Lords Sitting of 25 February 2004

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

The Lord Chancellor: Leave of Absence
The Lord Chancellor (Lord Falconer of Thoroton): My Lords, before business begins, may I take the opportunity to inform the House that I will be undertaking ministerial visits to Paris and Manchester on Monday I March and Tuesday 2 March? I will also be undertaking an overseas engagement on Friday 5 March. Accordingly, I trust that the House will grant me leave of absence.

Motoring Offences: Custodial Sentences
2.37 p.m.
Earl Ferrers Earl Ferrers asked Her Majesty's Government:
Whether it is the case that there are a greater number of persons held in prison convicted of motoring offences than those convicted of burglary.
Lord Bassam of Brighton: My Lords, taking the most recent published statistics, on 30 June 2002, the number of offenders in prison sentenced for burglary was 9,152 compared with 343 for causing death by reckless driving and 2,319 for other motoring offences, including carjacking and drink-driving.
Earl Ferrers: My Lords, I am grateful to the Minister for that Answer, which does not wholly surprise me. However, is he aware that, in 2002, 15,000 drivers and 10,000 burglars were sentenced to prison? In other words, 5,000 more people received custodial sentences for driving offences than for burglary. The number of drivers sent to prison to await trial has increased by more than 400 per cent since 1992. Does the Minister agree that most people are drivers and intend to drive well, and few people are burglars and have no intention of behaving well? Have the Government not got their custodial offences somewhat topsy-turvy?
Lord Bassam of Brighton: My Lords, this is an interesting question, because statistics can be variously interpreted. The first thing to remember is that sentencing is a matter for the courts. We would all agree with and accept that. It is worth listing the range of serious offences that fall under the motoring category. They include: causing death by dangerous driving causing death by careless driving, causing death by aggravated vehicle taking, causing bodily harm by furious driving, dangerous driving and driving while disqualified. The largest number of people who suffer—or enjoy, depending on one's interpretation—a prison
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sentence are those convicted of driving while disqualified, and they would have to have committed several offences before they were disqualified. It is therefore no great surprise that, in 2002, some 13,000 attracted a custodial sentence. A large number of people are going through our courts and are being convicted of very serious motoring offences that are subject to a custodial sentence.
The average custodial sentence for those convicted of a serious motoring offence is, in the end, 4.3 months. Therefore, the period of time that somebody spends in prison as a result of being convicted for a serious motoring offence is rather shorter than the period for which a burglar would be convicted.
Lord Faulkner of Worcester: My Lords, is my noble friend aware that the robust nature of his answer will be warmly welcomed by road safety campaigners everywhere who are concerned that the number of people killed on the roads still exceeds 3,500 a year, which is a national scandal? A large number of those people are killed as a result of the wanton action of criminals. If they subsequently go to gaol, then that is what must happen. Does he not agree that the sentences are commensurate with the scale of the offence?
Lord Bassam of Brighton: My Lords, I certainly hope that they are, because that is exactly why the courts are given such discretion. They have the authority to ensure that the appropriate sentence is meted out for the crime before them. When we devil away and look into the detail of the figures, that is the story they tell.
Lord Hylton: My Lords, is it not clear from a Question yesterday that the number of people in prison is far too high, with damaging consequences for regimes and rehabilitation? Will the Government therefore issue guidance to try to minimise the number of remands in custody and maximise the use of non-custodial sentences for non-violent offenders?
Lord Bassam of Brighton: My Lords, the Government's policy intent is to ensure the independence of the judiciary. That is paramount when it comes to sentencing. It is certainly right that we have the Sentencing Guidelines Council and it is the Home Secretary's intention to ensure that we have a full range of penalties appropriate for the crime. That is exactly what we have provided. Since we came to office in 1997, we have extended the range of community penalties and sentences and improved the quality of supervision. Those things should give reassurance.
Lord Mackay of Clashfern: My Lords, how many road traffic offences carry the possibility of custodial sentences?
Lord Bassam of Brighton: My Lords, looking at the list in front of me, I believe that there are in the region

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of 12. I am happy to provide the noble and learned Lord with a fuller and more accurate statistic and I will try to list each category of offence.
Lord Dholakia: My Lords, if the custodial options are so short, are they appropriate, save in cases of dangerous driving when death has occurred? Will the Minister not consider non-custodial options? In particular, will he have a word with the Sentencing Guidelines Council to ensure that people are not sent to prison for lesser offences?
Lord Bassam of Brighton: My Lords, obviously prison is not an option for lesser motoring offences. However, the penalty must fit the crime. That is what we intend and that is the course of action that we have set ourselves by way of policy, which the public generally support.
Viscount Tenby: My Lords, I declare an interest as a magistrate on the supplementary list. The most common motoring offences leading to custodial sentences are driving without tax and, much more importantly, driving without insurance—driving while uninsured not just once, but repeatedly. In the right circumstances, no one is more in favour of non-custodial sentences than I am, but surely the prime duty of the law is to protect innocent people from death and injury.
Lord Bassam of Brighton: My Lords, the noble Viscount's final point is the most important one. That is why the sentencing approach should ensure that there is certainty and that people in the wider community understand that if they break the law in a very serious way, in a way that endangers public safety, then they can expect to meet the full force of the law.
Lord Harrison: My Lords, would my noble friend advise burglars not to speed away from the scene of their crimes for fear of being caught by speed cameras?
Lord Bassam of Brighton: My Lords, I am sure that that makes some sense.
Baroness Trumpington: My Lords, did the figures that the Minister gave us include remand prisoners? Does he agree that people spend far too much time on remand? What steps are the Government taking to reduce that period of remand?
Lord Bassam of Brighton: My Lords, I am aware that the number of prisoners on remand and held in prison is an issue of concern. The Government's intention is to reduce the period of time that it takes to bring people to court so that they can meet their sentence, as it were. I believe that it is important that we follow that course.

Iraq: Casualties
2.46 p.m.
Lord Lamont of Lerwick Lord Lamont of Lerwick asked Her Majesty's Government:
What progress is being made in calculating the number of Iraqi casualties in the Iraq war; and when they expect to present an estimate to Parliament.
Baroness Crawley: My Lords, since the start of operations in Iraq, the coalition has made every effort to minimise civilian deaths or injuries. The Government deeply regret any such casualties.
We have no reliable means of ascertaining the numbers of Iraqi civilian, or indeed military, personnel killed during the combat phase. Since the end of major combat operations on 1 May, 27 Iraqis have been killed in security incidents with UK forces, four have tragically died in road traffic accidents involving UK vehicles and six have died while in UK custody.
Lord Lamont of Lerwick: My Lords, I thank the noble Baroness for that reply. Does she agree that independent assessments of the numbers of civilians and Iraqi soldiers killed in the war vary from 15,000 to 50,000? If it is as difficult as the noble Baroness says to compile assessments of the numbers killed, why did the Government in their dossier on WMDs before the war publish an estimate of those killed by Iraq's chemical weapons? Surely if the Government are going to go on telling us that this war was to the advantage of Iraq and the world, the very least they ought to do is to make some calculation of those who are no longer able to express an opinion on that matter.
Baroness Crawley: My Lords, on the issue of the difficulty of ascertaining the accuracy of numbers that the noble Lord, Lord Lamont, has acknowledged in his supplementary question, we know that NGOs have gone to enormous lengths to try to estimate numbers of casualties. Those results vary by over 100 per cent. This shows that it is not possible to say with any degree of accuracy how many civilians have died. For us, the bottom line is that we regret any civilian casualties and go to great lengths to avoid them. To count the number of civilians killed or injured would require us to be on the ground at the place and time. It is clearly impossible to achieve that, not least in respect of those killed during air operations. The accuracy issue will therefore remain a point of contention.
Lord Judd: My Lords, does the Minister agree that, however difficult it may be to reach a satisfactory and convincing conclusion on numbers, a real effort should be made by this Government and by that of the United States because, however unfair it may be, there is a view abroad that there is a deliberate policy of not

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revealing the numbers, lest they prove embarrassing? Does my noble friend accept that however many people it was, they were people who were not consulted about the purpose of the war but who gave their lives in the cause that we espoused?
Baroness Crawley: My Lords, I agree with the last point that my noble friend made, but when it comes to trying to ascertain the number of civilians killed or injured in any operations involving UK forces, we go to great lengths to get some accuracy. However, it is very difficult to achieve that. We record all incidents in which UK forces are involved, but we cannot ascertain the number of fatalities that result. For instance, in some incidents such as ambushes or firefights, Iraqi injured or dead have often been taken away by their own compatriots. Also, when UK forces have been ambushed, they are often forced to withdraw before a count can be made.
Lord Wallace of Saltaire: My Lords, I understand that the Minister has given us some figures on what is happening in the British sector. However, as the Coalition Provisional Authority has authority at present over the whole of Iraq and I understand that the British Government have some influence over the Coalition Provisional Authority, is any serious effort being made to maintain figures, or at least to get estimates from now on, about levels of civilian casualties across Iraq as a whole?
Baroness Crawley: My Lords, we can speak only for our own area of operation. I have given the House the figures involving UK forces, and I have also given it something of the process involved in trying to record as accurately as possible the civilians who have been killed or injured. We are not in a position to comment on fatalities caused by other coalition partners.
Lord Wright of Richmond: My Lords, can the noble Baroness give the House the estimate that the Government presumably received on the eve of the coalition's invasion of Iraq of likely casualties on both sides resulting from the presence of weapons of mass destruction available for deployment within 45 minutes?
Baroness Crawley: No, my Lords, I cannot give the noble Lord that figure.
Lord Elton: My Lords—
Baroness Turner of Camden: My Lords—
Noble Lords: This side!
Baroness Turner of Camden: My Lords, I have from time to time raised the whole issue of compensation for Iraqi civilians injured or made victims of the war, and I have been told that there is no legal entitlement. However, if no WMD are discovered—and, indeed, if no WMD existed—does that not undermine the legal
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justification for the war? Does that not therefore strengthen the case of Iraqi civilians for claims for compensation?
Baroness Crawley: My Lords, my noble friend has raised the issue on many occasions and has taken a close interest in it. I cannot give her a positive answer on compensation during the combat phase but, so far as concerns the phase beyond 1 May, claims made by Iraqis for losses that do not arise in connection with combat operations are handled in accordance with the direction of the Coalition Provisional Authority. That provides for such claims to be dealt with by the country whose personnel are alleged to have caused the loss, consistent with that country's national law. Hence our policy is generally to pay compensation in circumstances where the loss would give rise to a legal liability under English law. All cases are dealt with on a case-by-case basis.
Lord Elton: My Lords, can the Minister tell us how many casualties during and after the war have resulted from the use of cluster bombs?
Baroness Crawley: My Lords, I cannot give the noble Lord that figure. UK forces used only 68 air-delivered cluster bombs; they also used artillery-delivered cluster munitions. However, the sub-munitions dispensed have a secondary time-sensitive self-destruct mechanism to ensure that fewer unexploded sub-munitions are a consequence. The failure rate of those is estimated at around 1 per cent in test conditions.

Transport Developments and Land Values
2.54 p.m.
Lord Berkeley Lord Berkeley asked Her Majesty's Government:
Whether, in the light of a report that land values around Jubilee Line stations have increased by £13 billion, an element of such gains should be made available to fund new rail lines.
Lord Davies of Oldham: My Lords, at present land value increases are partially captured via measures such as developer contributions and business rates. The Government have no plans to impose new taxes on businesses or households for value uplifts associated with the existing Jubilee Line extension. The Government continue to keep funding options under review and will take account of any recommendations arising from the Barker review of property.
Lord Berkeley: My Lords, I am very grateful for my noble friend's reply. Would he not agree that the enhancement of property value could be used to at least part-fund, if not wholly fund, Crossrail? Is it not right that the property industry should contribute something to the common good created by such new lines? Does he agree that it would be a good idea to set

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up a task force with the Treasury, the ODPM and the Department for Transport to see how that could be delivered and help with the funding of Crossrail?
Lord Davies of Oldham: My Lords, as my noble friend will know, a decision on Crossrail has not yet been made, but the Government have made it clear that a significant contribution would be expected from businesses that benefited from the development, in addition to any government contribution.
Baroness Scott of Needham Market: My Lords, does the Minister not agree that it is ironic that, at the moment, many transport infrastructure projects do not go ahead because there is not enough finance publicly available? By using the increases in land values that accrue after a project has been built, transport improvements for the public would be gained at no cost to the taxpayer, and would provide an opportunity for wealth creation on the part of the current landowners.
Lord Davies of Oldham: My Lords, there is something in what the noble Baroness says, but she will recognise that it is quite difficult to quantify the enhanced value of property from transport developments. We would certainly find that extremely difficult with regard to the original Question on the Jubilee Line extension. She will also know that attempts in the past to tax land enhancement values have proved very difficult.
Viscount Astor: My Lords, can the Minister confirm that the Government have no intention to introduce any stealth tax that might impose on homeowners who happen to live near a Tube station? Can he tell us why the decision on Crossrail has been so delayed, now by over a month?
Lord Davies of Oldham: My Lords, the Government have no intention of introducing any stealth tax—
Noble Lords: Oh!
Lord Davies of Oldham: My Lords, we certainly do not intend to introduce one on those fortunate enough to live close to Tube stations.
Lord Lea of Crondall: My Lords, would it not be fair to say that there is as much of a challenge here to financial arrangements in the City of London as there is to the public purse? Capturing the benefit of Crossrail to businesses from east to west through London requires the City of London to come up with imaginative ways to get those businesses to chip in to a big bond issue to help to finance the scheme. Although that is not an issue for the Government directly, it captures the same principle as that enunciated by my noble friend Lord Berkeley.
Lord Davies of Oldham: My Lords, constructive minds in the City are looking at the way in which funding could be provided for the development of Crossrail. All Londoners recognise—certainly the City recognises—the benefits that Crossrail would bring. Of course, no immediate proposals are on the table, and the Government are making it clear that until a proposal comes forward that is realistic in terms of the contribution from the City and from business, the question of a government contribution to the scheme remains on hold.
Lord Skelmersdale: My Lords, would the Minister be good enough to answer the second supplementary question of my noble friend Lord Astor, which was on why the announcement on Crossrail had been so long delayed?
Lord Davies of Oldham: My Lords. I apologise to the noble Viscount for inadvertently—it was inadvertent—failing to answer his second question. I am grateful to the noble Lord for giving me the chance to do so now. The reason why no decision has been taken with regard to Crossrail is implicit in my answers so far in relation to Crossrail. The Government are saying that the project cannot be fully funded out of taxpayer-government funds. There has to be a realistic proposal of the contribution from the business community. When that emerges, we can make progress on Crossrail, which the whole House will recognise is a desirable development.
Lord Tomlinson: My Lords, does my noble friend agree that the greatest possible threat to Crossrail, a project that will require some public funding in addition to the private funding, would be any change of government that led to the election to office of a party committed to a moratorium on public expenditure?
Lord Davies of Oldham: My Lords, I shall shock my noble friend by saying that I agree with him.
Lord Greaves: My Lords, perhaps I may return to the Question, which is about increased land values following particular developments. Is not the answer that the Government ought, as a matter of urgency, to be revisiting the introduction of land value taxation? It is almost 100 years since your Lordships' House had a huge battle over this, and with terrible consequences in many ways. Perhaps I would look forward to such battles again.
Is it not the case that land value taxation would be a much better and fairer way of financing local government than the council tax and it would also, in many ways, allow a reduction in other taxes, such as income tax?
Lord Davies of Oldham: My Lords, a review of local taxation is being carried out by my honourable friend Nick Raynsford and his department. The noble Lord will recognise that the phrase used by Lloyd George in

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1909 about the desirability of taxing the unearned income of land values has proved to be an extremely difficult concept to realise in the succeeding century.

Directors' Remuneration
3.1 p.m.
Lord Smith of Clifton Lord Smith of Clifton asked Her Majesty's Government:
What is their policy with regard to excessive executive remuneration packages.
Lord Triesman: My Lords, my right honourable friend the Secretary of State for Trade and Industry made a Written Statement to Parliament about directors' remuneration, performance, contracts and severance earlier today. For the benefit of the House, I heave repeated this and copies have been placed in the Library and in the Printed Paper Office.
My right honourable friend announced that the Department of Trade and Industry will be commissioning an assessment of compliance with the Directors' Remuneration Report Regulations 2002 and changes in remuneration practices during the course of this year's AGM season. If this demonstrates that further changes to the Companies Act are required, the Government will not hesitate to take appropriate action in the context of wider company law reform.
Lord Smith of Clifton: My Lords, the Minister is an expert on remuneration, as a former general secretary of the Association of University Teachers, whose members are striking today in protest against the paltry offer made to them.
Does he not realise that the policy of the DTI on fat-cat pay since 1997 has been one of continued procrastination and that the issue remains a burning one? What hope has the Minister that the scrutiny unit that has just been announced will have British boardrooms quaking in their boots?
Lord Triesman: My Lords, it is most enjoyable to cross swords with a vice chancellor once again and I thank the noble Lord for giving me the opportunity. I am also grateful to the noble Lord, Lord Smith of Clifton, for maintaining the traditions of Lord Dormand of Easington.
I do not accept that there have been real delays. First, a major Statement has been made today by my right honourable friend the Secretary of State covering directors' remuneration, contracts, performance and severance. While accepting that all these matters are for companies and their shareholders, there is a proper analysis of the impact of the 2002 Directors' Remuneration Report Regulations to be made. It takes more than one year—more than one season—to obtain a proper and serious account of that.
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Secondly, as they have been in operation for only one year, it was important that the method for assessing whether the second season made the predicted changes was given a fair chance.
Lord Marsh: My Lords, does the Minister agree that over the years many attempts have been made by both parties centrally to control wage earnings and price movements and that they have all failed? Does he further agree that the people best capable of deciding whether payment is excessive are the shareholders who put their money into the company and the board which is legally liable for the running of the company?
Lord Triesman: My Lords, I acknowledge that there have been attempts to control pay and other matters and that in general they have not been successful. As I said in my Answer, this is plainly a matter for companies and their shareholders.
The reason we have regulation, and the reason regulation is so important, is that unquestionably there have been examples where failure has been rewarded disproportionately and success has not always been rewarded as generously. I do not believe that any decent society would tolerate that state of affairs for very long.
Lord Borrie: My Lords, how would the Minister react to a suitable amendment to the Companies Bill, now before this House, whereby all shareholders with a certain minimum holding had a legal responsibility, together with the board, to determine executive remuneration packages so as to ensure a wider responsibility for them?
Lord Triesman: My Lords, unquestionably, there are different arrangements in many companies for dealing with these matters. The regulations are full, initially following the listing principles for listed companies but have been extended in ways which everyone would accept are useful. Those methods and the operations of remuneration committees are now being examined after their first season. As I have suggested, it will be important to see how the second round of AGMs goes.
It is obviously open to any company to make arrangements which would extend consultation. Under the European directive that is likely to be ill force in due course, it may well be that others in companies will be able to express a view.
Lord Lea of Crondall: My Lords, does my noble friend recall that the fallacy contained in the question posed by the noble Lord, Lord Marsh—namely, that market forces create rapidly growing inequality of income—was that these are not market forces but are remuneration committees of joint stock companies which give each other the top percentile of the best performing companies? Trade unions do not do that. Trade unions are now in the market in a way in which companies at the top end are not. That is the matter that needs to be investigated, as was implied in the

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reply given by the noble Lord, Lord Sainsbury, when this question was last raised by our late lamented friend, Lord Dormand of Easington.
Lord Triesman: My Lords, I agree with my noble friend Lord Lea about the distinction between directors' pay and the pay of most employees. However, what goes to the heart of the Question, and the reason it was put in this way by the noble Lord, Lord Smith of Clifton, and others who have taken part, is the fact that everyone wants to see an effective link between performance and pay—an effective link which ensures that poor performance and failure are not rewarded by excessively high pay. I fear that some remuneration committees appear to be guided not so much by the wisdom of Solomon as by the avarice of the Temple money lenders.
Baroness Miller of Hendon: My Lords, given that the usual answer we receive from the Government Front Bench on this question is that it is for the shareholders of the company to decide, have shareholders been consulted about the new regulations announced today?
Lord Triesman: My Lords, I can confirm that there has been widespread consultation. The reports of the consultation are with the reports of the papers lodged this morning. If it is helpful to the noble Baroness, I can, in a way I could not in answer to a Question, give a more detailed breakdown of the nature of the responses and the spread of them, which I believe are most interesting.

War Crimes: Radovan Karadzic and Ratko Mladic
3.9 p.m.
Lord Russell-Johnston Lord Russell-Johnston asked Her Majesty's Government:
What action they have taken following the statement by the Chief Prosecutor at the Hague that she has evidence that the indicted war criminals Ratko Mladic and Radovan Karadzic have found sanctuary in Belgrade.
Baroness Crawley: My Lords, we cannot confirm that Karadzic or Mladic are in Belgrade. We believe it is essential that all countries in the region co-operate with the International Criminal Tribunal for the former Yugoslavia and that Serbia and Montenegro need to do more to bring indictees to justice.
The UK, with the international community, continues to exert pressure on Serbia and Montenegro and Bosnia Herzegovina to hand Karadzic and Mladic to the International Criminal Tribunal for the former Yugoslavia.
Lord Russell-Johnston: My Lords, I thank the noble Baroness for her reply, although I am beginning to
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think that if Karadzic and Mladic had been bank robbers, they would have been caught years ago. Did the Minister read the article in the International Herald Tribune, in which Misha Glenny, the well known Balkan commentator, alleged that Britain was highly critical in private of the public pursuit of those people by Carla Del Ponte? Will she please tell me that that is not true? Secondly, to make it absolutely clear, will she take the opportunity offered by this Question to pay tribute to the work of that honest and resolute lady?
Baroness Crawley: My Lords, I say immediately to the noble Lord, Lord Russell-Johnston, who has taken a great interest in that area of the world, that we are very supportive of the chief prosecutor and the International Criminal Tribunal for the former Yugoslavia. Let that be absolutely clear. We have great commitment to and energy in pursuing the indictees who are still at large. From his interest in the matter, the noble Lord will know that 94 indictees have appeared before the ICTY and that 20 now remain at large. Having myself been in Bosnia during the Bosnian war, I do not need convincing of the importance of apprehending those two people and the other indictees at large. I hope that I can give the noble Lord some reassurance in that SFOR has increased the intensity and frequency of its operations to break Karadzic's network in Bosnia-Herzegovnia.
Lord Howell of Guildford: My Lords, the chief prosecutor is clearly a resolute lady and her work should be fully supported, as the noble Lord, Lord Russell-Johnston, said. However, might there not be a case for someone passing to her a quiet and respectful hint that it might be wiser first to secure the apprehension and bringing to justice of those unsavoury individuals before making too many statements about their possible whereabouts? That seems unhelpful in tracking them down.
Baroness Crawley: My Lords, we indeed continue to support all the efforts being made. The result of the energy invested by the chief prosecutor in apprehending those indictees is that, as I said to the noble Lord, Lord Russell-Johnston, SFOR has increased the frequency and intensity of its operations—both the operations that it pursues under intelligence received and its day-to-day operations. We have shown our support for the tribunal by ensuring that the EU-wide visa ban includes nine further individuals this February. All in all, we are working at top whack with our international partners to ensure that those indictees are brought to book.
Earl Ferrers: My Lords, can the noble Baroness find a better, more suitable word to use than "indictee", or is that Civil Service jargon?
Baroness Crawley: My Lords, that is legal, as opposed to Civil Service, jargon. We know who we are talking about: those who have been charged with war

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crimes and, in the cases of the two individuals referred to in the original Question, two men who have both been charged with two counts of genocide.
Lord Richard: My Lords, now that Mr Justice May has had to withdraw from the trial of Mr Milosevic, what is the Government's view about what should happen?
Baroness Crawley: My Lords, I thank my noble friend for that question—sincerely. I am aware from the press statement by the ICTY president that Judge May is to resign on health grounds. That should not unduly disrupt the trial. I use this opportunity to pay tribute to Judge May's outstanding performance, as widely acknowledged by the international judicial community.

Business of the House: Debates this Day
The Lord President of the Council (Baroness Amos): 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 Earl Peel set down for today shall be limited to three hours and that in the name of the Lord Vinson to two hours.—(Baroness Amos.)
On Question, Motion agreed to.

Countryside
3.15 p.m.
Earl Peel Earl Peel rose to call attention to the situation in the countryside in the light of the rural White Paper; and to move for Papers.
The noble Earl said: My Lords, I start by declaring an interest as an owner of land in the north of England that is largely subject to tenancy.
The rural White Paper was published in November 2000 by the then mighty Department of the Environment, Transport and the Regions and the Ministry of Agriculture, Fisheries and Food. Since then the former has been reduced to less obese proportions and the latter has disappeared without trace. Subsequently, we witnessed in 2001 the birth of Defra and, as of the other day, a review of the White Paper by the Secretary of State, Mrs Beckett.
However, to further complicate matters, the Government have commissioned a review of rural delivery by the noble Lord, Lord Haskins, which can, I believe, only be viewed as an indictment of how ill-thought-through was the planning of the new department. On top of that, we are witnessing a major reform of the common agricultural policy, which is one of the most fundamental changes ever experienced in agriculture. The Secretary of State has just announced how she intends to implement those changes. During that turbulence, agriculture has lurched from crisis to
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crisis, with plummeting farming incomes, huge job losses and, of course, the crisis of foot and mouth disease, which literally tore the countryside asunder.
I should say from the outset that I, along with most other commentators, wholly welcomed the fusion of MAFF—so totally discredited after the foot and mouth epidemic—with responsibility for the rural environment. They are natural bedfellows and cannot be effectively separated if we are to have a cohesive rural policy.
Another major commitment in the White Paper was CAP reform and the decoupling of support from production. Again, that move had overwhelming support, ensuring that those in the business of food production should gear themselves to the marketplace, thus allowing the continued support from public funds—still very considerable—to be channelled into sound environmental management.
However, delivery of those new policies is complex and I am bound to say that I find it peculiar, to say the least, that England is taking a different route from all other countries in the United Kingdom. Of course, the principle of decoupling is to be welcomed, but the route adopted by the Secretary of State is bound to have a hugely damaging effect on efficient dairy and beef producers. Taking the special disadvantaged area boundary as the dividing line between the two areas could well bring about the demise of English suckler herds within those SDAs.
With those area payments are attached cross-compliance conditions, which will demand certain environmental standards. How those will operate is crucial. The conditions must be clear to farmers, land managers and those whose task it is to conduct the monitoring. Who will have the responsibility is uncertain, but we cannot expect civil servants to be given the power of objective measurement, unless the parameters are clearly defined. It is also important that the conditions imposed on our farmers remain pretty constant with those in other EU countries to ensure that British farmers and growers are not placed at a competitive disadvantage.
Furthermore—and it would be disingenuous of me not to mention Sir Don Curry's considerable input into current rural policy formulation—how will the implementation of the level entry scheme, one of his main recommendations for further environmental enhancement, dovetail with the cross-compliance conditions attached to area payments? Will the two schemes be the responsibility of different agencies? I suggest that the cost and confusion could be considerable if not.
I would like to add something at this stage about the recommendations of the noble Lord, Lord Haskins. I do not propose to dwell on these as they are complex and a subject for a separate debate. But if the Government do accept his basic principles in that the formulation of rural policy and its delivery are to be separated, it strikes me as essential that that part of the Countryside Agency which is responsible for rural proofing be retained in order to act as the overarching link between the two objectives. I

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entirely agree, however, that there must be a big push to streamline rural delivery, as at the moment it is far too confusing.
The new challenges facing those who make their living from the land, and whose responsibility it is to manage the environment, are demanding to say the least. Any new order creates concern—and the task of government in setting the right framework is equally demanding. But the key to success is, I believe, mutual understanding and trust. Here I feel that the Government have forced rural communities on to the back foot, and they have lost the confidence of so many.
European directives have been gold plated and forced through without proper consideration of their true impacts. There is the constant threat of anti-hunting legislation, which has gone deep into the heart of so many rural communities. There was the ham-fisted and irresponsible way that the Government handled the Animal Health Act after foot and mouth, which with more consideration could have had the support of the farming community. The Countryside and Rights of Way Act, the effects of which are still to be felt, showed a lack of practical common sense and was forced through on the back of political dogma. The draconian powers of compulsory purchase under the Planning and Compulsory Purchase Bill shows a gross insensitivity towards those who own land. The potential effects of regional assemblies, if successful, include virtually disenfranchising those who live and vote in rural areas.
On the first page of the White Paper, Mr Prescott claims that some want to drive a wedge between town and country. Well, he certainly seems to be setting the perfect example.
We all welcome the recognition of the importance of economic vitality in rural areas expressed in the White Paper. I am particularly glad that the Government have accepted the principles of broadband.
Rural Britain is changing and it is changing fast. Agriculture no longer dominates in the way that it did, even though I remain confident that the production of food, and the management of the countryside—so vital for the ever-important tourism business—will remain the bedrock of rural society. But the future must embrace new opportunities and new enterprises, as well as encouraging the old.
The rural White Paper review acknowledges that there have been real difficulties in coming to a workable definition of "sustainable development".
The current planning guidance PPG13 states:
"in rural areas, locate most development … in local service centres, which are designated in the development plan to act as focal points for housing, transport and other services, and encourage better transport provision in the countryside."
That is all very well. But many local planning authorities have interpreted this demand for traffic reduction as a reason for refusing sustainable rural development. There is no way that we can have a thriving rural economy without some measure of traffic generation, particularly when there are no alternative modes of transport.
Furthermore, and in addition to addressing this fundamental issue, I would like to see a whole culture change in the attitude of planners, when they actually begin treating people more like clients, and start serving the community in a more positive and helpful fashion. But, clearly, the first stage is to have a more realistic rural planning guidance that is not moulded around urban conditions.
I have just mentioned housing and, of course, the shortage of affordable accommodation has now become a crisis in many rural areas. Although recognised in the White Paper, since 1997 there has been a steady decline in new affordable accommodation in settlements with fewer than 3,000 inhabitants. Indeed, homelessness in rural areas has soared by 13 per cent since the Government came to power.
There is a real need for new thinking and new initiatives, and I urge the Government to enter into dialogue with organisations such as the CLA—and I declare an interest as a member of that organisation—whose members can help to deliver, and whose recent report on housing and the rural economy details the real impediments to securing a better prospect for rural people.
I turn to the police. Clearly, effective crime prevention is a hallmark of any civilised society. This is important, not simply in terms of protecting those that already live in rural areas, but also in encouraging new businesses and jobs. Reported rural crime has increased by 5 per cent in the past year. According to police authority figures, police numbers and funding have decreased in many rural areas. It is an astonishing fact, but over 50 per cent of rural businesses and 75 per cent of farmers have been victims of crime during the past five years. That is unacceptable. Indeed, to see a policeman on foot in any rural area has become a rarity: you stop, you take note, you look at him. But we must not forget the considerable psychological effect that this has on those who live in isolated areas, or by themselves.
I have no doubt that the most significant reason for this wholly unsatisfactory situation was the removal of the old tied police accommodation, brought about, I fully acknowledge, under a Conservative administration. Perhaps we should seriously consider restoring this system, thus ensuring that the police become, once more, an integral part of the communities that they serve.
Back in 2000, the Government responded to the ever-increasing wails of anguish being uttered by the farming community about the mounting burden of red tape. That is an issue that my noble friend Lord Vinson will be addressing later. As in most cases when the Government are in doubt about something, they turn to the noble Lord, Lord Haskins. He duly produced his report Environmental Regulations and Farmers. The noble Lord came forward with 21 specific recommendations but, to the best of my knowledge, none of these has been implemented by the Government. No doubt the Minister will put me right if I am wrong on this point.
The rural White Paper gives extensive coverage to environmental matters, including biodiversity objectives—and quite rightly so. What is notable,

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however, is that the whole thrust of the policies revolves around what the Government and their agencies and the large NGOs can do, implying that the private sector plays no part.
In reality, nothing could be further from the truth. Indeed, there are plenty of examples where the government agencies and the large NGOs have notably failed in their objectives.
For example, there is no mention of the considerable contributions that field sports have made, both in maintaining and enhancing habitats and ensuring the well-being of many species. In the north of England, the areas that have been designated as sites of special scientific interest have largely been on land that has been managed for shooting.
In conclusion, 30 per cent of England's businesses are in rural areas, thus making a hugely important contribution to the GDP. Yet metropolitan areas receive an average of 20 per cent more of standard spending assessment. That speaks for itself.
There are some excellent schemes both in the public and the private sector which have helped to encourage the survival of, or indeed the enhancement of, general rural services. But by and large—and here I entirely agree with the noble Lord, Lord Haskins—the key to their survival is use, and the key to use is businesses, jobs, and affordable housing.
I have no doubt that those who farm, manage land and run businesses in rural areas will continue to rise to the new challenge ahead. But the Government must start showing a greater appreciation of those who live and work in rural areas, and start governing and legislating accordingly.
I beg to move for Papers.
3.30 p.m.
Lord Livsey of Talgarth: My Lords, it is a privilege to speak in this debate; I congratulate the noble Earl, Lord Peel, on initiating it. We are debating a massive topic today. The noble Earl has mapped out the current situation, particularly regarding the rural White Paper and some of the reforms taking place. I shall try to build on that in relation to specific aspects of rural life, referring in particular to the situation in the farming industry, the rural infrastructure and the threat of bovine TB and its impact on rural communities.
I declare an interest as the former MP for Brecon and Radnorshire, the most rural constituency in England and Wales. At 87 miles long and 45 miles wide, it is a continent rather than a constituency, but I know it well. I am also president of the Brecknock Federation of Young Farmers, which, although not in England, puts the problems of young people living in the countryside very much to the fore. I shall try to approach this debate in the context of England, as I realise that agriculture in Wales is devolved, and rightly so.
I shall look first at the current viability of farming. In macroeconomic terms, farming constitutes only 1 per cent of the UK GDP; but if one considers the value
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added to the industry by food manufacturing, for example, it constitutes almost 10 per cent of GDP. That tells a story in its own right; the primary producers get only 1 per cent of the GDP and those that add on the value get another eight per cent or so. Six or seven years ago the output of farming was worth about £3 billion; it decreased to around £1.5 billion about three years ago and has now risen to just over £2 billion. During that period margins on farms have been cut to the bone. Taken together with the foot and mouth outbreak, the impact on the welfare of farming families has been very considerable.
Average farm incomes have increased from around £9,000 about two and a half years ago to the present rate of around £16,500. Incomes on many farms had been below the national minimum wage. The situation is better now but incomes are not as good as they were in the late 1990s. The situation is particularly poor in lowland livestock farms and for milk producers. Incomes of milk producers in the past 12 months have increased by only around 1 per cent, which is a reflection of the terrible price of milk; the fact that it has been used often as a loss-leader; and that there is a very poor marketing arrangement for it at present.
The other factor that must be taken into account is that on many farms up to 50 per cent of income now comes from diversification. The increased importance of the tourism industry, in particular, which is now worth many billions of pounds, was shown starkly at the time of the foot and mouth outbreak of 2001, when it was identified as being far more valuable as a source of income then the farming industry itself. That tells a story; the synergy between agriculture and tourism should never be underestimated.
I am particularly concerned about the exit of young people from rural areas. The noble Earl touched on one or two very important aspects, not least housing. I am concerned about the importance of sustaining young people in the countryside and in farming. I make no apology for quoting again that the average age of farmers is around 57 years old. I speak as a former member of staff of the Welsh Agriculture College and as president of a federation of young farmers. The closure of entire agricultural colleges and university departments of agriculture that has occurred during the past 10 years or so reflects a depression in the farming industry. Advisory services should be reinstated with links to university and college agriculture departments, as they were a long time ago and still are in Scotland. There should be a link between advice and education as a lifelong experience. It is a lifelong learning curve that never stops, so such communication must continue.
The common agricultural policy reforms should be broadly welcomed. The decoupling that has taken place between subsidies and production into a single farm payment should be welcomed. The problem is how it should be best administered, which is a problem in its own right. The noble Earl referred to problems in cross-compliance with environmental factors. We now see a diversification of how that will be applied in England—mainly on an area basis, although it is a hybrid scheme—compared to Wales and Scotland,

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where it operates on a historical basis. I shall not discuss the technicalities, but my party and I are interested in considering how best to support family farms, particularly small ones.
The noble Earl, Lord Peel, has outlined the problems in England, which have an impact on family farms, particularly on an area basis. The historical basis actually benefits small family farms. Will the Minister say whether the matter will endure in the long run, or will he be forced to change it in the medium term—by 2008 or so—and will the whole policy have to be applied on an area basis? I have seen that question put in the agricultural press and do not know the accurate answer.
The problem of product prices and the activities of supermarkets needs much investigation. All I will say is that the decision by Stephen Byers, when he was Minister in the other place, on the marketing of milk, particularly milk co-operatives, and the share of the market that they should have was very unsatisfactory and should be revisited. It does not make sense that milk co-operatives in the Netherlands and other countries in the European Union, for example, can operate with 80 per cent of the market share, whereas here it is below 30 per cent. That cannot be right.
The rural infrastructure, to which the noble Earl referred, is very important. Services in rural areas have declined enormously, which has brought genuine hardship for old and young people in particular. I shall not go into much detail, as the issue will be referred to later.
I am particularly concerned about the crisis of bovine tuberculosis in the countryside. I do not know what is behind a Defra leaflet that advised that farmers and farm workers should consult their GPs if they have bovine TB on their farms. That is a very alarming statement. I believe that there is only one answer as far as eradicating TB is concerned. I am talking about eradication—not trying to live with TB, which is unacceptable. Badgers and cows and cattle should be equal. If they have got TB, they should be controlled. That must be our aim.
We need an answer on whether the rural delivery review now supersedes the rural White Paper for England. Some of the Government's proposals are in line with the Curry report. Many years ago, I took a soil sample on Don Curry's farm in Northumberland. You cannot get nearer the grass roots than that.
Baroness Farrington of Ribbleton: My Lords, I remind all noble Lords that if everyone speaks for two minutes over their time, the Minister will have four minutes to reply.
3.41 p.m.
The Earl of Selborne: My Lords, I join in thanking my noble friend Lord Peel for the way in which he introduced this debate and has given us the opportunity to speak on this subject. I declare an interest as the chairman of the South East Rural Affairs Forum, as well as being a farmer in Hampshire.
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The review of the rural White Paper reminded us that the White Paper's aspirational view was based around sustainable development, which means a lot of different things to different people. It is important when we are assessing to what extent sustainable development—which everyone welcomes as a concept—has been delivered or is being delivered by successive rural policies, that we test these policies against economic developments, environmental impact, environmental enhancements and social implications. The review does not always help us to tease out these aspects of sustainable development.
For example, in the chapter headed, "A Protected Countryside"—not a good title, I fear; it speaks to me of protection rather than enhancement—the executive summary on restoring and maintaining wildlife diversity and the natural environment refers to just two objectives: the improvement of river quality, with which I have no quarrel, and conversion to organic management.
I have nothing against organic farming. It is clearly important that it be promoted, because there is a market for organic produce, and it should be met. Nevertheless, it is rather hit and miss as a way of maintaining wildlife diversity. Organic farmers on the whole tend to farm rather more benignly than the average farmer, but if we wish to deliver wildlife diversity, we must target that as a precise objective. I doubt if going for something that clearly is far from helpful in terms of social cohesion is necessarily a helpful measure. When we are talking about sustainable development, we should remember that social inclusiveness, landscape, house prices and quality of life in the countryside are all equally important. If anyone has any doubt about whether organic farming automatically delivers the best of natural wildlife benefits, one only has to look at who wins environmental awards such as the Silver Lapwing Award, which is by no means invariably won by organic farmers, and there is no reason why it should be.
Let me move to the social implications of rural policy. The report, particularly the appendices, demonstrates that levels of rural homelessness have increased since 1992. It used to be 11.8 per cent of the national total; in 2000 it was 18.8 per cent of the national total, which is the last figure that I could glean from the tables referred to on page 28. Housing prices in rural areas are up 17.2 per cent in one year, compared to 14.8 per cent in urban areas. In my region of the south-east we have the most acute affordability problems with the ratio of mortgage cost to household income being much higher than in most other regions. The Housing Corporation's rural programme has not delivered the target set out in the rural White Paper of 9,000 affordable homes annually in rural areas. Many would have said that that target was anyway an unambitious one.
It must be accepted by these Benches that the right to buy has played a large part in contributing to the housing problem. There must be stronger limits. There is also clearly a problem in respect of those who wish to conserve landscapes and local opposition at the price of social inclusiveness. Above all, there is the problem, that is true of both urban and rural areas, of high construction costs. It is a remarkable and sad fact

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that to build in this country, whether in urban or rural areas, costs more than elsewhere. In the countryside, where for perfectly good reasons of landscape, conservation of the environment and the like, all we seem to do is make even affordable houses even more expensive.
For example, in my area of Hampshire, where an enlightened affordable scheme was put in place and the land was free, thanks to planning gain, the local water company took the opportunity to say that since the water supply in the village was inadequate—probably because a lot of people had built Jacuzzis, swimming pools and the like—the cost of providing a better supply to that village would be added to the cost of the affordable housing scheme. The affordable housing scheme was nothing like the cost that it should have been. It certainly compared most unfavourably with housing schemes that could be constructed to high environmental and energy standards, were there to be much more research and development put in at a national level on how we could remove some of these construction costs. It would be of enormous benefit to rural areas and a great benefit to the nation as a whole.
Another example of lack of social cohesiveness and lack of ability to deliver to the minority—although it is a large minority submerged in rural areas, particularly in my area of great affluence in the south-east—is that some 20 per cent who are far from affluent are living at or below poverty levels in great social deprivation. On page 33, paragraph 17, the review refers rather feebly to a pilot scheme to develop post office one-stop-shops for access to a wide range of government information. This was abandoned because it was not thought to be good value for money. We had a look at this on our Rural Affairs Forum in the south-east, and we agreed with the assessment that it was not good value for money in that the amount of information available was limited. It was, however, welcomed by the people who accessed it.
We had a look at an alternative scheme from a not-for-profit organisation, StartHere, which gave a far wider range of services on health information, housing, education and social issues, together with all the information that the Government might wish, and we thought that it was excellent. It needs a champion. It is being championed in some urban areas and in the Scottish Executive, but Defra has not shown much enthusiasm for it. I hope that, if Defra, which is the lead agency in rural areas, is serious about delivering social cohesiveness, it will look at StartHere again, and recognise that what was tried by the Post Office in Loughborough, but dropped because the Post Office did not think that it met its requirements, could provide what people are looking for at a modest cost.
Rural policies must be seen not just to enhance the countryside and protect the values that make the countryside so attractive to those of us lucky enough to live in it, but must recognise the serious social issues that arise from the inability of so many people in the countryside to live alongside an affluent community. I am not sure that the rural White Paper that we are discussing today has yet addressed the serious issue of social divisiveness.
3.48 p.m.
The Lord Bishop of Peterborough: My Lords, I, too, want to thank the noble Earl for initiating this debate, and for his comprehensive introduction. The future of the countryside is a matter that affects us all, for wherever we live we are to a greater or lesser extent influenced and shaped by the countryside. My own formation goes back to a childhood in Dorset and a school in Derbyshire that had its own mixed farm, where I learned many skills of animal husbandry, which I confess that my present role does not often allow me to exercise. Like most bishops, I serve a diocese that embraces both urban and rural communities. As often as my duties allow, I have lived in Upper Weardale in County Durham, where we have had a home for 20 years.
As the review of the rural White Paper reminds us, one of the significant principles that the Government sought to implement was,
"a commitment to provide equitable access to public services regardless of where people live".
That is a laudable objective. The review also pointed out that the sister document, the urban White Paper, had a strong emphasis on the Government's regeneration agenda. Therefore, in the review's words, the two papers,
"had different, but complementary perspectives".
That comment prompts me to ask whether the level of delivery and the aims of the Government's rural policy would have been different if there had been an equal emphasis on regeneration in relation to the countryside. That is not just a semantic or theological question. The Rural Evidence Research Centre has emphasised the point that the ward-based indices of multiple deprivation tend to hide the heterogeneous nature of rural areas, where there are pockets of genuine and deep deprivation in more affluent and environmentally attractive contexts.
Birkbeck College's paper also reminds us that, in the remote areas—particularly in the north-east and south-west—there are clear signs of socio-economic disadvantage. It says that such areas are characterised by lower incomes, higher unemployment, relatively disadvantageous industrial structures and a poorer skills base. In addition, they have higher proportions of elderly residents and slightly lower levels of car ownership. The paper concludes that those factors combine to increase the risks of economic and social exclusion, affecting areas that contain more than one in 10 of the national population.
For people in such areas, regeneration is as live an issue as accessibility. A couple of years ago in Upper Weardale, Lafarge closed the Eastgate cement works, a major employer in the dale. The district council produced an imaginative plan for the regeneration of the village and the site. It sought to create a community with a welcome emphasis on energy-efficient and environmentally sustainable development. Regrettably, we have yet to see any tangible results, but I applaud the emphasis on the regeneration of that community. It was threatened with decay because of the closure of the works. That is not the only example in our country.

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Regeneration in the rural areas must, as others have reminded us, embrace the farming community that, for centuries, has shaped our landscape. The work that the Rural Regeneration Unit has done in Cumbria and other areas has shown the way in providing a means to increase farm gate prices by promoting local produce. As many noble Lords will know, the Rural Regeneration Unit has, since its launch in March 2003, demonstrated its ability to translate public policy into action at the grass roots. It has sought to ensure a sustainable future for rural communities by promoting food co-operation in Cumbria, bringing together farmers and disadvantaged local communities, providing food at prices that benefit both parties by cutting out the distribution chain. There is a similar scheme in Wales, with the commitment of the Welsh Assembly. It has also taken over the British Food Fortnight from the Countryside Alliance. With matched funding from Defra, it has devised the first national marketing and promotional campaign for the game meat industry and so on. Together with the unit's Kids in the Countryside programme, such schemes contribute significantly to rural regeneration.
In July last year, the Bishop of Hereford hosted a seminar on farming and the catering trade. It highlighted the benefits of linking local caterers with local sources of production. The recently published report called for levels of bureaucracy appropriate to the scale of the operation, often a problem for local suppliers and specialist units, including local abattoirs. It also called for government and the public sector to support the local sourcing of food in their catering procurement. My diocese joined its neighbours in East Anglia to promote a seminar on the issues facing the sugar industry, an important contribution to the fenland economy.
Those examples bring me, secondly, to the role of the Churches in the countryside, particularly in the delivery of the aspirations in the rural White Paper. The Church continues to play a vital part in rural community life throughout the country. In a previous debate, I mentioned the work of the Addington Fund during and after the foot and mouth disease crisis, but our contribution is wider than that. The Churches remain the largest voluntary network in the country, but their role is often unrecognised and unquantified. In Defra's work on community capacity building and the voluntary sector, we are scarcely mentioned.
Yet, in spite of the financial and other pressures that are causing a significant change in the pattern of our ordained ministry in rural areas, churches are often the only public building remaining in a village. Their adaptation to provide much-needed meeting space for many community groups is thoroughly to be welcomed and encouraged, and it is happening. In some cases, the Church has also made the valuable contribution to a community of assisting with keeping open a post office. It may be staffed by a non-stipendiary priest or a lay reader, drawing some financial support from the Church community. Furthermore, faith—not only the Christian faith—is a large contributor to the motivation to volunteer. If the Government's desire to see more
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services delivered by the voluntary sector is to be met, they would be wise not to neglect the Churches' existing networks.
Churches can have a significant impact on economic development—for example, via church tourism. Projects in North Yorkshire, where 250 churches participate, East Anglia and elsewhere are good examples of partnerships involving the Churches that benefit the local economy. Hidden Britain Centres, a sustainable tourism project, encourages churches to take the lead in a community in the sensitive development of tourism. Following the pilot project in Cumbria, six centres are now up and running throughout the country. Ecumenical working among Church and faith leaders has ensured Church representation on local strategic partnerships and regional and national rural affairs fora and other bodies. It has also contributed to the Market Towns initiative and Vital Villages.
Regeneration in our countryside remains a shared aspiration. As the review of the rural White Paper indicates, the Government have achieved several of their targets already. However, if we are to maintain a vital and vibrant countryside, we must address the further issues of genuine deprivation and the need for regenerative policies in the remaining pockets of social and economic exclusion. That requires a sense of partnership between government and our rural and agricultural communities. The Churches are keen to play their part. Although we face our own challenges, we are there, and our established network has much to contribute to the future prosperity of rural communities.
3.58 p.m.
Lord Renton of Mount Harry: My Lords, I have great sympathy with the remarks about regeneration in the countryside that the right reverend Prelate has just made. I hope that he will forgive me if I pursue a different aspect of regeneration. I welcome the opportunity that my noble friend Lord Peel has given us, and I congratulate him on the wide-ranging nature of his speech. I declare an interest as chairman of the Sussex Downs Conservation Board.
Looking at the list of Defra Ministers, I was interested to see that, under the Secretary of State, Alun Michael declares himself Minister of State for Rural Affairs and Local Environmental Quality; Elliot Morley is Minister of State for the Environment and Agri-Environment; and Ben Bradshaw is Minister for Nature Conservation and Fisheries. Agri-environment, local environmental quality and nature conservation are the matters on which I shall dwell this afternoon. They are especially important on the South Downs, where I have lived, and in other areas of outstanding natural beauty, such as the Cotswolds and the Chilterns. We have working farms on poor soil. Sheep is the traditional farming product. We have a beautiful countryside. We have 32 million tourist visits a year, over twice the figure in the Lake District, and 2,000 planning applications, many from those wishing to enlarge their stables in order to encourage the keeping of more ponies and horses, or to turn their stables into houses.

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It would be good if we could see more profitable farming coupled with wider unploughed margins around the fields, with the return to the South Downs of wild flowers and types of orchids which have disappeared. But what do we get from the Government? Over the past six or seven years, we have had an enormous number of speakers stating that they love and understand the countryside. The Curry report was a new look at farming. I agree with much of the Haskins report—it is a great pleasure to see the noble Lord present today. The report pointed out the inadequacies of Defra and suggested major changes in the way grants and subsidies should he delivered to the countryside.
We have had the nonsense of the Hunting Bill. Quite frankly, the Government lost their nerve in the Commons. They went for a total ban on hunting. That, in turn, was totally against the sympathy and traditions of the countryside. At present we see the budgets of Defra and the Countryside Agency being cut severely for the financial year ahead. Above all—my noble friend Lord Peel spoke about this in some wise detail—we have the mid-term review of the common agricultural policy with its intention of moving from mass cross-subsidy under Pillar 1 to agri-environmental schemes improving landscape and the countryside under Pillar 2.
What does decoupling mean to the small or medium-sized farmer who farms 200 to 500 acres? Has he really to change his ways? Does he know whether he will be better or worse off at the end of the day? So where does all the talking over the past few years about agri-environment, and so on, lead to? We have had many speeches, reports and visits from perhaps five NGOs where one was sufficient previously. But there are no clear decisions, action or money. Money is extremely important not only to the South Downs where I live but also to other areas of outstanding natural beauty. It is particularly important to us because, some four years ago, the Government announced at the Labour Party conference in Brighton that we were to be turned into a national park. The idea underlying that was to return the land on the Downs to the people. Great expectations have been aroused inevitably by the prospect which is subject at present to a major planning inquiry. Dreams are being dreamt: the stone curlew will return; the bee orchis will again be seen widely; sheep farming will become profitable; footpaths will be extended. Where is the money to do all that coming from? As chairman of the Sussex Downs Conservation Board which may become an embryo body that will turn into a national park authority, no one has given me a budget or indicated how the national park will find new money to fund all these new, good activities. There is no point in becoming a national park unless more money is available to help working farmers to improve the landscape, widen the bridle paths, create conservation areas where birds, butterflies and rare flowers can flourish and deal with the problem of parking the cars of tourists who visit us.
Agri-environment has become a buzz word—a strapline—but it has to be backed by hard cash and positive schemes which encourage the farmer and the
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neighbouring community to work for a better environment. As my noble friend Lord Peel said, to put into effect the changes in the common agricultural policy will be a massive challenge. The Secretary of State has published guidelines but, as has been said today, those often raise more questions and problems than they solve.
We have had speeches and sympathy but lack of implementation. We need clear, well financed policies which will improve conservation and the enhancement of our countryside if we are to move forward. When the Minister responds, I hope that he will give us a flavour of what policies the Government have in mind.
4.6 p.m.
Lord Plumb: My Lords, I feel privileged to support my noble friend Lord Peel. The situation has been debated many times but never more importantly than at this time.
As has been stated several times, we all recognise that the countryside is a national asset for rural communities and is enjoyed by many visitors. We all have a responsibility for maintaining the quality of the landscape and it is essential that we keep a fair balance between protecting the environment and sensible rural development.
Our major challenge in the 21st century is the effective stewardship of the land. I hope that in his response the Minister can tell us what actions will be taken or what plans Defra has in answer to the noble Lord, Lord Haskins—we are delighted to see him in his place—who stated in his Rural Delivery Review in October 2003:
"My underlying premise is that the existing arrangements for delivering Defra's policies are incapable of coping effectively with the changes that lie ahead whilst delivering value for money for the taxpayer".
He went on to say:
"Too many organisations are involved in rural delivery, resulting in confusion"—
about the role of rural delivery and, above all, those dealing with land managers. He concluded:
"Many of the difficulties are due to long-standing cultural and institutional problems, highlighting the need for greater devolution and the separation of responsibility for policy and delivery as being at the heart of the necessary reforms".
I ask the Minister, therefore, how much of the detailed blueprint will be retained.
I declare an interest. It may be appropriate to follow my noble friend Lord Renton. I declare an interest as president of one of the 41 AONBs in England and Wales. In the Cotswolds, the largest AONB in the country covering an area of 790 square miles, 78 miles from north to south, we represent 34 local, regional and national organisations representing local people, local authorities, tourist bodies and wildlife and heritage groups. About 200 voluntary wardens care for footpaths and other features—not least in assisting the police on rural crime. That is what we call the bottom—up approach, an approach which brings together partners concerned with conserving and enhancing the natural beauty of the area. Plans are

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being put forward for a conservation board to pursue two purposes as set out in the CROW Act. This is a good example of sensible and practical devolution. Rural communities have to be local and community-driven within a coherent framework that encourages them to be more self-reliant and removes the stranglehold of red tape and unnecessary controls on rural businesses.
Farming is at the centre of rural areas. Again, I declare an interest as a farmer following generations of farmers, whose motto was and still is,
leave the land in a better shape than you found it".
J F Kennedy said that change is the law of life. On the issue of change, does the Minister agree that 56 per cent of farm businesses have some diversification, that 15 per cent of rural businesses are related to farming, and that 575,000 rural businesses in England are related to agriculture in one form or another? So it is a myth to believe that only 3 per cent of the population in the countryside try to make a living from British agriculture.
Let us recognise that farming is everyone's business. As we decouple payments from production, intervention ceases to be a realistic option and the market place must be at the centre of the decision-making process. Two weeks ago, the noble Lord, Lord Whitty, repeated the Statement made in another place by the Secretary of State on reform of the CAP and implementation of a single farm payment scheme in England. Following that Statement, farmers and growers have had time to reflect and consider the options for reform and how the radically reformed CAP fits their business. It is essential to keep a fair balance between protecting environment and rural development. This CAP reform fits some businesses better than others.
At the weekend my telephone was red hot with farmers telephoning from all over the country expressing their concern or trying to work out the effect that this is having on their own businesses. Of course, there are serious winners and serious losers. Redistribution will be a feature that will cause massive disruptions of the English livestock farming scene, as recognised by the noble Earl.
The fact that a different system exists in Scotland and Wales will cause tangible disruption to trade. Consequences will be reduced confidence, especially by those younger people wanting to find a foothold, and destabilisation of the critical mass necessary to maintain upstream and downstream businesses. Unless action is taken, the result could be fewer beef animals, less dairying and more sheep, with market forces creating low prices due to the upset of supply and demand expectations.
Many people who farm in disadvantaged areas will lose out. Dairy farmers have been waiting for this reform hoping that it will return some confidence to the dairy sector. But estimates show that phasing out the historic payments and moving to regional payments by 2012 will result in a drop in income of some £14,000 on many of the smaller units. The Milk and Dairy Council estimates that prices could fall by more than 4p a litre as intervention prices are reduced.
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Therefore, I hope that the Minister can assure us that there can be a revision of milk pricing, recognising that many producers are relinquishing dairying, including my own son, as businesses become so unprofitable. The Secretary of State said in her Statement on package reform that one single payment simplifies the present system of support, which was the intention of Commissioner Franz Fischler, as he stated last week in this country. He accepts that one size cannot fit all but recognises that splitting the country into regions brings with it many complications.
This radical package follows a long period of crisis, which was fully recognised in the Curry Report. Foot and mouth clearly showed that the English countryside is vital for more business than farming. Development in the farming and food industry is lagging behind changes in consumer lifestyles and purchasing habits. Health experts tell us that we are stocking up problems through poor nutrition. European products have been more competitive, thus reducing our own export opportunities.
One of the main reasons is the weakness of the euro and the strength of the pound. Losses in support payments over three years are calculated by the NFU to be more than £1 billion. Farmers would have saved in interest payments a further £600 million if the exchange rate had been on a par with the euro-zone. In 2002, we received £2 billion from the European Community in support payments. Yet, it is paid in euros.
With the loss of this market, pressure from imports from Europe and countries where labour is cheap and where standards of production are lower, we face a reform of the CAP, which is seriously overdue, from a lower base than our main competitors. Farmers and taxpayers should welcome the commitment by government, but it must be fully and fairly fulfilled in practice. Many farmers would agree to move to a removal of government intervention altogether if they had the same system of import controls as New Zealand, Australia and many other countries. That is the issue facing the World Trade Organisation. I hope that the Minister can assure us that some of these issues will be reconsidered in recognition of the inequality of support across the country and a very unlevel playing field.
4.16 p.m
Lord Palmer: My Lords, I, too, thank the noble Earl, Lord Peel, for his superb and concise introduction to this important subject. I must, as always, declare an interest as someone who tries to farm north of the Border. As such, my farming business is not affected by the rural White Paper that we are debating today.
I have never much liked reports of any kind; that is, I suppose, due to the appalling ones that I used to get at school. Today, I often wonder whether they are worth the paper that they are written on, although I accept that this report has no doubt occupied the minds of a long line of distinguished civil servants. The review of the White Paper, Our countryside: the future,

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is beautifully presented, easy to read with some lovely rural pictures. But what is it trying to tell us? How much do all these reports cost to produce and, dare I ask, who reads them? Surely, what people want is action and not a constant flow of academic ideas, many of which in the real world are impractical.
Can the Minister indicate precisely what Defra will do with the Haskins report? How does it in reality relate to Defra? Despite Monday's press release, when will we see the appropriate legislation? What relationship will there be between the Haskins report and the "refreshed rural strategy", as announced by Alun Michael? For the sake of the countryside, let us hope that it really is refreshing and not just another attempt to paper over the cracks; for those cracks are very real indeed.
The powerhouse of the countryside has to be a healthy, sustainable and profitable agricultural industry. One must not forget that farmers are a complete hostage to so many factors outside their control. They are out in all weathers, and they cannot farm from nine to five, whether they are arable, livestock or dairy farmers. The right weather at the right time is all-important to yields and, of course, to quality.
It is impossible to prepare accurate budgets for agricultural products without knowing what the costs are to grow, harvest, dry and, more importantly, what, at the end of the day, those crops will be worth. No other business has to operate under such uncertain conditions. It discourages investment, especially bearing in mind the long turn-around period between investment and yield in the farming world. To change or expand an agricultural enterprise takes careful long-term planning. When I used to make biscuits, we could produce a new product and market it within weeks. In farming, new products can take years to introduce.
I would like for a moment to quote some statistics which I hope will emphasise the real plight of the farming community. In 1982 wheat was selling for £114 a tonne; 20 years later the gross figure paid to farmers was £62—a drop of 52 per cent. The farm gate price of malting barley has dropped 38 per cent and yet the price of a nip has gone up by 116 per cent. Wages in the agricultural sector have risen by 179 per cent and yet the number of hours worked has decreased by 3 per cent.
I too am worried about the future, particularly when one recalls a recent frightening headline: "Mass exodus from UK arable". It went on:
"As much as a quarter of the UK arable land could be removed from production as a result of the MTR according to a new study".
That is well over 1 million hectares—1 million. With such an exodus, nobody seems to have thought of the added costs of social security and housing benefit for the thousands who will undoubtedly be made redundant all the way down the agricultural chain. The deficit to our balance of payments is frightening, as undoubtedly we will have to import more of our food, as headlined by this week's Farm Business Magazine.Surely any economist with the minimum amount of intelligence would say that this was utter madness.
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Red tape is strangling many rural businesses—as the noble Earl mentioned—and legislation for the countryside seems far more stringent than in urban situations. I am sure that the noble Lord, Lord Vinson. will clarify this point later.
The farming industry does need access to the skills of workers from other parts of Europe, including the 10 accession states. Although I understand why the Government have decided to introduce regulations to limit the availability of benefits to workers who come to the UK seeking work, it must be of concern that there will apparently be an onus on employers to seek to verify that workers have registered. It appears that workers will have to register with the Home Office not only when they have found a job but also each and every time that they move jobs.
Given the short-term seasonal nature of much of the work in the agricultural and horticultural sectors, there is a risk that the new requirements will make it much more difficult for farmers and growers to have access to bona fide skilled workers. Will the Minister give an assurance that the particular requirements of agriculture will be fully taken into account in the drawing up of the new regulations?
The noble Lord, Lord Whitty, would be surprised if I did not mention biofuels, but today I would like to place on record how pleased the farming industry was with his sympathetic understanding for Amendment No. 113ZB to the Energy Bill, tabled by the noble Lord, Lord Ezra, and introduced so strongly by the noble Lord, Lord Carter, in Grand Committee on 12 February. I gently remind the Minister that the Budget is but three weeks away. I too am concerned about the MTR and the different guidelines and rules for the different countries within the United Kingdom, especially as I live so close to the Border and have friends whose farms are in two different counties, let alone two different countries.
My noble friend Lord St John of Bletso recently introduced a debate on Broadband. It was interesting to note that all the speakers prior to the wind-ups were elected Peers, and today 64 per cent of the speakers are elected Peers. Sadly, I am computer illiterate, to my shame, but do not live in the back of beyond; everyone is longing to be able to get Broadband and only this morning I was told it will be a long wait and expensive if and when it comes.
The right honourable lady Mrs Beckett, in her keynote speech on 4 November last year, said:
"Our goal must be to establish sustainable rural communities".
I am sure that we all agree with that, but putting words into practice is far from easy.
Sustainability is a three-legged stool: environmental, social, but most important of the three legs is economic. I hope that the noble Lord, Lord Whitty, and his Defra colleagues, will do all they can to give a major boost to the rural economy. I believe that it is vitally important for those of us involved in the countryside so that we can pass it on with pride for future generations, for the benefit and enjoyment of the nation as a whole.
4.24 p.m.
Lord Willoughby de Broke: My Lords, I am grateful to my noble friend Lord Peel for giving us the opportunity for this debate. My contribution will be limited to asking the Government two specific questions.
The first, on which I received a Written Answer from the Minister, concerns Countryside Stewardship payments. I declare my interests as a farmer and member of one of the Countryside Stewardship Schemes. My Written Question asked when farmers would receive increased Countryside Stewardship payments following the rise in grain prices on the "income foregone basis".
Any of your Lordships who are in a CSS will remember that payments were substantially reduced three years ago to all farmers in CSS who had established grass margins around their arable fields; I guess that is the majority of farmers who are in a CSS. This reduction in payments, we were told, was based on the "income forgone" principle; that is, that notional income from grain sales forgone by putting margins into grass should be repaid. That seems fair; I have no quarrel with that. When grain prices kept falling I understood the logic, even though I was disappointed at getting a smaller cheque than I had looked forward to.
But fairness cuts both ways. Grain prices have now risen and the relevant Countryside Stewardship payments should surely rise with them, hence my Written Question to the Minister. But I was a little disappointed. He said in his reply:
"Payment rates for both countryside stewardship and the proposed higher level environmental stewardship scheme, which will replace it, will be reviewed in the light of the introduction in 2005 of the single farm payment as part of CAP reform".—[Official Report, 29/1/04; col. WA 58.]
I am not sure what that means. I was not asking about future schemes but about the current one, and specifically whether this year's CSS payments will take full account of the rise in grain prices; that is, the payments due in the autumn. If the Minister cannot answer today, perhaps he will write to me and place a copy of his letter in the Library.
My second point also deals with a matter that I have raised previously—small business rates. As noble Lords know—my noble friend Lord Peel and the noble Lord, Lord Plumb, both referred to this matter—many farmers have diversification schemes. I declare my interest as a serial diversifier. Like many farmers, I have converted some of my farm buildings into offices and small workshops. In doing that I believe we are doing what the Government want. We are providing the opportunity for individuals and small businesses to get a start, to establish themselves at a ludicrously low cost.
I have a very mixed bag of enterprises, most of them one-person bands: a clockmaker, an olive oil importer, an upholsterer, a furniture repairer, a brewer and even an arts and crafts person who sells art by the square metre—never mind the quality, buy it by the size and you pay accordingly. They all make a living and some have taken
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on local people to help them; the most successful, a metal polisher, employs 12 people. But most are sole traders and are financially fragile. They are always on the edge.
We have quarterly meetings, and the first thing they say—after the routine question of whether I will continue grinding the faces of the poor—is, "Can't you do something about the rates? The rates are killing us". I have huge sympathy with that; the rates are virtually equivalent of the rent I charge them, yet they get absolutely nothing for those rates: no rubbish collection; no sewerage; no lighting; no street cleaning; no road repairs; nothing. If there is a theft or burglary, they may be lucky to get a letter from the police asking if they want counselling. That is all. But they are currently charged the full business rate of 43 pence in the pound. That is grossly unfair. These businesses are fragile. Dumping a four-figure bill on them for non-existent services is the last thing they need.
I know that the Government are seized of the issue and have taken steps to improve matters, so I emphasise that I am not attacking the Government here. I come not to bury Caesar, but to praise him. The problem appears to lie in the new jargon word, "delivery". A Green Paper published in 2000 contained proposals for rate relief for small businesses. This was followed in December 2001 by the local government White Paper entitled Strong Local Leadership—Quality Public Services, which confirmed that the Government intended to introduce a small business rate relief scheme, as was broadly outlined in the paper. Relief of up to 50 per cent was to be allowed for properties up to £3,000 rateable value, declining on a sliding scale of rateable value up to £8,000, at which point there would be no further relief.
I think that the Government got that absolutely right and I congratulate them on what they have done. The measure will be of enormous help to small businesses at a time when they most need it. I also believe it right that this valuable relief was granted to all small businesses, not simply those that are farm-based.
But—and I am afraid that, as was the case on my previous point, there is a "but"—while the Local Government Bill received Royal Assent in September last year, it appears that the part of the Act dealing with rate relief for small businesses—Section 61 in Part 5, to be precise—is not yet in force. It appears that only part of the Act came into force on Royal Assent on 18 September last and that Part 5 still requires a commencement order before it becomes operational.
Can the Minister clarify the position? If Part 5 of that Act is not yet in force, can he tell the House when it will come into force? After all, we are four years on from when the proposal was first floated in the Green Paper. I repeat, the Government deserve praise for putting this provision into the Act because it will make a real difference to small businesses. But how long will they have to wait before the good intentions are translated into effective action?
4.32 p.m
Lord Rotherwick: My Lords, as an arable farmer with my pastures rented, my involvement with foot and mouth disease was limited. I watched the

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proceedings with a critical eye for indications of how the Government would be likely to deal with any future agricultural emergency. The total direct and indirect costs of FM D to the countryside were between £9 billion and £10 billion—for just one livestock disease.
Also during the past four years we have seen swine fever, potato blight and rhizomania on root crops, and blackhead in turkeys. All are highly infectious diseases requiring destruction of the animals infected and cleansing of the fields involved. And that is not to mention the exploding crisis of tuberculosis. It is expected that over 18,000 cattle will be slaughtered this year, marking a 25 per cent increase on last year. The Government expect tuberculosis to cost £2 billion over the next 10 years.
The Government's efforts at controlling major agricultural disease to date have been rather less than reassuring. With other nasty diseases on the horizon, the countryside has every right to be jumpy.
On 25 March 2003 Defra published two documents, the Action Plan and a risk assessment by the Veterinary Laboratories Agency. The Action Plan, aimed at tackling illegal meat imports, made various improvements to the rickety old system. However, those who work in this area say that there are still major problems.
At ports of entry, Customs and Excise is responsible for illegal meat, while port health officials deal with legal meat. There is no link between the two. Once in the country, responsibility lies with local environmental health authorities. Environmental health officers have the power of seizure but not of arrest, and the police will not arrest for a food crime. What a pickle. Currently, the Government are wasting money supporting all these agencies without cohesion and communication. Should Customs, the revenue protection and smuggling agency, be responsible for the health of the nation as well? Should there not be one properly funded and dedicated new agency responsible for both port and inland health in food products?
Among other things, the risk assessment undertaken by the VLA estimates that each year, on average, some 7,500 tonnes of illegal meat is brought into the UK. It also estimates that 95 kilograms of such meat is contaminated with the FMD virus. At present, seized meat is destroyed immediately and no testing for disease takes place. Is this wise?
The VLA also estimates that each year, on average, 175 grammes of infected material is digested by susceptible livestock, which has been calculated to cause an outbreak of FMD every 130 years. No testing is needed here because we have already had two outbreaks during the past 50 years.
The assessment suggests that the method of entry is in air passengers' personal baggage. Blood trails in airport terminals provide a good clue. Furthermore, legally imported meat has an even greater chance of infecting livestock. So what is the VLA's estimate of the risk of legally imported meat being infected with FMD?
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In March 2003, responding to me in a Written Answer, the Minister stated that,
"prosecutions are an important aspect of deterrence which we would like to see used where there is clear evidence of a serious breach in the rules".—[Official Report, 4/3/03; col. WA 106.]
To date, it seems that a suitcase stuffed full of dripping meat being brought into this country is not considered serious. Paul Rainbird, a senior Customs and Excise official, is reported to have commented this month to John Healey, the Minister responsible for Customs, that illegal meat imports can be compared to a UK tourist taking a packet of biscuits on holiday. So that is all right: a suitcase full of illegal meat cannot be serious. Perhaps someone of importance and with common sense could tell Paul Rainbird that biscuits do not carry serious diseases such as Ebola or FMD. Could the Minister say what is "serious"?
Why should people worry about importing illegal meat? No one is being fined or imprisoned and no serious deterrent is being used. At a bushmeat conference held in December last year, African representatives stated that part of the reason for illegal meat imports is due to the smugglers not being frightened of facing a conviction if they are caught in the UK.
But the danger is not solely from unintentional infection. The Veterinary Record for March 2003 contains an editorial on the threat of bioterrorism in the shape of intentional food contamination. How can we find out about and prevent such an incident if our border arrangements are lackadaisical about illegal meat importation, and when illegal meat that is seized is not tested'?
The same editorial refers to the seriousness with which the bioterrorism threat is being treated in the USA. In 2003, the US National Institutes of Health, the leading government agency in biomedical research, was due to receive almost 1.75 billion dollars' worth of the planned investment into countering bioterrorism. The US has taken this issue extremely seriously, apparently unlike the UK.
In a recent response, the Government would say only that they are considering a wide variety of potential scenarios within the risk assessment of terrorist attacks. That is not very reassuring. Should we not follow the lead of the US and take seriously the massive dangers surrounding the importation of illegal meat? I support the actions taken by the US. I do not support the Government's lackadaisical attitude towards our national agricultural security. One cannot blame the noble Lord, Lord Haskins, for referring to Defra as a "dog's dinner of the highest order".
4.39 p.m
Baroness Thornton: My Lords, I welcome the opportunity to discuss rural matters and I congratulate the noble Earl, Lord Peel, on initiating the debate. The recent publication of the review of the Rural White Paper—Our countryside: the future—and the independent work of the noble Lord, Lord Haskins, in reviewing rural delivery, presents us with an opportunity to do three things: to celebrate the success of what is working, to assess the challenges, and to work out how

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best to move forward. The idea that this Labour Government are not interested in or committed to improving life in rural communities is simply not borne out by the progressive interventions and care that has been taken to make those interventions effective. I believe that it is a shame that the noble Earl returns to that old, so-called urban/rural rivalry and debate. We should have moved on from that by now.
I should like to speak about several parts of the review: access to and the care of the countryside; enterprise in rural communities; and the importance of the sensitivity of rural poverty programmes. Many of us, especially supporters of the Ramblers' Association, wish that the progress to implement the Countryside and Rights of Way Act had been more rapid. However, I accept that it is very important that extended access has to be the result of a sensitive and fair process. I welcome the fact that this programme will be completed by 2005.
This House amended the CROW Bill to include a commitment to the implementation of the biodiversity strategy and the Act strengthened the conservation and management of areas of outstanding natural beauty. The noble Baroness, Lady Miller of Chilthorne Domer, championed many of those changes and, I am pleased to say, the Government eventually accepted the proposals that she made.
I am particularly interested in the commitment in the review to rigorous evaluation of the new programmes and how they will work. The review sets some rather hard targets for the improvement of SSSIs in England of 100 per cent by 2010. Some years ago, when I served on a European Union sub-committee in your Lordships' House, we explored the issues, partly under the chairmanship of the noble Earl, Lord Selborne. We looked at the state of SSSIs and expressed our dismay at the dishevelled and sorry state of many of them. I note from the graph in the review document that by March last year all areas had been assessed and that over half had been improved.
I also welcome the fact that the UK is beginning to contribute effectively to the European Union's Natura network through the designation of further sites. SSSIs are affected by a wide range of complex factors. Although it will take time to deliver results, I believe that the review is right to note that greater effort is required, but that much progress has been made.
I turn to the issue of rural enterprise and in particular to the importance of Defra working effectively with regional development agencies, government offices, local government, the Rural Affairs Forum and the voluntary sector to define new mechanisms for delivering services to rural communities and supporting the 30 per cent of businesses in rural areas. I have a particular interest in social enterprises, community enterprises and cooperative enterprises. I declare an interest as the unpaid chair of the Social Enterprise Coalition. That organisation has made the development and growth of rural, social and community enterprises a major priority. By bringing together social and community enterprises across the UK, we hope to challenge some of the lack of coherence among the business support that is available
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through the Small Business Service, regional development agencies and other mechanisms. Our experiences very much echo the findings of the noble Lord, Lord Haskins. I particularly welcome the frank assessment contained in the rural White Paper review document which recognises that there are real challenges in improving support to rural businesses.
There is a requirement to improve the understanding of the needs of rural businesses and how best they can be delivered. When a local social entrepreneur or a group of local people want to establish a community enterprise, a co-operative business or want to buy out the local pub which is being closed down—as happened in Hesketh, where the community now owns the pub and the brewery attached to it, or in Lock Fyne where the community owns Loch Fyne Oysters or a group of which I heard yesterday in Cumbria that wants to run and own its village school) it is important that the new and more coherent ways of delivering support for rural businesses, promised by the review, provides the expertise and training that such enterprises require.
Last September the Social Enterprise Coalition brought together many of those who are supporting social enterprises in the countryside. We estimate that up to 36 per cent of our members trade and operate in rural areas. The pleas that came from them about co-ordination of services, training, management expertise and funding, absolutely echo the findings of the noble Lord, Lord Haskins, and the commitments in the review.
I believe that the Government's stated first priority in the review, which is to focus interventions and resources on areas and on people who need them most and to target those resources effectively, is absolutely right. It is clear that to deal with poverty in rural areas—a matter to which the right reverend Prelate alluded—one must deal with poverty in small pockets that are widely spread. That requires programmes that have detailed knowledge and are designed to deliver in an appropriate fashion.
NCH, the children's charity with which I had a close association some years ago, works with the Countryside Agency to try to provide blueprints about how those kinds of programmes may best be delivered. We can see that the enormously successful Sure Start programme, which operates in many urban areas, has been doctored and adapted so that it is available across rural communities.
I close by saying that the commitment made in Chapter 5 of the review—a chapter entitled "A Vibrant Countryside"—speaks of,
"a … countryside which can shape its own future and whose voice is heard by government at all levels".
I say hurrah to that.
4.46 p.m
The Earl of Courtown: My Lords, I thank my noble friend Lord Peel for tabling this Motion and for his very thoughtful speech. First, I declare an interest as a landscape contractor, working in the Cotswolds. I am fortunate to live there—an area of outstanding natural

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beauty, as mentioned by my noble friend Lord Plumb. If one is lucky enough to be able to afford to live there, it is a great place to live.
Difficulties arise for those taking the first step on the property ladder. How can a skilled worker earning, say, £8 or £10 an hour afford to get into the market unless he has an enormous deposit to put down on a property? People may say that the Cotswolds is an exceptional area, but every area has its exceptions. A two-bedroom cottage in the Cotswolds, in an outlying village, costs a minimum of £200,000.
As my noble friend Lord Selborne said, housing associations are doing a great job, but they cannot keep up with demand. That lack of supply feeds housing inflation. What else can be done? The Government have the Starter Homes Initiative. They do their bit, but perhaps more discretion should be given to those determining who is a key worker so that the scheme can be widened.
I note that there is to be a reduction in the discount on council tax for those with second homes. I do not believe that that will affect those purchasing properties, but it may raise a few more resources for local authorities. Perhaps the Minister could tell the House how much it is estimated that that will raise.
Education of the rural workforce is another important point. At the moment the rural skills centres, at such places as the Royal Agricultural College and Hartley College, provide a very useful service in providing skills courses, but red tape still manages to get in the way. Would the Minister clarify the position relating to the recognition of the ROLO and Lantra qualifications? Although they are recognised by the Health and Safety Executive, they are not recognised by the main contractors' group through the CITB. That means that workers with ROLO and Lantra qualifications cannot work on sites under the control of the main contractors' group. I realise that the Minister may not be able to answer that question off the top of his head, but perhaps he could write to me.
A more desperate situation is that of school leavers who come into the workforce with few skills. More worrying still is the lack of reading and writing skills in school leavers and among the adult population. That should be made a priority.
Another area of concern is the emphasis on forestry. When I was at college 20 years ago the emphasis was primarily on quality timber, followed by conservation and leisure. That has now been reversed. In the lowland environment a great deal of broadleaf woodland has been planted, but with little softwoods. During the planting season this year the only conifers we have planted are those in landscaping schemes around large country houses, which also happen to be second homes.
According to a recent article in a trade magazine, all that seems to be growing at the moment is rather expensive firewood; we are not looking to growing quality timber, both softwood and hardwood. We are now fourth in the list of importers of round wood behind China, Japan and the USA. I feel that we
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should promote the planting of more softwoods. I am not talking about the enormous blocks of softwood that received such appalling publicity in the 1970s and 1980s; I am talking about promoting the planting of softwoods in small blocks, whether as nurse crops or to vary the landscape. This will also help conservation.
It has also been established that mixed woodland copes better with global warming. It is able to handle the effects of the extremes of weather; it helps to stabilise ground water; it increases holding capacity and reduces run-off.
Many interesting issues have been raised in the debate. I look forward to the Minister's reply.
4.51 p.m.
The Earl of Shrewsbury: My Lords, I, too, congratulate my noble friend Lord Peel on introducing this important debate today. He has always been an acknowledged expert on, and a stalwart supporter and defender of, the countryside and those who live and work in it. He deserves our congratulations.
I shall be brief. I should like to demonstrate the economic and environmental contribution that the aggregates industry makes to the countryside and its economy. I declare an interest as the owner of a major limestone quarry situated in the Staffordshire moorlands on the periphery of the Peak District National Park.
Minerals are an important natural resource. The United Kingdom is fortunate that its geology allows us to be largely self-sufficient in our supply of aggregates. There are some 1,300 quarries supplying crushed rock, sand and gravel. Ninety per cent of this material is used for construction purposes, with 10 per cent for a wide range of other uses ranging from glass-making to antacids, from pills to chocolate soft-centres.
The benefits of using these minerals are apparent. They are used whenever we build a patio, repair our roads and railways, build a new school or hospital, or embark on a major national project such as the Channel Tunnel rail link. As well as providing for a national need, these quarries and associated manufacturing plants bring direct benefits to local communities, and because of the very nature of where the vast majority of these quarries are sited, especially to rural communities.
The 1,300 current aggregates quarries, which are mostly located in rural areas, support some 40,000 jobs. These jobs range from the southern part of Cornwall to the far northern tip of Scotland. At a time when traditional sources of employment such as agriculture are declining, these jobs are a most important part of rural life and vital to the rural economy.
But it is also important for local communities that the industry operates as sustainably as possible and that after-care of former quarries is carried out to a high standard, sympathetically and to the benefit of the locality. There exists, of course, a rigorous regulatory system operated through local minerals planning authorities—generally the local councils—and bodies such as the Environment Agency and the Health and Safety Executive.

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In recent years the operating standards of the industry have continued to improve. In 2002, only two out of 1,468 serious pollution incidents—which equates to 0.13 per cent—affecting air, land and water, recorded by the Environment Agency, were related to aggregate extraction. All reputable operators appreciate the need to work constructively with local communities.
Key sustainability improvements in the industry include the quality of the land restoration carried out. More than 700 sites of special scientific interest have their origins in mineral extraction. There is a high level of recycling. Twenty-four per cent of aggregates supply in Great Britain is from recycled sources, such as construction and demolition waste, ensuring that all aggregates resources are used efficiently. It is estimated that this recycling rate is three times higher than the European average. It is commendable.
In conclusion, it is important for countryside policies to reflect the real need of real communities. Quarrying and associated activities provide wide-ranging employment opportunities in rural areas—often in areas where very few other opportunities exist—and therefore produce income for local people and businesses, as well as supplying products of national and local importance in an increasingly sustainable manner.
I am aware that in the near future Her Majesty's Government will issue a consultation paper reviewing mineral planning policy. I impress on the Minister and his colleagues that this consultation must recognise the economic, social and environmental value of the quarrying industry to rural communities and to the countryside in general.
4.55 p.m.
Lord Grantchester: My Lords, I thank the noble Earl, Lord Peel, for introducing the debate today. It is very topical as the agricultural industry digests the ramifications of the Statement of 12 February on the system of single farm payments and before the publication of the refreshed rural strategy during the spring. I declare an interest as a dairy farmer in Cheshire, a director of Dairy Farmers of Britain milk co-operative, a member of the Cheshire Rural Recovery Board, a member of the NFU and chairman of the Cheshire branch of the CLA.
The countryside accounts for 80 per cent of the area of England and Wales, 23 per cent of its population and 30 per cent of its jobs in manufacturing and services. It is the start of the food chain and its prosperity is reflected both upstream to the supply trade and downstream to processing.
The announcement on 12 February takes CAP reform forward. The fundamental decision to decouple subsidy payments from 2005 and to ensure that all land is included to meet sustainable environmental benefits has been welcomed. My noble friend the Minister is to be congratulated on the imaginative dynamic change that will unfold from historical production support to geographical support.
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Nevertheless, there will be losers and gainers under the redistribution but generally the livestock sector, especially dairy and intensive beef—many of whose farmers will have invested in efficiency measures recently—will lose out. Furthermore, if they are located within the severely disadvantaged areas they will suffer from the reduced level of support. I know that the National Beef Association has examples where predominantly suckled calf breeding farms in the fringes of the SDA line face a 55 to 75 per cent difference between the historical coupled subsidy income and the flat rate SFP received from 2012. Livestock systems will be under severe threat as the SFP is larger than any expected profit.
This is of concern as the western side of England is naturally suited to livestock farming, which has a further reach into the rural economy through feed mills, auction marts and so on. Can my noble friend indicate how far those disadvantaged can be helped? For example, can the SDA line be split between above and below the moorland line? Can my noble friend give any indication when entitlements regarding applications to the natural reserve will he published for those under transition, and whether this will include provision for exceptional hardship?
The debate will naturally develop with the standards of environmental practice required under cross-compliance. Under present stewardship schemes, there is a poor take-up from the livestock sector as most livestock farmers, especially dairymen, judge it as inadequate in terms of reward for quite disruptive procedures, and yet intensive dairying has a huge contribution to make to improving environmental sustainability. In considering good agricultural practice and cross-compliance, can my noble friend indicate that procedures in relation to livestock farms will be reassessed, especially in regard to including more positive encouragement?
There is further concern that differing models will be adopted between England, Wales, Scotland and Northern Ireland. Can my noble friend clarify that there will be a consistent approach both within the UK and between the UK and Europe so that farmers and growers are not placed at a competitive disadvantage?
The changes in support mean that agricultural production must become market focused, not subsidy based. Many operations will be in deficit and unprofitable without support. The implication is that, for British produce to exist in the future, it will have to be paid for. No longer can food markets expect produce to be available at whatever price is offered. The milk co-operative, Dairy Farmers of Britain, responsible for some 20 per cent of England and Wales milk production through its members, has set itself an ambitious strategy to deliver real change in the dairy sector.
The rural economy is characterised by a greater proportion of small and self-employed businesses than in towns and cities. Agriculture is no exception to this and has been taking advantage of rural regeneration schemes. In the north-west, the Northwest Development Agency among others is to be commended for its rural recovery programmes. As part of that, Cheshire has been

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allocated £11 million to spend between 2002 and 2008. Cheshire has identified key flagship projects to aid regeneration. In partnership with Business Link, it is setting up a rural enterprise gateway, located at Reaseheath College, to help rural businesses assess opportunities, retrain and establish themselves through the planning system into new operations.
Secondly, it is focusing on market towns and villages to recreate them as rural hubs. Thirdly, it has identified key aspects of Cheshire, such as gardens and waterways, and will be helping them to develop as key features in the tourism sector. The interplay between agriculture and tourism was clearly identified during the disastrous foot and mouth outbreak. At a turnover of £16 billion in England and Wales, rural tourism far exceeds agriculture in headline importance.
Rural recovery programmes focus on rural entrepreneurship. The Country Land and Business Association, with Defra funding, has set up a programme of courses entitled Enterprise Works, with a three-year target of 20 new business start-ups. That figure has already been exceeded, with 70 courses already oversubscribed. The countryside is awash with potential entrepreneurs, who must be encouraged as the new heartbeat of the rural economy. Those entrepreneurs need to operate on an equal basis. Rural broadband is a key element in establishing rural areas as competitive locations for business. The Government, along with BT, are to be congratulated on the drive to enable all areas to have access to broadband by 2006.
Finally, new access to the countryside is developing. Mapping under the Countryside and Rights of Way Act 2000 is progressing to its conclusion. In January this year, my right honourable friend the rural affairs Minister in the other place announced that the new public right of access is to be brought forward and rolled out in stages, region by region. The lower northwest is to be one of the new areas, the first to be available from September 2004. That will prove to be an ambitious target, as a conclusive map for the area covering Lancashire, part of Cumbria, parts of North and West Yorkshire, Merseyside, Greater Manchester and Cheshire as well as parts of Staffordshire and Derbyshire is yet to be published. How will the public know about the areas for access if the Ordnance Survey maps are yet to be finalised? Will my noble friend give an assurance today that enough resources will be made available and everything will be ready on time?
The new Countryside Code has yet to be published. Local authorities are severely underfunded to undertake the additional work that is clearly needed. I must stress to my noble friend that these are pressing matters. The countryside continues to change. Problems have been recognised, much has been done and more is needed. I commend the policies being undertaken.
5.4 p.m.
Lord King of Bridgwater: My Lords, I am pleased to follow the noble Lord, Lord Grantchester. His last comment was that the countryside is awash with new entrepreneurs. I am not sure that I would go that far, but it is certainly a theme that I wish to address.
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I am grateful to my noble friend Lord Peel for introducing this debate, which is on the situation of the countryside in the light of the Rural White Paper. The situation in the countryside will be exactly the same before the White Paper and after it. I am pretty cynical about the ability of the Government. I cannot criticise them for a lack of enterprise, initiative or energy. The time it takes to produce these telephone directories on the subject is indication enough of a measure of industry. However, they bear a startling resemblance to some that I published, with the same pictures of rural post buses, voluntary post offices and the various rural initiatives with which I once sought to arrest the decline in country services and the quality of life in the countryside, to which noble Lords have drawn attention.
The noble Lord, Lord Livsey, and I were in the House of Commons together. I apologise for not knowing for how many years. I have watched my own largely rural constituency face such challenges over 30 years—the irresistible forces that seemed to be at work. We faced appalling challenges in trying to sustain agriculture as a key engine of employment and economic survival in the countryside. The continuing decline in employment was progressive over those years. It was partly because of productivity, but partly because of the declining state of agriculture.
There has been enormous pressure on the family farm. We would all love to see the romantic concept of the family farm, which continues generation after generation. I remember two years ago standing in Nether Stowey in Somerset—which the noble Lord, Lord Hussey, will know well. A very experienced farmer pointed towards the Quantocks hillside, at farms of 200 or 300 acres. He said, "In 10 years' time, there will not be a single farm of less than 1,000 acres". Three years later he revised that forecast to closer to 2,000 acres, if those farms are to be viable, agricultural units.
Just down the road is what used to be an agricultural college. It now has hardly any agricultural courses. Now it has courses about municipal parks and a course on green-keeping for golf courses. Those are enterprising initiatives to find alternative activities because, sadly, of the tremendous decline in demand for agricultural courses. We all know the sad statistic of the average age of farmers in this country and the percentage of farmers who have no successors for the active, energetic, hard-working and, at times, arduous work that farmers have to undertake.
As we increasingly look at what can be seen as palliatives—environmental support and turning the countryside into our nation's parkland—we cannot avoid the conclusion that, unless we can re-establish that engine of economic justification, the future for the countryside will be challenging indeed. Nothing is free of that. The noble Earl, Lord Courtown, mentioned forestry, which was not mentioned by other noble Lords. I read the recent Forestry Commission report, published under the chairmanship of the noble Lord, Lord Clark of Windermere—a colleague in this House. I read all the various pages about access,

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biodiversity and environmental sustainability. Until I got to the end I hardly found anything about timber production.
We face further pressures, which grew throughout the time that I mentioned, but are now accelerating. I must tell the noble Earl, Lord Shrewsbury, something about globalisation and the globalisation of imports. We know about agricultural produce. One can walk into any supermarket and, regardless of the season, products are available—anything one could want—which come from some quarter of the world in which it happens to be in season. Such are the challenges that we face. I should warn him that I went to a recent exhibition about stone. I found that, if one wished to surface a patio, one could now get a competitive supply not only form India, but from Afghanistan. Even something as bulky and unsuitable for long-distance transport as stone threatens our own domestic industry.
At the moment, the purchasing power of the supermarkets is a challenge continually faced by home agriculture. Very shortly, we shall face the expansion of the European Union and the greater challenges that that will pose. We know that farming is like a manufacturing industry. Parts of it are labour-intensive and those areas will face enormous pressures from imports from eastern Europe and the rest of the world. That will not happen immediately, and there will be certain transitional arrangements, but it is a great challenge.
In that situation, I shall add to the depressing list. Other noble Lords have referred to housing. The housing situation is becoming much worse. It is the background to the huge rise in house prices. By its nature, housing in the countryside, in rural areas, is very much in demand. The Cotswolds have been referred to. I know them well and live in the Cotswold AONB. It now seems to be a given that a house bought at a price at which some local person might have competed for it is immediately doubled in size by some massive extension which puts it completely outside the reach of a local person next time round.
As a former chairman of the English Rural Housing Association, I noticed that there was a brief from the CLA which referred to the opportunity for using exception sites, which the English Rural Housing Association strongly supported. Moira Constable, who some noble Lords may know, has been very active in this field. The opportunity is taken to build small numbers of houses on those sites, which can be restricted to local people, perhaps being available under shared ownership schemes, to give them some chance of continuing to live in the countryside. We knew the challenge of second homes, but if other homes are now extended beyond people's reach, it is a very serious challenge indeed.
So, in this situation, am I totally pessimistic? Do I see nothing but an inevitable, irresistible drive towards the decline of the countryside? I do not. My hope is based on the initiative, the entrepreneurial capabilities, of people if they have the chance, as mentioned by the noble Lord, Lord Grantchester. But their voices must be heard. I had
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not thought about the introduction of RDAs to the same extent as the noble Earl, Lord Peel, who said that it is virtually the disenfranchisement of local people. I noticed that the voices of local people and rural communities were always liveliest in district councils, became slightly more attenuated in county councils, and in RDAs, with the major conurbations being contained within them, it will be very hard indeed for their voices to be heard.
If people have to find their own solutions, there are initiatives, there are opportunities and it is up to them. Thirty years ago, I was asked to chair a conference of the Rural District Councils Association about transport in rural areas. That led to initiatives such as the post buses. I said—and I do not often remember what I said 30 years ago—that, at a time when there was the least public transport in villages, there was more transport in villages than there had ever been. That is an illustration in relation to transport of the way in which co-operation and constructive effort by local people can help them to meet their own opportunities. In my own constituency we had volunteer post offices, we had a butcher's shop that was a butcher's shop and a post office, we had opportunities and the ideas of local people.
The rule for government—a point made by the noble Lord, Lord Haskins—is to listen to local people, to give them opportunity and local delivery. MAFF was and Defra is too centralised. We live in a world of "regulationitis". I call it "health and safety disease". Every regulation has a good point behind it. But the overriding duty of Ministers is to look at the totality, to see what it adds up to and to try to ensure that we produce an environment for people in the countryside. Then the entrepreneurs, whether they are in farming or in other activities, will have a chance to get support to enable them to survive and make a future.
5.15 p.m.
Baroness Miller of Chilthorne Domer: My Lords, I thank the noble Earl, Lord Peel, for giving us the opportunity for this debate this afternoon. It has become a debate between those who see the glass as half-empty and those who see the glass as half-full. I feel that the second half of the debate was more in the category of the glass half-full, which has allowed us to end on an optimistic note.
The right reverend Prelate the Bishop of Peterborough started the trend by talking of local produce. The theme was taken up by the noble Earl, Lord Shrewsbury, who talked about quarrying, the noble Baroness, Lady Thornton, who talked about social enterprise and the noble Earl, Lord Courtown, who talked about wood and the shame that there is no domestic production. Like the noble Lord, Lord King of Bridgwater, I noticed with dismay that the Forestry Commission's splendid publication did not mention timber production as a useful product.
The theme that has run through the debate this afternoon may give the Government pause for thought. I found their review of the rural White Paper helpful. I noticed that, when it comes to local production—I refer noble Lords particularly to paragraphs 60 and 61—they

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have concentrated around regional food initiatives, which are about the more extraordinary or special products that are marketed in a particular way, often for export. They have not concentrated enough on ordinary produce and products for ordinary people living locally. I know that the Minister has championed some local procurement efforts and I am surprised that they are not reflected more strongly in the review. This is an area that needs another look from government.
Food from Britain has taken the lead in. for instance, promoting local food but its expertise is in specialist producers. It has a very strong producer interest. For example, in the south-west the rural development agency has given the lead to a private-sector organisation that is entirely producer-run. This means that the interest in developing a market for, for example, health, building on the Government's work with local schools and hospitals and their interest in local food, is missing from the equation at the moment. That area needs substantial further thought.
I especially welcome the emphasis on social enterprise this afternoon. That is where the future of rural areas lies. They have a terrific rural land base, which, at the moment, is in a state of flux. This afternoon, noble Lords have emphasised the difficulties that farmers and growers will face in the reform period of the CAP. Given that, it is particularly important that there is one place where farmers and growers can go for advice on how to deal with the forthcoming changes and how they may best access the markets that, if they are given sufficient advice and help with marketing and training, they will find locally, regionally and nationally. That area of work for the Government needs to be emphasised particularly.
I was also interested in a theme that came through very strongly about the changing framework that rural areas have faced. I was grateful to the noble Lord, Lord King of Bridgwater, for his 30-year view. I of course have a much shorter view, but it was only in 1999 in this House that we had a debate on the changes that rural areas were about to face with the introduction of rural development agencies, the abolition of the Rural Development Commission, and the setting up of the Countryside Agency. As a House, we expressed a lot of concern that that would mean great change for those in rural areas. We also expressed our hope that it would mean more streamlined delivery and a much simplified regime.
As we know in retrospect, that was not the result of those changes. The noble Lord, Lord Haskins, has done us a service in laying out the options for a better way forward. In his report, he talks about the fact that local authorities and partnerships should assume the main responsibility for the delivery of schemes and services to rural communities. I am glad that he said that, but I would go further than him. They should assume the main responsibility as the local elected bodies not only for the delivery of schemes and services, but largely for their design.
That issue has stymied development in rural areas time after time. Successive governments have been very keen to lay down a central pattern for the way in which the services should be delivered, which has been
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taken on wholesale by rural development agencies. They themselves have very little rural focus. It was very strongly argued in this House that they should have even one board member with special responsibility for rural areas, and they perhaps have one such member. If the Government feel that rural development agencies are the right bodies to design services for their regions, I ask them to think again.
Local government is the right place for the design of those services. I was quite surprised at the strength of the comments of the noble Earl, Lord Peel, on planners. They largely enact the local and national policies laid down by central government or councillors. It is often forgotten that the local planning officers merely enact policies that others have laid down. I am sure that they do not always get things right, but it is more incumbent on those elected to make sure that they lay down the sorts of policies that then become enacted in the right way.
If we are to address any of the issues about which noble Lords have talked so eloquently this afternoon, local entrepreneurs and local people must design services for which they see the need in their region and which can support local businesses and the local environment within a very light-touch regulatory framework. The noble Lord, Lord Palmer, described the three-legged stool of sustainability, and I agree with him on that. He suggested that the economic leg should be much longer but, of course, if one leg is much longer than the others, that results in a very unbalanced and tippy stool. We have to make sure that we get all three legs the same length.
Social divisions have become much sharper in the countryside, another fact referred to by noble Lords. There is no quick fix for that. I recognise very much what was referred to on the issue of affordable housing. That was the other theme that ran through the debate, and it is a critical issue. As my noble friend Lord Livsey said, we will not have young people in the countryside unless they can afford the housing. I agree with the noble Lord, Lord King of Bridgwater, that exception sites can prove one way forward. The experience of many homeowners who went into shared ownership schemes in the 1980s and early 1990s was very difficult, so I am not sure that I could recommend that as a way forward. However, I ask the Minister to say what the Government are doing with regard to both exception sites and affordable housing schemes.
5.25 p.m.
Baroness Byford: My Lords, I would like to begin by thanking my noble friend Lord Peel for instigating the debate, which has produced a wide range of issues this afternoon. I also remind the House of our families' farming interests and my interest with several rural groups—the NFU, the CLA, the National Trust and many others.
Last year, we had a debate in June on the state of the countryside instigated by the noble Lord, Lord Palmer, the rural delivery review by the noble Lord, Lord Haskins, and Defra's autumn performance report on 2003, and now we have the review of the rural White Paper. That is

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an amazing amount of words, as mentioned by others, and follows an alarming expenditure of time on consultation, discussions, drawing conclusions and committing the whole thing to paper. Yet there is still a palpable feeling in the countryside that little is going right. My noble friend Lord Renton of Mount Harry said that there were no clear decisions, action or money, which is reflected in several areas where I have been lobbied. The noble Lord, Lord Palmer, asked what happens next, a subject to which I shall return.
One tangible effect has been the drain on farmers and farm labourers from the land, and the migration of young people to towns and cities in search of jobs and a place to live that is affordable and does not mean sharing their lives by living with their parents at home. All that has taken its toll on the countryside. In addition, the rise in crime on rural properties and the increasing proportion of road accidents on rural roads is alarming. So too is the increase of litter on our rural roads, the fly-tipping in the lanes, gateways and fields, and the burning of vehicles anywhere that is not easily overlooked. The case of fly-tipping is extremely important, because the Environment Agency said in its recent pamphlet that it rose by 20 per cent in 2003.
The review of the White Paper contains plenty of statistics concerning delivery or the lack of it, against the target set only three years ago. It in some ways excuses Defra's inadequacies. There are no central statistics; there was not, and there still is not, a robust definition of what is rural or urban; and there is no clear understanding of priorities. Only today, I received a written reply from the Minister informing me that he cannot tell me how many consultants and professional advisers are employed by Defra. Yesterday, I was told that the fallen stock scheme is to be postponed until the autumn or even November. As that is caused by the Government's inability to sort out the state aid problems, will the Minister assure the House that the rules governing the disposal of fallen stock will be applied with a light touch, which was originally the suggestion? Will his department issue guidance to local authorities, which actually implement such light touches?
On the question of fallen stock, I would like to refer to the contribution made by my noble friend Lord Rotherwick. Disease control is hugely important, and the lack of it is of worry not only to those who look after livestock, but to those who have no association with livestock. My noble friend suggested that too many departments overlapped and in some cases did not talk to each other at all. I hope that the Minister will explain briefly where the Government intend to go on that.
I turn to crime. Last week, the NFU Mutual, which is the largest insurer of farmers and rural businesses, reported a steep rise in claims of burglary, theft and damage to property. The feeling of violation caused by such acts goes in deep and results in increased expenditure of time and money in trying to protect possessions necessary to carry on rural business.
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There is real anger that throughout the country the police are being centred in towns. Village police stations have been closed and telephone calls are dealt with miles away. Those in charge insist that the result is more cost-effective and that modern technology removes the need for local knowledge. I must say that that is not shared by those who live in rural communities.
There is also bewilderment and anger at the way in which access to the countryside has been handled. Most people who do not live in rural areas believe that the Prime Minister has given them the right to roam wherever and whenever they please outside towns and cities. They have no concept of crops or, sadly, of livestock. A field of young corn is very different from a type of grass. Very young animals are cute, but there is no understanding of the levels to which their mothers will go to protect them. Sometimes, farmers who try to explain the difference and the dangers are liable to receive some rough language—if not something stronger.
The noble Baroness, Lady Thornton, referred to greater access. We all welcome greater access, but walkers must have a clear understanding of those who maintain the land. We do not want aggravation. Is the Minister confident that the recent slippage in preparing for open access, particularly in the north-west and the south-east, will be remedied in time, or are the Government considering delaying its implementation? The noble Lord, Lord Grantchester, questioned whether money was available and the timing was right.
Last week on the airwaves there was news that contracts would free up GPs from doing night work. Could the Minister explain the replacement service that will be operated in rural areas? Will a GP who is close by provide cover, or will it be provided by a national call centre? We have no idea what will happen and we need to have confidence in the new system. It is one thing being ill in an urban area where other doctors are around, but another in a rural area where there is only one doctor, probably several miles away.
Several noble Lords—my noble friends Lord Selborne, Lord Peel, Lord Courtown and Lord King—highlighted the problem of housing. I, too, want to touch on affordable housing in particular. It is a disgrace that in the so-called "nice" areas of the countryside hidden homelessness has risen from 11.8 per cent to more than 18 per cent. My noble friend Lord King in particular mentioned smaller houses being extended. I am worried about small cottages which house independent families being bought and knocked together to displace two or even three families in order to house only one. That is a tremendous challenge for the future. I agree with my noble friend and others who question whether the RDAs are the way to make a success of any future housing policy.
On planning, the Government must be well aware of the fact that they must give clear guidance to local authorities to define and endorse the wider meaning of "sustainability". If not, we risk misinterpretation and inconsistency in different areas of the country. I have previously given examples of that.

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The right reverend Prelate the Bishop of Peterborough talked about post office closures and the roles of the churches. I have for some time campaigned on behalf of post offices and of the need for them to be maintained. The Minister may bring me up to date, but I know that they continue to close at an alarming rate.
I cannot leave the debate without finally returning to the CAP review. It is the most important event in agriculture at the moment. The noble Lords, Lord Grantchester and Lord Palmer, and my noble friend Lord Peel, spoke about that. My noble friend Lord Plumb questioned whether redistribution and different systems would cause great difficulty between those who farm in England, Wales and Scotland. I support what he said because he was right.
Also in that context, could the Minister say more about yesterday's announcement on the joining together of English Nature, the Countryside Agency and the rural development services? We have heard only the announcement and we have no idea how it will work.
In conclusion, I thank my noble friend for making the debate possible. I am one whose cup is half full. I believe that there are opportunities out there, but the Government have many questions to answer. They need to free up people to get on and make their businesses a success.
5.36 p.m.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whiny): My Lords, I thank the noble Earl for initiating the debate and I thank all noble Lords for their detailed participation. They made a wide range of points, not all of which, I regret to say, I shall be able to answer.
The Government's position has been clear. In the rural White Paper, we gave a commitment and we have reviewed the White Paper. The general direction of policy arising from that review demonstrated a number of significant achievements. There has been a general view that the vision established in the White Paper was accepted by a large swathe of individuals and organisations in rural areas. Good progress has been made on many of those commitments, but many challenges remain. With varying degrees of welcome and grace, today's contributions reflected that.
There is also the question of whether the policies are right. Broadly speaking, the review indicates that they are. Then there is the issue of delivery, which my noble friend Lord Haskins addressed in his usual forthright and trenchant manner which the department has fully taken on board. There is a need to rationalise the means of delivery; to ensure that entrepreneurs and others within rural areas are aware of the structure of the schemes and regulation. It can be greatly confusing, as the report amply indicates. There has also been a move to regionalise and localise some of the deli very and decision-making.
That is a massive task in terms of government machinery, parts of which we have begun and parts of which we announced only yesterday in relation to the integrated agency which will oversee the land
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management responsibilities, regulations and schemes. It will take in almost the whole of the current work of English Nature; a large part of the work of the Countryside Agency; and the rural development service work in support of agri-environment schemes. Other grant schemes are currently located within the central department.
The Government have therefore embarked on a major step and clearly it will ultimately involve legislation. But already we can rationalise our delivery to a significant degree along the lines the noble Lord, Lord Haskins, recommended to us. We are addressing major delivery issues and we are facing up to many of the major problems within rural areas.
One of the problems of the debates is that there is no clear definition of "rural" as against "urban", as the noble Baroness said. That is of course true, but it is largely because there are huge differential problems in different parts of what we broadly call "rural Britain". Some agriculture remains the dominant factor, or the driver, of economic and social activity. In others, we are talking about a similar pattern of life and employment to those of urban areas. Many people living in those villages and smaller towns work in larger towns or retire from larger towns.
By and large, the range of prosperity in rural Britain is pretty wide. Much of rural Britain is more prosperous than much of urban Britain. There are remoter rural areas, even in England, which have particular problems but, in general, the countryside—rural Britain—is sharing in the general prosperity and, to some extent, is doing rather better than many parts of urban Britain. We must address those different problems. That is one reason why my noble friend Lord Haskins said that we had to localise and bring delivery of schemes, support and policy closer to the people.
Many contributions focused especially on agriculture. We have recently announced our decisions on implementation of the radical change in common agricultural policy. There has been welcome for the principle of the change—in particular, the principle of decoupling. The principle of decoupling will give agriculture here and across Europe a means to get away from dependency on production-related subsidy. That often leads to production that may not strictly be overproduction but produces things that the market does not especially want or for which it is not prepared to pay a sufficient price to maintain what we all want: a profitable agricultural sector.
Now, significant support will remain under the common agricultural policy for people who farm and manage the land, but it will not be linked to what they produce on that land. In other words, farmers will be left to direct their activity—their production and their whole economic enterprise—to what the market really wants. They always claim that they would love to do that. Many of them find difficulty moving from a dependency on subsidy to a dependency on what the market wants, but they are making valiant efforts to make that change and some are clearly well down that road already.

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They will complain about aspects of the new system and about regulation. As the noble Earl, Lord Peel, mentioned at the beginning of the debate, my noble friend Lord Haskins also addressed that problem and gave 21 recommendations. I can tell the House that 14 of those recommendations are being acted on and Defra is involved in a much wider range of rationalisation of regulations—in environment as well as strictly in agriculture. One of the main recommendations of the Curry commission was that we must approach regulation in a more holistic manner.
As one noble Lord—I think it was the noble Lord, Lord King—said, regulations may be individually justified but, when we consider their totality, they inhibit the proper operation of enterprise and the environmental and safety outcome that we want. By moving to a whole-farm appraisal, whole-farm planning and whole-farm management, we will adopt a much more holistic approach in which regulation is carried out in a more sensible, whole-farm, whole-enterprise manner, rather than farmers in many cases having to deal with 17 different regulators or sets of regulation.
It will take time to move towards that position, but it will be easier to do so when we move to a single farm payment, rather than the whole range of additional regulations—over and above those that may be desirable for environmental, welfare or safety reasons—that are attached to forms of the 21 regimes in the common agricultural policy that we are replacing. The move during the next eight years to a single farm payment based on area rather than production, on not an historic basis but one related to the quality of management of land for agricultural and environmental purposes, will also allow us to move to a better system of regulation.
So there is a lot to be gained here. Various noble Lords—my noble friend Lord Grantchester probably put it the most crudely and straightforwardly—said that there will be huge winners and huge losers. Yes, there will he winners and losers; there would be however we implemented the proposals. But if we had chosen to stick with an historic system, the worst system would be to try to freeze in aspic a method and pattern of farming that related to 2002 and to continue paying support systems on that basis for another 10 years. That is unjustifiable, so we decided to move away from that system—not overnight but over a period of eight years, so that farming can adjust to the new system.
Over those eight years, some forms of farming will benefit more than others compared with the historic system. However, in a sense, that creates something closer to a level playing field, rather than the opposite, as the noble Lord, Lord Plumb, suggested, than has existed in the past. The vast distortion of the 21 regimes differentiated hugely between farmer and farmer.
To have frozen that system in 2002 and continued it until 2012 would have led not only to a distortion based on history, not reality, but to an extremely
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uneven playing field. We are trying, for the benefit of farmers, the profitability of farming and the environment, to create a level playing field, so that any area in England has roughly the same level of support. There is a differentiation here. We found that if we dealt with the whole of England as a single entity, the winners and losers became greater, as did the shift. That would be hugely disruptive. If the noble Lord, Lord Plumb, had referred to that in that context, I should have accepted it. However, having considered the SDA area, which was already being treated somewhat differently, and removed it from the rest of England, we have a viable system with less distortion and immediate disruption.
Nevertheless, there will be winners and losers. We must consider those sectors that will lose—including, as was mentioned several times, the dairy and beef sectors, especially those on the edge of the SDA area. However, frankly, the main problem of the dairy sector is not the result of the current, not yet completed, agricultural reform nor of the new one that we are imposing on top of it. It is a severe structural problem that needs addressing as a food chain issue. The Government are engaged in that with various elements within the sector—with some difficulty, I must say; but we need structural change in dairy farming.
That creates the possibility of agriculture delivering the environmental public goods, in return for what continues to be by far the biggest subsidy that we give to any industry, while at the same time basing its activities on what the market—not only the national but the international market—really wants. The noble Lord, Lord King, was perhaps a little pessimistic in his early remarks about our ability to compete. If we are involved in the right areas—high-quality, high value-added areas in which we have a natural comparative advantage—English agriculture can be competitive.
That will not involve every area. We need to contribute to the freeing up of world trade in general, in a way that will take time but will not be too disruptive of European agriculture. We cannot go on subsidising, supporting and protecting European agriculture against world trade, but we can provide the basis for our agriculture to be competitive in those fields where it can compete.
If I may, I shall move on from agriculture. Although other questions were raised about it, I shall have to answer them in writing. The totality of the rural community depends for a sustainable social and economic basis on a much wider range of activity than agriculture. Much of it depends on the state of the countryside—much of which is delivered by agriculture—but the tourist industry is now by far the biggest rural industry and depends on the landscape looking good and bringing people in. Much of the quality of life of rural England depends on the landscape, but the economic activity is very different.
We therefore need to encourage firms of all sorts, large and small, to locate their businesses in rural areas. We also need to ensure that those working for those firms can afford to live in those areas. Several

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noble Lords said—I think that the right reverend Prelate said it first, but so did the noble Earl, Lord Courtown, the noble Lord, Lord King, and many others—that the housing situation in many rural areas is a serious problem.
It is a problem in price and quantity. Some of that is due to movement into rural areas by people who previously made sufficient money outside those areas to move there, which raises the price for locals.
It is also a question of quantity, because there has been insufficient building of affordable housing—or, indeed, any housing—in many rural areas. Some of that is due to planning problems and the constraints that local planning authorities—rather than national planning policy—tend to put on housing developments in rural areas. It is important that rural housing is addressed as one of the key issues for regeneration and prosperity, as it will allow people to live a high-quality life in rural areas. We have almost doubled the funding for affordable housing, increased the housing corporations' rural targets and given greater encouragement to local authorities and housing associations in rural areas. But we recognise that significantly more needs to be done in the areas of housing provision and planning guidance. Local authorities and the housing market have a big role to play here.
Some of the problems go beyond housing. The right reverend Prelate referred to social inclusiveness and the need to recognise that there are serious social problems in a number of rural areas. In many ways, inequality in rural areas is worse than in many urban areas. We need to address those problems through access to services and, in particular, by retaining services in villages. Innovative ways may be used to do that, such as using the post office—which may otherwise be facing closure—the pub, the garage or the village shop to provide the basis for a range of services instead of its original function. A lot of initiatives are dealing with that.
The rate relief that has been provided to small businesses will also help with that. I can tell the noble Lord, Lord Willoughby be Broke, that the full effect of that rate relief will come in on 1 April 2005. Financial year planning means that that is the earliest we can bring it in on a mandatory basis. That answers his question. It is an important contribution to ensuring that there are motivations for rural businesses to move in—or stay in—areas of rural Britain.
We need to attract not only permanent inhabitants to remain in rural areas, but also temporary visitors such as tourists. In some parts of the House there is a reluctance to recognise that that depends on better access, as my noble friend Lady Thornton emphasised. The CROW Act provides the basis for that. Some of the mapping issues involved have proved complicated, as we envisaged when it was debated in this House, but we are getting on with it.
To answer other questions, we are providing the resources for that to happen. We will not move to the full implementation of access until it is clear that we can do so. We are confident that we can meet the
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timetables that we have set out. But the full effects of the CROW Act will involve a long period of regional roll out. If access is properly managed and resourced, then we can provide a further contribution to rural revenue, and also a means by which the urban and rural communities can mix more effectively and reduce misperceptions on both sides.
Baroness Byford: My Lords, I raised the point that people out there have the expectation that access is now. What are the Government doing to convey the fact that it will be rolled out and that it is not possible over all the country at the moment because it is causing difficulty between landowners and those who want to go walking?
Lord Whitty: Difficulties between landowners and people who want to go walking are not entirely new. I recall that some of the confrontations that were referred to would have occurred without the CROW Act.
Nevertheless, it is important that the information gets down the line and it is part of our engagement with local authorities, national parks and local access fora to ensure that more and better information is made available.
The noble Earl, Lord Courtown, emphasised the need for retaining skills in rural areas. We have just completed a review of the skills needed in rural areas, and that will be published shortly. He should keep his eye open for that. It is an important dimension of our activities.
I am reaching the end of my time and there are clearly a significant number of questions which have yet to be addressed, many of which I will need to write to noble Lords on. The rural White Paper strategy—and its further refreshment, as we have referred to it—presents a clear way in which the Government will support rural enterprise, address the social, environmental and economic problems of rural areas, and do so in a way that is sensitive to each particular locality, and is not entirely dictated nationally.
There is a slight disconnection between those who say that they welcome the proposals of the noble Lord, Lord Haskins, in devolving issues, but at the same time argue that there should be no inconsistency. We do not want too much inconsistency, but there are different solutions for different parts of the country, different landscapes, different communities and different patterns of work.
It is important that all aspects of government recognise that, including the planning systems, the RDAs and all the schemes for rural delivery that come under Defra. It is also important—and here I take issue with some noble Lords—that all three pillars of sustainable development are respected. The noble Baroness, Lady Miller of Chilthorne Domer, graphically demonstrated that she was a milkmaid in her youth. Equal emphasis is needed on all three.
We have a system where we clearly need money and revenue to go into rural areas, but we need the environment to be maintained in order to retain the

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attractiveness of those areas and the quality of life within them. We also need social cohesion and social inclusiveness, otherwise the economic enterprises will not flourish.
All three elements of sustainable development are there in our policy for rural areas, and the way in which we are trying to deliver them follows through the careful and clear recommendations of my noble friend Lord Haskins. Fuller details of those will be revealed as we go on, but the general direction is clear both from his report and the Government's commitment to the principles set out within it.
My thanks again to the noble Earl and to all who participated in the debate.
5.58 p.m.
Earl Peel: My Lords, I thank everyone for taking part in the debate. As is always the case when we discuss these matters in your Lordships' House, there is a wide range of interests and opinions. We have covered as many subjects as I would have expected. My noble friend Lord Shrewsbury surprised me by mentioning aggregates, but why not? It is a perfectly legitimate topic, and his points were extremely well made.
The noble Baroness, Lady Thornton, accused me of raking through the coals of divisions between rural and urban areas. The issue is not of my making. If I go down to "The Blue Lion", the local pub in East Witton, I find that the issues that I have raised are being talked about every day by country people. They are deeply concerned by some of the legislative procedures that have been introduced by the Government which affect their everyday lives. I am not making it up. The points that I raised were to illustrate that if we are to have a successful union between government and rural people—and that is the way forward—then those who legislate must understand the minds, workings and traditions of those who live and work in the country. That is the point that I was trying to make.
We have discussed a great range of subjects. The one that has blossomed to the fore is housing. Seven or eight noble Lords have mentioned that. I was grateful that the Minister acknowledged this. I think that he said that the Government would look at ways to develop in more imaginative ways. That will be required. It is not just a simple question of finance; we must find new land available for housing, as my noble friend Lord King said. That is perhaps the key.
The other point that evolved from the debate was the question of regional regeneration. Quite a number of noble Lords mentioned specific cases. I have noticed quite often when reading rural documents and listening to debates that many initiatives come forward from both the public and private sectors but the two never seem to get together. We must try to unite those good ideas so that we do not waste time and resources and have a more effective means of developing the notion of regeneration, which is the whole secret of the countryside.
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I am grateful to the Minister for his response. I am also grateful to what I may call the Minister of the Back Benches who sat through the entire debate. His role in the rural debate is as important as that of the Minister, from what I can see, so I am extremely grateful to him for listening to our remarks.
The Minister started by talking about significant achievements, but then he stopped, so we did not hear what they were. I shall leave that up to noble Lords' imagination. He at least acknowledged that there were weaknesses, for which I am grateful. On agriculture, he said that there were big winners and big losers. I suggest to the noble Lord that the route that his right honourable friend the Secretary of State has pursued will result in marginal winners but very big losers, particularly in the beef and dairy sectors. It speaks volumes that the Minister's noble friend behind him made the criticisms that he did about the route that the right honourable lady has taken.
I have said enough. I share the optimism of my noble friend Lord King for the future. I believe that the rural community will rise to this tremendous challenge. New businesses will develop, and I firmly believe that farming will remain the bedrock of the rural community. We must make certain that it does, as I could not begin to contemplate the very notion of not having farmers managing the land, bearing out the experience that has come through from generation to generation. I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Regulation
6.2 p.m.
Lord Vinson Lord Vinson rose to call attention to the unintended consequences of regulation; and to move for Papers.
The noble Lord said: My Lords, none of us here today is against sensible regulation. The object of this debate is in no way to prevent regulation but to try to make certain that we can create a regulatory framework that is, above all, proportional to the mischief that it attempts to correct, and is applied intelligently and realistically. Should it have consequences that were not intended or anticipated at the time at which the regulation was introduced, at least it is rectifiable so that overall it does as it was intended to do—more good than harm.
In that aim I am sure that we would be supported by those many inspectors and officers whose task it is to interpret and execute often ill-drafted and ill-considered laws that they know in their heart of hearts are inappropriate. They, too, want better regulation.
Throughout this debate I expect that we will hear many horror stories of where regulation appears to have gone wrong and where European Union legislation, in particular, appears to have been gold-plated as it is interpreted into English law.
It is perhaps not widely understood, but the whole basis of continental law is very different from our own. Broadly, under British common law everything is allowed except that which is disallowed. Here the law is enforced mandatorily. Under European law, broadly

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nothing is allowed except that which is allowed, so in order to make a law workable—because it virtually covers everything—it must be interpreted flexibly. It is often framed in a way that is broadly indicative; so much so that our lawyers find that unsatisfactory and hence tighten the meaning when drafting it into English law. It is thus so much harder for our law enforcers to exercise a sense of proportionality than it is for their continental equivalents.
That point could be met if, when drafting laws, we state that their interpretation should likewise be exercised proportionately and realistically. The problem is that through successive EU treaties, and the associated treaty of human rights, an ever-tightening network of restrictions and regulations has been constructed that inhibits common sense and adds unnecessary costs.
A timely example is the review of the Working Time Directive. I see no clamour from the workforce for more than the existing voluntary arrangements where most people can choose to work what overtime they wish in a free country. The unintended consequences of a mandatory short week would not be to keep people in jobs but rather to deny them. It is essential that we keep the opt-out and do not narrow its definition.
Overtime in all businesses is the essential mechanism that helps to bring supply and demand together. Existing staff can work overtime to meet peaks in demand. If that demand continues then at that point the firm reduces overtime and takes on new staff. Without overtime it loses custom. The unintended consequence of a mandatory shortened week would be a rise in unemployment, particularly in youth unemployment, exactly as has happened in France. Earlier this month the problem was recognised by the Dutch Deputy Prime Minster, who said that Europe's economic growth can be raised only,
"by lining the myriad of [regulatory] barriers",
and
"that the enterprise sector is tied down by red tape".
We are not alone.
It is for that reason that regulatory impact assessments (RIAs) are so vital. However, many of them carry little conviction because the department attempting to carry them out in a hurry turns to the easiest source—very often, the regulatory authority that is to apply them. That is like asking a barber if you need a haircut. If the impact assessments are to fulfil their purpose, time must be taken to consult, in particular, smaller firms and businesses, where the real impact will be felt.
In another place Mr Archie Norman MP is introducing the Regulatory Impact Assessment Audits Bill, the very sensible purpose of which is to try to make certain that RIAs have been correctly done by an impartial body. As often as not, they are regarded as a chore by the department concerned, produced grudgingly and, to quote the Social Market Foundation report,
"crafted with as little information as possible".
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There is a pressing need for impact assessments to have an ex post proper validation to restore confidence in the process.
In the first place we introduce too many laws. Over the past few years there have been 27,000 items of legislation covering 97,000 pages of instruction. It is never wrong to be reminded that Dean Swift, in his allegory Gulliver's Travels, was attempting to tackle the same problem. He said of Gulliver:
"No one silken thread held him down, but a thousand made him immobile".
We need to start cutting those threads.
The economic cost to this country is enormous. The British Chamber of Commerce has estimated that £20 billion worth of extra regulatory costs were placed on organisations over the past five years. But the problem is not just one of making more appropriate regulation but also of unscrambling existing regulation where it has become inappropriate. In particular, it is difficult to unscramble safety legislation; one can be so easily accused of not caring whether somebody is killed or injured.
In our safety-ridden society we are advised that decisions are best based on the precautionary principle. In effect, that enables any authority to abandon the concept of risk assessment and balanced judgment based on proportionality. Precaution is so much easier to justify than proportion. The avoidance of risk does not have to be justified, because who can be brave enough to challenge publicly the concept of putting safety above all else? Thus the precautionary principle stifles rational scientific debate regarding the nature of risk and is often nothing more than the cloak for intellectual cowardice.
A classic example is aircraft lifebelts. I have checked and found that not once in the past 25 years had lifejackets been fitted prior to an accident on a passenger aircraft. Even if they had been, I doubt whether they would have had much practical good, because a jumbo jet hitting the water at any speed would disintegrate and sink rapidly. There is an inherent risk in aircraft—thank God they have a fantastic safety record. The demonstration fitting of lifejackets does nothing, except perhaps to comfort passengers or to cause them concern. Nobody has yet had the courage to suggest that that useless safety charade should be discontinued.
At the other end of the over-regulatory scale, Sir John Stevens was prosecuted when one of his constables was injured while chasing a criminal across a roof. Our police chief was forced to waste weeks of his time defending a case that the judge subsequently said should never have been brought. The unintended consequence of this action was that the real criminal problems of this country did not get the attention that they deserved. More damagingly, our own Health and Safety Executive was seen to be publicly encouraging the culture of blame. The whole episode was an appalling waste of public money and the then chairman of the Health and Safety Executive should have resigned.
It should be possible to check the excessive zeal and lack of common sense of some of our regulatory authorities. As the Romans used to say, "Who will

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judge the judges?" Would it be possible to extend the powers and resources given to the Audit Commission so that it had time to audit regulatory effectiveness and to hold such bodies to account?
The Better Regulation Task Force does valiant work, but it is like matching David against Goliath. It certainly needs more clout and a wider remit in all departments, particularly over pre-legislative scrutiny and RIAs. Its power would be substantially reinforced if there was a Standing Committee on deregulation, probably composed of Members of both Houses. I would welcome the Minister's views on this. I am not suggesting that the Government are not conscious of the problem. At least employment regulations are now co-ordinated to appear on two days a year. This should be made to apply everywhere, but more importantly, the Government should attempt to stem the flood of regulation in the first place.
We live in an increasingly safety-conscious age, a litigious age. Sadly, many lawyers who used to run their practices with an ethos of what is good for society—pro bono publico—now do so wholly to exploit the system under the maxim, "Where there's blame, there's a claim". An increasing number of lawyers, like leeches, bleed the rest of us white. I often wonder, too, whether some of our judiciary understand that it is not just an insurance company who pays, but ultimately their fellow citizens. Many people feel that somehow society must reverse this ethos of blame.
The examples of over-regulation, litigation and its consequences are unlimited. We all know how the well intentioned regulation on canoe sporting clubs, as a consequence of the Lyme Regis tragedy, has closed down most of the amateur canoe clubs in this country that gave such wonderful outings and fun to so many school kids. Only this week in my local town the cub scout group is closing. It had been run for 20 years by the most delightful vicar and his wife, who now say that they simply cannot afford the cost of registering with the Criminal Records Bureau and the 21 sessions of retraining to be able to carry on. Sadly, they can find no one else who wishes to take on the responsibility, compliance costs and hassle.
Likewise, only this week the second biggest teaching union, the NASUWT, advised its 200,000 members not to take children on school trips:
"It is highly regrettable NASUWT has been forced to advise members against taking school trips. When something goes wrong, the leader bears legal responsibility—an accident is no longer treated as an accident. It leads to lengthy enquiries by the police, the local education authority and the Health and Safety Executive".
This is a classic case of the unintended and malign consequences of over-regulation.
I shall not attempt to blame obesity solely on safety precautions, but if one makes school playing fields and sports activities subject to too much safety regulation, those who might have been team leaders and instructors and who would have happily given their time free, now walk away from an over-litigious task. Over-regulated sport equals no sport. In an effort to
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prevent minor tragedies, we undermine major benefits. We must make it perfectly normal for laws to be readjusted in the light of circumstances, or to be abolished where necessary. If we could make the implementation of sunset clauses a wholly natural process, it would begin to chip away at the tide of overdone safety and other regulations that are unnecessarily damaging our society.
However, the problem is wider than that. It is damaging the whole concept of personal self-reliance. If we are encouraged to believe that it is never our fault and always somebody else's, that we are not responsible for our own actions, that it is the fault of the society in which we live and not we ourselves, that it is the seller's fault and not ours, we undermine the whole basis of our historic laws. If we substitute caveat vendor—let the seller beware—for caveat emptor—let the buyer beware—we reverse the whole concept of blame by denying responsibility for our own actions.
If all matters are defined in detail in legislation, people will spend their time and effort working out whether what they are proposing to do falls within, or can be made to fall within, the law. Surely, we want a society where people should be asking themselves whether what they are proposing to do is something which in principle they ought to do or ought not to do. Apart from the economic consequences of excessive regulation, the greatest unintended consequence is that the denial of personal responsibility becomes embedded in our culture. The road to national decline is paved with well intentioned regulations. I hope that this debate will help to reverse that trend. I beg to move for Papers.
6.16 p.m.
Lord MacLaurin of Knebworth: My Lords, I am grateful to my noble friend Lord Vinson for introducing this debate. I speak as chairman of the Vodafone group. It would be hard to think of a better example of innovation and enterprise in the United Kingdom over the past two decades than the mobile phone industry.
There are now 51.5 million mobile subscribers in the United Kingdom enjoying a wide array of mobile services that nobody could have imagined five years ago—that is 87 per cent of the people in this country. There may not be many Members of your Lordships' House experiencing the joys of customised ring tones, but millions of people do. The industry stands on the verge of another technological revolution as the next generation of services—the third generation—is rolled out.
The UK mobile companies are world leaders in the industry, and most of this was achieved without specific regulation. The Government initially had to award radio spectrum to the operators, but then largely left them to get on with it. They did that most successfully on any measure, from the number of customers to the value created for the British economy. Of course, the market economy must be built on the foundations of a solid legal and regulatory framework. I want to focus on the trend towards

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regulations that are specific to a particular sector or industry, as opposed to the basic rules governing the function of the economy.
We need to be much clearer about what circumstances justify this kind of specific regulatory intervention and how the impact of those interventions is assessed. We are now seeing more regulatory attention focused on mobiles. Perhaps it is the very success of the mobile industry that has attracted this attention. I will talk about some of our specific experiences and make a few observations arising from them about the real motives for regulation.
The industry faced one of its biggest challenges when the Government decided to auction the last hatch of radio spectrum, which resulted—to the surprise of many, including I suspect the Chancellor himself—in the industry paying over £20 billion to the Exchequer. It is hard to see how this intervention assisted the industry or its customers. It has taken several years to recover from the financial consequences. The Government's stated intention in designing the auction was to ensure that spectrum was allocated more efficiently than in the past, but it is reasonable to ask whether it was not simply a slightly more sophisticated form of windfall tax on past profits.
While people in the industry could be expected to have a better idea than civil servants about how profitable their business would be over the long term, no one could escape the innate uncertainty about a new technology or indeed about the future of the economy. The auction moved all these general risks on to the mobile phone operators.
Additional regulation has often been called for by competitors of the mobile operators rather than by their customers. Although regulators invariably claim to act on behalf of and in the interests of consumers, complaints from customers are often not the driving force. What is more, the immediate effect of additional regulation is often to protect particular competitors in the market. In particular, it favours those who may be better armed with advocates and lobbyists than with commercial acumen. As the Director-General of Fair Trading noted in a recent lecture, a competitive market will often protect consumers more effectively than additional regulation. That is especially true in an industry such as mobile. When the technology and consumer demands shift rapidly, it is all but impossible for regulators to keep up with the pace of change.
Arguments in favour of further regulation typically focus on potential benefits that are short-term and narrowly defined. It might be easier to quantify them in that way, but it leaves out of the reckoning the accumulated long-term costs, perhaps spread widely over all consumers. They will often be large—87 per cent of people in this country are mobile users—but they may be difficult to quantify. Without taking them into account, there cannot be a proper cost-benefit analysis of any regulatory proposal. The need has been recognised recently by the Dutch, Irish, Luxembourg and UK Governments for better impact assessments of regulatory proposals at the European level. We must apply the same lesson at home.
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If we are not careful, we will eventually drown enterprise and innovation in a sea of piecemeal regulation. We need to continue to work hard to ensure that regulators take the long-term view and take account of the interests of all consumers. From that perspective, detailed intervention in a particular sector will not look like the obvious answer to every problem.
What should regulation accomplish? We should be very clear. It is right to be concerned about fairness and affordability, but such issues are properly addressed by elected representatives, rather than by unelected regulators. Otherwise, there is a real danger that regulators could become unduly politicised. We rightly have a system of transfers and reliefs that are intended to ensure that the most disadvantaged members of our society have access to the basic requirements of participation in a civilised society. For the most part, we do that without a detailed set of regulations for every individual industry. So I hope that Ofcom and the other industry regulators take a more pragmatic approach to regulation.
The test for the specialist regulators should be: "What would he the result, if I were to apply the measures that I am proposing for my narrow area to the rest of the United Kingdom economy?". After all, most parts of the economy do not merit a specialised regulator. Most industries safely fall under the ambit of the Office of Fair Trading and the Competition Commission. Regulators who focus on one narrow area need to remember that competition is never perfect in any industry, but that it is often better than the alternative of detailed regulatory scrutiny. Of course, the authorities need to take action against monopolies. Indeed, the UK pioneered incentive regulation of the former state monopolies. The Enterprise Act 2002 has made the competition regime in the United Kingdom one of the most stringent in the world. That will boost enterprise and innovation, but we threaten our economy if we do not check the creep of regulation to markets that are, in fact, formidably successful and competitive.
The growth in regulation has been considerable. The combined operating costs of Ofwat, Ofgem and Oftel were £42.6 million in 1996–97. Those costs were up by a further 65 per cent by 2002–03. We must scrutinise regulatory budgets, but I have some sympathy with the views of the noble Lord, Lord Currie of Marylebone, the chairman of Ofcom, when he says that good regulation does not come cheap. That is an important point: the focus should be on the quality of regulation, not just the cost.
The judiciary should have an increasingly important role to play. For too long in this country, regulators have been subject to review only on procedural aspects of the case under judicial review procedures. The regulators are invariably well advised. The new Communications Act, considered in this House last year, at least introduces appeal rights on the merits and substance of the matter at issue. These will be complex and difficult cases, requiring expertise in finance and economics as well as the law. It is important that the

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courts or the Competition Commission, as the case may be, engage fully in such matters and are fully aware of the broader consequences.
Some regulation is absolutely essential to a properly functioning market economy, but we must be wary of the assumption that regulators can be relied upon to improve on the market in terms of social and economic outcomes. We need to check the creep of intervention in specific sectors and ensure that the potential costs of regulation are weighed against the benefits. Enterprise has served this country very well. We must continue to provide it with the freedom that will allow it to thrive.
Baroness Farrington of Ribbleton: My Lords, I wonder whether I could draw to noble Lords' attention the fact that the timing for this debate is extremely tight. There is absolutely no time to spare for people to speak beyond their time.
6.26 p.m.
Lord Haskel: My Lords, I congratulate the noble Lord, Lord Vinson, on moving the Motion and thank him for doing so. However, I must say to the noble Lord that the purpose of regulation is not only to achieve a level playing field but to reflect the values and aspirations of our society. I do not agree that regulation overwhelms our society and undermines our economy. If that were true, the least-regulated countries would be the most successful, and people would move to the least-regulated countries, such as Nigeria. The fact is that the G8 economies are the most successful and they are the most highly regulated, but most people want to live in those countries. Perhaps, the first unintended consequence of regulation is that it is good not only for our society and quality of life but for the economy.
I shall give your Lordships an example. A study arising from the European Union's water resources framework directive by the Department of the Environment concluded that the amenity benefits could total £1.9 billion in England and Wales alone from the improved water. In addition, there could be benefits to anglers of £706 million. The unintended consequence of higher environmental standards is that they provide incentives for companies to be more efficient and to cut waste. Indeed, a recent report by Imperial College and the Fabian Society concluded that the actual cost of compliance was therefore much lower than the cost of simply abating the pollution. If the benefits are taken into account, the cost could even prove to be negative. The market in carbon emissions is having exactly that effect. Without being prescriptive, it encourages companies to change their processes to become more efficient and, therefore, less polluting. That saves time and money and protects the environment. Is that an unexpected consequence of regulation?
That leads me to another consequence of regulation. Because high standards make a country a more attractive place in which to live, the means of achieving those high standards has given rise to whole new industries, creating a new and growing sector of the economy. I declare an interest, as honorary president
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of the Environmental Industries Commission, which is a group of 250 UK companies that deliver higher environmental standards through engineering, technology and innovation.
That does not mean that more regulation is good: it means that regulation must be right, as the noble Lord, Lord Vinson, said. It must be balanced. It must reflect the aspirations of our community. It must have reasonable lead times. Many of our regulations come from Europe. We heard from the noble Lord, Lord Vinson, about the red tape and bureaucracy involved. There is some justification in that. The justification arises in part because we have a culture in this country of ensuring that the law is obeyed. It is an honourable and sensible culture to which we are all committed. It is because of that attitude that we insist on implementing regulations to the letter. As the noble Lord, Lord Vinson, said, as regards European regulations we call it gold plating. My right honourable friend the Chancellor of the Exchequer is aware of this. In trying to identify and minimise unnecessary excess he has asked companies to write to him stating which European regulations they find offensive and unreasonable.
The Government have also asked Sir Peter Gershon to report on how the administration of regulation can be eased and the costs reduced. I congratulate them on that. According to the Financial Times report last week there are some sensible proposals on the horizon. Sir Peter recognises that it is particularly irritating for companies to send similar data and information to several government departments when they could obviously share the information. It is equally irritating to be inspected by two or more regulatory organisations when obviously one visit could take in two or more regulators. He is considering, therefore, how forms, visits and data should be co-ordinated so that each serves a number of purposes.
However, more can be done. Obviously firms and organisations which comply and work to high standards need less regulation than "cowboys" but the law does not allow for that flexibility. We now have a much greater awareness of corporate responsibility. Regulators should recognise that and perhaps take a risk with companies and organisations which show a high degree of responsibility. They should listen to organisations which say, "This is what we believe in; this is our culture; there is no need to regulate us, we shall do it anyway".
It is to be hoped that Sir Peter Gershon will tell us how regulation can be more streamlined and made more effective. It is to be hoped that the outcome, unexpected or not, will be not only a decrease in the cost of compliance but also an increase in the efficiency of our regulation, leaving more money for front line public services.
In the meantime we cannot afford to ignore regulations from Brussels. I give one further unexpected result. Because of the political sensitivity of some of the regulations we often tend to be late in implementing them. It is an understandable attitude. But those countries which move to implement regulations early also encourage the development of the technologies needed to meet those higher standards. They then sell

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those technologies to other countries as they catch up. For instance, when we finally decided to implement the regulation regarding the disposal of fridges and the dangerous gas in them we had to buy the technology to do so from Germany. However, we were quick to accept the regulations regarding aircraft noise and Rolls Royce developed the Trent 600/900 engine to more than satisfy the regulations. As a result, about one-third of the world's passenger aircraft now fly using those engines. Is that an unintended result of regulation?
A Private Member's Bill was introduced in another place on 4 February which allows business, individuals and public bodies in Britain to seek a declaration by the courts that regulations from Europe are ineffective here if their provisions go beyond the basic minimum required by Community law. The unintended consequence will be that our quality of life will scrape along the bottom; it will be minimalist. Our economy will suffer as we accept lower standards; and Britain will gradually become a less attractive place in which to live and work. I hope that noble Lords will join me in opposing the Bill when it comes before us.
6.34 p.m.
Lord Freeman: My Lords, as usual the noble Lord, Lord Haskel, makes his points in a very reasonable manner. The time for good intentions has long since passed. That is why I congratulate my noble friends Lord Vinson and Lord MacLaurin on making the point that tough measures must now be taken. My noble friend Lord Vinson is right in drawing the Government's attention to the wisdom of having a Standing Committee. I do not think that Parliament does a good job in reviewing, or even in being able to change, regulations. The sooner we can reform the practices not only of this House but also of another place the sooner we shall make progress.
I wish to draw noble Lords' attention to some statements made over the past five years by public servants who are to be congratulated on their battle against the flood of regulation under this Government. They are beginning to realise—there are some indications that the Prime Minister and the Chancellor realise it—that steps must be taken not only to reduce the current burden but to stem the flow. Rather than asking the Minister to respond at the end of the debate—I have learned to do this from hard experience in this House—I shall go straight to the Table Office to put down five questions. Rather than trespassing now on the Minister's time, I may receive in due course a more considered and comprehensive answer.
First, I refer to the Better Regulation Task Force. I pay tribute to the chairman, David Arculus, Theresa Graham and their colleagues in what they seek to do. Theresa has been a member of that task force under both administrations and I pay tribute in particular to her. My first question is this. When will the task force report on the results of its investigation, which is welcome, into whether the European Commission is doing enough to stem the tide of unnecessary business regulation? I think that we all know the answer in principle but some detailed comments from the task force when it reports will he much appreciated.
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I draw your Lordships' attention to the report of the Better Regulation Task Force published in October 2003, headed Independent Regulators. It states:
"We question whether even Ministers could be certain that they know of all the independent regulators that surround their Departments. The regulated also expressed concern. This is obviously a situation that cannot be allowed to continue".
Neither the Better Regulation Task Force nor Ministers can tell us definitively how many regulators there are. The task force makes 14 recommendations. My second question will be this. What progress has been made in dealing with those 14 recommendations?
The Audit Commission's report, Strategic Regulation: minimising the burden, maximising the impact, is excellent. It says that the burden of interference with local authorities and other public bodies has got to an intolerable pitch and that more strategic regulation is required. The report states:
"The current system of regulation of public services is fragmented and there are legitimate concerns about the cost, value and accountability of regulation. This presents a significant challenge to regulators".
Therefore, I shall ask the Minister what progress has been made in that regard.
In November 2003, the National Audit Office published a report entitled Success in the regions. Your Lordships' Select Committee on Science and Technology has published a report on the relationship between the regional development agencies and the science base, and the over-regulation and direction by central government departments of what the RDAs seek to do. On 19 November, in summarising the National Audit Office report, the Financial Times, said:
"Over-interference from Whitehall is undermining efforts to stimulate regional economies by forcing agencies to waste time and money responding to civil servants' demands".
My question to the Minister is: have the DTI and, in particular, the Treasury, paid attention?
My penultimate piece of evidence, to which the noble Lord, Lord Haskel, referred—I think his references were correct—is the work by Sir Peter Gershon. We have not seen his report. Perhaps the Minister may tell us when noble Lords will have sight of his report. On 17 February, Sir Peter is quoted in the Financial Times as concluding that,
"regulation and oversight is overdone to the point where it is counter-productive and threatens the government's most cherished goal—improved public services".
How right Sir Peter is.
In conclusion, today I read in the Financial Times a report of what the Prime Minister said yesterday. My heart rose, not sank. I only hope that the Prime Minister means what he said. On government efficiency, the Prime Minister is reported as announcing,
"a review of regulation in both the public and private sectors saying 'we have to change the whole approach to risk'".
My noble friend Lord Vinson put his finger on that problem. We are averse to risk in the public sector. I am sure that both Ministers and civil servants should ask themselves: "Do we really need to regulate in particular instances? Can we not trust the people? Can we not allow individuals to make sensible and

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responsible decisions for themselves?". If we pursue that policy, we are on the right road to deregulating this society.
6.42 p.m.
Lord Hodgson of Astley Abbotts: My Lords, it is a great pleasure to follow my noble friend Lord Freeman who had such experience of this topic when in government. I congratulate my noble friend Lord Vinson on the exhilarating way in which he introduced the debate today. I share his view that most regulations are designed to solve a problem, to remedy a deficiency. They answer a genuine need and therefore deserve serious consideration.
There are two major exceptions to that rule. The first is what I call the knee-jerk reaction to one-off events. The "something must be done" reaction following short-term public pressure. I am afraid that I do not exclude my own party from any blame in this regard when it was in government. For example, the Dunblane tragedy was appalling. But I am very doubtful about what the regulations that followed Dunblane did to inhibit gun crime generally. Currently, no doubt, the Government are under pressure with regard to the cockle-pickers in Morecambe Bay. It is another terrible personal tragedy, but no doubt it will lead to the Government coming under pressure to produce some special regulations to cover that one-off event. So, first, we have knee-jerk reactions.
Picking up the point made by my noble friend Lord Freeman, the second exception is the command and control wish to centralise more power to enable Whitehall or the authorities to interfere, pry and control. I am afraid that this Government are very susceptible to command control ideas.
So much for how we add to regulations: what about subtracting from them? That is a much less easy task and we are much less good at it. There appears to be no overview or cross-departmental view of regulatory burdens: there is duplication, overlap, inconsistency and, sometimes, outright opposition between regulations from different departments. There is no consideration of the overall effect; the straws on the camel's back. Individual regulations of themselves may be beneficial, but taken as a whole they are extremely detrimental. As Archie Norman MP raised in another place, there is no subsequent reassessment.
Some regulations ab initio prove ineffective or even useless. But, overall, regulations, like most things in this world, have a shelf life. Their value wanes as society changes, but they are left in existence. Officials warn Ministers against removal because of the political danger of unexpected events. I regard them as barnacles on the ship of state. A single barnacle would be no problem, but we have hundreds of barnacles now and they are causing extreme and increasing damage.
Perhaps I may give a couple of short illustrations. I accept that they are trivial examples, but the burden of regulation is about the cumulative effect of triviality. It is not about a great clash of ideas. It is just the steady
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encroachment of octopus tentacles. My first example is from the Environment Agency. For many years my family has rented a short stretch of trout stream at Malmesbury, North Wiltshire, into which every year we put about 120 brown trout. Under Section 30 of the Salmon and Freshwater Fisheries Act 1975, we have to apply for an application to introduce those fish, which is absolutely fair and perfectly reasonable. New stock being introduced must be wholesome.
Each year, I used to telephone Mr Steve Thomas, a delightful man at Bridgwater, to ask for a form that I could fill in and return to him. Two years ago, he told me that he was no longer able to send me a form because new regulations required a central register to be maintained, which was run from Peterborough. So I called Peterborough. I pressed buttons one and two and listened to some Mozart. I pressed button three and listened to some more Mozart. Finally, I reached a lady who told me that the forms could not be sent in response to a telephone call. I had to write in for a form. Why? That is because the register required a formal application.
I sent in a letter requesting a form; the form came back to me. I sent the completed form off. The lady wrote back saying that she had received my form and was pleased to tell me that,
"It has been passed to Steve Thomas … for determination".
That is five or six letters where two used to suffice.
Letters probably cost about £10 to £15 each. My trout application is now costing me and/or the state £45 to £60 more than it did two years ago. Will this break my bank or the Environment Agency's bank? Of course it will not. But that is one of hundreds of thousands of examples around the country that are driving people crazy because of the waste of effort and the huge economic drag on our prosperity.
The second example is about money laundering and NCIS. I am the director of a building society and I am chairman of its audit committee. It is a blue-collar society in the West Midlands. We have to follow strict guidelines on money laundering and we have a money laundering officer. Of course, we are content to do that because we want to help the fight against crime, although since most of our returns are for sums below £200, I am not sure that much money is being laundered.
In the 12 months to 30 September 2003, we sent 173 referrals to NCIS. What response have we had? The answer is, absolutely none. We are a small society. NCIS must be getting hundreds of thousands of reports. Does anything ever happen to them'? At the last meeting of the committee, I asked whether NCIS could be approached to tell us how we were doing. As recorded in the minutes of the meeting, NCIS was prepared to say only that,
"A conversation with NCIS officers suggests that if there were an issue with report quantity or quality the Society would have been advised".
So we have absolutely no confidence that those reports are being used in any meaningful way. It is just form filling and box ticking.
In my last minute, I should like to offer some suggestions about how we might improve matters. I share the view with other noble Lords that we will not

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be able to unpick regulation. First, we need to stop gold-plating; that is, adding regulations on top of what is required from Brussels. As my noble friend Lord Vinson said, we definitely need to insert sunset clauses in all regulations. We need to find ways of providing opt-outs for very small businesses and so encourage entrepreneurial activities. As many noble Lords have said, we need to initiate a sensible discussion about risks and the limitations of personal responsibility.
My noble friend Lord Vinson referred to air safety. I should like to refer to rail safety. Over the past 10 years, passenger miles have increased by more than 25 per cent, and I understand that more people are travelling by rail than at any time since 1950. During the past 10 years, according to a Written Answer from the noble Lord, Lord Davies of Oldham, in no single year have passenger fatalities on the railways exceeded 20, oilier than in 1999–2000 when there were 40. That should be compared with the hundreds of deaths every year on our roads. Are we actually having a sensible debate about risk and the relative risk of different forms of travel?
Whatever is the case, we urgently need to consider radical steps if we are not to dent our economic prosperity by strangling ourselves in red tape.
6.50 p.m.
Viscount Goschen: My Lords, I was particularly struck during the course of this debate by the importance of your Lordships' House as a pre-emptive filter for unintended consequences. My mind went back to legislation with which the Minister and I were involved—the Regulation of Investigatory Powers Act. It came from the House of Commons with a glowing report from that Chamber, but had it been enacted as it arrived here, the consequences for the e-commerce industry in this country would have been absolutely devastating. Those consequences were only picked up here.
I was also struck by our difficulties in amending secondary legislation; that is, individual regulations faced with a nuclear option of forcing a confrontation and throwing a regulation out, as opposed to making some minor change.
We are not really talking here about regulating new forms of human endeavour. My noble friend Lord MacLaurin talked about the mobile phone industry. Clearly that had not been envisaged before and required some regulation, but generally we are talking about regulating areas such as agriculture, building and trading, which have been around for centuries. So all that we are doing is increasing the volume of regulation and putting less importance on prioritisation. If the statute book continues to grow at the rate that it is, the public will begin to lose confidence in the regulations. Regulations can work and be supported only if those who are being regulated—and those who have to impose regulations—believe to some extent, even grudgingly, that the rules are worthwhile.
I was interested to hear my noble friend Lord Vinson refer to travel safety; indeed my noble friend Lord Hodgson talked about rail travel. In our
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debates we are in real danger of focusing on rail fatalities and chasing people on to the roads—which in terms of death are more dangerous by a factor of at least 100.
I am concerned about the ratchet effect here. We have the Deregulation and Contracting Out Act—the Government have the power at their disposal to get rid of unwanted regulation. I offer the Minister the opportunity to inform the House how that is going. How much regulation has been amended by this route? What does that represent as a percentage of the statute book? What is the net position regarding new regulations that are introduced versus existing regulations that are removed? I suspect there might he some imbalance.
Transport safety is not all bad. In one very good example, the Civil Aviation Authority has delegated certain powers to a small group known as the Popular Flying Association for the regulation of small vintage home-built aircraft. That works very well. It is staffed by enthusiasts and is a good example of how you do not need more legislation in order to keep high standards of safety.
There is a gap between the rhetoric about deregulation from this Government and the reality. We have recently read stories of "Brown battles against EU red tape", but I am not sure that the better regulation that we have heard is the objective of the Government is necessarily the whole case. We need less and better regulation. I would put considerable emphasis on the volume of legislation and support proposals for more sunset clauses.
There is also an opportunity for the Minister to give some figures. We have heard the figure quoted that the British Chambers of Commerce estimate the cost of new business regulation since 1998 as over £20 billion. The Government dispute that figure; let us hear what the Government believe the actual figure is. They must know, because presumably they have undertaken regulatory impact assessments. The £20 billion does not even include the £10 billion of the national minimum wage, which I understand is the Government's own figure.
We know a lot of this pressure for regulation comes from Europe and I will leave that issue to others, but I believe that there is a feeling deep within the heart of this Government that legislation on its own can cure problems of society. If there are too many low-paid workers, we should legislate to increase their pay and we will all be happy. If there are concerns about imbalance in society, we should impose social engineering regulations on university undergraduate selection. We heard at Question Time today that if there is disparity between shopfloor pay and the boardroom, that can be solved with legislation as well. But of course it cannot: there are no net gains to be made just by regulating to make people richer or better off, or to enable them to work less.
We need to look in more detail at these regulatory impact assessment procedures, and to question whether this process is taken seriously by the Government. What role does the Department of Trade and Industry have in

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defending the interests of business? People are often concerned about the DTI and wonder what it is for. It does perform a number of valuable functions, but surely one of these functions is to act as an advocate for business when regulations are brought forward. Can the Minister give us good recent examples of the DTI reining in regulatory departments? Are the Government adhering to their own rules?
The British Chambers of Commerce study of the national minimum wage RIA found that no alternative options were being reported; the question of who picks up the cost of enforced wage rises was not discussed; there was no overall summary of costs and benefits. Despite that, the sponsoring Minister at the time, Mr Stephen Byers, signed that he was satisfied that the balance between cost and benefit is the right one in the circumstances. That is a weak assertion and apparently made on the basis of very limited information. The Government must show that they are not just going through the motions.
I would like to know how many regulations have failed to proceed because of an unacceptable RIA. The BCC study found only 11 cases over four years where that has happened. Is that the case? It is important information.
How do the Government monitor the efficacy of the RIA procedure? It is important to note that in this BCC study, 68 per cent of its respondents believed that consultation operates poorly and the majority of respondents stated that the consultation process had little impact on the final regulation.
My noble friend Lord Vinson talked about the importance of personal responsibility and I echo that. I recall the arrangements made to introduce contingency fee arrangements. The original purpose—while outwardly to broaden access to justice—might have had something to do with trimming the legal aid bill. But the result is that we get ambulance-chasing spurious claims and spiralling insurance costs in a litigious society, such as that which destroyed whole industries—including the light aircraft industry in the United States—until it was corrected.
I urge the Government to think twice before calling on a parliamentary draftsman.
7 p.m.
Lord Harris of High Cross: My Lords, from the Cross Benches I should like to congratulate my old friend the noble Lord, Lord Vinson, on the Tory side on his splendid opening speech. I also congratulate the noble Lord, Lord Haskel, as the only occupant and spokesman on the Labour Benches.
The phenomenon of regulation is nothing new. The 19th century saw the introduction of extensive regulation in factories, banking, weights and measures, sale of goods, the adulteration of food, private contracts and much more. What is new is the scale of unchecked and indiscriminate regulation to restrict competition. It is yet another example of my favourite word these days, which is "inordinacy". That term suggests the temptation to take everything to excess.
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An example that today would be widely accepted but which was much contested a few years ago is that of the Shops Acts. Here was a complex rigmarole of regulations on hours and days, opening and closing times and so forth. The intentions were benevolent in that they sought to prevent the exploitation of shop workers, but the consequences were wholly baneful. They froze competition and delayed the revolution in retailing which has extended choice not only to shoppers but, no less, to shop workers themselves.
A regulatory framework is necessary, but it must not swamp competition. Regulation is inevitably restrictive and unproductive. In contrast, competition is progressive, enterprising and dynamic. It is said that the trouble with competition is that it is not perfect according to textbook theory. However, it is one thing to provide guidelines, but quite another matter to bury competition beneath extensive uniform standards. I searched for a homely analogy and found that of the motorist. He will accept the Highway Code, speed limits, even congestion charges and perhaps the occasional speed camera, but he will not accept the Minister getting into the driving seat.
Why has regulation mania grown like Topsy over recent years, especially in the labour market? According to a recent Hobart Paper on employment tribunals by Professor Shackleton, the direct administrative costs total around £1 billion per year. However, the total cost of our compensation culture dwarfs that sum. Various estimates range from £5 billion according to the British Chambers of Commerce, £6 billion according to the Institute of Directors and an impressive £10 billion according to the Institute of Actuaries, including a steep rise in premiums for employers liability insurance. My first question to the Minister is this: what is his best estimate of the cost of regulations in the labour market?
My second question is this: who pays the cost? Economic analysis shows that firms faced with a new levy or tax seek to shift the cost forward to customers in higher prices or backward to workers in reduced employment. If competition makes it impossible to escape the cost, it falls on profits, which means that investors will put up less capital for future expansion. Which of those damaging effects does the Minister prefer? Does he prefer higher prices to cover the cost, does he prefer lower employment, or does he prefer contracting businesses? Or does he prefer to dwell in Tommy Cooper's make-believe world where costs simply vanish—just like that?
There are several reasons why this costly mountain of regulation has grown. One is that regulations are cheap for governments because they do not have to meet the costs of compliance. Another reason is that while the apparent benefits of regulation are concentrated and highly visible, the costs are widely dispersed, delayed and obscure. Thus in the short run, trade unions stand to gain from regulation favourable to their members. It pays them to invest heavily in organising and lobbying for government favours without concern for the long-run damage, even to their own members. Since governments do not pay the bill,

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weak Ministers have no incentive to resist the constant pressure for more regulation. In any case, Ministers crave popularity.
The wider, deeper and longer-term unintended consequence is that costly job protection may end up costing jobs. If a restricted, rigid labour market prevents firms responding flexibly to the constant challenges of change in a global economy, British firms will lose out further to foreign competition. Thanks to radical liberalisation by the Tories after 1979, we forged ahead of France and Germany. Today their highly regulated economies have condemned them to massive unemployment and stagnation. Yet our head-in-the-clouds Prime Minister boasts of a campaign to liberalise restrictive economies in Europe while his colleagues yield to every pressure to restrict and rigidify the labour market at home.
The reckless increase in British regulation is encouraged, even incited, by the various commissions on equal pay, minimum wages, conditions at work and various forms of discrimination—real or imagined—relating to race, sex or age. Applications to tribunals more than doubled from 38,000 in 1985 to 80,000 in 1997, and rose again to 130,000 by 2002. This explosion of grievances is encouraged by absurdly inflated and well-publicised jackpot awards to lucky winners.
The full costs and consequences of regulation extend far beyond higher prices, lower employment and reduced investment. Most hidden of all costs are the daily frustration, hassle and distraction of complying with ever-increasing regulations and their frequent changes. Do Ministers simply not care that this inordinate legislative activism has already driven many small, defenceless businesses to the wall? Our complacent Chancellor may shrug off such warnings with the constant refrain, "Behold! The economy is doing fine". I believe that he once studied economics, so I shall remind him of an old Liberal adage: what gives regulation the illusion of working are the freedoms that regulation has not yet destroyed. A strong economy can bear much mischief, but this progressive process renders effort and enterprise ever weaker and less able to bear the increasing burdens.
7.7 p.m.
Lord Plumb: My Lords, if I had a little more time in which to speak I would add to the stories told by my noble friend Lord Hodgson, but I welcome the opportunity to support my noble friend Lord Vinson in drawing attention to the unintended consequences of regulation. I could speak at considerable length in exploration of the myths alleged to have come from Brussels—from bananas to double-decker buses—but I take seriously the question of the effect regulation has had on competition through misinterpretation and misrepresentation. Reports on regulatory issues and on the cost of inappropriate regulation are enormous.
It will not surprise noble Lords to learn that I take a more earthy approach to this problem and to the effects of regulation on the land, farming and farmers, as well as on the wider countryside.
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There are several motivations for inputs into agriculture, such as dangers to the health of farmers and farm workers, the effect some products may have on consumers and hazards to the environment. Restrictions are put on the use of some chemicals and seed imports are banned from countries with seed-borne diseases.
Regulatory systems may also monitor the quality of inputs that are sold to ensure that they are unadulterated and correctly labelled. But I have to say that, as we look around the world, the mind boggles when we consider the problems facing the World Trade Organisation when formulating regulatory reform in developing countries, taking into account both over and under-regulation.
Many of the current systems have difficulty in adjusting to the rapid technical change in agriculture and to the growth of private input trade. Therefore, I shall take three examples of what I consider to be poor, good and inappropriate regulation, three examples of what I consider are the worst aspects of regulations in agriculture, of which I could name many.
First, the nitrates directive is a classic case under which huge amounts of money have been spent in implementing the standard, which is widely regarded as scientifically flawed. The Government have been forced by the threat of infraction proceedings by the European Community into an implementation approach that could have been achieved in a much more sensitive way. A light touch could have been taken with fewer adverse implications for the management of and the costs to farm businesses involved.
Secondly, there is the animal by-product directive under which it has been unlawful to bury fallen stock since last May. That is another example of very poor handling—indeed a fiasco—resulting in a last minute rush of domestic regulation, which was much delayed, with the risk that the United Kingdom would be in trouble with Brussels again for failing to implement the directive effectively.
Thirdly, the Government have accepted that fly-tipping is a scourge on the environment. Some time ago the regulations proposed included the idea of charging occupiers of land to clear up waste that is tipped on their land—I speak from personal experience—only because they are sitting-duck targets, as it is more difficult to catch the perpetrators. Regulations should be directed at the guilty, however difficult they are to enforce, but not at the innocent party who can be easily imposed upon. Fortunately common sense seems to have prevailed as Alun Michael in another place said yesterday that although the Government want more robust powers under the Environmental Protection Act for clearing waste from land, it is not, after all, planned to remove the defence for landowners and occupiers who have not knowingly caused or permitted fly-tipping to take place.
I have one example of a good regulation—I give only one because I could only think of one. Like other small businesses in general, farmers are hardly looking for new regulations. But there arc circumstances where appropriate regulation has its place. I support the Sheridan Bill, which I understand will be debated in

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another place on Friday and which will introduce a statutory scheme for regulating gangmasters. That is an appropriate theme to consider at the moment. Farmers and growers need a flexible source of skilled labour but it is recognised that some gangmasters abuse and exploit their workers. The law needs to be cleaned up and nothing short of changing the law to bring the situation under better control will be adequate for the task.
On inappropriate regulation, my noble friend Lord Vinson's debate focuses on the unintended consequences of regulation. There is an instinctive tendency among legislators to reach for new laws to tackle issues that they believe need to be controlled or regulated. Usually such new laws are concerned with stopping citizens from doing things that otherwise would be unlawful. Obviously, society requires such measures in relation to criminal activity, like theft and assault of a person, but they are much less persuasive in regulating businesses.
The RSPB among others has campaigned for a tax on pesticides because it believes that farmers use too much of them and that there is a direct link with the decline in the populations of farmland birds. Imposing taxes on pesticides would be bound to have unpredictable results. It would be no more likely to result in benefits to the environment than would slapping tax on hamburgers and other fatty food lead directly to a decline in the nation's level of obesity. I can speak! A much better approach is to involve farmers in partnerships, which will result in crop protection management plans that will deliver far more benefits for wildlife and the environment generally than the blunt instrument of tax.
7.15 p.m.
The Earl of Onslow: My Lords, I was, perhaps rather unkindly, amused by the completely justifiable attack of my noble friend Lord Freeman on over-regulation. I wondered whether he was quite so keen on it when he was in Cabinet. Those in Cabinet are always tempted to regulate and those outside government are tempted to do a lot of kicking.
Lord Freeman: My Lords, my noble friend may have forgotten that in Cabinet I served as the Minister responsible for deregulation.
The Earl of Onslow: My Lords, that means almost certainly that it did not work. That was a friendly, gentlemanly tease. The problem of regulation is nothing new. John Masters' book, Bugles and a Tiger, is about how an officer had to travel across half of India to arrest someone who had stolen the mess funds. He had to fill in a form and finally, in exasperation, the clerk at Indian army headquarters asked why the officer did not take his horse as he was a field officer and why had he not applied for the money to bring it back. That was carrying regulation too far. Gulliver's Travels has also been quoted so the problem is nothing new.
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The noble Lord, Lord Haskel, had the situation half right. I completely agree with him. He said that the rule of law and security of property are essential to both human and economic progress. That goes without saying. Society cannot have those things without the rule of law. Therefore, good regulation is a friend and an ally. Too much and bad regulation is the enemy. It is the "too much and bad regulation" that some of us find so irritating.
Of course, we do not wish to go back to the casualty rates that Brunel had when he built his first tunnel under the Thames. They were appalling. We must have health and safety regulations; we must have regulations to ensure that people do not drown casually because no one has carried out a proper survey. No one argues about that. But do the police have to dress up as road-menders because it might be unsafe for them to go out at night? They all wear yellow jackets. The excuse of health and safety comes tripping off the tongue and it is an excuse for doing nothing under certain circumstances.
I believe that when the Better Regulation Task Force was set up the number of regulations passed was something like 2,500 a year; it is now over 4,500 a year. I can give two or three examples. The asbestos regulations failed to differentiate properly between blue and brown asbestos on the one hand and white asbestos on the other. We have a totally fatuous regulation for horse passports solely because the French army had to eat them in the retreat from Moscow and acquired a taste for horse meat. The cattle and sheep movement orders have become more and more complicated.
My solicitor, to whom I have gone for the past 20 years, has asked me for my passport, a photograph of me and an electricity bill so that he can show the Financial Services Authority that he and I have not been money laundering for the past 20 years. Such regulation is fatuous.
I had reason to go into hospital the other day and on the consent form there was a section asking for my racial origins. The kind of thing that had to be ticked was whether I was Welsh black, English black or Friesian—sorry; those are cows. I could not be bothered to fill it in. I am waiting for someone to write to me asking why I did not fill it in to which I shall say that I could not be bothered. Such matters go on and on.
It is all very well for noble Lords to complain about over-regulation, but we have to expect that 80 per cent of English regulations now are passed in Europe and we have no choice but to accept them. At least with the 20 per cent that remain we can change them. Changing a European regulation is almost impossible. The acquis communautaire makes it almost impossible to change them.
The nitrate directive has been mentioned. Fly-tipping has been mentioned—but, of course, fly-tipping will increase if you put a land-fill tax on it. It follows as night follows day that if you make it more difficult and more expensive, the wide guys will go round the corner and dump it on my property or the property of my noble friend Lord Plumb.

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I have a reference to health and safety in my notes. A pancake race had to he cancelled the other day because of worries about the public liability of children and women flipping pancakes. What kind of society are we becoming when we are so worried about women flipping pancakes?
I also note, with encouragement, that the Chancellor of the Exchequer and the Prime Minister go around Europe lecturing others on the need for less regulation and a freer labour market. I cannot remember the chapter and verse and in which gospel it is, but they should read the parable about motes and beams. If they are going to lecture others they should start by trying to cleanse the Augean stable of British regulation.
7.21 p.m.
Lord Newby: My Lords, I, too, congratulate the noble Lord, Lord Vinson, on introducing the debate. While there is nothing new in the concept of regulation, as a number of noble Lords have said, we are undoubtedly more regulated than ever before. While there is nearly always a good case for regulation in principle, there is a growing sense that its volume and extent is increasingly disproportionate to the problems that regulations seek to tackle. As a result, they are often ineffective and counter-productive.
We all have our favourite nonsenses. Like the noble Earl, Lord Onslow, one of mine relates to money laundering. I have been working as the trustee of a charity for 25 years this year, using the same firm of solicitors to act for the charity. I now want the solicitors to conduct another piece of business b
but, before they will even begin to accept me as a client. I will have to submit a passport and a utility bill. Among the many other nonsenses involved, they say apologetically that the regulations on money laundering contain no de minimis limit. So anyone can be covered by this. It is a clear nonsense.
Another area of nonsense is employment law, where far too many restrictive regulations are in place. One was referred to by the press at the weekend. A recruitment company was having great difficulty with the NHS because every nurse supplied to it by the recruitment company was newly required to provide 27 pieces of paperwork to prove that they had the relevant qualifications to do the job. Not surprisingly, not every nurse had the paperwork, although many of them were already working at the hospital. Before Christmas, the recruitment company bought a turkey for every nurse on its books in an attempt to get them to fill in the paperwork—but even that failed. Several hundred experienced nurses are now in jeopardy of having to leave their employment because they cannot find 27 pieces of paper relating to their entire employment history.
The area of health and safety has been mentioned. My particular nonsense in this regard concerns the issue of church picnics, a subject in which my wife is heavily engaged. Under the law, it is now impossible to ask people to bring to a picnic food that they have made themselves; it all has to be pre-packaged. As a
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result, the whole character of a picnic has changed. You are opening supermarket packages of food rather than benefiting from the cooking and preparation of individual members of the picnic. That again is a nonsense.
The underlying theme in relation to health and safety and some employment legislation is that the concept of the accident is no longer acceptable. "There is no such thing as an accident", is increasingly the cry. More and more there is a blame culture when anything goes wrong, and there has been a huge growth in heavily advertised litigation. This has many unintended and unsatisfactory consequences, not least of which is that it deters volunteer leaders of community activity at a time when community activity is under threat from a whole raft of changes within society.
An area of regulation which, surprisingly, has not been mentioned concerns targets and inspections in the public sector and the vast plethora of additional tax legislation introduced within the past six years. It is hardly surprising that there is a sense that the regulation and inspection of the public services is so serious that the improvements to which the Government are rightly committed—and which we all hope will be successful—are in many cases being delayed and jeopardised because of the straitjacket in which those attempting to improve public services find themselves.
I agree very strongly with the comment of Sir Peter Gershon, reported last week, that an entire industry based on regulation desperately needs to he rationalised. I should love to be able to talk about the Gershon report today but, as has already been mentioned, the Government authorised its leak to one newspaper on 16 February with the sole purpose of upstaging the publication of the Conservative Party's public expenditure plans. A selected journalist was encouraged to publish extensive details of the proposals, yet Parliament and the country are still denied access to the report. In my view, such a cynical use of information and disregard for Parliament is typical of the Government and brings them and the parliamentary process into disrepute. I echo the call that has already been made that the Gershon report—in whatever form it was leaked to the Financial Times—should now be published in full.
How have we got into this mess on regulation and how can we get out of it? As the noble Lord, Lord Hodgson, said, we have event-driven regulation—the concept that something has to he done. In one sense, while there may be a case for the licensing of gangmasters, the gangmaster responsible for the death of the cockle pickers was breaking umpteen pieces of legislation already; the MP for Morecambe raised the issue. The problem was not that there was no regulation but that it was not being enforced.
A second problem is that when it comes into force it is a kind of belts and braces regulation which, if followed, would virtually eliminate the activity it seeks to regulate. This raises a whole raft of problems. The

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noble Lord, Lord Vinson, tellingly made the point about the proportionality of the cost and benefit of regulation, which is often completely out of kilter.
Flowing from that is the impossibility of monitoring regulation. There is too much of it and the monitoring is ineffective. Returning to the issue of the cockle pickers, there simply were not enough people in that part of the country able to be deployed to look into what was going on. The more regulation we have and the more detailed it is, the more we lose track of the main issues and get bogged down in the detail. If we were to monitor the regulation properly, virtually every second person would need to be a regulator.
What happens when people break regulations? How are they treated? Enron, for example, largely followed the reporting and accountancy rules. It was all there in the annual report but it was very difficult to spot. Its officers did what they did because they thought they could get away with it. There is a real issue about ensuring that the punishment fits the crime in regulated areas. Otherwise, there is no adequate incentive for people to follow regulations in the first place.
Finally in terms of how we got into this position, there is the complicated additional layer of regulatory burden that has undoubtedly flowed from our membership of the EU.
I commend to noble Lords who have not read it the section on regulation in the government document published earlier this month, Advancing Long-Term Prosperity: Economic Reform in an Enlarged Europe. It points out that the IMF has concluded that improvement in the EU regulatory framework could deliver a 7 per cent increase in EU GDP in the longer term, and sets out what the Government are going to do about it, some of which is laudable. For example, I welcome the plan on regulatory reform that the finance Ministers of this country, Ireland, the Netherlands and Luxembourg have signed in order to boost regulatory reform during their four presidencies, and some of the specific things that they are committed to do. However, if the Chancellor is going to put this at the centre of his personal agenda, he needs to go to the meetings, which he consistently fails to do. It is no use making speeches in Westminster, but not turning up to ECOFIN and then expecting Europe, having been lectured by him, to do what he wants.
There must also be a change in the Government's mentality. Some of the Gershon arguments are strong, to the extent that I understand them and have seen them, and the Prime Minister apparently agrees. The Gershon argument for reducing compliance costs and increasing penalties sufficient to change corporate behaviour is a sensible idea. At the end of the day, determined people will always attempt to evade any regulation. The answer is not to regulate human activity out of business, but to get a better balance between risk-averse box-ticking, effective investigation and effective penalties.
7.32 p.m.
Baroness Miller of Hendon: My Lords,
"We must get rid of the red tape that comes out of Brussels that is throttling business in Europe".
Those are not my words, but those of the Secretary of State for Trade and Industry, Patricia Hewitt, speaking on "Newsnight" on 18 February. In my astonishment on hearing those words from that particular source, I thought how appropriate they were for the debate that my noble friend Lord Vinson has initiated so very well today, and for which we are most grateful, especially for pointing out that one great, unintended consequence is the denial of personal responsibility that is becoming embedded in our culture. That is something that not many of us have ever thought of as an unintended consequence.
I could hardly believe my ears when I heard a Secretary of State of one of the four major departments in the Government complaining about red tape. This is a Government headed by a Prime Minister who, figuratively, did not even wait to perform the dramatic taking off of his jacket when he entered Number 10 for the first time before he signed up to the Social Chapter. The regulations coming out of Brussels, time and time again, are gold-plated by this Government, making the regulations and the directives impact more heavily on our businesses and citizens than they do on our neighbours on the mainland. This Government can do nothing when, far from gold-plating regulations or even making a pretence of performing their minimum obligations, our European partners simply ignore regulations when it does not suit those countries to comply with them.
Let me remind your Lordships, for example, of the way that French farmers are allowed to blockade the Channel ports whenever they are in dispute with their own government—a frequent occurrence—or when they want to prevent imports of British lamb or beef, or the way that the French and Germans simply ignore fiscal rules about government borrowing in the so-called Stability Pact, which they themselves imposed on the euro-zone.
It is not just over the effect of over-regulation from Brussels that Mrs Hewitt should be directing her newly discovered ire. Only 40 per cent of the new regulations introduced since 1998 emanated from Europe. The remaining 60 per cent were home grown. If there were an Olympics for regulation and control, the Government would surely win the gold medal.
Of course, I agree with my noble friend Lord Hodgson that the problem did not start with this Government, but it has certainly become worse. There were 3,990 new regulations in 2003. The record was in 2001, when Whitehall spewed out 4,621 new regulations and then, exhausted by its labours, the numbers were reduced to a mere 3,839 in 2002. However, as I pointed out, they were again on an upwards trend last year. In the six full calendar years of this Labour Government, there have been a total of 23,322 new regulations—almost 15 every working day.
There are two other figures. This flood of regulation is 53 per cent higher than was the case under the last Conservative government, and the cost to business is

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estimated by the CBI to be up to £15 billion a year. I refer to those two figures, because I last quoted them during Questions on 11 February.
Lord Haskel: My Lords, I thank the noble Baroness for giving the way. She may have been unwell, but we did have a debate on regulation some months ago. It was revealed that nearly half the regulations that she has told us about relate to things such as bus timetables and digging holes in the road. They are called regulations, but they are purely formalities.
Baroness Miller of Hendon: My Lords, they are certainly regulations. I forgive the noble Lord. I will not answer him in any detail, because this is a timed debate.
At the time when I quoted those two figures, the Minister dismissed them as being,
"a contentious assumption, which is totally in dispute"—[Official Report, 11/2/04; col. 1100.]
But the figure that I gave for the number of new regulations came from Her Majesty's Stationery Office and the figure for the cost to business came from the CBI. Of course, they may be in dispute, but perhaps the Minister will tell us what he believes the figures for the number and cost of regulation to be.
It is not just the quantity and cost of regulation that is the issue. It is the mood created by the environment of regulation with which we are afflicted at a rate of 15 new ones every day. Many of them are regarded by the public as nit-picking, pettifogging and nannying to the extent of treating the public as irresponsible children.
It is not just in Whitehall that regulations and laws are gold-plated and applied without a modicum of common sense. The Data Protection Act 1998 is accepted by everyone as a necessary protection from the over-intrusive invasion of reasonable rights of privacy. However, Humberside police destroyed relevant intelligence on Ian Huntley, allowing him to get a job that he should never have had. We see from today's Daily Telegraph that the Data Protection Registrar has told the Bichard Inquiry that the Humberside police's decision,
"to delete intelligence of such obvious value … was astonishing".
Meanwhile, the Association of Chief Police Officers will tell the same inquiry—and I quote from the newspaper report—that,
"the Information Commissioner has demanded that police forces delete convictions for violence and sexual assault from computer and intelligence files in the interest of data protection and civil liberties".
ACPO accuses the Information Commissioner of,
"undermining the safety of children".
While this unseemly squabble was going on, two very unfortunate children died.
Whoever was right in this particular case, who could and would have complained if the material held had been retained? British Gas cut off the heating to an elderly couple, Mr and Mrs Bates, but did not notify local social services early enough for something to be done to help them, because it was decided that that
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would be a breach of the Act. The couple both died from hypothermia. Who would have complained if the clerk who made the cutting-off decision had picked up the phone and told the local council?
Last week we read that Okehampton was on the brink of having to cancel its traditional pancake day race because of the cost of insuring the children. I am happy to tell my noble friend Lord Onslow that fortunately, at the last minute, the event was saved by a former pupil who is now an insurance broker and found a more realistic premium.
The Earl of Onslow: My Lords, that is the first really good news that I have heard in this House for a very long time.
Baroness Miller of Hendon: My Lords, I hope that the Chief Whip sitting on the Government Front Bench will forgive me if I finish a couple of moments later.
Baroness Farrington of Ribbleton: My Lords, I thank noble Baroness for the promotion, but there was no vacancy.
Baroness Miller of Hendon: My Lords, that farcical decision to cancel is blamed on the current compensation culture that we are importing from the United States of America. However, if insurance companies simply stood and fought speculative claims, the ambulance chasers to whom my noble friend referred in his speech, who incessantly advertise on television, would soon stop. My noble friend Lord Goschen also mentioned them.
It is the stupidity of applying the Data Protection Act and other laws and regulations instead of applying a modicum of common sense—hounding market traders who want to sell bananas by the pound rather than the kilo, for example—that creates this nit-picking atmosphere and the attitude to which I referred. Only today, the same paper reported that the traders' case had been rejected by the European Court of Human Rights. So common is the phenomenon of blindly enforcing petty regulations that the latest edition of the Oxford English Dictionary now recognises the word for it. "Jobsworth" is in the dictionary: "It's more than my job's worth to do this or to do that". One of our local councils fined a resident with a valid parking permit because it had fallen off his windscreen. My own local council—Conservative controlled, I am sorry to say—has just sent me a leaflet warning me that if my car overhangs my parking bay, I may be fined. Are all these people crackers?
This debate is about the unintended consequences of regulation. Despite the somewhat philosophical title that my noble friend has chosen, and because of the examples that he and other speakers have given of the consequences of some regulations in the course of the debate, I am not prepared to acquit the Government of responsibility for all the financial and economic damage, the damage to employment and the effect on the moral attitude of officialdom caused by the never-ending stream of regulations that they issue.

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At law, we hold everyone responsible for the natural consequences of their actions. It is not as if the Government have not been told of the damage they are causing. We have repeatedly told them from this side of the House; the CBI has told them; the Institute of Directors has told them; the British Chambers of Commerce has told them; the Federation of Small Businesses has told them. Innumerable trade organisations, think tanks, economists and pressure groups have told them. How many times do the Government have to be told of the danger?
In his speech seeking leave to introduce his Bill, my honourable friend in the other place pointed out numerous deficiencies in the present system of regulatory assessment. Several of my noble friends have mentioned that this evening. However, it is a matter of regret to my noble friend, and to me, that the Bill has little, if any, chance of reaching the statute book under the procedure of the other place. However, I join my noble friend in, as he indicated, sincerely hoping that the Government will take the objects of the Bill to heart and that they will voluntarily ensure that they receive full and accurate information of the probable effects of what they do every time a Minister signs his name to an order that has the full force and effect of law. Lastly, but by no means least, I hope that they will stop ignoring and denying the consequences, unintended or otherwise, of each and every regulation that they make.
7.42 p.m.
Lord Bassam of Brighton: My Lords, I join in the general congratulations to the noble Lord, Lord Vinson, on the way in which he has brought forward this Motion and has focused an important debate on the issue of regulation. There have been many interesting and good points made during the course of the speeches. It would be invidious to dwell on too many of them.
I thought that the noble Lord, Lord Vinson, was right to say that regulation should be about proportionality. The noble Earl, Lord Onslow, had a good point when he complained about gold-plating, which was a theme that came up on a number of occasions. I liked the question from the noble Lord, Lord MacLaurin, about what regulation should accomplish. It is the right question in the right circumstances. I really enjoyed the trout story of the noble Lord, Lord Hodgson. I think that it was the best of the favourite nonsenses regaled by noble Lords this evening, and is a story well worth retelling.
I also enjoyed the comments of the noble Lord, Lord Plumb. I thought that they were balanced in many respects and that he was right to say that there is poor, good and, sometimes, inappropriate regulation. I think that we are all well aware of that. Of course, the noble Baroness, Lady Miller, is right to say that sometimes we live in a society where there is a denial of personal responsibility. In looking at regulation, that is a very important issue as well.
The noble Earl, Lord Onslow, is undoubtedly right when he said that there was nothing new in this debate. He then gave us chapter and verse about why that is the case. I was very grateful to the noble Viscount,
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Lord Goschen, for taking my mind back to the Regulation of Investigatory Powers Act and all that it brought forward in its time. I thought that he put his finger on the core of the debate when he rightly said that good regulation requires public confidence. I think that we all agree with that. Of course, the noble Lord, Lord Freeman, with his vast experience in government, was right to say that in some ways our concerns about regulation are a reflection of the fact that we live in a risk-averse society.
All of those were important and well-made points. I welcome the opportunity to discuss the Government's progress on the better regulation agenda. This Government and previous governments have all been concerned about regulation and the way in which it develops. After all, it was a Conservative administration who introduced the Deregulation and Contracting Out Act 1994 and, in some ways, started and inspired this whole debate—a debate that the Government have continued.
This debate takes place against a backdrop of a strong and stable economy. Employment is at record highs, unemployment is at its lowest for more than 30 years, inflation is low and stable, and interest rates are at levels not seen since the 1950s.
The Government's approach to regulatory reform has contributed to this record of success. The UK is at the "forefront of regulatory reform". They are not my words, but those of the OECD. The World Bank's "Doing Business in 2004" survey named the United Kingdom among the top 10 countries out of 130 with the least regulation. Other countries included Australia, Denmark and the United States. The Economist ranked the UK top of the 1997–2001 Entrepreneurial Framework Index of 60 countries that are low on red tape, with Switzerland coming second and the US coming third. An OECD review of the EU found that the United Kingdom has almost the lowest administration cost and fewer regulations for entrepreneurs than any other EU country.
The noble Lord, Lord Haskel, put his finger on the benefits of regulation. I thought that it was very illuminating that he referred to the positive consequences of regulation in creating new markets. Some regulation will always be necessary and desirable. Effective and well focused regulation can play a vital role in correcting market failures, promoting fairness and ensuring public safety. Sometimes we might get irritated with the health and safety culture but we all recognise the importance and value of health and safety legislation and regulation.
For those reasons, the Government are not going to apologise for introducing the first ever national minimum wage, which has raised the incomes of more than 1 million people in poverty, the right to four weeks' paid holiday and improved maternity and paternity leave arrangements. At the beginning of the debate about the national minimum wage, I can remember that we were told that it was going to cost a million jobs in the UK economy. That never transpired and is not likely ever to be the case. We are

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not going to apologise for seeking to use regulations to protect the environment, to eliminate discrimination and to promote opportunity for all.
Our aim in doing all of this must be to minimise the burdens of compliance for business and the voluntary and community sectors, while ensuring that workers, consumers and the environment are protected. The potential effects of regulation must be fully thought through so that policy meets its purpose and does not end up causing more harm than good.
New regulations should only be introduced when other alternatives have first been considered and rejected and where the benefits justify all the costs, direct and indirect. We are committed that where regulations or alternative measures are introduced, it should be done in a light-touch way. Any policy intervention, and its enforcement, must therefore meet the five principles recommended by the Better Regulation Task Force in 1997. Let us remind ourselves what those principles are: proportionality, which was discussed by the noble Lord, Lord Vinson; accountability; consistency, which we all wish to see; transparency; and targeting.
To ensure that these principles work in practice, in 1998 the Government committed themselves to ensuring that no proposal having an impact on business, charities or the voluntary sector, should be considered by Ministers without a regulatory impact assessment being carried out. Compliance with this process is now nearly 100 per cent, up from 55 per cent three years ago. The Government are committed continuously to improve the quality of RIAs. We have already asked the independent National Audit Office to help to vet the quality of regulatory impact assessments, to bring the measure of independent that Archie Norman is seeking in his Bill in another place.
We recognise that, even where a policy proposal would meet its objectives, there may be wider impacts and unintended consequences that outweigh the benefits of action. That is why the impact assessment must include not only the obvious costs and benefits of the proposal, but also the wider economic, social and environmental impacts. The Government are committed to ensuring that regulatory impact assessments consider all the potential impacts of regulation, including the potential unintended consequences. Only if the benefits of each action outweigh all the costs of doing so should a proposal go forward.
Those who would be affected by a proposed regulation can often add a perspective that might not otherwise have been considered. That is why we have introduced a minimum 12-week consultation period for all proposals that require an impact assessment, allowing the relevant stakeholders to contribute to policy development and flag up any potential unintended consequences of particular proposals before a final decision has been taken.
In bringing in measures, we therefore ensure that we listen to the views of business and meet its concerns. For example, the CBI noted that,
"the Government's minimum wage legislation has not created an excessive burden because of good consultation".
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We will keep listening. The CBI is to be congratulated on that observation. The Government recognise that there can be uncertainties over the potential impacts of a regulation, such that even if on the balance of probabilities it appears justified beforehand, in practice it is not. That is why each regulatory impact assessment must discuss how the effectiveness of regulation is to be reviewed. We are also making use of new powers introduced in the Regulatory Reform Act to scrap unnecessary legislation.
In addition, we are making greater use of sunsetting clauses—specifying a particular date when a piece of legislation or regulation will expire—where appropriate. Sunsetting clauses have been included, for example, in the Football (Disorder) Act 2000 and the Terrorism Act 2000. I know that there have been calls from opposition parties to introduce sunsetting clauses for all new pieces of legislation and regulation. However, such clauses will not always be justified. A blanket commitment to them would introduce unnecessary uncertainty for business and impose unnecessary demands on parliamentary time.
Lord Vinson: My Lords, time is running out and I am rather anxious that the Minister makes a specific reply to some of the points put to him. At the moment, he does not seem to be getting there. Specifically, I wrote to him about and raised in my speech whether it would be advantageous to look at the possibility of setting up a deregulation Standing Committee of both Houses. That would give a wonderful backbone to the better regulation unit, and give it a friend in court, so to speak. I know that it is a fairly novel idea, but I have given him a chance to think about it and I wonder whether he has.
Lord Bassam of Brighton: Indeed I have, my Lords, and I shall come to the point.
We are trying to ensure that we look at the issues on a case-by-case basis and that each regulation has a clear reviewing mechanism in place. As well as ensuring that any regulation is strictly necessary and reviewed systematically, the Government are committed to reforming existing regulation. The Regulatory Reform Act 2001 brought in new procedures for scrapping outdated legislation, and last December we published our action plan. It details 650 deregulatory and simplification measures that the Government will deliver, a point raised by the noble Viscount, Lord Goschen.
Since the launch of the original version of the plan in February 2002, more than 240 reforms have been delivered. We have already delivered: licensing reforms which increase flexibility over opening hours, saving business in the order of £1.9 billion in the first 10 years" business tenancy reforms modernising procedures for renewing or terminating business tenancies, saving businesses approximately £6.5 million a year in court costs alone; and removal of limits to the number of partners in a firm, estimated to save around £10,000 per relevant partnership.

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There is much more that we can and must do, however. Looking ahead, in the private sector we plan, for example, to modernise and streamline the planning processes; make it easier for business to obtain the patent protection essential to protect innovation; comprehensively reform company law, in order to meet the needs of business today; reflect the particular needs of small businesses and create an internationally competitive framework for all UK business; and rationalise government information requests to farmers, in the whole farm approach project, significantly reducing overlapping bureaucracy.
We are also pushing the reform agenda across Whitehall. I think that it was the noble Lord, Lord Hodgson of Astley Abbotts, who said that there needed to be a cross-Whitehall approach, and we entirely agree. We are establishing the panel for regulatory accountability, which will be made up from business and ministerial representation. The Regulatory Impact Unit in the Cabinet Office is there to assist. We have also set up the Small Business Service, which acts as a voice for small businesses within government. And, of course, we set up the Better Regulation Task Force, an independent body with a broad membership. The Government have accepted many of its recommendations, including the introduction of common commencement dates for all changes to employment regulation.
We have appointed a Minister for regulatory reform in each department, so that each department is advised on and understands the impact of measures that it seeks to bring forward. We have established a network of departmental boards responsible for promoting better regulation.
The noble Lord, Lord Vinson, raised the issue of perhaps creating a joint parliamentary committee comprised of Members of both Houses. It is an interesting idea and I certainly do not dismiss it out of hand. However, we already have the House of Lords Select Committee on Delegated Powers and Regulatory Reform, and the House of Commons has its own Regulatory Reform Committee. Those two bodies carry out important work in the area. The importance of that work is respected and acknowledged, not least because, certainly so far as the Delegated Powers Committee is concerned, the Government are almost bound to acknowledge and bow towards its recommendations.
As many speakers said, an increasing proportion of regulation affecting this country originates in Europe. The Government want to ensure that European legislation is subject to the same level of scrutiny as British legislation. That is why we welcomed the European Commission's action plan for better regulation, published in June last year. Specifically, the plan committed the Commission to publishing 42 regulatory impact assessments in 2003, reducing existing legislation by 35,000 pages by the end of 2004 and creating a minimum consultation period of eight weeks.
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The Government will continue to push for further improvements. The forthcoming Irish, Dutch, British and Luxembourg presidencies are proposing a joint initiative to drive forward regulatory reform across the European Union. Government guidance also aims to ensure that transposition of EU work is done as simply and easily as possible to avoid "gold plating", to which many noble Lords have objected.
I now want to turn briefly to the public sector. Improving public services is the Government's top priority. Better regulation can help to deliver public service. Clearer national targets and rigorous performance management systems are essential parts of driving up standards, but we also need to ensure that we minimise the bureaucracy that those impose, and strip away unnecessary burdens wherever possible.
The Government are pursuing that agenda through, for example, earned autonomy for highly performing hospitals. Three-star trusts can now set their own management cost limits without being monitored by the department or the strategic health authority. Foundation trusts will be freed from Whitehall control, and run instead by local communities and frontline staff.
We are also reducing the number of statutory plans and targets that the public sector has to produce. For example, in the National Health Service we have devolved 75 per cent of funding direct to primary care trusts, and have halved the number of targets that trusts will face from 108 in 2001–02 to 44 this year. By 2003, there had been a 65 per cent reduction in the volume of information returns that the Department of Health required, saving nearly 30,000 man-hours over the past three years. The Health Secretary, John Reid, announced on 10 February a further drive to reduce the number of targets and increase focus on the quality of patient care.
The Government are acting to remove unnecessary burdens from frontline staff, including through Making a Difference reports—and they are making a difference. Nurses, for example, can now request tests and investigations. Patients can now be dispensed 28 days' worth of medicine instead of seven days' worth, and re-registration of nurses returning to practice is now quicker. All such examples show what can be done when we decide to attack the burdens of bureaucracy and move towards forms of deregulation.
I would like to summarise the Government's case on the debate. The Government are committed to regulating only where necessary and only where the benefits of doing so justify the costs. Every proposal having an impact on business must have an RIA which must consider all of the wider costs and benefits, not just the most obvious, as well as the alternatives to regulating. This system helps to ensure that all potential consequences of regulation, intended and unintended, are considered when deciding whether to proceed with a policy proposal.
In addition, the 12-week consultation period ensures that those who will be affected by the proposal have the chance to feed in their views and raise concerns about any potential unintended consequence of the kind we

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have heard today. We are, as a government, committed to listening to business and minimising the burden that regulation places upon businesses. The Government are committed to reforming existing regulation, whether it is outdated or failing to achieve its policy objective. We are drawing on the expertise of both the private sector and front-line public sector staff in seeking areas for reform. We are also drawing on the expertise of private-sector secondees and the independent Better Regulation Task Force.
This comprehensive strategy for better regulation is recognised by the World Bank, the Economist, and the OECD as among the world's best, with the United Kingdom at the forefront of regulatory reform. It is this strategy that has helped to make the United Kingdom one of the best places in the world to do business, contributing to our enviable record of record employment, low inflation and interest rates and the longest period of economic expansion on record.
8.1 p.m.
Lord Vinson: My Lords, time is up and I want merely to thank all those who have taken part in the debate. I thank the Minister, after a long day, for listening so attentively. I am sure he is impressed by the level of expertise and experience of regulation, over-regulation and unnecessary regulation. I hope that the debate generally will raise the whole level of the regulatory framework in this country greatly to the benefit of its citizens. I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

European Union: Taxation
8.2 p.m.
Lord Pearson of Rannoch Lord Pearson of Rannoch rose to ask Her Majesty's Government whether direct taxation has been ceded to the European Union under the existing European treaties.
The noble Lord said: My Lords, I trust we all agree that control of taxation is fundamental to the sovereignty of a nation. In other words, our democracy is not worth much if we cannot elect and dismiss the people who levy our taxes—our Members of Parliament or, more precisely, our Members of the House of Commons. This seems to me to be such an historic and acknowledged assumption that I must ask the Minister whether the present Labour Government agree with it. I will not ask him many questions tonight, but I should be grateful if he would answer that one.
The purpose of the debate is to discover to what extent this fundamental part of our democracy may have already been ceded to the qualified majority vote in Brussels and to the Luxembourg Court. The Motion does not call for an assessment of what the situation might become if we signed up to the draft new constitution for Europe, which as your Lordships know is on the back-burner under the Irish presidency of the European Union and looks likely to re-emerge by the end of this year under the Dutch presidency at the latest.
The draft constitution explicitly envisages Brussels taking control of direct taxation, which is why the Prime Minister made tax one of his famous red lines in the stalled negotiations last December. So this debate is also partly to ask how much point there is in the Prime Minister's red line on tax, if it has already been potentially given away to Brussels.
I propose to deal with the Question under three broad headings, as the Minister knows, because, given the density of the subject, I volunteered them to his civil servants this morning. I shall start by explaining how the Commission and the Court can use clauses in the treaties to achieve an aim which may appear to be frustrated under more specific clauses. I shall then give examples of where the Court is already clearly encroaching on the nation states' prerogative to decide matters relating to corporation tax, and I shall finish by identifying clauses in the present treaties which would already allow Brussels, supported by the Court, to take control of all direct taxation, both corporate and personal.
Before any of your Lordships think I am being fanciful, let me clarify at once that I am not saying that Brussels is about to use this power in the near future. I am saying that the power is there, hidden in the existing treaties, to be used at a time when EU integration has progressed a bit further; at a time when Brussels feels it can get away with using it.
So, first, the contention that Brussels and the Court use hidden clauses in the treaties to achieve an aim which may appear to be frustrated under more specific clauses or prohibitions. I can do no better than to remind your Lordships of how the Working Time Directive, or 48-hour week, was deceitfully imposed upon the United Kingdom.
The 48-hour week was a central aim of the EU's social chapter, over which Brussels was keen to take control in the Maastricht Treaty of 1992. The Conservative government of the day was opposed to the social chapter in general and to the 48-hour week in particular. It therefore only agreed to the Maastricht Treaty as a whole provided that the UK was allowed to opt out of the social chapter. The treaty was duly signed on that understanding, but the Commission had a trick up its sleeve in the shape of Article 118a of the TEC. This article governed the health and safety of workers and had been introduced under unanimity in the earlier Single European Act that was made subject to the co-decision procedure at Maastricht; in other words, after Maastricht, we could be outvoted on matters relating to the health and safety of workers.
So the Commission asserted, despite our objection, that the 48-hour week was a proposal covered by health and safety at work and that it should apply to the UK. The Court as usual agreed, and so the UK was forced to accept the Working Time Directive after all.
I suppose it is just conceivable that some of your Lordships may think that this version of events is the usual Euro-sceptic negative scare-mongering. So I fear it is worth placing on the record in your Lordships' House, for the first time, a letter written on 12 November 1996

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by the Prime Minister, Mr John Major, to the President of the Commission, Mr Jacques Santer. The letter goes as follows:
"Dear Jacques,
"My intention in agreeing to the Protocol on Social Policy at Maastricht was to ensure that social legislation which placed unnecessary burdens on businesses and damaged competitiveness could not be imposed on the United Kingdom. The other Heads of State and Government also agreed that arrangement, without which there would have been no agreement at all at Maastricht.
"However, in its judgement today, the European Court of Justice has ruled that the scope of Article 118a is much broader than the United Kingdom envisaged when the article was originally agreed, as part of the Single European Act. This appears to mean that legislation which the United Kingdom had expected would be dealt with under the Protocol can in fact be adopted under Article 118a.
"This is contrary to the clear and express wishes of the United Kingdom Government, and goes directly counter to the spirit of what we agreed at Maastricht. It is unacceptable and must be remedied.
"The United Kingdom will therefore table amendments in the Intergovernmental Conference to restore the position to that which the United Kingdom Government intended following the Maastricht agreement. Those amendments will be aimed at both ensuring that Article 118a cannot in future be used in ways contrary to the United Kingdom's expectation, and dealing with the specific problem of the Working Time Directive.
"I attach the utmost importance to these amendments and I shall insist that they form part of the outcome of the Intergovernmental Conference. I do not see how new agreements can be reached if earlier agreements are being undermined.
"Meanwhile, I urge the Commission to refrain from making proposals under Article 118a that properly belong under the other Member States' Agreement on Social Policy.
"I am sending copies of this letter to Heads of State or Government of European Union Member States.
"Yours sincerely,
"John Major".
I submit that that letter is one of the most important documents in the history of our relations with the European Union, about which it says so much. The inter-governmental conference to which Mr Major referred was the IGC leading up to the Treaty of Amsterdam. By the time that treaty was signed at the end of 1997, the Conservatives had lost a general election and a new Labour Government signed up to the treaty and to the social chapter. So Mr Major's letter became somewhat academic, but I trust that it serves to prove my point: that the Commission and the Court are very capable of using unexpected clauses in the treaties to advance their ambitions. I remind your Lordships that the Working Time Directive is much in our thoughts today.
How does that apply to direct taxation'? The obvious tax provisions of the European treaties are contained in Articles 90 to 93 of the TEC and appear at first sight to offer some comfort. Indeed, Article 93, which the Government never tire of reading out when pressed on the subject, states that there must be unanimity in the Council to adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation. So we have retained the veto over indirect taxation. But the
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treaties are largely silent on direct taxation; and they certainly appear to be silent on corporation tax and income tax.
Or are they? Have the Commission and the Court got another card up their sleeves? It would appear that they do, but that card is not to be found in the obvious place in the treaties, under tax provisions. It is to be found instead in the clauses which bring about the single market and specifically in the articles which ordain the four fundamental freedoms—being the free movement of persons, services, goods and capital and the right of establishment within the EU. Those freedoms are enshrined in Articles 39 to 60 of the TEC, which are often referred to as the anti-discrimination clauses: one EU country cannot discriminate against others to its advantage. Like all single market legislation, that whole area is subject to the qualified majority vote, so we do not have a veto here.
Of those clauses, there is one, Article 43, concerning the right of establishment, which is being used by the Commission and the Court to interfere in national corporation tax. Their basic long-term aim seems to be to eliminate the different tax regimes of the nation states and incorporate them into a single corporation tax regime—to be followed, I fear, by a harmonised personal tax regime, to which I shall return—all of it eventually under the benign control of Brussels. They justify that basic aim by saying that it is necessary for the completion of the single market; that we cannot have what they claim to be the benefit of a level playing field in the single market if we have different tax regimes all over the place. Hence the need for harmonisation and eventual central control.
For your Lordships to appreciate how dense and tenuous is the case for the Commission's and the court's interference in corporation tax, I fear that I should quote from Article 43. It states:
"restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting of the agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State.
"Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms",
and so on.
Once again, I must apologise for quoting Euro-speak in your Lordships' House. I hope that your Lordships will agree that, as usual, it is numbing stuff—as it is always intended to be. But, from that verbiage, the Court has taken the power in some 80 cases so far to find in favour of company tax payers and against their national governments, on the ground that their national tax laws restricted freedom of corporate establishment. Thus, the Court found against Her Majesty's Treasury in a recent case brought by ICI, which claimed group relief for losses incurred by overseas subsidiaries, and in the Hoechst/ Metallgesellsehaft cases, which put paid to our requirement for UK subsidiaries of overseas parent companies to deduct advance corporation tax from their dividend payments upwards. Those two cases alone are estimated to have cost the Treasury about £2 billion. Can the noble Lord confirm that figure?
Whatever the noble Lord's answer, to which we look forward, that strategy of the Commission and the Court has become big business for our large accounting firms and their international clients, whom they are advising how to benefit from it. Those firms confirm what I have been saying, so your Lordships do not have to believe me.
For instance, last March, Ernst & Young issued a report entitled, Damned if we don't? How EU law is challenging and changing the EU tax system, which identified the Court's determination,
"to align the tax treatment of businesses throughout the EU … basing its position on the fundamental freedoms guaranteed by the EC Treaty".
Or, as Mr Peter Corcoran wrote in Deloitte's World Tax Advisor report last August:
"Direct taxation was not originally a priority for the EU … It has been viewed by the member states as national business, and as one of the last bastions of sovereignty for member states … Nevertheless, the ECJ has embarked on a course to ensure that the fundamental freedoms of the EC Treaty are respected in the area of direct taxation".
As an international UK businessman, one is tempted to welcome a regime that allows one's profits to arise in convenient tax regimes. I am sure that my finance director will not be altogether amused if he reads what I have said so far. But as a resident in our comparatively low tax regime—not to mention as a child of our democracy—one must be deeply worried as one contemplates the obvious development of the Commission's and Court's ambitions. It is clear that they will continue to widen their judgments against national tax authorities until the nation states concede a common corporation tax policy.
As Mr. Frits Bolkestein, the EU's commissar for the single market said recently:
"The concept of a common consolidated tax base for EU-wide activities of companies … is ultimately the only means of tackling the various tax obstacles in the Internal Market 'in one stroke'".
Can the Minister tell the House what, if anything, the Government think they can do about this situation, and whether they intend to do it?
Finally, I come to my contention that the treaties already contain a clause which potentially cedes control of all taxation, including personal taxation, to Brussels.
This provision is Article 44(2)(h), and it appears in the next Article to the one that I have quoted above, in the same chapter on the right of establishment. It is therefore subject to the same wide and imaginative interpretations as its predecessor.
In order to spare noble Lords more Euro-speak at this time of night—I am sure that one dose is enough—I will paraphrase the key parts of Article 44 as follows: in order to attain freedom of establishment, the Council and Commission shall issue directives, in particular by satisfying themselves that the conditions of establishment are not distorted by aids granted by member states. They can therefore rule out "aids granted by member states"—those are the key—words if they think that they are discriminatory or to the advantage of one member state against the others.
When I first read those words some 12 years ago, I assumed that the word "aids" meant things like government aid to British Steel, or perhaps Air France, that sort of thing. Now I know better. Now I know that the word "aids" can mean anything that the Luxembourg Court decides it means. I fear it could mean our entire direct taxation system, including personal tax, if the Court agreed that that was causing distortion to the single market, perhaps by enticing a larger share of inward investment into this country, or by making the UK a more attractive place for the very rich to live in, with consequent advantage to our economy.
As I said at the beginning, I do not pretend that Brussels will consummate this power in the near future. I merely suggest that the corrupt octopus already has a tentacle around our entire taxation system, which it will tighten when the victim can no longer escape.
I end where I started. These decisions are not taken by the House of Commons, by those whom the British people can elect and dismiss. They are taken in Brussels and Luxembourg, and this Parliament must rubber stamp them on pain of unlimited fines. And worse is surely to come.
I do not know how the people will react when they discover that this vital part of their democracy—of their sovereignty—has been taken from them. But I imagine they will want to know how the Government intend to give it back to them.
I look forward to the noble Lord's enlightenment in that regard.
8.17 p.m.
Lord Newby: My Lords, I hope that the House will forgive me if I do not spend the bulk of my speech commenting directly on the speech given by noble Lord, Lord Pearson of Rannoch, but I will make one or two comments about it.
First, the idea that there is a hidden clause in any EU treaty is, frankly, risible. The whole EU spends its Lime looking through the treaties. There are copies of them in our Library. I do not believe that there is anything hidden.
As for the language in which they are written, we have just had a debate on regulation. Does anyone argue that EU regulation is somehow more difficult to understand than the extraordinary language in which all parliamentary drafting takes place? This is another fear that the noble Lord seeks to raise and it is completely unjustified.
The noble Lord referred to Article 93, and pointed out that as far as indirect taxation was concerned, changes require unanimity. He then said that there was no such article relating to direct taxation. Direct taxation is not covered by the treaty, so there is no Community competence in it. It is therefore hardly surprising that there is no equivalent article to Article 93.
The points that he made about the long-term consequences of Articles 43 and 44 were overdone. Major degrees of harmonisation of direct taxation

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within the EU will happen only if there is a political will for it within the EU—if a large majority of member states wish it to happen. There is no sign that this is the view across the EU, leaving aside the view of this country. The noble Lord raises fears that are completely unjustified.
My final point—and it is a point that has been made before in response to the noble Lord's comments—is that many of us find his reference to EU high officials as commissars offensive. Personally I find that description of Frits Bolkestein, a free-market liberal, both offensive and ridiculous. It does nothing to the level of our debates when the noble Lord continues to use that kind of language.
What is worthwhile discussing in your Lordships' House as a serious economic issue is how far tax levels and structures within a single market can diverge and should be encouraged to do so without jeopardising the free movement of goods, labour and capital, and without causing serious market distortions. The noble Lord referred briefly to indirect taxes, in particular excise duties. At present, the extremely disparate rates of indirect excise duties in the UK and much of continental Europe, particularly in wines, spirits and cigarettes, have led to levels of smuggling into this country not seen for more than 250 years. That has been extremely damaging to UK businesses. It is now decreasing somewhat as duties rise on the Continent, most notably with the French decision to make very significant increases in tobacco duty. But in the absence of such voluntary coming-together of duties, there is a strong argument from the viewpoint of UK domestic industry for at least greater European co-ordination of indirect tax levels, even if there are no formal harmonisation plans, which I do not support.
EU decisions on direct taxes have already had extremely significant consequences. For example, the decision to allow the Irish, particularly the International Finance Centre in Dublin, a zero corporation tax rate, a derogation that they were given for a short period, had a very big impact in attracting financial services investment to Dublin. The impact was such that prosperity in Ireland has allowed the Irish to reduce corporation tax to a very low level so that it is still worthwhile for all the footloose companies that moved into Dublin to remain there.
That single tax change, more than any other single change, except possibly the common agricultural policy, has led to an extraordinary level of growth in the Irish economy, which, for good or ill from our point of view—it has taken investment and activity away from the UK—has happened under existing EU legislation. I wonder whether the noble Lord, Lord Pearson, thinks that that has been a positive development, and whether, had there been greater co-ordination on corporation tax matters across the EU, that change might not have happened and a single corporation tax decision would not have had such a big impact.
I had thought that the noble Lord would talk to a greater extent—although he referred to it in passing—about the alleged suggestion that some member states
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would move to harmonise the base of corporation tax, not the rate. That issue was covered in an article in the Financial Times on 21 and 22 of this month. Frits Bolkestein, in an interview to Le Monde, said that the Commission sought to draw up proposals under the in-house corporation rules for a group of countries to harmonise the bases on which corporation tax was charged.
That potentially significant development is worth discussing rationally to see how it might affect UK business. To a certain extent, international harmonisation of accounting standards means that the way in which companies will report their activities will be more closely aligned. From that it is a relatively small step to have a harmonised base of corporation tax. That would bring with it some benefit to business, because it would mean that companies operating across all EU countries would not need to establish subsidiaries in each single one for corporation tax purposes. There would be significant benefit for large companies. I am not saying that that is an overriding argument but it is one worth having.
The point that Bolkestein makes on the consequence of such a move for tax rates is valid. He argues that the first consequence of such a change might well be that a common system by making the system more transparent would reveal hidden disparities in the way in which the tax base was currently calculated. He argued that in a second period thanks to tax competition, tax rates would move close to each other once again. What we have seen in any event in the EU is that corporation tax rates have been lowered, because member states have realised that it is to the advantage of their industries not to overtax them against other member states. There has been something of a common movement in the EU without any new powers going to the Commission, the European Court, or to anybody else.
As far as income tax is concerned, there is no serious politician in Europe who is now arguing, or has argued recently, that income tax should be levied on a harmonised basis. That being the case, while, as always, there is merit and interest in discussing some of these issues on a theoretical basis, we should not believe that there is any movement, pressure, impetus, or push in Europe to see a harmonised income tax base or any suggestion that the Commission, the Parliament, the member states, the Council or anybody else wishes to see this in the foreseeable future.
8.26 p.m.
Baroness Noakes: My Lords, my noble friend Lord Pearson of Rannoch has raised an important issue with his Question this evening. I am sure that the Minister will say later this evening that direct taxation has not been ceded to the EU, and that was the burden of the speech made by the noble Lord, Lord Newby. In a narrow, technical sense, that may well be correct. However, I believe, like my noble friend, that the substantive position is that direct taxation, or elements of direct taxation, have already been ceded. The position is now getting serious, and we are already part-way down a slippery slope. Unless the Government act with some determination, of which

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we have seen no sign yet, we will end up with UK taxation becoming subsumed more and more in the tentacles of the EU. That could well harm British taxpayers.
It might seem something of a surprise that the Chancellor of the Exchequer, a veritable master of the stealth tax, has failed to spot the arrival of the even more deadly EU taxation by stealth. The truth is that despite the rhetoric of not ceding sovereignty over direct taxation—I will leave the Minister to wheel out the standard government quotes—the Chancellor has already accepted that EU control over at least part of our direct taxation is a fact of life. There is no other explanation for his Pre-Budget Report announcement that in response to the Lankhorst case in Europe, legislation will be introduced from April this year to require arms-length pricing arrangements within groups of companies.
Let me digress for a short while on this proposed legislation, because it can be portrayed as a minor adjustment to our tax rules, but that is simply not true. All of the companies that I am involved in are now embarked on expensive exercises to identify and price all of their UK intra-group transactions. Tens of thousands of pounds are being spent on advisory fees. That just establishes the base line; tens of thousands more pounds will be spent every year by many companies in changing arrangements, changing systems and implementing new record-keeping requirements. I hate to think what that will add up to across the corporate sector. It will be yet another regulatory burden imposed by the Government, and the UK economy will benefit not one iota. We should not be beguiled by the Government's assertion that only the largest companies will be affected by the new tax law. In practice, only the smallest will escape the net.
The purpose of the debate is to consider not the specifics of our latest submission to EU control but the principles. For a long time, there have been good reasons to be afraid of the EU's designs on the tax systems of member states. An excellent pamphlet of 2001 entitled European Tax Harmonisation by Theresa Villiers, a Member of the European Parliament, has a seven-page annex of quotations that should chill the heart of all but the most extreme Europhile. States that have chosen to join in economic and monetary union will face the biggest challenge. For example, Commissioner Solbes put it succinctly when he said:
"Member states cannot be allowed to pursue whatever tax and spending policies they want after joining the euro".
That is another good reason for staying out of the euro.
Keeping our monetary policy independence will not guarantee fiscal independence. For example, in 2001, the Commission said:
"It remains the Commission's view that a move to qualified majority voting at least for certain tax issues is indispensable".
The Commission repeated that view last year in its formal opinion on the proposed constitution. As has already been said this evening, Frits Bolkestein is pursuing another approach to harmonisation. Last
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week, he was quoted as saying, "The moment is right". The "moment" in this case being right for the harmonisation of several countries. I disagree with the noble Lord, Lord Newby, who said that, following the move to some form of accounting harmonisation, it is only a small step to harmonising the tax base. It is a big step, and we should want no part of it.
Ms Villiers's pamphlet does not simply repeat quotations from the usual suspects at the Commission. She includes politicians from France and Germany, the very countries to which our Prime Minister is now trying to get close in Europe. Do we know what game they are playing? Back in 1997, France's Europe Minister, Pierre Moscovici, said:
"we need to move towards fiscal harmonisation. It won't happen immediately but we are talking 5 or 10 years' time".
They are playing a long game. I am not convinced that our Prime Minister has a long game in him.
Ms Villiers also notes how spin has been allowed to mask the real agenda. In 1998, Oskar Lafontaine, then German Finance Minister, said:
"our English friends have asked us not to use the word 'harmonisation' and instead use the word 'co-ordination' ".
I wonder which English friends those were—almost certainly the Prime Minister and possibly even the Chancellor. I hope that, when the Minister replies this evening, he will confirm that, if he uses the word "co-ordination", it is not euro-code for "harmonisation" or something worse.
There are significant threats. We have had a reprieve—perhaps only temporary—from the proposed European constitution. I will not delve into the dangers that lurk there. Even the Prime Minister has said that tax harmonisation would be a "fundamental change". Will the Minister confirm this evening that, if tax harmonisation were suddenly to appear in some resuscitated European constitution, there would be no question but that the constitution would be put to a vote by way of referendum in this country?
There are threats beyond the constitution. The most important is that posed by the European Court of Justice, using the treaty provisions, as my noble friend Lord Pearson of Rannoch pointed out. The European Court of Justice does not directly impose fiscal policies, but, under the guise of enforcing the fundamental freedoms in the treaty about which my noble friend spoke, the court has steadily achieved the ability to interfere in the tax policies of nation states. I do not believe that any signatory to the treaty would have anticipated Article 43 which prohibits restrictions of the freedom of establishment could have been used as a Trojan horse to attack the autonomy of member states in relation to tax. The noble Lord, Lord Newby, said that the language of the treaties has not been hidden: that is indeed the case. But I do not believe that the way in which the language could he used was appreciated until relatively recently. Over the past 10 years or so, we have seen a number of cases, starting with the ICI-Colmer case—I declare an interest as a director of ICI—which have started the process of moving into member state autonomy.

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In 1999 the Select Committee of your Lordships' House on European Communities reported on taxes in the EU. In that report a single paragraph of analysis related to the possible role of the European Court of Justice. That did not identify the grave danger to the UK which is now posed. I wonder whether that committee would be so unconcerned today, given the more recent cases. I venture to suggest that the committee might like to revisit the issue.
The Government seem not to regard the territorial ambitions of the ECJ as a big issue. We have already seen the introduction of transfer pricing rules following the Lankhorst case even though there is a patent detriment to British companies. Accountancy firms have identified a raft of other UK tax rules which now look vulnerable. It could be only a matter of time before the European Court of Justice catches up with them too.
My question to the Minister is this: do the Government care whether or not the ECJ slowly eats away at our tax competence? We may not be faced with full blown tax harmonisation which the Prime Minister has declared a fundamental issue. But the list of tax arrangements which could fall foul of the ECJ is very long indeed. At what point would the Government regard the loss of our tax autonomy as fundamental? Will the Government stand by and let the Court increasingly dictate our tax rules?
There are other threats to our freedom to devise our tax system. In particular, the Code of Conduct on Business Taxation, drawn up in secret proceedings, represents a cause for concern. This is not for any attacks to date on our tax system but because our active participation in the code is predicated on tax competition between member states being harmful. We on these Benches do not accept that proposition and believe that it is only a matter of time before the code is taken in more ambitious directions which could well harm the UK. The Government have not even called for the group which produced the code to be dismantled. Instead, the Paymaster General, who chaired the group, told your Lordships' Select Committee in 1999 that "its work will never be finished".
We should be afraid; we should be very afraid. We are well on the way to losing control of direct taxation. If the Government do not act decisively and quickly, our valued national freedom of control over our own direct taxes will disappear. I hope that the Minister will be able to tell us that decisive action is indeed on its way.
8.38 p.m.
Lord Davies of Oldham: My Lords, it has been a stimulating debate introduced with his usual panache by the noble Lord, Lord Pearson, to whom we are grateful. There were relatively few participants. Nevertheless, important issues have been covered. I shall concentrate overwhelmingly on the issues which have been raised with regard to direct tax matters, the subject of the debate.
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In passing, I must say that I find it a little difficult to take from an Opposition spokesman the concept that the Prime Minister, the Government and the Chancellor of the Exchequer have no long game in them; that, from a party involved in boom and bust during the years it was in government. When we produce an economy with some solidity of achievements in terms of low interest rates, low unemployment, significant consistent and economic growth over years, to say that this Government are not capable of a long game seems to have an element of effrontery about it. But we are not here to mix issues of general economic policy. We are here to talk about the issues that exercise the noble Lord with regard to direct taxation.
The noble Lord, Lord Pearson, asked whether direct taxation has been ceded to the European Union under the existing EU treaties. The implication of the question is that direct tax policy is an important part of national sovereignty. It has a vital role to play in our social and economic well being. Of course, I agree with him.
It is precisely because of the importance of tax issues that the Government are committed to a modern and fair tax system that encourages work, saving and investment, keeps pace with developments in business practice and the global economy, and raises sufficient revenue to fund the Government's objective to build world-class public services. Those are ambitious objectives, but through the changes and reforms that we have introduced we are achieving them.
We are making significant progress with regard to cardinal points in the economy. We compare well with our European neighbours and other significant countries. It is clear that power over direct taxation has not been ceded to the European Union. The Government are using their authority to deliver radical reform within the framework of their participation in the European Community.
Maintaining control over our own tax system is, in particular, key to pursuing the kind of tax competition between states that globalisation demands, and which is an essential element of the Government's economic reform agenda. Such tax competition can encourage innovation and thus make more efficient ways of raising revenues. It can help to cut through bureaucracy and reduce compliance costs.
Competition between states, each controlling their own tax policy, recognises that countries have different preferences for how to structure their tax system; preferences that often reflect long-standing national values. Clearly, we fit into exactly that pattern. That is why the Government are quite clear—as repeated on many occasions—that they are not prepared to see tax harmonisation with regard to direct taxation.
We reject direct taxation harmonisation. The one-size-fits-all solutions are a barrier rather than a spur to global competitiveness. The global flow of capital, and the global sourcing of goods, are fatally undermining the old flawed assumptions that a European single market must be followed by European tax harmonisation.

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In relation to a harmonised tax on savings, the Government took action two years ago and succeeded in ensuring that we protect our very important position with regard to saving. When recognising the importance of investment strategies in the City, the Government took action to protect them, clearly using their willingness to operate a veto in that area and to achieve a solution based on agreement that protected our essential interests.
It is right that the Government continue to resist any schemes for harmonised direct tax and right that they have made a manifesto commitment to maintain the UK's tax veto in the European Union. Taxation is, and will remain, a key component of national sovereignty. We are at one with the noble Lord when he stresses the importance of that. But national sovereignty on direct tax is not entirely unconstrained, and nor should it be.
The Government recognise that in some areas we need international standards. Such standards ensure that British businesses can trade freely across borders without facing unfair discrimination or the risk of double taxation. They ensure that tax competition is fair and above hoard. That is why Ministers from OECD member countries first agreed in May 1996 to co-operate to combat harmful tax practices. The UK has been closely involved in the OECD's work in that area ever since, helping to produce recommendations and guidelines that identify potentially harmful practices and encourage their "rollback". I am surprised that the noble Baroness, Lady Noakes, suggested, I think, that there was something remiss about that behaviour.
The issue developed with regard to the code was one that was chaired by a British Minister, the Paymaster General. Over a number of years it has been involved in making significant progress towards reducing unfair practices that inhibit growth and the development of fair competition.
All markets, and particularly those operating across borders, need some rules if they are to deliver the benefits that we know competition can bring. As in trade policy or competition policy, so too in the field of taxation, some international standards and co-operation are needed if we are to achieve the full benefits of liberalisation. So whereas I accept entirely the importance of the issue that the noble Lord raised, I disagree that our national objectives and the enhancement of our national sovereignty can be delivered on the basis of unilateral isolated "little Englander" action. Not so.
We need an international framework in which to play our part, in which to influence from a position of considerable authority. We need to work with our international partners within the OECD and the European Community. This is surely unsurprising in a successful single market. After all, this is a market, as the noble Lord will recognise, where 3 million jobs are at stake in terms of the UK's relationship to the market. It is a market in which 55 per cent of our trade is with the European Community. Millions of British consumers benefit from lower prices and more choice as a result of us being members. For this single market to function, and for UK business and consumers to
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benefit, it must be based on rules and the impartial application of certain fundamental freedoms set out in the treaty.
As the noble Lord, Lord Newby, clarified for me, the position is one in which although there are European rules necessary in the treaty, there is no explicit competence to legislate on direct taxes, nor is there any serious political intent to produce harmonisation with regard to income tax. I do not need to go into this issue further because I am grateful to the noble Lord for having clarified those issues successfully earlier in the debate.
However, there are a number of issues which we need to look at with care. I want to comment on the question of legal judgments. The noble Lord, Lord Pearson, identified legal judgments that have significant financial implications for this country. I did not recognise the global figure which he presented, which ran, as I recall it, into billions; it may have been 2 billions. That figure is more than 1 billion so I am entitled to add the plural "s" to billion! As far as our figures are able to identify the issues now, we have settled claims from a number of companies related to judgments from the European Court of Justice to a value of £183 million. There are unsettled claims estimated in the region of £250 million.
I am not in a position to do what the noble Lord, Lord Pearson, can do. His representation today was even more far-sighted than we are used to from him. Mini caveats introduced into his speech were about his talking about not the "here and now" or even the immediate future but about that which might be implicit in the treaty over a very long period. I can respond by saying only that I would put his figure of £2 billion into that category. I am not able to predict how costly judgments might be in the future and I certainly cannot quantify them.
I turn to the particular cases that were identified. The noble Baroness, Lady Noakes, referred to the Hoechst/Metallgesellschaft judgment. The decision in that case was reached subsequent to our own decision to abolish advance corporation tax. I cannot enter into discussion on the particular case because some claims are still outstanding, but it is clear that we were bent upon reforming and changing the position with regard to ACT. In fact, the decision from the European Court of Justice produced some costs against past practice.
The European Court of Justice has a certain role to play in determining when and how the law governing the concept of the single market should be applied and interpreted. Some noble Lords have suggested that the power of the ECJ to consider aspects of direct tax policy in and of itself presents proof that we have ceded sovereignty in this area. I do not agree with that interpretation. The primacy of Community law over national law in the areas covered by the treaty is a well-established and necessary principle of the European Union and is integral to its operation. The alternative, in which presumably we would have a Union with member states free to choose not to apply the rules, would destroy the whole concept of the single market.
However, that does not mean that we cede to the European Court of Justice primacy over our national taxation. Let me make the most obvious point. All

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cases appearing before the European Court of Justice are brought by national organisations. The European Court of Justice does not originate the cases, they come from within nation states. So it is national courts that create the problem by referring to the ECJ. Despite our limited time, I shall give way to the noble Lord.
Lord Pearson of Rannoch: My Lords, we have several minutes were we to need them. Does the Minister agree that the Commission itself can bring cases in the European Court of Justice?
Lord Davies of Oldham: My Lords, that is true, but the cases quoted this evening were all referred by national courts. The noble Lord cannot make the bogey look too great in circumstances where all the instances quoted were reflections of national will.
The noble Lord raised the issue of problems regarding state aid. Let me say that I do not think that the UK has been prevented from doing what it wants to do on taxation as a result of these matters. When we set out to reform stamp duty there was a delay because we wanted to be reassured that there were no implications concerning the definition of the use of state aid. But the Government introduced stamp duty reforms on the basis of their own principles, and that is reflected in our present position.
This has been a stimulating debate, as are all debates originated by the noble Lord, Lord Pearson of Rannoch. I am grateful to him. However, let me make it absolutely clear once again that we do not believe that we have ceded control over direct taxation to the European Union. The position is governed by the veto. We do not hesitate to say that we are committed to that position. We shall continue to insist on tax unanimity and we shall argue both in the EU and internationally for fair tax
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competition and against damaging harmonisation. But we shall also continue to co-operate with others where it is in the best interests of this country to do so. In a global economy it is essential that we have a framework for co-operation as well as competition. To refuse to co-operate, to opt out and to leave others to dictate the international agenda would be to sell short the world economy and, much more crucially, would adversely affect Britain's economic interests. We do not intend to do that.

London Local Authorities Bill [H.L.]
A message was brought from the Commons that they have made the following orders:
That the promoters of the London Local Authorities Bill [Lords] may, notwithstanding anything in the Standing Orders or practice of this House, proceed with the Bill in the present Session; and the petition for the Bill shall be deemed to have been deposited and all Standing Orders applicable to it shall be deemed to have been complied with;
That, if the Bill is brought from the Lords in the present Session, a declaration signed by the agent shall be deposited in the Private Bill Office, stating that the Bill is the same in every respect as the Bill brought from the Lords in the last Session;
That the Clerk in the Private Bill Office shall lay upon the Table of the House a certificate, that such a declaration has been deposited;
That in the present Session the Bill shall be deemed to have passed through every stage through which it passed in the last Session, and shall be recorded in the Journal of the House as having passed those stages;
That no further fees shall be charged to such stages.
House adjourned at five minutes before nine o'clock.