of Multi-Ethnic Britain were offended by the government response to our deliberations when the report was first published. I do not wish to rehearse those arguments again, except to say that the commission was made up of 22 distinguished individuals drawn from many community backgrounds and from different walks of life, all with a long record of active theoretical and practical engagement with race-related issues in Britain and elsewhere. Many of the report's recommendations are as valid today as they were when it was published. It was sad to see that the Government were quick to dismiss it simply because they were uncomfortable with a number of the findings.
I hope that that will not be the case today, because the debate has attracted contributions from such distinguished speakers of diverse cultural backgrounds. I suspect that this may well be the first occasion in the history of your Lordships' House that speakers from no fewer than nine ethnic minorities have contributed to a single debate. I shall start by saying that we need to move away from saris, samosas and spices and look seriously at the issues confronting the minorities in this country.
Britain has always been a nation of migrants. Migration and the global economy are interrelated. Evidence shows that economically-driven migration can bring substantial overall economic benefits both for growth and for the economy. Just take the example of the United States of America. The huge recent inflow of migrants, estimated at 11 million during the 1990s, has been a key to sustaining America's longest ever economic boom. The same is true of our economy. Let us not lose sight of the fact that migration to the United Kingdom is based on economic factors benefiting both the individual and the state. We cannot sustain a global economy by being Little Englanders.
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Perhaps I may add a few statistics to those produced by the noble Lord, Lord Bhatia, in his contribution. The recent census figures are yet to be published, but it is accepted that just over 7 per cent of the UK population is made up of the ethnic minorities. Immigration to the United Kingdom has never been a planned process. Most minorities have settled in Britain's major cities and conurbations. Over 70 per cent of the combined ethnic minorities are to be found in London, the South East and the West Midlands. Add to that some unique characteristics of the ethnic minority communities: in the United Kingdom population as a whole, women outnumber men, but it is quite the reverse in ethnic communities, where men outnumber women.
When we look at multi-ethnicity and multi-culturalism, we have to look at other relevant factors. For example, the ethnic minorities belong to many diverse religions, as has already been pointed out by a number of noble Lords. Family structures vary among the different groups, as do language, employment practices and a number of other relevant factors.
Today's debate offers us an opportunity to examine ethnicity and multi-culturalism by taking into account events following the publication of the Runnymede report and also the conclusions reached by the Macpherson report into the murder of Stephen Lawrence. Much has happened since. We have had disturbances in our northern towns of Burnley, Oldham and Bradford. Damilola Taylor was brutally murdered. We see the impact of black on black crime. We have to accept that the world will never be the same after the events of 11th September in America. It is most important that the debate does not lose sight of this changing situation.
No one should underestimate the value placed by the minorities on their ethnicity and in their belief in multi-culturalism, yet there is confusion in government circles. It is evident that we are prepared to pay lip service to the objective of an integrated society without qualifying our stance on these important values.
I have gone through some previous government reports. The concept of multi-culturalism in 1965 was qualified by a number of concerns. One report stated that:
"It must be recognised that the presence in this country of nearly 1 million immigrants from the Commonwealth with different social and cultural backgrounds raises a number of problems and various social tensions in those areas where they are concentrated".
That is as true in 2002 as it was in 1965. It is clear that assumptions that have been made over the past 50 years have not been realised. Even before my noble friend Lord Jenkins of Hillhead, then the Home Secretary, defined "integration" not as a flattening process of assimilation but as one of equal opportunity, accompanied by cultural diversity, in an atmosphere of mutual tolerance, policy makers had assumed that Britain was a true melting pot, that all the many racial, cultural and religious groups would be assimilated into a new whole—a single nation with shared ideals, attitudes and values.

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But how wrong can we all be? Black and Asian groups have to a great extent retained their identities. Of course we now have cultural pluralism, but unlike previous migrations, this one is different because it is supplemented by the visual identity of the individuals. This confusion has continued from the days of early migration. The government stance in the 1960s had been based on the assumption that the Commonwealth immigrants would be absorbed into our community and that the good sense of the British people would prevail.
What we have failed to do is to reinforce among the population the fact that ethnicity and multiculturalism should not mean the loss of national characteristics and culture. We do not need a melting pot, which would deprive us of most of the benefits of immigration, which are very great indeed.
Cultures do not remain static and communities change. Conflict often occurs over matters of gender, generation, religion, language and a community's relationship with the wider society. There is nothing to be frightened about. We are already witnessing fusion in music, the arts, fashion and sport. The new emerging culture will be exciting and, to an extent, it will lessen the need to put too much emphasis on ethnicity and multi-culturalism. That is why we require leadership at every level. We look to the Government and political parties to provide that leadership.
The United Kingdom has an enviable record on race legislation. The principle of equality before the law is rightly embedded in our legislation. But as my noble friend Lord Lester of Herne Hill has often pointed out, we should not be too carried away but should understand the narrow limits of this principle. The 1965, 1968 and 1976 Race Relations Acts, along with the most recent Race Relations (Amendment) Act 2000, have all helped, but they have not removed inequalities. Now, with human rights legislation in place, is it not time to look again at an equality commission based on a similar model to that established in Northern Ireland?
I wish to emphasise that, despite over 60 years of settlement of black and Asian communities in the United Kingdom, race relations still remain very fragile and many of the issues affecting those communities are discussed on an emotional basis. We live in a fair and just society and all reasonable people would condemn racism and racial discrimination, but we still find that many of the practices we adopt may lead to precisely such outcomes.
Let me add that it is not so much what the law or a declaration specifically says as our general underlying attitudes and values which, as they are held and expressed, are of such importance for our social well-being. Equality should never be undermined. In the final analysis, the emphasis in any policy determination should be the manner in which and the extent to which minorities' deepest feelings about their race, colour, national or ethnic origins are truly accepted within the community and by the policy makers.
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For as long as I can remember, I have expressed my concerns about the rights of the minorities: the right to live in peace, to receive an education, to get a job, to raise a family free from fear and, above all, the right to be treated fairly, without reference to race, colour, national or ethnic origins. These are the issues at the core of everything that needs to be done. They stand at the heart of every issue. No longer can a society endure in peace, really live with itself, really prosper in all ways, if in that society discriminatory practices still persist.
A number of issues now cry out for planned economic immigration to the United Kingdom: a shortage of labour, an ageing society and a diminishing workforce. Last night I attended a dinner hosted by the Asian Business Association. One in 10 businesses in London is now Asian owned. There are potentially huge economic benefits. Their record in providing service is second to none. A few isolated incidents of misdemeanours cannot take away the vibrant economy that the migrant community has created. Many of them are now contributing to charitable causes in the United Kingdom. This is the acceptable face of the ethnic communities in Britain.
Of course, to many of us, particularly the first generations, the challenge will be frightening. Look at what our youngsters are rejecting—class, elitism and conformity. But look at what we are gaining—interdependence, self-reliance, openness, liberty, diversity and pluralism.
It is evident that there is a conflict between the concept of what is appropriate and what is required. But, more fundamentally, after 50 years of settlement here we should be asking some pertinent questions. What kind of society do we want to take forward into the new century and the new millennium?
I am running out of time, but let me quote a politician whom I have always admired for his stand on race relations—the late Lord Boyle of Handsworth.
He said:
"Political wisdom consists of trying to narrow the gap between the value which men and women place on their own personalities and the value placed on them by the community in which they live: furthermore no community can afford for long to deny the application of this principle to racial minorities as well".
8.1 p.m.
Lord Dixon-Smith: My Lords, in thanking the noble Lord, Lord Parekh, for introducing the debate, I hope that he is very pleased with the result. I can count only eight out of the 19 contributors to the debate who might be called "English".
It is a considerable tribute to the development of both this country and Parliament that in this, the most traditional of all parts of the great British Parliament, there is a minority of English people to debate the important question of a multi-cultural and multi-ethnic society. I include in those remarks the noble Lord, Lord Morgan, who is Welsh. He and a number of other speakers—including the noble Lord, Lord Parekh—took the opening part of my speech from me in the sense that they all commented on the fact that Britain is not, and never has been, a homogeneous

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society. It has always been a diverse society of different races and different peoples. We know about the Scots and the Welsh, but I am never quite sure whether or not the Irish consider themselves British. Certainly a number of them do. We have not handled that problem well and I hope that on this side of the Irish Sea, at least, we can do rather better.
The big change in the world and in British society generally has happened over the past 50 years. Up until then it was not possible physically for large numbers of people to move easily about the world with any expedition and comfort. Since that time the world has become a very different place. Indeed, some say that transport is too available and that we move too easily. I do not have a problem with that. As the debate has shown, British society generally has developed and gained as a result of that change.
However, one point needs to be noted; that is, that if you change things too rapidly you create stress. This does not always happen as a result of changes in race or culture; it happens if you change very rapidly communities which are all of one race and culture anyway. Noble Lords should come to some of my towns and villages in Essex which have seen their populations double, treble and quadruple in a very short space of time—literally in three or four years— and see the tensions that that can create. While we do have some problems as a result of what has happened, this country has been very successful in dealing with these matters—although of course there are certain localities where there is stress.
I am particularly grateful to the noble Lord, Lord Dahrendorf, for picking up on an important aspect of what is happening in this country; that is, that we must take care not to lose the essential character that has made it worthwhile for people to come here in the first place.
It is often said that this country does not have a constitution. I have always said that it does. The constitution is the body of the law. In addition to that, we have the common law on which the body of the law is based. The trouble with that kind of constitution is that we, as legislators, are constantly changing our constitution.
But that also is beneficial in this context because it has brought us the race relations and other kinds of legislation which try very hard—I pay tribute to legislators of all political parties in this regard—to treat everyone as equally as can reasonably be done. But it is an evolutionary process and that is why we, as legislators, continue in business.
The noble Lord, Lord Chan, referred to a point, which I found interesting and which caused me some concern, when he mentioned the changing attitude to immigration in Europe. The demographers—for whom we should have great respect and of whom we should take great note—have been showing for some time that the population in western Europe will very soon decline. Therefore it is tempting for us, as a developed part of the world, to say that we should— and, indeed, can— rectify some of the problems that that will cause by bringing in people from other parts of the world.
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That is perfectly true—but the demographers show that the global population will also go into decline. That of itself will create a different level of problem. It will mean that if we continue to accept wide numbers of people into our developed communities—as it is perfectly reasonable in every liberal sense to do—we shall be doing so at the expense of the rest of the world. That causes my conscience some problems.
I throw that in for what it is worth because it is something about which we need to think. It will have its impact on the problem we are discussing because, as has been said by many noble Lords, the health service, in particular, and many other aspects of our lives are now dependent on people who are not of immediate English extraction. But we have disadvantaged people within those communities who could—I hope we will have an opportunity to make this happen—begin to fill the requirements of society which we are already generating. We need to think very carefully about this problem before we start to find solutions from outside our own boundaries. I have always been of the view that we can do far more to help ourselves.
The education service was mentioned. It has its successes and its failures. I hope that the right reverend Prelates will not be upset when I say that I have some difficulty with church schools—partly because in my office I sit next to a colleague who has too much experience of Northern Ireland, where the faith schools have been so rigid that they are not a cure for the problem. Again, that is a situation that one would wish to see improved; but we need to examine these issues with great care.
In the end, the solution to the problems of our multiethnic society—I prefer that phrase to "multi-cultural", because we cannot as individuals be multi-cultural; we can only understand—if solution there be, will come through understanding, tolerance and mutual respect. If we can develop those characteristics, Britain will become an even better society than it is today. They are characteristics that cannot be developed by law. We can develop them by means of debates such as the one we have had today.
8.11 p.m.
Lord Bassam of Brighton: My Lords, first, I thank the noble Lord, Lord Parekh, for introducing the debate and for stimulating what has been one of the most diverse, interesting and fascinating discussions on a report that I have ever had the privilege to listen to. It is always said that during our debates there are particular distinguished contributions. This time, all the contributions have been distinguished. They have dealt with many different aspects, not merely of the Parekh report, but of our national life, our cultural life and the problems that we confront: the issues of racism, the violence that exists in some of our inner-city areas, the passion with which people raise these issues and the central importance of understanding race and multi-culturalism in the 21st century.
I have made extensive notes. I do not know whether they are of value, but they help me to draw together some of the threads. I want to refer to some of the

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comments made by noble Lords on their experiences. I was particularly interested in the account by the noble Lord, Lord Greaves, of his experience working in the communities where he was an elected representative and in the points that he made about residential separation and the complexities of developing communities with greater integration through housing strategies. Those were important comments. They reflect the difficulty of creating the social cohesion which the report of the noble Lord, Lord Parekh, has at its core.
I was impressed, too, by the remarks made by the right reverend Prelate the Bishop of Bradford about his understanding of the community in which he works, and how he had to develop a whole new knowledge of a faith; and how, through that work, he had come to the conclusion that faith schools, notwithstanding some of the difficulties and challenges with which they confront us, were not part of the problem but were, in fact, part of the solution. He felt that much progress had been made in the last year since the disturbances in Bradford.
The noble Baroness, Lady Prashar, made some telling comments about the lack of cohesion, as she saw it, in the overall policy direction of the Government with regard to dealing with multiculturalism and the challenges that it provides. She spoke of the importance of providing good analysis and drawing on that so that cohesive strategies were developed. Importantly, she spoke of the value of leadership in that field.
The noble Lord, Lord Hunt of Chesterton, drew on his experiences in the United States, and asked us to look at the value of positive discrimination. Clearly, that is part of the wider agenda.
The noble Lord, Lord Bhatia, reflected on some of the values that had been developed and the progress that had been made in his own work at the Ethnic Minority Foundation. He made an important point about the need to build community capacity in many ethnic minority organisations. In this area, government departments have a vital role to play. I was pleased to hear that he felt that government organisations were engaged in that role, because of the recognition that they give and the funding that they provide, so that many of those organisations can fulfil important service activity.
The noble Lord, Lord Morgan, reminded us of the distinct contribution of Welshness. He pointed to the ironies of Arsenal football team and its fan base not perhaps perfectly reflecting each other—although, in defence of Arsenal, I would say that the club has a very pro-active attitude to engaging fans from the immediate locality and ensuring that ethnic minorities do not feel excluded in that football ground. I pay tribute to the club for the value of that work.
The noble Lord, Lord Dahrendorf, reminded us—if we needed reminding—of the wisdom in the report. He made an interesting argument about the separation of faith and law being one of the vital, critical features of civic society.
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The noble Lord, Lord Desai, was a dissenting voice in the debate—nevertheless, as ever, an interesting and challenging one. The notion that the noble Lord could ever escape certain aspects of his personal identity is one that I find particularly challenging, as I am sure do most Members of this House.
The right reverend Prelate the Bishop of Chester referred to the point in the report about communities, recognising that and drawing ideas and inspiration from it. He spoke also about the role of the Church and its understanding of multi-culturalism. He made the point that Europe was more of a religious concept than a geographical entity. I shall certainly pass that piece of wisdom on to my son as he struggles with his geography lessons. It was an interesting point.
The speech which I personally found most interesting, and one that I want to read, was that of the noble Baroness, Lady Rendell. I shall study it with great interest. She referred to the neglect in terms of understanding the contribution by writers from a whole range of ethnic backgrounds to our culture and to our understanding of other cultures. We should not otherwise have had the benefit of hearing those points.
I was impressed, too, by the observations of the noble Lord, Lord Chan, on the positive aspects of migration and the way in which demographers are looking at migratory shifts across Europe and the challenges that western economies, and the German economy in particular, are beginning to meet in examining the strengths and weaknesses in their labour markets.
The noble Baroness, Lady Uddin, made an interesting set of observations about the process of change needing greater candour and honesty as we confront and develop our multi-cultural, multi-racial, multi-faith, multi-ethnic community. The noble Baroness made a plea for the debate on multiculturalism to move out of the cul-de-sac and liberate itself from its current confines.
The noble Lord, Lord Patel, reminded us of the complexities not only of his own family structure and national loyalties, but of the profound contribution that ethnic minorities make to our health service—a health service which, without their support, work, endeavour and imagination—would indeed suffer greatly.
I listened with great interest to the contribution of the noble Lord, Lord Clarke, with his hands-on experience of the Burnley task force. I was most impressed by the quality of the work that went into that report, its depth of understanding, and its approach in seeking to listen to the communities of Burnley with their different problems.
There is a point that needs re-stating; namely, the importance of taking on and confronting far Right incitement to racial hatred. Of course the Government deplore and condemn the activities of the far Right extremists who actively exploit the fears which sometimes divide communities. We have given the police every encouragement and support in prosecuting all types of incitement to racial hatred. Many far Right groups are cunning and stay just inside

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the law in many of their activities. They probably take careful legal advice in the way in which they attempt to whip up racial hatred and incitement through innuendo.
It is worth reminding ourselves that the anti-terrorism legislation that was passed before Christmas made important changes to the law on incitement to racial hatred. That Act increased the maximum penalty from two to seven years' imprisonment, which is a measure of the seriousness with which we regard those offences. The Act also extended their scope to include hatred directed at groups abroad. We shall continue vigilantly to monitor the activities of far right organizations—not just because we should but because it is right to do so.
Racism has deeper roots. For all the efforts oldie far right, we need a broader understanding of the part that race plays in our national life. The Government are determined to lead the national debate on community relations, shared values and identity—something that comes from the lessons of the Parekh report, in the way that it looked at the future of a multi-ethnic Britain and called for a re-evaluation of our national identity to find a common definition of what it means to be British today. We need an identity that can be shared and experienced by all members of our society. It is critically important to recognise the contribution made by the many different communities that make up the United Kingdom.
Britain has been transformed over the past two decades into a truly multi-cultural country. The contributions made by black and Asian Britons, as well as by people with Irish, European and other backgrounds, is plain to see daily. People from minority backgrounds contribute to industry, the public sector and the work of local authorities as well as to charities and culture—despite the discrimination that undoubtedly remains and prevents many people from making the contributions of which they are capable.
The Parekh report made an insightful and valuable contribution to the vision of a modern multi-cultural society. The Government place on record and welcome the contribution that the commission has made and can make in future. I know that the previous Home Secretary was extremely impressed by the report's detailed analysis and its recommendations. Last year, some 70 of the report's 130 recommendations were already part of government policy and thinking, which is an indication of the report's relevance. The idea of a "community of communities" is highly pertinent to the current debate about social cohesion and identity.
At the time of the report's publication, the Home Secretary commented that it highlighted the need for government resources to strengthen communities. One could add in parenthesis that the disturbances that followed in the summer were perhaps a demonstration of that need. We have put in that extra resource.
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When communities do not feel that they are bonded by common values and principles, we will see something of the segregation and distrust that contributed to the disturbances in some of our northern towns last year. It is as important as ever to emphasise the positive aspects of multi-culturalism and to create an environment in which all communities can thrive. The Race Relations (Amendment) Act 2000 provides a robust framework for the Government and all public bodies in anticipating and preventing racial discrimination in our service to the public. That legislation will be supplemented by efforts across government, co-ordinated by the Home Office, to ensure that public bodies promote community cohesion.
We recognise that central, regional and local government and non-governmental organisations have a duty to promote a strong and pluralistic society in which cultural differences are appreciated and seen as a benefit to communities. If we do not take into account the diverse needs of the many groups that make up our communities and harness their potential, we as a nation will be the worse for it.
The Parekh report contained a wealth of ideas for tackling problems and making race equality a core issue for our public services and other national institutions. Many of the report's suggestions—particularly for monitoring performance, consulting with minority ethnic communities and taking a more structured approach to mainstreaming race equality—are being introduced or have been achieved in part through the implementation of the Race Relations (Amendment) Act 2000, though not necessarily in the precise terms of the report.
Regret has been expressed at unfortunate press comments at the time of the Parekh report's publication, which focussed on one narrow aspect and deflected attention from the report's many positive and constructive contributions to the broader debate. We must challenge racism and discrimination if we are to achieve a wholly successful multi-cultural society. I draw strength from some of the work by the Burnley task force, which seeks to mainstream infrastructure changes that need to be made, so that we can fairly deliver on promises about achieving equality.
The police, local authorities and other local service providers, regeneration partnerships, employers in the public and private sectors and the Government must work together to respond to the needs of all the people that make up the communities that we seek to serve.
I can probably deal with four or five of the six specific questions that my noble friend Lord Parekh put to me. He asked about our vision of a multicultural society. We seek to ensure that multiculturalism is supported and have for that reason developed funding schemes and streams across the country that try to connect communities and make them more self-confident.
We have tried also, particularly in the wake of September 11th, to provide more support and encouragement to Muslim communities, which felt themselves under pressure following that event. We

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have sought to ensure that our consultations with representatives of Britain's many and diverse faith communities reflect their vision of multi-culturalism.
Historically, the Government have looked at citizenship issues. A programme is being developed as part of the national curriculum to encourage young people to consider controversial issues and to challenge traditional stereotypes. That programme will play an important part in addressing some of the issues highlighted by my noble friend's report and his questions.
We want to promote into employment far more members of the many and diverse ethnic minority communities. Target percentages have been set by the Cabinet Office for each department of state and they must be met by 2005. Great progress has been made towards that. I know from personal experience that the matter has been tackled with some vigour within the police service, and each force area now has a precise target which it must achieve.
The Government are also seeking to promote ethnic minorities into senior Civil Service positions. The Race Relations (Amendment) Act 2000 introduced a new and enforceable duty on more than 25,000 key public bodies to promote race equality. It will also require them to prevent acts of race discrimination before they occur. The Community Cohesion Panel, to which the noble Lord, Lord Parekh, also referred, has not as yet been appointed, but its appointments will shortly be announced. The appointments will be determined by John Denham, the responsible Minister.
The process itself has been complicated. The Government have therefore sought to identify and contact a wide range of potential panel members, and to look at their range of experience in community relations and their knowledge of the issues raised by the disturbances. The Government have also looked at the many diverse reports on the issue, particularly that of the noble Lord, Lord Parekh. The objective is that the panel itself will support communities and advise government on the issues which were very usefully highlighted in the Parekh report.
I should like in closing to remind the House of how far we have come. Britain is a multi-cultural society. As the Parekh report makes clear, however, that is something that has not always been recognised in its institutions. People from ethnic minorities have made a massive contribution to Britain's prosperity and culture over many years despite the barriers of discrimination and racism. The Government have an active race equality agenda aimed at eliminating discrimination from public services. The recent legislation provides a robust framework to achieve those aims, and it is vital that we engage with communities to achieve the objectives set out in that legislation and secure meaningful change.
The reports commissioned following the disturbances in the North of England along with the Parekh report and the report by the noble Lord, Lord Ouseley, regarding community relations in Bradford give us plenty of ammunition, food for thought and
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scope for further action. That whole set of issues is now being addressed as part of an action programme. Support is increasingly being given to public bodies to implement the race equality agenda. That is a job that requires not only positive thought, but action from every part of government and the private sector. Britain is enriched by the wide range of cultures and races represented in the modern British people. What we have to do is ensure that we reflect that fantastic diversity and celebrate and give voice to the new and emerging British culture so that we can satisfy and address the needs of all of our citizens. I believe that we can do that, and that all our citizens will be enabled to make a greater contribution to our national life.
I thank the noble Lord, Lord Parekh, for his report. It has stimulated an amazingly good quality of debate. I only wish that I was halfway adequate in responding to the very many interesting points that have emerged during the course of this evening's deliberations.
8.32 p.m.
Lord Parekh: My Lords, following the excellent tradition of your Lordships' House, I shall be extremely brief. I thank all noble Lords and Baronesses who have spoken in this excellent three-hour debate. They have been most generous with their time and ideas and placed me and your Lordships' House in their permanent debt. I am a little disappointed that we have not had anyone from the Conservative Benches other than my friend Lord Dixon-Smith, but I suppose that Wednesday evening is not a good time for those on the other Benches. We shall have to bear that in mind for next time.
I also thank my noble friends Lord Bhatia, Lord Morgan, Lord Chan, Lord Dahrendorf, Lord Dholakia, Lady Prashar and the right reverend Prelates the Bishop of Bradford and the Bishop of Chester for making extremely kind and generous references to my report. I am particularly grateful to my noble friend Lord Bassam for the extremely generous, courageous and kind words about the work that many of us put into that report. I am particularly delighted that he should have set the record straight and spoken well of the report. I am reassured.
My final remark is about my noble friend Lord Desai. He wondered about the vocabulary in which we have articulated our topic for debate, namely multi-ethnicity and multi-culturalism. All I can tell him is that we are all born encumbered with multiple identities which stay with us until the end of our lives. We emerge as full human beings not by discarding them but by expanding them and critically reinterpreting them. Given that that is the case, ethnicity and culture will always remain part of our lives. They will therefore always remain subjects of public as well as philosophical discussions. My Lords, I beg leave to withdraw my Motion for Papers
Motion for Papers, by leave, withdrawn.

Liverpool
8.35 p.m.
Baroness Hooper: My Lords, in opening this debate, I start from the premise that Liverpool is a great city, recognised as such worldwide because of its historic port and shipping activities, sporting achievements, artistic and musical heritage and pre-eminence in the world of entertainment, and because of the very many personalities whose names are synonymous with Liverpool, including Ken Dodd, Cilia Black, the Beatles—need I go on? Liverpool's international reputation is well established, and its rich ethnic mix— which includes the longest-established Chinese community in the country—bears witness to its international past.
Liverpool is also well recognised nationally as an ancient city granted its Royal Charter as a borough and a port as long ago as 1207 by King John. It has produced famous lawyers from F E Smith to Rose Heilbron and our very own Attorney-General. It has also produced famous doctors and famous politicians, from Gladstone to Harold Wilson, in addition to many of those who will contribute to this short debate. Liverpool certainly holds the record for an incredible number of firsts in the social and educational spheres and in the voluntary sector. For example, the very first citizens advice bureau was established in Liverpool, and the concept of soup kitchens began there. One of the first schools of tropical medicine was founded in Liverpool, and the first special school for handicapped children began there. The world's first underwater telephone cable was laid between Liverpool and 13ilbao because of their shipping ties. Those are only a few of Liverpool's firsts.
Like many great industrial cities and ports, however, Liverpool has experienced a post-war decline in its prosperity and a depletion in its population. It is now in the process of seeking a new identity for the future. This debate is intended to acknowledge and encourage all those who are working towards that future.
Noble Lords may well ask why we are having this debate today. The noble Lord, Lord Alton of Liverpool, and I have for some time been discussing the possibility of a "good news" debate. We had hoped for a slot last month, at the end of February, during "Liverpool Week", when a number of events were held in and around Parliament celebrating success on Merseyside. We also want, of course, to prepare and excite people about the 800th anniversary, in 2007, of Liverpool's city status. We also hope for a successful outcome to Liverpool's bid to be Europe's city of culture in 2008. Now therefore seems to be a good time for this debate.
Perhaps I should explain my personal involvement. Although riot born and bred in Liverpool, I can claim to have been a twinkle in the eye there. My mother's family is a Liverpool family, and she was a teacher there before her marriage. My father, then working for the Canadian Pacific Steamship Company, superintended the movements of the great liners such
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as the "Empress of Britain" and the "Empress of England" which, during the war, served in the convoys that provided the country with a lifeline. I have therefore known Liverpool all my life. One may therefore imagine my surprise and delight when, with that background, I was elected as Member of the European Parliament for Liverpool in 1979, in the first direct elections.
I was there at the time of the Toxteth riots and urged the noble Lord, Lord Jenkins of Hillhead, who was then a European Commissioner, to provide European Community help and support. He did, as did the noble Lord, Lord Richard, who succeeded him. Ii was also at the time that Michael Heseltine set tip the Merseyside Development Corporation to open up the South Docks and to restore the Albert Dock to its present glory, which includes the splendid Maritime Museum and the Tate of the North. That led to the International Garden Festival in 1984.
The city has gradually been transformed and the work of very many organisations, such as the Liverpool Chamber of Commerce, the Merseyside Partnerships, the Merseyside Special Investment Fund, the Liverpool Biennial, and many other organisations, businesses and individuals have all contributed. If tourism is to be part of Liverpool's future, the foundations and infrastructure are clearly there and the environment can provide a jumping-off ground for new ventures and industries, as well as maintaining the many established industries that still exist in Liverpool.
I cannot let the occasion pass, especially in the context of Liverpool's cultural heritage and its bid for the city of culture status, without drawing attention to national museums and galleries on Merseyside, which are part of the transformation that has taken place in Liverpool. As a former trustee, I can say that everyone involved with the different parts of the museums and galleries on Merseyside has worked tremendously hard to ensure that the people of Merseyside can be aware of their heritage, proud of their past and able to show it off to others.
I can certainly recommend a visit to the Walker, with its magnificent permanent collection and the new galleries that are currently housing a splendid Romney exhibition and which are due to show the first exhibition of the paintings of Sir Paul McCartney later in the year. In addition to the Walker, there is the Maritime Museum, to which I have referred, and the Museum of Liverpool Life, which is currently undergoing yet another transformation but will be open again next year to show off many of the treasures that have been collected in the great port of Liverpool over the years.
There is a great deal more that I should like to say about Liverpool as a city of education, its sporting prowess and why it is one of the best places in the country in which to live, work, invest and visit. But time does not permit me to expand greatly. In any event, other noble Lords who are contributing to the debate will cover these matters probably far better than me. I thank all those who will contribute to the

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debate and say in passing how sad I am that the Viscount Mersey and the Earl of Derby are not now entitled to participate as they have both contributed a great deal to Liverpool life over the years. However, I am glad that my noble friend Lord Liverpool will be contributing to the debate.
By promoting the debate I am asking the Government to acknowledge Liverpool's achievements and efforts to emerge from its great industrial past, and to meet the challenges of the 21st century head on. I am also asking the Government to continue to support Liverpool's efforts and I hope that the Minister when replying can give us those assurances.
8.44 p.m.
Lord Rodgers of Quarry Bank: My Lords, I am an unqualified Liverpool loyalist, so I greatly welcome the initiative that the noble Baroness, Lady Hooper, has taken in tabling this Unstarred Question for debate.
My comments will be brief, but I wish to draw attention to the circumstances in which I grew up, and to make a brief comment on the essence of Liverpool. I was born and brought up in Liverpool, like my father, my grandfather and my great-grandfather. My grandfather and my great-grandfather were born in Liverpool 8. I grew up in the 1930s and 1940s and went to Sudley Road council school near Aigburth Vale and then to Quarry Bank high school, Calderstones, from which I took my title. I hope that your Lordships will allow me to say that I was taught in the scholarship class, as it was then called, in 1939 by Miss Budd. I am glad to say that Miss Budd is still alive and well, aged 103, and I pay tribute to her and all those who taught pupils like me. They were devoted teachers and we are greatly in their debt. As I have said, I took my title from Quarry Bank school and I am pleased to have the opportunity to say how much I benefited from my experience at Sudley Road and Quarry Bank schools.
Although it would be a very risky undertaking, I think that I could still ride a bicycle blindfold through the city as I once knew it. There have been changes but much is similar and I can identify with Liverpool at that time. We lived about four miles from the centre of Liverpool and I remember that I used to go down to town by tram, where there were all sorts of activities. I listened to orchestral music for the first time at the Philharmonic Hall, conducted by Sir Malcolm Sargent. I went to the Christmas plays at the Liverpool Playhouse, a great repertory theatre. I visited the university, which is strong on history, medicine and architecture. I often went to the Walker Gallery to see its fine collection of pre-Raphaelites. I remember that I saw them for the first time as a teenager and was a little uncertain as to whether I liked pre-Raphaelites. As time has passed, I realise the great benefit of having visited such galleries.
I admired St George's Hall, where I saw the results of the 1945 election as a 16 year-old. Much later, I bought a fine print that hangs on my wall at home. There is also the Picton Library, where I studied, and
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the neighbouring William Brown Library. Earlier, in the May blitz of 1941, many of the buildings were badly damaged by high explosives and fire. One of the victims was the William Brown Library which lost nearly 300,000 books. I was standing in my garden one afternoon when I was about 12 when the sky suddenly darkened and large black flakes fell to ground. The burning pages had been carried upwards in the vortex of the blaze, and cinders with the faint imprint of language were now floating down four miles from the city centre.
I could refer to other aspects of how I lived my life there. I was a strong supporter of Liverpool Football Club. I played tennis and cricket and watched both in the fine parks. I supported what was called the Mississippi Jazz Band and other examples of popular music which led indirectly to the Beatles and to what has evolved since. I am tempted to continue my voyage of nostalgia. I hope that my remarks are relevant to the text of the Unstarred Question in the context of Liverpool's achievements.
I shall summarise what might be five characteristics of Liverpool, which are relevant to the nature of the city. First, Liverpool was a great sea port. It set its character in that respect. The port is at the heart of its identity. Secondly, Liverpool is a tough city. It made some people rich and some people poor. It was, and is, a city with warts and all. It was not, and is not, a genteel and soft place. Again, we must take account of that. That is part of the character it has become. Thirdly, Liverpool had a significant number of immigrants and many seafarers. It has had, and has, great ethnic diversity; what the noble Baroness, Lady Hooper, referred to as racial mix. That caused problems and we must recognise that. However, at the same time it gave Liverpool depth and variety and made it an exciting and cosmopolitan place. Fourthly—this is rather an obvious cliché—Liverpool has both continuity and change. As part of its inheritance, I refer to its fabric, its buildings. I greatly welcome the announcement yesterday of the partnership between English Heritage and the city council which is hoping to restore those buildings now at risk from the 2,500 listed. Fifthly, civic loyalty and civic pride are relevant. Liverpool has had its ups and its downs. There have been some bad years, damaging to its citizens and making it a by-word for local government disaster. But now the news is good. There is now a high quality of leadership. I hope that all parties will work together in putting the city first.
Liverpool is a unique place. It has been moulded and toughened by circumstances and has survived full of vigour. It is a great, resilient city. I hope that the Minister will give a warm and unambiguous endorsement to our message.
8.53 p.m.
Lord Alton of Liverpool: My Lords, the whole House is indebted to the noble Baroness, Lady Hooper, for tabling this Unstarred Question. She made a positive and well-informed speech which eloquently set the scene.

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This is a rare and welcome opportunity to flag up the significant social and cultural developments that have been achieved by the City of Liverpool. I declare my interest by virtue of the Chair that I hold at Liverpool John Moores University; as a director of its Foundation for Citizenship; a director of the Merseyside Special Investment Fund and patron or officer of a number of voluntary organisations and charities in Liverpool. Perhaps adding to the list of firsts that the noble Baroness laid before your Lordships' House, the NSPCC, of which I am president of a local branch, was founded in Liverpool. The noble Baroness also mentioned the previous involvement in your Lordships' affairs of the Earl of Derby. His wife is the president of Zoe's Place, the first hospice in the country to care for dying babies, following in the footsteps of the work begun by the NSPCC a century ago.
It will be 30 years ago in May, while a student in the city, that I was elected to Liverpool City Council and subsequently served as its deputy leader and chairman of its housing committee. In addition to my time in local government, I was privileged to serve for 18 years in another place as Member of Parliament for Liverpool Edge Hill and for the Liverpool Mossley Hill constituencies. I am glad to be able to say to the noble Lord, Lord Rodgers of Quarry Bank, that the two schools he mentioned, Sudley Road and Quarry Bank, Calderstones, were both in that constituency of Mossley Hill.
There is no doubt that the 1980s were a bleak decade which the city lived through and that the following decade was spent in reclaiming lost ground. Tonight we meet in happier circumstances, able to celebrate significant progress and achievements in a new chapter of Liverpool's life.
Although there always will be plenty more to do, I warmly congratulate the leaders of the city council and the local community on forging new partnerships and creative relationships. Both Mike Storey, the leader of the council, and Gideon Ben Tovim, who leads the Labour Opposition, have behaved in a constructive way in addressing the needs of the city. That has altered the outside world's perception of Liverpool and created a climate in which new investment and change have become possible. Earlier in the month the city at last shed the unwelcome and invidious title of levying the highest council tax in the country, and the council's 3 per cent tax reduction has been generally welcomed.
Tonight is a chance to celebrate a number of Liverpool's achievements, but real challenges remain. Although the city's economy is steadily improving, it still lags behind both the North West and the UK average when measured against a number of indicators. The ILO unemployment rate in Liverpool stands at 6·8 per cent compared with 5·2 per cent across the North West and 3·2 per cent nationally. GDP per capita for Liverpool is £10,886, which is 86 per cent of the UK average. Average growth is 3·8 per cent, compared with 5·3 per cent for the UK.
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But the good news is that Liverpool is bucking the current UK trend of increasing unemployment with the number unemployed and claiming benefit falling for several consecutive months. The city has moved from 67th to 35th in the UK's top locations to do business and ranks joint third with London in the UK inner-city 100 index of fastest growing businesses.
Over the past four months the Liverpool Business Centre has taken over 300 inquiries for industrial and office space totalling some 250,000 square feet. The sale of the Cunard Building for around £18 million, £3 million ahead of the guide price, and the sale or the Port of Liverpool building, also underline the buoyancy of the local economy.
There have always been two tales to tell of this city. Too often we hear only the negative stories. These are some of the facts of life in the greater Liverpool area today. More than 15,000 people are employed in the automotive sector alone, with over £2 billion investment in the past 10 years. It was a particularly great achievement to secure the new Jaguar car for Merseyside. Retail growth in the city centre location is 11·4 per cent, twice the national average, and the fastest growing in the UK. Liverpool is the number one call centre in the UK, with a further 700 jobs announced in November. Twenty-two thousand people are employed in leisure and tourism, with 19 million visitors spending £600 million annually. Each year 4·5 million people come to the Albert Dock alone, and many see there the moving exhibitions on slavery and the Irish famine that are commemorated in the Maritime Museum. An application for world heritage status has been sought for the waterfront and for part of the city centre. When he replies, perhaps the Minister can tell us whether there is any up-to-date news on the status of that application.
The Port of Liverpool is handling record levels of cargo, some 13 million tonnes per year. As a Liverpool MP I was involved in the successful campaign to create a free port in Liverpool. I am glad to tell your Lordships' House that it is now the largest in the UK. Next month the new ro-ro terminal for freight and passengers will open, entrenching a cultural and economic link with Ireland.
The construction industry is anticipated to be involved in building work worth £1·4 billion over the next five years. The £8·7 million FACT centre (the Foundation for Art and Creative Technology) which is due to open in the autumn will be Britain's principal electronic arts agency, while the Kings Dock Arena development and the Paradise Street development will herald further regeneration and jobs. Only last week Mrs Cherie Booth QC and Yoko Ono unveiled the John Lennon statue at what has become one of the fastest growing airports in Europe. Last year there were more than 2 million passengers. Approximately £50 million of investment has been committed in the last four years.
The strengthened relationships between the Government Office on Merseyside, the European Union's Objective One Programme, the Chamber of Commerce and the associated private sector

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businesses and the local authority have all made these achievements possible. Some questions still remain to be resolved and, again, when the Minister comes to reply perhaps he can say when the DTLR response to the business case for the proposed Merseytram link to the city's cultural sites will be made.
I should like to say something further about the city's cultural achievements, to which both the noble Lord, Lord Rodgers, and the noble Baroness, Lady Hooper, referred. Before boarding the train at Lime Street on Monday I purchased the new publication of the Liverpool Echo entitled 100 Liverpool Facts. The Echo has enthusiastically supported the city's bid to become the City of Culture. This supplement, which I shall lend to the Minister after the debate, brilliantly sets out a compelling case for Liverpool. The recent launch of Liverpool's bid at the London Tate Gallery—at which the noble Lord, Lord Rodgers, and the noble Baroness, Lady Hooper, and I were able to be present—led by the indefatigable Professor Peter Toyne, set out why Liverpool really is "the world in one city". I hope that that bid is successful.
Last month I celebrated Chinese New Year in Liverpool with my goddaughter and her family, to some of whom I taught English as a student volunteer on an immigrant language scheme 30 years ago. We were sitting in the shadow of the magnificent Chinese arch at the entrance to China town. Nearby, in the summer, there will be the Hope Street Festival, in June the Mersey River Festival, the Comedy Festival in July, the Beatles Week in August and the biennial arts festival in September.
This year the Liverpool Biennial—a privately inspired event—will bring together five core strands. But also as a centre for popular music, film, broadcasting and sport Liverpool is among the country's leaders.
There have been some fascinating spin-offs from this. The Greenhouse multicultural play and arts project, for instance, began with two women identifying the need for multi-cultural play activity in Toxteth. It now has a turnover of almost £1 million with a participation of over 5,000 people. The city's two universities and its college of education attract between them some 50,000 students. The institutions, their staff and students make an incalculable contribution to the life of the city.
Higher Education contributes in numerous ways to the city's economy and its social life, but also in a city where turn-out in elections has reached dangerously low levels it has been engaging in renewing civic life. Over the past four years I have staged a series of almost 30 public lectures on behalf of Liverpool John Moores University. Some of your Lordships have participated in these. Named for the Liverpool abolitionist poet and MP, William Roscoe, these have attracted audiences of up to 1,300 people. The theme of those lectures has been citizenship.
The quality of the lectures and the debates that have followed are another aspect of the vibrancy and vitality of the city. They show a city ready to engage in
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profound and difficult questions, in addition to being a city that knows how to enjoy itself. In the words of one of its most famous sons, what it needs now is "a little help from its friends". In the past its reputation was marred by confrontation. Today it deserves to succeed.
Tonight's brief debate is a welcome opportunity to underline its impressive achievements and its newfound confidence. I am grateful to the noble Baroness for the chance to say so.
9.3 p.m.
Lord Greaves: My Lords, I am tempted to say to myself, "Follow that". I, too, am grateful to the noble Baroness, Lady Hooper, for asking this question and introducing the debate. I am particularly privileged to follow the noble Lord, Lord Alton of Liverpool, whose contribution to the welfare and development of Liverpool over the past 30 years or more has been well demonstrated by his speech just now.
I first remember the noble Lord when he was chairman of South Liverpool Young Liberals, if I remember correctly. In those days he was a rebel to those of us in establishment positions in the Young Liberals nationally. But, I have to say that he has come on a bit since then. I particularly remember him as chairman of the housing committee on the city council in a previous period of Liberal administration on the city council. He was in those days a radical and innovative chairman of that committee in very difficult circumstances. He was a model for many of us at that time.
Liverpool is a special place. I am one of the small minority of people in today's debate who is not a Liverpudlian, or who has any particularly close connections with the city. Most of my connections with it have been in going to help my political colleagues in elections there. Despite that, they sometimes win the elections.
However, there is something special about Liverpool. There is a vibrancy, a feel, about the place, which is shared by some other British cities. One thinks of Glasgow as being a similar city. The people are a bit different from people everywhere else. The tragedy of the city is that it has been in decline for so many years. Its population over a period of 45 years has fallen from around 1 million to 400,000. That is astonishing. Many of those people moved out on overspill schemes and so on, and they, their families and descendants now live in places such as Skelmersdale, Huyton, and Kirkby.
Nevertheless, despite that, for many of us who live in other parts of the North West—as I do—Liverpool is a beacon, and always has been one, for what can be done in very difficult circumstances. It also performs one other very useful function for those of us in the North West: it acts as a counterbalance to Manchester. It prevents Manchester thinking that it runs everything all the time. That is a very useful counterbalance for those of us in the more northerly parts of the region who sometimes find it difficult to get a look in.

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Liverpool is also a city which has an intense sense of pride. The spirit of regeneration in the city—not just a physical but a spiritual and a civic regeneration—is very noticeable and marked. One Member of our Benches tonight was bound to stand up and express some pride in the fact that the present civic leadership of the city is Liberal Democrat. The achievements of the present Liberal Democrat administration of Liverpool in the four years since it took over are quite astounding. I would not be able to say that of all the councils in the country that we run—do not ask me for names—but as regards Liverpool the administration is an inspiration to the rest of our party and it should also be to the rest of local government. That administration has shown what can be done.
Nowadays, people say that local councils no longer have any powers because everything goes to partnerships or is centralised in Whitehall. Liverpool is a very good example of where in a big city at least an enterprising and progressive civic leadership can actually achieve a huge amount. As the noble Lord, Lord Alton, said, it followed a very difficult period which included an era when it appeared that the people running the city council were engaged in some sort of latter-day class war and were at great risk of bringing the city to its knees.
Liverpool is not a rich place on the whole and yet it has had the highest council tax in the country. One of the direct achievements of the council is that it has been able to hold the level of council tax for three years. This year it has been able to reduce it by 3 per cent, even allowing for increases in the precepts from other bodies. That is a great achievement. If that were taking place at the cost of cutting services, it would not be an achievement at all, but it is not. The council has been able to find the magic formula to cut costs and at the same time put into effect very significant increases in services.
I would like briefly to say what has happened in the Education and Lifelong Learning Service, as it is called, in Liverpool. Noble Lords may remember that in May 1999, there was a damning Ofsted report on the education administration of Liverpool. Ofsted itself now cites Liverpool as the best example of a turn-round in performance and expertise. In fact, Ofsted is now using people in Liverpool as an example of good practice for other authorities in the same circumstances. The school effectiveness work of the authority has just won the Local Government Chronicle education team of the year award. The intervention work for failing schools in the city is outstanding. In May 1999 there were 17 schools in Liverpool under special measures. At the end of August this year, it is confidently expected that that number will be reduced to zero. In terms of pupil attainment in public examinations and tests, the results have improved every year to record levels.
I do not believe that anyone in Liverpool is complacent about the situation. People are saying that it is improving from a low base, but from a situation in which the administration was a shambles and morale was at rock bottom. It is being turned around. Liverpool even has its own primary-age modern
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foreign language programme with a three-year project developing nine centres of expertise. That is typical of what is happening in the city.
When we on these Benches look at Liverpool we can be proud. But it is also a beacon for local government generally. It is not just old-fashioned local government. Nowadays, one cannot run a city or a council in the old ways. As the noble Lord, Lord Alton, said, one has to be prepared and able to work with other people. One has to work in partnership with others whether one likes it or not. A great many people do like it. One has also to provide genuine leadership rather than simply administering everything oneself. That is what is happening in Liverpool. Obviously, it is not simply down to the leadership of the council, but down to everyone else it works with, although the leadership of the council is a vital part of it.
I finish with two useful quotes. One is from the right honourable Tony Blair, MP, who, my note says, is the Prime Minister. He said,
"The last time I was [in Liverpool] there was a real buzz about the place. People can see that things are beginning to happen".
Nick Raynsford MP, the local government Minister, said,
"I have been impressed by the city council's commitment and determination to transform services for the people of Liverpool … which are already beginning to bring change for he better".
If noble Lords believe that all I am giving here is a party political broadcast, I also give genuine credit to the Government. Despite the fact that this major city is in Liberal Democrat hands, they have recognised good council leadership and have been able to work hand in hand with it.
9.13 p.m.
Lord Chan: My Lords, I also wish to add my congratulations to the noble Baroness, Lady Hooper, for asking this Unstarred Question on Liverpool. My task is made the more difficult because of the erudite speeches of noble Lords who were born and bred in Liverpool. However, I declare my interest as an academic paediatrician who worked for 17 years in the Liverpool School of Tropical Medicine until 1994. I hold an honorary chair in ethnic health in the Department of Public Health of the University of Liverpool. I have also been the Elder of the Liverpool Chinese Gospel Church for the past 23 years.
Having lived in the Wirral for 26 years, after moving from London, and having worked in Liverpool for most of that time, I have observed great improvements and achievements in that great city and among its people. Sadly, Liverpool and its people continue to receive a bad press from sections of the media based in the south of England. Tonight's debate is, therefore, important in that it gives us the opportunity to review and celebrate the real Liverpool. I shall focus on issues of which I have personal experience, and which demonstrate the best of the city.
Liverpool was the world's premier port 150 years ago, and it continued to prosper until after World War II. The city has an area equal to that of Greater London, but its population has declined to about

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450,000 from 750,000. Many talented sons and daughters of Liverpool have moved to other parts of Britain and the world to seek their fame, but some have recently returned to invest in their home city. A good example is Sir Paul McCartney—a talented Liverpudlian who returned five years ago to establish the Music and Performing Arts Institute at his former school next to Liverpool cathedral. Students from all over the world have competed to enrol in this reputable institute, and some of its graduates are now making their mark in the world of popular music.
Another cultural achievement for Liverpool has been in the making of films for the cinema and television. Because of its historic houses, buildings and streets, it is a much sought-after location for film crews and famous studios from Hollywood to India. The architecture of these locations spans the Georgian, Victorian, and Edwardian eras. Every week, a film is being made in the streets of Liverpool to be shown on television and cinemas around the world. Liverpool has also developed two other universities besides the University of Liverpool, which was established during the reign of Queen Victoria. All three universities complement each other and attract more than 50,000 students from all parts of the world. My noble friend Lord Alton has described the achievements of Liverpool's John Moore's University, which I admire for taking over many large buildings around the city and developing them into teaching and research centres for subjects that are not available in the University of Liverpool. For example, it has established a bachelor's degree course in public health for non-medical practitioners. Liverpool Hope University, based in Sefton Park, has established courses in multi-cultural and ethnic studies based on Liverpool's multi-ethnic communities and their history.
In 1981, Liverpool faced one of the darkest periods of its history, with the riots in Toxteth between her inner-city population of black and ethnic groups and poor white people and the police. Houses and other buildings were burnt down and tensions were high between young black Liverpudlians and the police. The noble Lord, Lord Heseltine, visited Toxteth and was horrified by the dereliction that he saw in the housing stock, and by the exceedingly high unemployment of local people lasting more than a generation. I was privileged to participate, with a large number of people from Toxteth and other parts of Merseyside, in the regeneration of Liverpool set in train by the noble Lord, Lord Heseltine, who became Minister for Merseyside.
Between 1981 and 1994, I was involved as an advocate, initially for Liverpool's Chinese community. In 1986, this advocacy was extended to the residents of Toxteth by the establishment of the first community clinic in England catering for the needs of people, including minority ethnic people, who wanted to know more about inherited blood diseases such as sickle cell disease, thalassaemia and the red blood cell enzyme, glucose-6-phosphate dehydrogenase deficiency. This clinic, run by a
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specialist nurse, Dorothy Zack-Williams—a black American woman married to a Liverpudlian—is based in a primary health centre, the Abercromby Health Centre. I continue to support this clinic by advising Dorothy, who receives calls for help from all over England, including London.
Toxteth also boasts the very modern Liverpool Women's Hospital, the last to be opened by the late Princess of Wales. It is appropriately located in the inner city where many needy people live, and employs a significant proportion of local people at various levels on its staff. All Toxteth families use the hospital, including refugees, and it has focused on the obstetric needs of female refugees who have suffered from female genital mutilation and who can now safely be delivered of healthy babies.
The noble Lord, Lord Rodgers, alluded to the existence of so many black and ethnic minority groups in Liverpool. This is unique, because many of them have been in England for several generations. Liverpool is, therefore, a living social laboratory for the study of multi-ethnic and multi-cultural communities. This opportunity has been ignored for too long, resulting in many black Liverpudlians feeling disfranchised. This is ironic because most black Liverpudlians have one white parent and all have been born in the city. But with better educational achievements of black Liverpudlians in the fields of law, art and sociology, they now feel confident and secure enough to speak with the police without resorting to threats of physical force.
Other ethnic minority communities have also influenced life in Liverpool. Let me take the example of the Chinese community, who first arrived in the city in the mid-1850s. Today, if you look Chinese, no one will ask you where you come from because they assume you are local. Further, the Chinese community has influenced Liverpool to be twinned with China's main port, Shanghai. And the government of Shanghai donated the million pound enormous Chinese arch that stands at the entrance of Nelson Street, the heart of Chinatown. This is the largest Chinese ceremonial arch outside of China.
For the past decade Liverpool City Council has supported and publicised the 15 days of celebrations of the Chinese New Year in partnership with the 10 long-standing Chinese community organisations in Liverpool, including the Chinese masons and the Chinese Christian Church. The traditional dragon dance of the New Year is performed exclusively by white Liverpudlians. Similarly, the Chinese lions are also each made up of two white men. This transference of Chinese cultural activities to the white Liverpudlian community must be unique in Britain and in other parts of the western world.
That surely is an example of cross-cultural appreciation unsurpassed in Britain or anywhere else in the world. For those and all the other achievements described by other noble Lords, I hope that the Minister will support Liverpool in becoming the European City of Culture.
9.21 p.m.
The Earl of Liverpool: My Lords, I join with other noble Lords in thanking my noble friend Lady Hooper for giving us the opportunity to focus our thoughts on the city of Liverpool this evening. She gave us an excellent synopsis of the many flavours of Liverpool and I learnt a lot, both from her and the other speakers who either live or have greater connections with that city than I have.
I say at the outset that my only direct involvement with the city of Liverpool is that I am patron of a charity called Cancer Resource Store. It helps cancer sufferers and their families who live on Merseyside to obtain medical, nursing, counselling and other care. It provides an invaluable service in an area where, sadly, the incidence of lung cancer is considerably above the national average.
My duties take me to Liverpool only infrequently. But I am always made to feel extremely welcome whenever I visit. I am somewhat reluctant to tell your Lordships about my family tree, but as I am the holder of the title of Liverpool I should like to explain that the Earldom was first granted to my great-great-great-great grandfather in 1796. He held many senior posts in government but I believe it was given in recognition of his initiatives while President of the Board of Trade developing the country's world trade and shipping. As the maritime port of Liverpool was the main beneficiary of this, it was felt appropriate that he should take the name of that great city. His son later became Prime Minister, which I hasten to say is a feat unlikely to be achieved by his great-great nephew.
Nevertheless, I am happy that their past endeavours afforded me the privilege of having a seat in your Lordships' Chamber which enables me to speak on this subject this evening. I am happy to support my noble friend, especially as I believe that Liverpool is in the process of undergoing something of a renaissance. As has already been said, it is mounting a robust hid to he selected as the culture capital of Europe in 2008. The bid will be submitted at the end of this month, with a short-listing in September, and a final decision to be taken by the Prime Minister in March next year.
So what are Liverpool's strengths? It is well known nationally and internationally as a creative city that has bred and exported world-class musicians, writers, film and television programme makers, actors, artists, personalities and, last but not least, comedians. I believe that the so-called creative industries in Liverpool now account for just under 5 per cent of all Merseyside jobs—that is, 16,000 people—and those industries generate an annual turnover of over £485 million.
It is a famous city of learning, as we have heard from the noble Lord, Lord Alton of Liverpool, and others. It is the home of the Walker Art Gallery. It is the home of Europe's largest Anglican cathedral. It is a multi-faith, multi-cultural and vibrant society. More generally, and very encouragingly, Merseyside unemployment figures are falling at a faster rate than any other location in the UK.
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As the noble Lord, Lord Alton, also said, businesses are finding it attractive as a regional location. A recent Best Locations for Business survey, conducted by the Occupier Market Intelligence Service, showed that Liverpool had moved up 39 places to 28th position— an impressive move up a ladder by any standards.
It is surely Liverpool's long history as a maritime port, however, which gives it its richness of humanity and architecture. The Albert Dock, which was restored and opened as a tourist attraction in 1988, as my noble friend Lady Hooper said, is testimony to that and now attracts millions of visitors every year.
Yesterday marked the launch of a campaign to conserve Liverpool's rich architectural heritage, which has around 2,500 listed buildings. Part of this effort will be to compile a comprehensive heritage map of the city by 2006. More or less in tandem with this, I believe that Liverpool Biennial is producing a contemporary culture map of Liverpool in collaboration with more than 50 private sector partners.
The appetite of the people of Liverpool for art and culture is growing. I read that in a recent MORI poll more people in the city said that they had visited a museum or gallery in the last six months than had watched Everton or Liverpool play football—which is surprising to some. While on the subject of football, I cannot let the opportunity pass without congratulating Liverpool on last night's win over Roma, which now puts them in the quarter-final of the Championship League. Things are definitely going Liverpool's way at the moment.
At the Heritage campaign launch yesterday, the chairman of English Heritage, Sir Neil Cossons, said,
"There is no other city equivalent to Liverpool…you can walk through Liverpool and see why it was the great seaport it was, and the tremendous commercial dynamic is reflected in shipping offices, the banking quarter and the three wonderful buildings on the waterfront".
As I have already said, there is a lot going for this city.
I believe that it was an inspirational decision to give the redeveloped city airport the name of John Lennon. He was undoubtedly a genius both musically and artistically and that his name should live on in this way does the city nothing but credit.
I was lucky enough to meet him once with the other members of the Beatles. Not many noble Lords will be aware of this but in the long distant past I was a drummer with a pop band and we were asked to stand in for them and do what is called a "warm-up" on a television programme called "Ready Steady Go!" at Teddington Studios. We met afterwards backstage and I remember him telling us, with a wink and a smile, that with a lot of practice we could only get better. A backhanded compliment if ever there was one, but it typified his Liverpudlian sense of humour.
As I reach my conclusion I make no apology for repeating that I believe that we are witnessing the renaissance of Liverpool. The city's 800th birthday is in 2007. What a wonderful birthday present it would be for it to be selected as the Cultural Capital of Europe in 2008. There is some stiff competition, but I believe that the indomitable spirit of Merseyside will win through.
9.30 p.m.
Lord McNally: My Lords, the noble Earl, Lord Liverpool, may not have been an elected politician in his career, but he certainly knows how to push all the right buttons—for example, congratulating Liverpool Football Club and confessing to have been on the same bill as the Beatles, would, I believe, get him through most public meetings.
Like other speakers, I am most grateful to the noble Baroness, Lady Hooper, with her experience of service to Merseyside, for initiating tonight's debate. I am also pleased that my noble friend Lord Rodgers chose Liverpool as the topic on which he has got back into the saddle as a speaker in this House. Like my noble friend Lord Greaves, I put on record my thanks to the noble Lord, Lord Alton, for his past service to Liverpool, and for the contribution that he continues to make.
The noble Lord, Lord Alton, reminded us that Liverpool still has some way to go in terms of economic recovery. My own impression is that Liverpool no longer has a chip on its shoulder about Manchester or Leeds. Indeed, there is a general celebration in the North that those three great cities are growing, recovering and building together.
Why have I put down my name to speak tonight? My father was born in Old Swan in 1899 in Oceanic Road, and my mother was born six months later across the way in Oceanic Road. They were brought up in pre-First World War Liverpool. Although they later moved to Blackpool, my early days were dominated by tales of their childhoods—stories of the Cast Iron Shore, Biscay Bay, the Adelphi, Nanny Conners' lodging house, selling the Liverpool Echo on the day that the "Titanic" sank, Jackson's Rope Works, the Sunlight Soap Works, the Glass House in Old Swan; and, indeed, the policeman who, according to my father, cleared the streets simply by saying, "Clear off!" It was many years later in this House that the noble Lord, Lord Hoyle, suggested that my father's version of "Clear off!" might have been bowdlerised for my ears.
When I visited Liverpool as a child in the late 1940s and early 1950s it was with a sense of awe at the power and majesty of the city. I recall the excitement of the trip to New Brighton on the ferry, the talk among my family of the Mecanno, the Automatic, Crawfords biscuit factory, and, of course, Littlewoods and Vernons. Then, in 1981, as a north-west MP, I was asked to go on a round table discussion initiated by Granada Television. It was a terrible and traumatic experience to feel the bleakness of an uncared-for city. This was a city of the Empire—an Atlantic city—which was now facing the wrong way as Britain turned its face towards Europe.
I believe that the noble Lord, Lord Alton, observed that the 1980s was a bleak decade for Liverpool—with its industrial militancy, racial tensions, high crime rate, low educational standards, low skills base, and a shrinking population. As one Liverpudlian once put it to me, it was a "Naples without the sun". Many of those problems were self-inflicted wounds.
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In the early 1990s, I was commissioned to assess from a public relations point of view what Liverpool could do to reposition itself. I was actually in Liverpool on the day Mrs Thatcher resigned as Prime Minister. If there had been a vote in Liverpool, Michael Heseltine would have been elected by a large majority. The question that I kept hearing was, "Will Heseltine get it?" The reason, quite frankly, was that Michael Heseltine had shown interest in the city during those bleak times. He had demonstrated that he cared and had shown initiative. I believe that that is still appreciated on Merseyside.
But even 10 years ago the building blocks of "renaissance", as the noble Lord, Lord Alton, pointed out, were there. I should mention Liverpool's marvellous architectural heritage. A number of speakers referred to the new initiative to protect it that was announced just yesterday, and reported in today's edition of the Guardian. The quote from Sir Neil Cossons is worth repeating:
"There is no other city equivalent to Liverpool in terms of high quality 19th century architecture".
He goes on to remind us, as did my noble friend Lord Rodgers, that St George's Hall is Europe's finest neoclassical building. Sir Neil made an important point. He said:
"Historical buildings should be the key to regeneration, not an obstacle".
I would go further. I would say that economic regeneration and cultural and social regeneration go hand in hand.
I am pleased to discover that I share with Tony Blair the opinion that there is a buzz about Liverpool again. I was there just after Christmas and again saw improvements in the public buildings. The noble Lord, Lord Alton, and I were talking about how John Moores University had at last removed that dreadful eyesore of a hotel that was left derelict for decades. Reporters would come out of Lime Street station, take one look at it, write their story about Liverpool's decline, and get back on the train.
We have heard from the noble Lord, Lord Chan, about the drive of the education sector and from a number of speakers about the magnificence of the art galleries, and Liverpool's music and pop heritage. The noble Earl, Lord Liverpool, reminded us of one aspect of sporting heritage: football, where two clubs can have a fierce rivalry without some of the poisonous relationships that bedevil the rivalries between other clubs. Fans, whether blue or red, can go to each other's grounds and go to the pubs afterwards to discuss the game. Long may that continue. Of course, Liverpool also has the Grand National and golf. Tribute has been paid to the John Lennon Airport, which is another imaginative initiative.
The noble Lord, Lord Greaves, made the point that the regeneration programme, which has been led locally, has been supported nationally. That is greatly appreciated in Liverpool. A strong and adaptable skills base is growing. When I went to the reception given by John Moores University, I was told that students want to stay in Liverpool after graduating. It

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was pointed out that Ford, a pretty hard-nosed company, did not decide to build Jaguars in Liverpool for the love of it, but because it makes good, sound business sense.
Liverpool has a cultural richness and diversity and the environment is improving all round Liverpool. It has both countryside and sea. It has good communications, although we all know that the West Coast Main Line could do with improvement. As has been said, there is a well-led local authority that is restoring civic pride by example. I recently attended a briefing given by councillor Richard Kemp about public/private partnerships, which seem to be succeeding more in Liverpool than in London, say. There is a joint venture with BT on payroll and human resources. Street cleaning, lighting and highways are all being provided by joint ventures, as are car parks and street parking. There is a genuinely non-ideological approach to public/private partnership, with no inferiority complex on the part of public providers but acceptance that funds and know-how exist in the private sector which benefit the city and its inhabitants.
I cannot finish without paying tribute to another factor which during the 1980s and 1990s built that recovery. I pay tribute to Bishop Warlock and the noble and right reverend Lord, Lord Sheppard. It is suitable that the two cathedrals in Liverpool are linked by Hope Street, because the bishops recognise that Liverpool's greatest asset is its people. They are funny, irreverent, tough, resilient and, as the noble Earl, Lord Liverpool, reminded us, very creative. They are citizens of no mean city. My mum and dad would have been very proud of Liverpool today. I know that I am, and I wish it well.
9.39 p.m.
Lord Luke: My Lords, perhaps I may say first that at one stage during this interesting debate I felt that I would be interrupting a mutual admiration society between the Cross Benches and the Liberal Democrat Benches. But my noble friend Lord Liverpool broke the mould, so I can too. Perhaps I may also gently point out to the noble Lord, Lord McNally, that my noble friend Lord Liverpool and I have been elected. It is because we have been elected by our hereditary friends that we still serve your Lordships' House.
Like all the preceding speakers, I am grateful to my noble friend Lady Hooper for introducing the debate about Liverpool and its culture. It is an enormous subject, and we could have spent much more time discussing Liverpool's centres of learning and centres of art, such as the Walker Gallery, which has been mentioned on several occasions.
Liverpool was, of course, extensively damaged in the Second World War. It took a long time for effective regeneration even to start. I repeat the suggestion made by my noble friend Lady Hooper and others that we must thank my noble friend Lord Heseltine, who, sadly, is not in his place this evening, for the imagination, initiative and sheer energy that he put into starting the regeneration process in Liverpool in the early 1980s.
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During my research for the debate, I came across the following description of Liverpool. I was scared that someone else would produce it. Liverpool is described as,
"A small and picturesque port nestling in the mountains".
It comes, as your Lordships will probably not know, from a short and not very distinguished opera by Donizetti, called "Emilia di Liverpool. Emanating from Naples, it has not proved easy to translate into English, especially as England in the 1820s, viewed from Naples, was a distant land with distinct romantic overtones. It has been sung with Joan Sutherland in the name part and performed by the BBC. History does not relate whether it has been performed in Liverpool.
As had been said by several noble Lords, Liverpool's history can be said to have begun effectively in the reign of King John, when a Royal Charter was granted, mentioning 168 merchants. Not much progress appears to have been made with the port through the Middle Ages. Indeed, Liverpool was in decline during the reign of Elizabeth I. However, as soon as a trade route to the new American colonies developed across the Atlantic, Liverpool's prosperity was assured. Even by the early eighteenth century, Liverpool dominated transatlantic commerce. Principally, that meant the slave trade—sadly—then cotton and sugar coming in from the Americas to England. Of course, the shipping of cotton goods From the north-west of England to the colonies came soon after. Then it was immigration into Britain from Ireland and emigration from England to the USA. Liverpool became a great port, which it still is. All that activity produced a cosmopolitan but overcrowded, unhealthy and turbulent city of some 850,000 people in 1931, declining to 425,000 in 2001, as the noble Lord, Lord Greaves, said.
That history produced an ideal breeding-ground for creativity. That has also been mentioned by noble Lords. At present, 4·7 per cent of Merseyside jobs—some 16,000—are in what one might call creative industry, generating £485 million per annum. Arabella McIntyre-Brown says in Liverpool: The First 1000 Years—a splendid book that, I am sure, most noble Lords will have read:
"Liverpool is not really an English city: from its earliest days as a port, Liverpool has attracted people from other places; people with an appetite for the new and the different; people with the courage to travel and explore; people with ideas and people with the guts to back them. Risk takers; pioneers; entrepreneurs; inventors; reformers. This is not a place for quiet contemplation, but for doing, changing and trying".
As we all know, the occasion inspiring the debate is the Liverpool Biennial contemporary arts festival, which runs from 14th September until 24th November this year. However, as several speakers have also pointed out, a longer-term target is the city's bid to become the European capital of culture in 2008. We have heard a great deal about that bid in the contributions made to this evening's debate, in particular the efforts being made by the city itself. If Liverpool wins—some 17 or perhaps 19 other cities

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think that they may have a better chance of being chosen—it will be a major boost to the arts as well as to the city's general commercial activity.
Winning the bid would also serve as a great encouragement to tourism in the North West. That area has just endured a desperate year and it will take a long time for the tourist industry to build itself up again. If Liverpool wins, then in 2008 not only will there be visitors from abroad, but also visitors will come from the rest of the United Kingdom.
This has been a diverse and wide-ranging short debate. It has informed the House and, it is hoped, it will inform the general public. It has certainly informed me. I have to say that the range of statistics provided by the noble Lord, Lord Alton, slightly lost me, but I shall enjoy reading them in Hansard. As a result of what I have learned about Liverpool, I should very much like to visit the city and hope that I shall be able to arrange to do that soon. I have visited Liverpool only once; by sea from Canada. I do not know it well.
I look forward to listening to the Minister's reply.
9.46 p.m.
Lord Davies of Oldham: My Lords, like all noble Lords who have participated in the debate, I owe a debt of gratitude to the noble Baroness, Lady Hooper, for having introduced this important topic. There has been a certain eclectic quality to the contributions which suggests that perhaps I ought to be able to represent some eight or nine government departments in order to respond to all the points that have been raised. At one stage I had thought that I could have left out the Foreign Office, but then the noble Lord, Lord Chan, corrected me on that point by mentioning the Chinese arch.
Questions have been asked of every other department during the course of the debate but I am not equipped to offer effective replies. First, I must confess to the noble Lord, Lord Alton, that I have no answer to his question on the tramway link. That has somewhat taken the Department for Culture, Media and Sport by surprise, but I promise that once I have contacted the Department for Transport, Local Government and the Regions about the issue I shall write to him. I also cannot follow the noble Lord, Lord Greaves, too closely down the by-ways of local government. I hope that he will forgive me for that.
I hope that I have not been wrong in this respect, but I had thought that, given the timing, the main thrust of the debate would relate to the question of Liverpool's bid to become the European Capital of Culture in 2008 because the deadline for submission of those bids falls on 31st March, a point made by several noble Lords. I have not the slightest doubt that Liverpool will submit its bid in time. I am not sure whether it has yet been delivered but I am reassured that it will be sent shortly. Many of the contributions to tonight's debate have been designed, I believe, to strengthen that bid. I am not in a position to adopt anything but the most benign neutrality on the point, as no doubt will be recognised on all sides of the House.
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However, noble Lords have certainly succeeded in making a strong case of the virtues of Liverpool. The noble Lord, Lord McNally, stressed with his customary force the important aspect of Liverpool's architectural heritage. It is one that all will greatly respect. No one should underestimate the change in the economic circumstances of the city. We are all well aware of the comparative reduction in the transatlantic sea trade and the development of the European trade. That means that where Liverpool stood 100 years ago, Felixstowe stands today. But even my greatest friends in Suffolk are not prone to advocate the architectural glories of Felixstowe. We all recognise that the great architectural inheritance of Liverpool built over those great years is a major feature of the city and is not a disadvantage to a city bidding to become a capital city of culture.
I was delighted to see the noble Lord, Lord Rodgers, speaking with his customary force and fluency from the Back Benches as he had from the Front Benches. I cannot follow him too far down the road of Liverpool 8 because I have no ancestry at all connected with that area. The best I can do to correct that deficiency is that my eldest son went to Liverpool University and lived in Liverpool 8. So we were working in the opposite direction, but what a great experience it was for him. I hasten to mention that this was a year or two after the great difficulties of the city. We appreciated at that time how fast the city was making a recovery, and due tribute has been paid today to the recovery of the city from those difficult days of the early 1980s.
Primarily, I wish to respond to the broad theme that in 2007 Liverpool will celebrate its 800th anniversary and that it hopes to crown this in 2008 by being the European capital of culture based upon its unique heritage, which combines a diverse population, maritime history, commerce, industry, music, the arts and, of course, sport.
I was particularly grateful to the noble Baroness, Lady Hooper, for emphasising the character, humour and the popular culture of Liverpool, which is one of its great glories. There is a tendency on occasion when one is considering the cultural advantages of a city or region to think only in terms of high culture when we should respect how much popular culture means to the vibrancy of a place. After all, in a democracy, it reflects the culture of a far larger number of people than those who enjoy high culture—although we hope increasingly to ensure greater and greater access to our wonderful cultural opportunities for all our citizens.
That is one of the great features of Liverpool's artistic resources. We applaud the fact that the Tate Gallery in Liverpool has made strenuous efforts to be socially inclusive, to open up its treasures and to inspire in its remarkable works the interest of children and those sections of the population who may not otherwise enjoy the opportunity. It is a great tribute to the Tate that it has broadened its appeal. It has set an example which many other art galleries in the country may wish to follow. So that, again, is another great advantage of the city.

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The noble Lord, Lord Rodgers, also mentioned the theatre, which he enjoys. He will also recognise that lottery grants to our regional theatres have been significant over the past year. The Liverpool Theatre has benefited to the tune of a £6 million investment. These resources are long overdue in terms of our regional theatres. There has always been a problem in Britain of over-concentration on the incredible resource in the West End, but we also need to cherish those regional theatres to which so many of our citizens have readier access. Again, Liverpool enjoys such an amenity.
Although we shall be awaiting developments in regard to the bid over the next 15 months, Ministers have been active in looking at Liverpool's position. My noble friend Lady Blackstone recently re-opened the Walker Art Gallery following the very significant redevelopment of its facilities in a scheme costing £4·3 million. She also discussed the plans for the Liverpool Biennial at the Tate Gallery and visited the Liverpool Institute of Performing Arts.
Earlier this month, the Minister for Sport was also in the city. He had the enormous benefit of going to the match at which the lights failed for the first half hour. It has been suggested to me that he might claim credit for switching the lights on. I am not too sure that he did that, but he certainly enjoyed the match. What was reflected in his visit—and last night's triumph was another notch in those terms—was that Liverpool is associated right across the nation with sporting prowess, particularly in football. While not wishing ill to any other side in the Premier League, as well as extolling Liverpool FC's achievement, I think we all hope that the city retains a Premier League status for both its football clubs despite the present trials and tribulations.
We should emphasise the way in which Liverpool has been developing in terms of cultural works. A new post of Assistant Executive Director for Culture has
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been created, giving strong emphasis to the role of culture as a driver of services across the city. There is no doubt that the city is reflecting what we all recognise; namely, that there are new drivers in the economic development of our cities and of our regions.
The noble Lords, Lord Chan and Lord Alton, referred to higher education in that respect. That is an important dimension in the age of lifelong learning. The noble Lord, Lord Greaves, also referred to the important role of educational institutions in developing the skills of our nation and enhancing not only our economic development but also the abilities of our citizens to benefit from all aspects ofthe cultural life of the great cities in which they live.
In addition, there is no doubt that we recognise the cultural advantages that this country has in its many great cities, among which Liverpool is outstanding. These factors are increasingly valued both by tourists from abroad and by our fellow countrymen—who are able to travel more easily than in the past and who value the riches which a city like Liverpool is able to offer.
I have very much enjoyed the debate. I refer to the obvious fact that we regarded the debate as being centred primarily on Liverpool's proper expectations and ambitions to fulfil itself in terms of being the EU capital of culture. That will be a significant event for all of us. We all recall with enormous pride just what that meant to the city of Glasgow on the occasion when it enjoyed that privilege. If Liverpool proves to be the fortunate city, I have not the slightest doubt that all the features identified in the debate will be enhanced and developed by that opportunity. I wish the city well, while at the same time saying that perhaps at some distant day I shall be able to come to this Dispatch Box and congratulate the city on such an achievement.
House adjourned at one minute before ten o'clock.