Sitting of 3 July 1986

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]

PRIVATE BUSINESS
SOUTH YORKSHIRE PASSENGER TRANSPORT BILL
Lords Amendments agreed to.
PLYMOUTH CITY COUNCIL BILL [Lords]
Order for Second Reading read.
To be read a Second time upon Tuesday 8 July.
BOURNEMOUTH AND SWANAGE MOTOR ROAD AND FERRY BILL [Lords]
Read a Second time and committed.
FELIXSTOWE DOCK AND RAILWAY BILL (By Order)
Order for consideration, as amended, read.
To be considered upon Thursday 10 July.
TEIGNMOUTH QUAY COMPANY BILL (By Order)
Order for Second Reading read.
To be read a Second time upon Thursday 10 July.
SOUTH YORKSHIRE LIGHT RAIL TRANSIT BILL (By Order)
Read a Second time and committed.
BEXLEY LONDON BOROUGH COUNCIL BILL(By Order)
SHOREHAM PORT AUTHORITY BILL(By Order)
Orders for Second reading read.
To be read a Second time upon Thursday 10 July.
BLYTH HARBOUR BILL [Lords](By Order)
Order for Second Reading read.
To be read a Second time upon Tuesday 8 July.

Oral Answers to Questions
  NORTHERN IRELAND

    Assembly (Costs)
    Mr. Stephen Rossasked the Secretary of State for Northern Ireland if he will publish the cost of the Northern Ireland Assembly from its inception to its suspension.
    The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Nicholas Scott): The cost of the Northern Ireland Assembly for the period November 1982 to 31 May 1986 was £9,317,000. There will be additional costs in respect of Members' salaries and allowances payably from 1 June up to the date of dissolution.
    Mr. Ross: I thank the Minister for his reply. Does he agree that, whatever else may be said, that is a sizeable sum, which shows the strength of our commitment to try to restore local democracy in Northern Ireland? Is it not tragic that it has not been taken that way? Will Stormont now be put on a care-and-maintenance basis?
    Mr. Scott: Various activities take place inside the Parliament buildings on the Stormont estate other than the activities conducted by the Assembly. I share the hon. Gentleman's view. The establishment of the Assembly was amply justified. I am sorry that better use was not made of the opportunity that it provided for local parties in Northern Ireland. I hope that, as soon as possible, the circumstances will be created under which it can be restored.
    Mr. Michael McNair-Wilson: In the absence of the Assembly, what plans do the Government have to create some form of scrutinising body for Northern Ireland within the House?
    Mr. Scott: Those are matters about which my right hon. Friends the Prime Minister and the Secretary of Slate made it clear they would be anxious to talk to hon. Members of all parties to find out what they think would be most suitable. In the meantime, we shall continue to send to party leaders and others in Northern Ireland proposals for legislation affecting the Province.
    Mr. Bill Walker: Does my hon. Friend agree that this experiment, sadly, has not worked, that it has not exactly been inexpensive to the taxpayer and that before we continue with experiments that can be, and are, expensive we should consider whether there are other ways in which we can continue to have the Province governed in the same way as the rest of the United Kingdom?
    Mr. Scott: For the time being, direct rule will be the vehicle, as it were, by which Northern Ireland is governed. I hold firmly to the view, as does my right hon. Friend the Secretary of State, that the restoration of devolved government provides the best hope for the future government of Northern Ireland. To suggest, as some have, that this means that Northern Ireland is being treated unequally compared with the rest of the United Kingdom is not a sustainable argument. In the meantime, however, if elected representatives wish to come and talk to my right hon. Friend and other Ministers about these matters, we shall listen to what they have to say.
    Mr. Meadowcroft: Will the Minister consider enhancing the powers of local government within Northern Ireland and perhaps introducing an elected element into the boards which have been appointed and which administer so many of the functions?
    Mr. Scott: There are elected representatives on the boards who have been appointed by the local authorities. The single most important criterion for any change in the way in which Northern Ireland is governed is that there should be widespread acceptance of it throughout the community there. I do not believe that the restoration of increased powers to local government would achieve that sort of consent at the moment.

    Security
    Mr. Peter Bruinvelsasked the Secretary of State for Northern Ireland if he will make a statement on the current law and order situation in Northern Ireland.
    Mr. Spencerasked the Secretary of State for Northern Ireland if he will make a statement on the latest security situation in Northern Ireland.
    Mrs. Virginia Bottomleyasked the Secretary of State for Northern Ireland if he will make a statement on the security situation in Northern Ireland.
    The Secretary of State for Northern Ireland (Mr. Tom King): Since I last answered questions in the House on 5 June, two people, a part-time member of the Ulster Defence Regiment and a Catholic business man, have been killed in incidents arising from the security situation. The Provisional IRA has claimed responsibility for both these brutal murders.
    The efforts of the security forces are continuing to yield results. During 1985 a total of 522 people were charged with serious offences, including 24 with murder. So far this year, 330 people have been charged with serious offences, and 125 weapons, 15,000 rounds of ammunition and 1,200 lb of explosives have been recovered.
    Mr. Bruinvels: I join in congratulating my right hon. Friend and the members of the RUC on the success of their clear-up rate. However, does my right hon. Friend agree that it is bad enough leading Members of the Democratic Unionist party threatening the lives of members of the RUC? Does he agree that the clear-up rate for crimes that has been achieved by the RUC makes Northern Ireland the safest part of the United Kingdom, with about 42·8 indictable offences per 100,000, compared with massive figures for the rest of the United Kingdom? Can my right hon. Friend reassure the House that every possible financial aid and means will be given to help the RUC, to give it that protection and to ensure that Northern Ireland remains virtually the safest part of the United Kingdom?
    Mr. King: I am grateful to my hon. Friend for the tribute that he has paid to the RUC. In the light of certain difficult charges that have been made and the inquiry, with which the House is familiar, it is important to put on record the outstanding performance of the RUC in impartially seeking to enforce law and order and to protect people while they go about their daily lives. It is worth remembering that the hon. Member of this House who made that disgraceful remark about the police force was then safely protected by members of the same police force as he went home.
    Mr. Spencer: The sons of Leicester who are serving in two battalions of the Royal Anglian Regiment in Northern Ireland are daily showing their commitment to the security of the Province. Does my right hon. Friend not feel that their efforts would be helped if those who at present are obstructing the Anglo-Irish agreement withdrew that obstruction?
    Mr. King: I take the point that my hon. and learned Friend has made and I pay tribute to the Royal Anglian Regiment and those who serve in it. My hon. and learned Friend will know that, sadly, a major in that regiment lost his life as part of the total commitment of this House and this country to seeking to defeat terrorism in Northern Ireland. I wish that there were greater recognition by some of those who describe themselves as Loyalists of the commitment of us all to the defeat of terrorism and of the support that we give to that commitment.
    Mrs. Virginia Bottomley: Will my right hon. Friend continue to emphasise that it is the overwhelming wish of the House that the Government should maintain their commitment to the Anglo-Irish agreement, providing as it does for further cross-border co-operation? Does he agree that the IRA's wholehearted opposition to the agreement stems from its recognition that it is likely to be the true loser from this agreement, and not others?
    Mr. King: I am grateful to my hon. Friend for what she has said. It is true that the IRA greatly fears the agreement, because it provides the best hope that we have had of the start of the co-operation that will be the only effective and lasting way to deal with terrorism. Perhaps I should add in reply to my hon. Friend the Member for Leicester, East (Mr. Bruinvels) that when one refers to Northern Ireland as being basically a law-abiding place, one should not underestimate the continuing threat that terrorism poses. That is why we need to use every endeavour, particularly in co-operation with the Government of the Republic of Ireland, to defeat this curse.
    Ms. Clare Short: Does the Secretary of State remember that one of the reasons that we were given for the Anglo-Irish agreement was the need to reduce the alienation of the Nationalist population of Northern Ireland? We know that supergrass trials are one of the factors that alienate that community from any belief in justice in the criminal justice system. We in Britain now face the horrifying reality that probably the wrong people have been locked up for the Birmingham and Guildford bombings. Does this not make the Secretary of State worry more about the use of supergrass trials without even juries in Northern Ireland? When will he give us some progress on this issue?
    Mr. King: The hon. Lady may recognise that concern about supergrass trials has not been exclusive to the Nationalist minority community. There is concern because of the real problems that are posed in a society where terrorist intimidation is rife. There are problems in having jury trials, including the problems that they pose for an extremely brave and committed judiciary in Northern Ireland, the members of which have discharged their responsibilities with amazing courage and dedication. It is right that the House should recognise that. We are aware of some of these concerns and these are some of the matters that we are considering.
    Mr. Bellingham: Does my right hon. Friend agree that the conduct of the UDR men who have recently been

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    convicted was appalling and a disgrace to that fine regiment? Does he agree also that that outrage should be seen in the light of the fact that tens of thousands of first-class men and officers have served in the UDR since the troubles began? Will he confirm to the House that he still has complete confidence in the regiment?
    Mr. King: I can give that assurance absolutely unequivocally to my hon. Friend. I am glad that he has put matters in perspective. The charges were serious on which members of the UDR were found guilty, but that must be put in the context that 33,000 men have served in the UDR. Some of the bravest people in the whole of the United Kingdom are part-time members of the UDR. The House will have noted that, sadly, one of the murders that occurred only this week was of a part-time member of the regiment. The part-time members serve with great courage and dedication. It is particularly because of their courage and dedication that one so much regrets the occasional incidents, such as we have had, that involve UDR men. If such incidents occur, those concerned will be brought to justice.

    Policing Policy
    Mr. Maclennanasked the Secretary of State for Northern Ireland what recent discussions he has had with representatives of the Royal Ulster Constabulary concerning policing in the Province.
    Mr. Scott: My right hon. Friend and I have regular meetings with the Chief Constable and the General Officer Commanding in Northern Ireland to discuss security policy issues.
    Mr. Maclennan: Will the Minister accept that a prolonged period of government of Northern Ireland without the consent of the people of Northern Ireland, which is apparently what we face, puts intolerable pressures on the police, who see themselves having to fulfil more than their proper role of upholding the rule of law? They see themselves, in addition, as the defenders of an unpopular Government. Is the Minister conscious of the criticisms that are now being made within the police force of this role?
    Mr. Scott: I believe that the Government's policies in Northern Ireland are correct. The job of Ministers is to win the consent of the majority of the population there for these policies. I am well aware of the pressures that are faced by the RUC. I am probably more aware than anyone in the House of the pressures on the RUC and its members and of some of the disgraceful attacks that have been launched against them and their families. The Government, the Police Authority for Northern Ireland and the Chief Constable have been at pains to ensure that the pressures are ameliorated in so far as that is possible. I am confident that the RUC will do its job on behalf of the entire community in Northern Ireland.
    Mr. Gow: Does my hon. Friend consider that the degree of consent of the people of Northern Ireland to be governed under the terms of the Anglo-Irish agreement is greater on 3 July 1986 than it was on 15 November 1985?
    Mr. Scott: I do not accept the terms of my hon. Friend's question. Northern Ireland has been governed in exactly the same way since 15 November 1985. All that has happened is that institutional arrangements have been
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    made so that Irish Ministers can reflect the views of the Nationalist community in Northern Ireland. The government of the Province is on precisely the same terms now as it was before 15 November 1985.

    Stalker Inquiry
    Mr. Meadowcroftasked the Secretary of State for Northern Ireland if there has been any change in the terms of reference of the Stalker inquiry following the appointment of Mr. Sampson.
    Mr. Tom King: The terms of reference of the inquiry are a matter for the Chief Constable of the Royal Ulster Constabulary. I understand, however, that there has been no change following the appointment of Mr. Sampson.
    Mr. Meadowcroft: The Secretary of State will be aware of the exceptionally high regard in which Mr. Colin Sampson is held in West Yorkshire and that no involvement of his could ever be regarded as malign. Can the Secretary of State tell the House what the thinking was behind appointing Mr. Sampson to carry out both inquiries simultaneously? Is it possible to hold up the continuation of the Stalker inquiry pending the resolution of the inquiry into Mr. Stalker's involvement in Manchester? Is it possible that Mr. Stalker could be put back on to the inquiry in Northern Ireland once the question of the disciplinary action in Manchester is resolved?
    Mr. King: I note the hon. Gentleman's tribute to Mr. Sampson. I think the House is aware that the decision to appoint Mr. Sampson was taken by the Chief Constable of the RUC, but only after consultation with Her Majesty's Chief Inspector of Constabulary and the Attorney-General. Part of the answer may lie in the further question that the hon. Gentleman asked, which is that he was advocating delay. My concern is that the matter should be pursued as vigorously as possible, the facts established, and if charges are to be brought, they should be brought at the earliest possible date.
    The innuendo and rumour about matters that happened in 1982—four years ago — are undoubtedly doing great damage to a force—to which I paid tribute earlier—of outstandingly brave men who seek to uphold law and order in the Province. Many Nationalists have recognised the brave way in which, in recent months and years, RUC officers have sought impartially to uphold law and order. I am anxious to see the inquiry pursued at the earliest possible date. Although it is not a matter for me—it is a matter for the Chief Constable—I am anxious to see no delay.
    Mr. Douglas Hogg: Does my right hon. Friend agree that we should be making inquiries to ascertain whether anybody in the Province was in any way responsible for the lodging of complaints against Mr. Stalker? If my right hon. Friend agrees that inquiries should be made, what steps is he taking to ascertain the facts?
    Mr. King: I have no evidence to suggest that that is the case. The inquiry conducted by Mr. Stalker relating to the RUC is a matter not for me, but for the Chief Constable, as is Mr. Sampson's appointment. As I said in reply to the hon. Member for Leeds, West (Mr. Meadowcroft), the matter will be pursued diligently and vigorously.

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    Any evidence regarding the appointment and any other matters that may be investigated would, presumably, come to light in the further inquiry that is being conducted at the request of the Police Authority.
    Mr. Mallon: As inquests into the deaths of six people in Northern Ireland in 1982 have not been held, four years after their deaths, does the Secretary of State accept that the appointment of Mr. Sampson to continue the Stalker inquiry in Northern Ireland, and to inquire into the Stalker affair in Britain, must inevitably cause further delay? Will the Secretary of State accede to the request by the Greater Manchester police authority to meet it so he can hear the authority express its views and disquiet about these delays?
    Mr. King: The House may be aware that Mr. Stalker was not acting alone. He had a team working with him. The whole team has remained in place and is now reporting to Mr. Sampson. The matter is being carried forward by the same investigating team, without delay. As I said to the hon. Member for Leeds, West it is unsatisfactory to suggest that the inquiry should be delayed. I believe that it is necessary for the matter to be carried through as promptly as possible.
    Mr. Franks: Does my right hon. Friend accept that it is just not possible to isolate the Stalker inquiry in Northern Ireland from the current inquiry into Mr. Stalker himself, and that the current inquiry inevitably inhibits comment on the Stalker inquiry and what is supposed to be contained in the interim report? Does my right hon. Friend have any indication from the West Yorkshire police of how long its inquiries into Mr. Stalker will continue? Does he share with me, and I am sure all hon. Members, the desire that the inquiry into Mr. Stalker should be concluded before the House begins the summer recess?
    Mr. King: I cannot comment on the interim report that Mr. Stalker submitted to the Chief Constable and which is now in the hands of the Director of Public Prosecutions of Northern Ireland with a view to considering whether charges should be brought. As my hon. Friend knows, the matters affecting Mr. Stalker in respect of the Manchester situation are not matters for me.
    Mr. Archer: Does the right hon. Gentleman recall that I have written to him asking a number of questions about this subject which are being widely canvassed? I appreciate that he has not yet had time to reply. However, has the right hon. Gentleman not agreed that there has been widespread and damaging speculation? If no answers are given to those questions, are not people hound to guess at the answers? In particular, why was it announced that Mr. Stalker had been removed from the RUC inquiry, before the complaints against him had been investigated, and presumably irrespective of the outcome?
    I wish to repeat a question that has already been put to the right hon. Gentleman today: was not the appointment of Mr. Sampson, both to inquire into the conduct of Mr. Stalker and to complete the RUC inquiry bound to delay one or the other?
    Mr. King: The right hon. and learned Gentleman has returned to the interesting point put by the hon. Member for Leeds, West, who suggested that the Stalker inquiry should be suspended while investigations were carried out. It is important that the matter is pursued, for reasons
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    which the House understands. Everyone has paid tribute to the independence and quality of Mr. Sampson. I think that the House can be confident that he will seek to pursue the matter in a vigorous and effective manner.
    The House may know that Mr. Sampson had a full meeting yesterday with the Chief Constable of the RUC, at which I understand satisfactory progress was made, ensuring continuing co-operation in the inquiry. I hope that I have made my position clear. I feel that it is sensible to proceed. However, the matter was decided by the Chief Constable in consultation with the Chief Inspector of Constabulary and the Attorney-General.
    On the question about the decision that Mr. Stalker should not continue with the inquiry, I understand that the Chief Constable was advised that as Mr. Stalker had been invited to take leave, he was therefore no longer available for the inquiry at that time.

    Security
    Mr. Bellasked the Secretary of State for Northern Ireland if he will make a statement on cross-border security.
    Mr. Scott: Cross-border security co-operation plays a vital part in combating terrorist activity. The last meeting of the Anglo-Irish Inter governmental Conference welcomed the completion of a report by a joint Royal Ulster Constabulary-Garda working party on measures to improve arrangements for the exchange of information and the development of liaison structures. I look forward to receiving progress reports on the implementation of the proposed measures and to seeing the results of other joint Royal Ulster Constabulary-Garda studies which have been commissioned.
    Mr. Bell: Will the Minister take this opportunity to pay tribute to the Garda for its success this year in seizing large quantities of arms, ammunition and explosives on its side of the border? While noting with interest the Minister's comments on the report, may I ask whether he is confident that the report will lead to a real and continuing improvement in cross-border security?
    Mr. Scott: I certainly pay tribute to the Garda for its success with a number of operations on the other side of the border. I also pay the warmest possible tribute to members of the RUC serving on the northern side of the border, to whose bravery and commitment my right hon. Friend has already paid tribute.
    The hon. Gentleman asked whether the report would produce an improvement in cross-border security cooperation. It will, but it is the implementation of the report, not its production, that will be the proof of the pudding. We look forward to that implementation.

    USA (Extradiction)
    Mr Adleyasked the Secretary of State for Northern Ireland if he will make a statement on his Department's most recent discussions in the United States of America on the position concerning the extradition of Irish Republican Army terrorists from the United States of America.
    Mr. Tom King: As I told the House on 5 June, this was one of a number of topics which I discussed in the United States in May with leading Americans who take a close interest in Northern Ireland affairs.

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    I am sure that the House will join me in welcoming the approval of the supplementary extradition treaty by the Senate Foreign Relations Committee on 12 June. If, as we expect, the treaty receives the necessary majority on the Floor of the Senate, those accused or convicted of a wide range of offences will no longer be able to avoid extradition by claiming that their crimes were politically motivated.
    Mr. Adley: I thank my right hon. Friend for that reply. While having just minor reservations about the tendency towards ethnic politics in the way in which the matter has been handled, may I nevertheless offer my right hon. Friend congratulations on the skilful way in which he has handled a difficult situation?
    Will my right hon. Friend continue to press upon the American public, through their representatives, the fact that citizens in the north and the south of Ireland have full access to democratic rights, and that Americans should be persuaded in every way possible to desist from contributing to NORAID?
    Mr. King: I am grateful for those remarks. It was not possible for me to say very much after my return from Washington. I felt that there was a real commitment in America to get the treaty established on a sensible basis. This is an encouraging start and yet another demonstration of the United States' willingness now to stand against terrorism. In the context of Northern Ireland, the United States is an important ally.
    Mr. J. Enoch Powell: Will it be necessary for the original agreement between the British and American Governments to be altered?
    Mr. King: Yes, Sir.
    Mr. Stanbrook: Is not a great weakness of the revised draft extradition treaty the fact that it no longer includes the offence of conspiracy to commit murder and other violent crimes? As the people we are after are often the godfathers of crime in Northern Ireland, should not that weakness be remedied?
    Mr. King: I think that people who look fairly at this matter recognise that it is a great improvement on the previous arrangements. People who have committed crimes will now find, as I said in my original answer, that they no longer have the political defence open to them. One problem is that crimes in this country, such as crimes of intent — carrying a weapon with intent or or possession with intent, but where a crime is not actually commited—are not crimes in the United States. It is therefore difficult to have such aspects incorporated in the treaty. I am concerned that people who commit murder or other crimes should find that they cannot use the political defence. That is what we sought to achieve and what has been achieved.
    Mr. Skinner: Does the right hon. Gentleman accept that another point of view prevails, which suggests that the only reason why the treaty was accepted was that many Senators and others were able to put an altogether different construction on it? As far as they were concerned, the small print of this new so-called extradition policy is about as worthless as a Slater Walker unit trust policy of the early 1970s.
    Mr. King: I am sure that the hon. Gentleman is thrilled with the cleverness of that supplementary question. Recent Sinn Fein literature makes it clear that Sinn Fein regards it as a major setback.
    Mr. Proctor: What progress is my right hon. Friend making with the extradition of IRA terrorists from countries other than the United States of America, for example, the Netherlands?
    Mr. King: My hon. Friend will have seen the recent judgments on this matter, which may have to go through one further stage. I should like to put on record our gratitude to the Netherlands authorities for the thorough way in which these matters have been investigated. Obviously they are matters for the courts, but we have sought to give all possible evidence to the Dutch authorities. We are grateful for their approach in this matter.
    Mr. Archer: Is the right hon. Gentleman aware that one factor in the debate has been the fairness of the legal system in Northern Ireland? Has he grasped that it would greatly help those in the United States who argue for effective extradition if the Government were at least seen to be implementing the Baker recommendations with enthusiasm and if the supergrass trials were discontinued?
    Mr. King: I think that the right hon. and learned Gentleman will be aware that there has been one hearing in connection with extradition, in which, under the previous rules, the Government were not successful. The fairness of the courts in Northern Ireland came under judicial review. The right hon and learned gentleman may be aware that Judge Sprizzo made it absolutely clear in his finding that, in his judgment and to the satisfaction of the court, there was no question but that if the gentleman concerned had been extradited he would have received a fair trial in Northern Ireland.

    Community Relations
    Mr. Altonasked the Secretary of State for Northern Ireland what steps he proposes to take to seek to improve relations between the Royal Ulster Constabulary and the Nationalist community in Northern Ireland.
    Mr. Scott: The Chief Constable, Police Authority and Government give a high priority to the improvement of relations between the RUC and the community in Northern Ireland. The Chief Constable has taken various measures designed to improve relations between the police and all sections of the community. The Government have put forward proposals for changes to the police complaints system.
    Mr. Alton: How many of the three senior assistant chief constables, the eight assistant senior chief constables and the officers of the RUC are members of the Catholic community? Does the hon. Gentleman agree that it is more difficult to attract people from the minority community into the RUC because of the Government's handling of the Stalker inquiry?
    Mr. Scott: I cannot produce the precise figures. It is more important that we have good policemen in the higher ranks of the RUC than a balance between the communities. However, a disproportionately high level of the senior ranks are Catholics compared with lower down the force. The real threat and inhibition to the recruitment

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    of Catholics to the RUC is the threat that they would be murdered by the IRA, which could then claim that the RUC is a sectarian force, which it is not. It is manifestly a professional police force.
    Mr. Hirst: Does my hon. Friend agree that the past few months have confirmed that the RUC carries out its duties under difficult circumstances in a thoroughly impartial way, which should reassure all communities in Northern Ireland? Will he take this opportunity of expressing to the Chief Constable of the RUC the esteem in which the British people hold the RUC on account of the way in which it carries out its job?
    Mr. Scott: I can do nothing but say that I will draw the attention of the Chief Constable to the remarks of my hon. Friend, which are wholeheartedly endorsed by all the Ministers in the Northern Ireland Office.
    Mr. Flannery: Will the Minister explain why the minority Catholic community so widely distrusts the RUC? Has he done any research into that, and can he give us any reasons why members of the Catholic community do not want to join the RUC? In fact it is very similar to black people in certain sections— [Interruption.] The Minister will notice where the noise is coming from. It is similar, is it not?
    Mr. Scott: Having been responsible for policing matters in Northern Ireland for rather more than three years, I have been struck by the increasing confidence of the Nationalist community which has been won by the RUC. The Chief Constable is determined to work and develop that work in the future, but the RUC is making good progress and I have already drawn the attention of the House to the real inhibition to the recruitment of Catholics to the RUC.
    Mr. Dickens: Does my hon. Friend agree that the extravagant language recently used by the hon. Member for Antrim. North (Rev. Ian Paisley) has undermined the authority of the Royal Ulster Constabulary, the British Army and jobs and investment in Northern Ireland? Does the Minister feel that the very good and sterling work undertaken by the Northern Ireland Office has been completely undermined by one hon. Member who should be in his place today to answer for his call to mobilise the Loyalists in Northern Ireland?
    Mr. Scott: I share my hon. Friend's view that the utterances of the hon. Member for Antrim, North (Rev. Ian Paisley) and some other Unionist Members have damaged job prospects in Northern Ireland in a severe way. However, it is not within the capacity of the hon. Member for Antrim, North to damage or undermine the morale of the Royal Ulster Constabulary.

    Equal Opportunities
    Mr. Mallonasked the Secretary of State for Northern Ireland what steps have been taken during the past three months to promote religious equality of opportunity in promotion and employment within Government training centres in Northern Ireland.
    The Minister of State, Northern Ireland Office (Dr. Rhodes Boyson): Having collected figures for the religious composition of the existing staff of Government training centres, the results have been collated over the past three months and will be published very shortly in the first
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    report of the Equal Opportunities Unit. Monitoring has been introduced for recruitment and promotion procedures in order to confirm that appointments are made on merit alone.
    Mr. Mallon: I thank the Minister for that reply. May I ask that he pays special attention to the figures produced by the Fair Employment Agency some three months ago in the case brought by Mr. Sloan against his own Department? Will he assure, not just me, but the House and everybody concerned, that the absolute imbalance which exists within the Government training centres will be put right at the earliest possible opportunity?
    Dr. Boyson: I have read the report on Mr. Sloan to which the hon. Gentleman referred. I assure him that our concern in government is that recruitment to the Government training centres and to any form of Government employment in Northern Ireland should be based on merit alone and not on which community someone comes from. I would welcome a discussion with the hon. Gentleman soon after the figures are published, as they will be within a month.

    Security
    Mr. Dubsasked the Secretary of State for Northern Ireland when he will next meet the Chief Constable of the Royal Ulster Constabulary to discuss security in Northern Ireland.
    Mr. Tom King: While it is not my practice to give details of timing or content, I can confirm that I do have regular meetings both with the Chief Constable and the General Officer Commanding on security matters.
    Mr. Dubs: At the forthcoming meeting with the police in Northern Ireland, will the Secretary of State discuss the problems caused by so-called Loyalist marches, which deliberately and provocatively seek to go through Nationalist areas? Will he comment on the implication of those marches in the forthcoming months?
    Mr. King: The hon. Gentleman will know that marches are taking place at this very moment. Marches called the "mini-12th" took place on Tuesday. The vast majority of those marches passed off peacefully. There are further marches, such as one on Sunday in Portadown, and others. Those are matters for the Chief Constable. Obviously they are matters to which he gives careful consideration. In that regard, I am absolutely satisfied that he will seek to exercise his responsibilities, as he has over the years, in the interests of law and order.
    Mr. Gow: Does my right hon. Friend think that it is wise to continue to arrange for the Chief Constable of the RUC to be present at meetings of the Intergovernmental Conference at ministerial level? Is it not possible to secure that excellent co-operation that we all seek between the Garda and the RUC without the attendance of the Chief Constable of the RUC at meetings of the conference?
    Mr. King: I think that my hon. Friend is aware that the Chief Constable has a particular interest in closer cooperation on cross-border security. I do not think that it is any secret that the RUC sees, in the structure that we have now established, of conference and discussion on cross-border security, the best opportunity yet for tackling

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    the problem of terrorism, so much of which is closely border-related. The Chief Constable is very keen to play his part, and does not want not to play any part in that important co-operation.

    Pollution
    Mr. Wallaceasked the Secretary of State for Northern Ireland what recent studies his Department has made into the pollution of the Northern Ireland coastline by Sellafield.
    The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Richard Needham): There has been regular monitoring since 1977 and the levels found have been of negligible radiological significance to the Northern Ireland public. Since October 1985 Northern Ireland has been included in a United Kingdom-wide research programme, which will also provide information on the levels of radioactivity along the Northern Ireland coastline.
    Mr. Wallace: I am grateful to the Minister for that response. I am pleased to hear that monitoring has taken place. He will be aware that in the Republic of Ireland there is considerable anxiety and concern about pollution caused by discharges from Sellafield. Now that Sellafield has an open house policy, will the Minister take the opportunity at the next meeting of Anglo-Irish Ministers to invite politicians from the Republic of Ireland to visit Sellafield and see the reprocessing plant for themselves?
    Mr. Needham: No, Sir. The problems of Sellafield have nothing whatsoever to do with me. However, I shall bring the hon. Gentleman's points to the attention of the responsible Minister. As I said, we have three different ways of going about monitoring in Northern Ireland. There is no significant pollution of any sort.

    Security
    Sir John Farrasked the Secretary of State for Northern Ireland if he will make a statement on the current security situation.
    Mr. Tom King: I refer my hon. Friend to the reply that I gave to a question by my hon. Friend the Member for Leicester, East (Mr. Bruinvels) earlier today.
    Sir John Farr: I thank my right hon. Friend for that reply. In that connection, will he confirm that the brutal attacks on the homes and families of RUC members in the north are being curbed?
    Mr. King: The scale of attacks is much less, but there have been further isolated incidents. I know that the whole House will join me in deploring the way in which people have sought to intimidate both members of the RUC and prison officers in their own homes.

    Energy Efficiency Year
    Mr. Galleyasked the Secretary of State for Northern Ireland what measures have been taken to promote Energy Efficiency Year in Northern Ireland.
    Dr. Boyson: Northern Ireland is playing its full part in Energy Efficiency Year through intensive advertising campaigns, seminars, exhibitions, domestic competitions, presentations to schoolchildren and energy saving demonstrations for both the domestic and industrial consumer.
    Mr. Galley: What is the total level of energy efficiency savings from specific measures run by my hon. Friend's Department? How far does he expect those savings to increase during Energy Efficiency Year? Perhaps my hon. Friend can also comment on the development of lignite as a contribution to energy efficiency.
    Dr. Boyson: Figures show that the investment on energy saving is repaid within three or four years. That is one of the best investments that can he made. Similarly, Government money is helping with insulation in domestic housing. There is no doubt that if we can get lignite at the right price and generate electricity from it, we should be able to reduce the price of electricity in Northern Ireland, to the benefit of domestic consumers. It would also lower the cost of industrial production.

    Inward Investment
    Mr. Michael McNair-Wilsonasked the Secretary of State for Northern Ireland if he will make a statement about inward investment into the Province.
    Dr. Boyson: In the year ended 31 March 1986 the Industrial Development Board promoted 1,482 new jobs in Northern Ireland in companies owned outside the Province. This represents just over 50 per cent. of the total number of new jobs promoted in Northern Ireland in that year, and total investment of £98 million.
    Mr. McNair-Wilson: Can my hon. Friend comment on the package of financial assistance which the United States Government is proposing to give to Northern Ireland? Will he agree with me that there should be more companies such as Hughes and Dupont, rather than financial assistance?
    Dr. Boyson: We would welcome both. We do not mind money coming into the Province which can be used for infrastructure and other purposes. We would also welcome more American investment. I remind my hon. Friend that some 27,000 people in Northern Ireland are employed in 27 firms already owned by American industrialists.

  PRIME MINISTER

    Engagements
    Mr. Dormandasked the Prime Minister, if she will list her official engagements for Thursday 3 July.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in this House I shall be having further meetings later today. This evening I shall attend a dinner given by the President of the Federal Republic of Germany.
    Mr. Dormand: How does the Prime Minister account for the massive gap between what she says heir Government are doing for education and the National Health Service and what the public say is really happening?
    The Prime Minister: It is up to us to get the facts over more effectively than we have. I shall try to do that now. As the hon. Gentleman knows, more in real terms is being spent per pupil in the education system than ever before and there is a bigger proportion of teachers to pupils

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    —[HON. MEMBERS: "Answer the question."] I am answering the question. Hon Gentlemen might not like the answer. More money is being spent than ever before. That also applies to the National Health Service. That has resulted in more patients being treated, and being treated better than before.
    Mr. J. Enoch Powell: In view of the outcome of the referendum last Sunday in the Irish Republic, does the Prime Minister recognise that the Irish Prime Minister is no longer in a position to deliver any commitment that he may have made or suggested to secure an amendment of articles 2 and 3 of the constitution of the Republic?
    The Prime Minister: The right hon. Gentleman will know that a referendum in the Irish Republic is not a matter for me. He will also be the first to know that agreements are made between the Government of the United Kingdom and the Government of the Republic of Ireland, and not between persons.
    Mr. Proctorasked the Prime Minister if she will list her official engagements for Thursday 3 July.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Proctor: While regretting the necessity, is my right hon. Friend aware that all law-abiding citizens who live and work in London, especially those who live in Tottenham and Brixton and who were subjected to tyranny last year, will support the measures announced by the Home Secretary last night?
    The Prime Minister: I agree that all on the Government side will support the measures proposed by the Home Secretary. The Government have consistently given the police the extra support that they need, whether in manpower, resources or equipment. That has been our policy, and it will continue to be our policy.
    Mr. Ashton: Will the Prime Minister make a statement today on the fact that one of her Cabinet Ministers has asked all members of the Conservative party to complain continually about Left-wing bias on the BBC? Does she think that the BBC is there simply as a propaganda tool of the Government, or does she believe in its impartiality and integrity?
    The Prime Minister: My right hon. Friend the Chancellor of the Duchy of Lancaster has asked for a monitoring system to find out the facts. I believe that that is the right way to go about it.
    Mr. Adleyasked the Prime Minister if she will list her official engagements for Thursday 3 July.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Adley: In the light of the Peacock report, and notwithstanding that a statement is to he made shortly, will my right hon. Friend, especially in view of chapter 8, please give a categorical assurance that her Government have no intention of seeking to introduce any legislation to put advertising on the BBC?
    The Prime Minister: I give a categorical assurance that the Government which I lead will study very thoroughly the plan, about which we shall hear later this afternoon.
    Mr. Frank Cook: The Prime Minister has recently received most readily rings of roses and sycophantic posies from her Republican puppet-masters. Will she call to mind
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    today the efforts of the same paymasters to foster destabilisation in areas such as Chile, Nicaragua, Libya, Cuba and more recently the United Nations, from which they are withholding financial support? Bearing that in mind and putting it together with her recent standing in the opinion polls, will she tell the House what she knows of the activities in this country of certain individuals anonymously—that is, C for certain, I for individuals and A for anonymously who seek to foster and foment the organisation, the financing—
    Mr. Speaker: Order. This is not an Adjournment debate, come on.
    Mr. Cook: —and the political direction of some destabilised pseudo-politicians. That is, S for some, D for destabilised, P for pseudo-politicians
    Mr. Speaker: Order. It is unfair to take as long as that.
    The Prime Minister: I answer for this Government, and in terms of Nicaragua we note that the International Court of Justice called on both parties to co-operate with the efforts of the Contadora Group and to seek a lasting peace in Central America. That is our policy. On Chile, we deeply regret the deaths that have recently occurred and condemn violence from whatever quarter. We take every opportunity to urge the Chilean Government to take early steps to ensure the orderly and peaceful restoration of democracy in Chile.
    Mr. Higgins: Has the First Lord of the Treasury seen today's judgment of the European Court of Justice? That judgment has just been published and holds that the European Community's 1986 budget is not legal but that payments have been made under it. Will my right hon. Friend take steps to claw back this amount through reduced expenditure by the Community in future? More fundamentally, will she take steps to ensure that in future the amount of revenue that is approved restricts expenditure rather than allows profligate expenditure to go on unabated?
    The Prime Minister: We wholeheartedly welcome the judgment of the European Court of Justice. It vindicates the Council's contention that the European Assembly's President acted illegally in adopting the 1986 budget without the Council's agreement. As my right hon. Friend knows, there are certain provisions under which payments to the Community go on, in accordance with the due proportion of last year's budget, which, I believe, is legal. Of course we will look at the full implications of the judgment and find a way to let my right hon. Friend know our decisions.
    Dr. Owen: Is not the real lesson of the CPSA ballot that workplace balloting is always open to serious objection? Would not the Prime Minister have been better advised to put the onus of proof on those who wished to depart from postal balloting? Does she agree that the norm should be postal balloting?
    The Prime Minister: As the right hon. Gentleman is aware, there are two arguments about ballots. One is the argument that he has effectively advanced, that it is argued by some that postal ballots seem to provide the least scope for manipulation. That is why we enourage unions to make use of them through our ballot fund scheme, and unions can always do that if they wish. The other argument is that the number of people voting tends to be

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    higher in ballots held at the workplace, and that is an important factor to consider. It is not easy to come down on one side or the other, but all unions that wish to have postal ballots can have finance for them.
    Mr. Phillip Oppenheimasked the Prime Minister if she will list her official engagements for Thursday 3 July.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Oppenheim: Will my right hon. Friend take time later today to consider the depressing news that most of our so-called EEC partners have decided against following our lead and against effective liberalisation of the European airline market? Will this not result in unnecessary extra costs on both consumers and businesses, and is it not ironic that those who are often fastest in deploying European rhetoric are often the slowest to act when the interests of their inefficient, state-run airlines are at stake?
    The Prime Minister: My hon. Friend has made his point very effectively. It is, of course, quite true that the European Council is a long way short of agreement on worthwhile liberalisation of European air services. Britain and the Netherlands have led the way. We hope to pursue this very much more during our presidency and the Commission has said that, in the absence of agreement in the Council, it may begin independent action under article 89 of the treaty against airline cartels. In the meantime, we shall do our best to take the matter forward. Our record is excellent.
    Mr. Kinnock: Has the Prime Minister seen the admission made yesterday by the Secretary of State for Employment that shortages of specialist teachers are the major constraint on technical education? Is she aware that the shortage of specialist teachers in mathematics, science and technology subjects and languages is serious and widespread in secondary schools? What will she do to ensure that the shortages in those vital subjects are overcome by the beginning of the new term in September?
    The Prime Minister: As the right hon. Gentleman is aware, this is one matter that is being considered by ACAS in the discussions that it is having on teachers' pay and on much wider matters. May I point out that specialist teaching is also being studied in an inquiry in Scotland as part of the wider matter of teachers' pay and the possible new structures for teachers' pay. The Government would like, if need be, to get the extra teachers by paying them extra on the grounds that we cannot get mathematics and physics teachers at the present rates of pay, because the demand for them in industry is so great. We have a duty to children to try to obtain those teachers, but the objections to that come not from the Government but from the National Union of Teachers.
    Mr. Kinnock: Does the Prime Minister imagine for one moment, as a former Secretary of State for Education and Science, that the allocation of premiums to teachers in shortage subjects would be satisfactory as a way of rewarding teachers, with the present general feeling among teachers in all subjects, and in primary schools, that they are undervalued and underpaid in our society?
    The Prime Minister: What the right hon. Gentleman is saying is that he absolutely refuses to give permission to the way to get extra mathematics and physics teachers to teach our children. Children, too, have rights.
    Mr. Kinnock: May I ask the right hon. Lady to take the advice of Her Majesty's inspectors, who have a non-partisan interest in these matters, and to inquire of them whether they believe that the way to repair the grave shortages in the education system is to pay premiums to some teachers, with all the consequences of demoralisation that will occur—[Interruption.] that is the reality, I give fair warning—in other areas of the curriculum that are vital, although not so subject to shortages at present?
    The Prime Minister: The right hon. Gentleman asked about getting specialist teachers in mathematics and physics. Therefore, he accepts that children need extra teachers. I am saying that one way of getting them— possibly the only effective way— is to pay a premium. He is saying that he would rather we did not have teachers and that the children did not get them.
    Mr. Woodasked the Prime Minister if she will list her official engagements for Thursday 3 July.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Wood: Is my right hon. Friend aware of the concern felt by Conservative Members about the allegations concerning the election of a Militant supporter to the leadership of a Civil Service union? Is it not true that, despite the words of the Leader of the Opposition, neither Militant nor its methods have been brought to an end?
    The Prime Minister: My hon. Friend is right in the conclusions that he reaches. The elections in that union are a matter for the union itself, or, if any member is aggrieved, for the courts to resolve.
    Mr. Dubs: What action does the Prime Minister intend to take in the light of the clear evidence that racial discrimination is practised in the British Army?
    The Prime Minister: I know of no such evidence and no such practice. I believe it is totally untrue.

    Dunchurch
    Mr. Pawseyasked the Prime Minister if she has any plans to make an official visit to Dunchurch near Rugby.
    The Prime Minister: At present I have no plans to do so.
    Mr. Pawsey: My right hon. Friend will understand that my constituents living in Dunchurch and Rugby will naturally be disappointed at that reply. Will she consider a question which they would have asked her, had she visited Dunchurch, about the effect that Greek dumping of cheap cement would have on Rugby Portland Cement? Is she aware that the dumping of that cheap cement will undermine the cement industry in the United Kingdom? Will she bear in mind that that cement is cheap because it enjoys a subsidy from the Greek Government of some 18 per cent.? Will she say what action her Administration will take to repair matters?
    The Prime Minister: I am grateful to my hon. Friend for giving me notice of a matter which is of considerable importance to his constituents. My hon. Friend is right. The silo of Greek cement arrived at Tilbury on 18 June, and the United Kingdom industry fears that it will be the

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    start of regular shipments. It has made representations about the fact that the cement is subsidised by the Greek Government. My hon. Friend the Minister of State, Department of the Environment, will be discussing the matter with the industry's representatives shortly, but I am not over-optimistic about the result because, as my hon.
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    Friend knows, the subsidy has been approved by the European Commission until 31 December 1986 as part of the transitional arrangements for Greece joining the Community. However, we shall do everything we can to help my hon. Friend and his constituents.

Business of the House
3.31 pm
Mr. Neil Kinnock: May I ask the Leader of the House whether he will state the business for next week?
The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): Yes, Sir. The business for next week will be as follows:
MONDAY 7 JULY — Until seven o'clock, private Members' motions.
Debate on the tin industry on a Government motion.
Remaining stages of the Latent Damage Bill [Lords] and the Education (No. 2) Bill.
TUESDAY 8 JULY—Progress on remaining stages of the Finance Bill.
Remaining stages of the Patents, Designs and Marks Bill [Lords].
There will be a debate on a motion on EC documents relating to agricultural structures. Details will be given in the Official Report.
WEDNESDAY 9 JULY—Completion of remaining stages of the Finance Bill.
Motions on the Housing (Northern Ireland) Order and the Criminal Justice (Northern Ireland) Order.
THURSDAY 10 JULY—Until seven o'clock, Estimates Day (1 st Allotted Day, 2nd part). The Estimates due to be debated relate to the budget of the European Communities. Details will he given in the Official Report.
Remaining stages of the European Communities (Amendment) Bill.
FRIDAY II JULY—There will be a debate on policing the metropolis on a motion for the Adjournment of the House.
MONDAY 14 JULY — Until seven o'clock, private Members' motions.
It is expected that the Chairman of Ways and Means will name opposed private business for consideration at seven o'clock.
Debate on Tuesday 8 July:
Relevant European documents

(a) 6466/86 Socio-structural reforms in agriculture

(b) 7126186 Agricultural structures in Spain

Relevant Reports of European Legislation Committee

(a) 11C-21-xx (1985–86) paragraph 2

(b) 11C 21-xx (1985–86) paragraph 3]

[Estimates due to be debated Thursday 10 July 1986 Supplementary Estimate 1986–87
Class III, Vote 1 (Budget of the European Communities)]
Mr. Kinnock: I am grateful to the right hon. Gentleman. It is obvious from next week's business that the Government have got themselves into a hopeless muddle over the remaining stages of the European Communities (Amendment) Bill. The short time allotted next Thursday for this major constitutional issue means that there will he hardly any time for debates between votes on amendments. The Government have made a fool of themselves over the way in which they have dealt with the legislation and now they are trying to treat the House with further contempt. Even at this late stage, will the right hon. Gentleman, out of respect for his office, the House of Commons and his previous record, ensure that there is time for a proper debate on this vital issue of major constitutional significance?
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Will there be statements on the rate support grants for different parts of Britain before the summer recess? Later this afternoon we are to have a statement on the Peacock report. Will the right hon. Gentleman ensure that the House can debate the report as soon as possible and preferably before we rise for the recess?
On Tuesday I asked the Prime Minister whether she would accept the defeats inflicted on her Social Security Bill in the other place. She said in her reply:
"Events in the other place are matters for consideration later."—[Official Report, 1 July 1986; Vol. 100, c. 815.]
Does that mean that the Government are going to do the decent thing and not make changes that will disadvantage the poor and the elderly, or does the right hon. Gentleman have plans to bring back the measure to the House of Commons and use his majority to prevail in place of the reason and right that prevailed in the House of Lords?
Can the right hon. Gentleman ensure that the Foreign Secretary, who we understand will leave for southern Africa next week, will make statements to the House before and after his visit so that, first, he can outline purposes and, secondly, on his return report progress, if any, to the House of Commons?
The return to London today of Mr. Richard Branson reminds us of reports a few weeks ago of the anti-litter crusade that he was said to be going to lead. Can the Leader of the House now respond to my earlier request, for a statement on the matter, or was the whole affair just a spasm of enthusiasm of the Prime Minister on her return from Israel that now turns out to be a load of rubbish?
Mr. Biffen: May I take the points in the sequence in which they were presented by the right hon. Gentleman the Leader of the Opposition? Of course I recognise the general interest in the House about debating the European Communities (Amendment) Bill, but he will recognise that the business for Thursday is governed by a motion that the House passed a few days ago, and I hope that that will ensure a reasonable balance of time.
Secondly, the right hon. Gentleman asked about the possibility of statements upon the rate support grant in the component parts of Great Britain. I am happy to tell him that we hope that statements will be made before the House goes into recess.
The right hon. Gentleman also asked whether there would be a debate on the Peacock report. I am sure that the House will wish to have such a debate after there has been an appropriate period for reflection following the statement that will be made later this afternoon by my right hon. Friend the Home Secretary. I do not think that it would be helpful at this stage to speculate exactly when such a debate would take place. Certainly I would not wish to impede a reasonable recess by making a commitment to hold such a debate before we go away for the summer.
I take note of what the right hon. Gentleman says about the Social Security Bill. My right hon. Friend will be following the normal conventions and will be making his own recommendations to the House on how the Lords amendments should be considered.
As to the question about my right hon. and learned Friend the Foreign Secretary making statements to the House in relation to his proposed visit to South Africa, I am sure that the House will wish to take a very constructive stance in these matters and assist in what is undoubtedly a matter of considerable delicacy. It is perhaps something that we can discuss through the usual channels.

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Finally, of course, I take account of the Prime Minister's statement on the anti-litter crusade, and will be happy again to discuss that with the right hon. Gentleman through the usual channels.
Sir Fergus Montgomery: Is there any prospect of our having next week a debate or a statement on the plight of my constituent, Mr. John Stalker, the deputy chief constable of Greater Manchester? As I am sure my right hon. Friend is aware, since the end of May this man has been the subject of innuendo and rumour. Now he has been suspended by the police authority, a decision that was endorsed by the Police Complaints Authority—and a decision, incidentally, that was made public before it had the courtesy to tell Mr. Stalker. Does not my right hon. Friend not think that it is about time that the agony of his family should be brought to an end and could he please talk to the relevant Ministers to see whether the matter could be easily disposed of?
Mr. Biffen: My hon. Friend understandably and very effectively puts the problem that concerns his distinguished constituent. He will understand, I am sure, that there are problems that arise when there are matters still under investigation and consideration, but I am sure that my right hon. Friend the Home Secretary will have heard what has been said.
Mr. David Alton: The points raised by my hon. Friends yesterday call for an inquiry into the abuse of the housing benefits system. Given the widespread concern on both sides of the House that much of the £4.6 billion paid out in housing benefits last year found its way illicitly into the pockets of private landlords who are racketeering, will the right hon. Gentleman arrange for a statement to be made in the House next week? Can he say also when he expects to be able to make a statement about when the House will rise for the summer recess?
Mr. Biffen: The hon. Gentleman will realise that although those two points may seem to be quite far apart, they are not entirely unrelated, in that the more business that I am requested to undertake, the further away becomes the mirage of buckets and spades. However, I heard the hon. Gentleman's first point, and I shall draw his remarks to the attention of my right hon. Friend the Secretary of State for Social Services.
Mr. John Stokes: Is my right hon. Friend aware that the General Synod of the Church of England meets tomorrow? Is he further aware that one of the motions before it recommends effective economic sanctions against the South African Government and the disengagement of all British companies operating there? Are we to have an opportunity next week to debate that motion, or at least to hear what the Government's opinion of it is?
Mr. Biffen: As a very distinguished member of the Church Assembly, my hon. Friend will be able to make his views known perfectly well either within that body or by using all the other avenues of publicity available to a Member of Parliament. I appreciate that there is a proper and legitimate concern in the House to be involved in the
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political situation relating to this country and South Africa, but we must also be a little sparing in our insistence on debates and statements on the matter.
Mr. Merlyn Rees: The Leader of the House has announced a debate next week on the Metropolitan police, because the Home Secretary is directly responsible for policing in London and there are problems. But is he aware that we also have problems in west Yorkshire? Following the disbandment of West Yorkshire county council, there has been a court case involving the Department of the Environment, and the chief constable, whom we all respect, is talking about 1,000 policemen having to go. Can the Home Secretary, who is responsible for the efficiency of the police in the provinces, make a statement next week? Law and order is a great issue in west Yorkshire and we should like to know what is going on.
Mr. Biffen: My right hon. Friend the Home Secretary is literally at my left elbow, and he will have heard the right hon. Gentleman's point.
Mr. Michael Latham: Has my right hon. Friend noticed early-day motion 1039 which stands in my name and that of other hon. Members, and which calls for the bank holiday weekend to be designated "cone free" throughout our motorway system?
[That this House urges the Secretaries of State for Transport and for Wales to declare Friday 22nd to Monday 25th August, inclusive, to be a cone free weekend, by ordering that all road works be suspended on every motorway in England and Wales, and all cones removed, thus having one weekend for the first time in a generation when motorists could take their families to and from their holidays without fuming helplessly for hours in hot and immobile queues of traffic.]
In the interest of the perhaps millions of motorists and their families who will be driving over the bank holiday, will my right hon. Friend ask the Secretary of State to take this issue seriously and do his very best to ensure the free flow of traffic during that weekend?
Mr. Biffen: In view of the difficulties faced by the hon. Member for Cambridgeshire, North-East (Mr. Freud) the other day, I must congratulate my hon. Friend on having got an early-day motion bearing that designation past the Table Office. I understand that it is already Government policy to minimise the amount of coning on bank holidays, but that is just one more example of where the good work of the Government has not yet been fully recognised.
Mr. Jack Dormand: Does the Leader of the House intend to make a statement or to arrange for a debate on hon. Members' salaries and allowances next week, or at least before the summer recess?
Mr. Biffen: No, I have no plans for a debate on that subject.
Mr. Michael Shersby: When does my right hon. Friend think that there will be a debate on the conclusions and recommendations made following the review of legal aid? Should not early steps be taken to limit that non-cash-limited, demand-led vote?
Mr. Biffen: My hon. Friend has raised a valid point that is of growing public concern. However, the more I am pressed to give time for debates during the next few weeks, the less likely it is that we shall be able to rise for the recess at a civilised time.
Mr. Andrew Faulds: The right hon. Gentleman will know how much we in Britain welcome distinguished visitors to this country, and their public display along the streets of London, but will he get the House authorities to approach both the Metropolitan police and the local authority to see whether the roads can be cleared more quickly for public transport, the coming and going of Londoners in general, and of Members of Parliament in particular, because there was considerable delay last Tuesday in reopening the streets? Does the right hon. Gentleman realise that the hon. Member for Warley, East was half an hour late for a luncheon with Czechoslovak parliamentarians and suffered from severe dyspeptic indigestion for the rest of the day?
Mr. Biffen: I am sure that gastronomy has played its part in international ill will, and I shall take full account of what the hon. Gentleman has said.
Sir John Farr: In view of the serious collapse in exports of textiles and clothing in the first quarter of the year, for which the figures were announced a couple of days ago, and the rapid surge in imports of textiles and clothing at the same time, will my right hon. Friend arrange, before the recess, another debate on the MFA so that hon. Members can express the concern of constituents for their jobs and have action taken?
Mr. Biffen: I very much understand the anxieties of my hon. Friend and his concern that he should be able to inform the House of his constituency difficulty. Perhaps he would like to consider applying for an Adjournment debate as one way of doing that.
Mr. Stuart Holland: Was it not wrong for the Home Secretary not to make a statement on the Metropolitan police review on the disorders in Brixton and Tottenham before giving his consent yesterday to the measures that it contains? Does he also agree that it is scandalous that the hon. Members most directly affected by those disorders received copies of the review only after Sir Kenneth Newman had given a press release with his version of the events? Will he ensure that in the debate on the police next Friday the Home Secretary is able to give commitments from other members of the Government that resources will be put into inner city areas to offset the deprivation that underlies such disorders?
Mr. Biffen: I cannot accept the strictures directed at my right hon. Friend the Home Secretary, but I am sure that the points of substantial policy that the hon. Gentleman has made will be included in the debate on Friday.
Mr. Roger Sims: My right hon. Friend will be aware that many individuals and organisations are interested in the Government's consultation paper on family courts. Submissions on it are invited by 31 October, and, as the House will be sitting on only a limited number of days between now and then, can my right hon. Friend earmark one of those days for a debate on those proposals so that the House can play its part in the consultation process?
Mr. Biffen: I hope that we shall be sitting for only a limited number of days between now and the date that my hon. Friend mentioned. Clearly I shall have to take account of his representation and all others when judging when it will be appropriate for the House to go into recess.
Mr. James Hamilton: Bearing in mind the disquiet and worry in Scotland, and in
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Lanarkshire in particular, about the lack of investment in the steel industry in Scotland, will the right hon. Gentleman get the Secretary of State for Scotland, who met the chairman of the British Steel Corporation on Tuesday, to make a statement to allay the fears that prevail in Lanarkshire?
Mr. Biffen: I shall draw the attention of my right hon. Friend the Secretary of State for Scotland to those anxieties.
Mr. Nigel Forman: in view of recent press reports that my right hon. Friend the Secretary of State for the Environment intends to proceed rather more rapidly than hitherto has been envisaged on the reform of local government finance, can my right hon. Friend ensure that the House gets an early opportunity, if not before the summer recess then early in the autumn, to have a full debate on this important matter because of its implications for wider aspects of Government policies?
Mr. Biffen: I am sure that my hon. Friend, who is a most sophisticated politician, will not be seduced by every newspaper article that he reads.
Mr. Jeremy Corbyn: The right hon. Gentleman is being patronising.
Mr. Biffen: No, I am not. I am being adroit and accurate. I take account of the interest in such a debate, and I am grateful for the fact that my hon. Friend does not think that it will happen any earlier than the autumn.
Mr. Terry Davis: Why have the Government insisted on taking the Report stage of the Finance Bill next week, although they have not yet tabled all their new clauses and amendments to this important Bill, and in spite of representations that they have received on this matter through the usual channels?
Mr. Biffen: This state of housekeeping is not entirely unknown on Finance Bills throughout the decades. I understand the hon. Gentleman's point, and I shall look into it.
Mr. Neil Thorne: I draw my right hon. Friend's attention to early-day motion 974 on the proposed takeover of Plessey that has been signed by no fewer than 117 hon. Members from all parts of the House and by one other hon. Member who has tabled an amendment, which I believe he intends to be helpful.
[That this House believes the GEC's proposed takeover of the Plessey Company would be against the public interest in view of: (a) the resulting damage to competition in the domestic market in the fields of private telecommunications, defence electronic equipment and other sectors including traffic signal systems, (b) the serious implications for employment prospects in Plessey and within their small firm suppliers, (c) the erosion of the country's technological base following the inevitable reduction in the variety of approaches to British research and development in a number of highly specialised applications and (d) the danger of increased opportunities for foreign suppliers as a result of the Government's policy of competitive tendering in the defence field; and calls upon the Secretary of State for Trade and Industry to give due weight to these factors when he considers the report of the Monopolies and Mergers Commission on this matter in due course.]
In view of the large measure of concern about this matter, will my right hon. Friend consider the possibility

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of holding a debate in the near future on the important implications, both to defence and employment, of the predatory nature of some firms that have far too much money standing idle and that seem to want to benefit from other extremely efficient companies that have put up a very creditable performance?
Mr. Biffen: My hon. Friend makes a point which will have touched on a quite widely held anxiety. However, he will appreciate that it will be much more appropriate if the House were to wait until the findings of the Monopolies and Mergers Commission are reported, which I understand will not be until, at the earliest, later this month.
Mr. Greville Janner: In view of the continued erosion of the rights of employees who are fortunate enough to have jobs and the Government's apparent belief that the way to create more jobs is to remove the rights of those who are in work, may we have a debate soon on the proposals that are contained in the Government's consultative document that are designed to promote the further reduction of employees' rights, particularly of part-timers?
Mr. Biffen: That is a most tendentious interpretation of some extremely progressive proposals that have been mooted by this Government. But, leaving that aside, and curbing all that I would otherwise wish to say, I must observe that very little time is at the Government's disposal which would allow such a debate to take place this month.
Mr. Dennis Skinner: As it has now been disclosed that the Leader of the House could not bear to put his name on the European Communities (Amendment) Bill, despite the fact that the names on that Bill are headed by that of the Prime Minister and various other biased members of the Cabinet, including Dumpling—[HON. MEMBERS: "Who is he?"] Agriculture.
Mr. Speaker: Order. I think that we should refer to the constituencies of hon. Members rather than to nicknames, however friendly.
Mr. Skinner: I was only taking the micky. Think about it! Why does the Leader of the House not do the decent thing? Why does he not do as he did a decade ago and back those of us who realise that the Common Market has now blown its full course, that it is bankrupt and that, if it were a coal mine, the Prime Minister would shut it? Why will he not decide to take the Bill off next Thurday's business and instead let us have a debate about the six months' old industrial dispute at Wapping? Is it not a scandal that, although a major industrial dispute in Britain has already lasted for more than six months, it has never been properly debated in this House? There's a challenge for the Leader of the House!
Mr. Biffen: I am always flattered and touched to receive the fraternal interest and good will of the hon. Gentleman; but, as he said, he was taking the micky.
Mr. Tony Marlow: Although we have only recently had a very interesting and important debate on defence, I wonder whether it would be possible to have a specific debate on the very interesting proposal of the right hon. Member for Plymouth, Devonport (Dr.
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Owen) on the European deterrent—particularly as the French take the view that any nuclear deterrent involving France should have only one finger on the button, and that that finger should be a French one. It would give the right hon. Gentleman a very good opportunity to explain that he is not actually in favour of fudge and mudge.
Mr. Biffen: And, of course, there would be the related interest as to only one finger being on the alliance button. However, we have just concluded a two-day debate on the Defence Estimates and I am afraid that there is no immediate prospect of returning to that topic in parliamentary time.
Mr. Robert Maclennan: Bearing in mind his expressed understanding of the impending chaos in the cereals market last week, is the Leader of the House able to say why he has not made arrangements for a debate to be held on the introduction of the co-responsibility levy before the scheme becomes operative?
Mr. Biffen: As the hon. Gentleman has said, there is no provision for a debate. However, I am sure that he would not expect a great use of parliamentary time on those topics at this stage of the year if, at the same time, he had any regard for his Scottish colleagues who would like to recess earlier rather than later in July.
I understand that my right hon. Friend the Minister of Agriculture, Fisheries and Food will be laying a statutory instrument before the House shortly, which should provide an opportunity for debate.
Mr. Peter Bruinvels: When will the House debate the Widdicombe report so that I may have the opportunity to reveal further Left-wing excesses by the Labour-controlled city council in giving money to Nelson Mandela, Nicaragua and the inner-area programme? Does not my right hon. Friend agree that local authorities should be debating local matters, not the privatisation of water authorities, social security reviews and anything to do with South Africa? They should not interfere in national affairs.
Mr. Biffen: It is an interesting proposition—[Interruption.] Well, it is an interesting proposition for the purpose of this answer. I hope that my hon. Friend will reflect seriously before suggesting that by statute we should limit the subjects to be without legitimate discussion by local authorities.
Mr. Tom Clarke: Leaving aside the need for a debate on South Africa before the recess, will the Leader of the House give an assurance that if the threat to Commonwealth unity worsens, especially after the events of 2 August, he will not hesitate to recommend that the House be recalled?
An Hon. Member: It is the first cuckoo.
Mr Biffen: That is an ominous contribution to these exchanges. I have no wish to exacerbate feelings between Opposition Members.
The hon. Member for Monklands, West (Mr. Clarke) made a very proper observation, but I suggest that we wait for that difficulty to arise.
Mr. Harry Greenway: Will my right hon. Friend note that the pupil-teacher ratio announced two days ago is the highest ever? Will he also note that the

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Government are paying teachers 15 per cent. more than the last Labour Government, and that before the current ACAS discussions are concluded?
Will my right hon. Friend ask the Secretary of State for Education and Science to consider the problem of the shortage of teachers in specialist subjects such as maths and science, and perhaps to introduce in-service training or retraining schemes for some of the large number of teachers in this country?
Mr. Biffen: I think that my hon. Friend will have been encouraged by the exchanges during Prime Minister's Question Time this afternoon. My right hon. Friend the Secretary of State for Education and Science will be top for questions on Tuesday, and I hope that my hon. Friend will have the opportunity to make his point then.
Mr. Ray Powell: Is the right hon. Gentleman aware that, although Opposition Members are concerned about teachers' pay, we would also like to have a debate on the decline of competitive sport in schools and the loss of school playing fields as a result of the cuts in local authority finance? May we also have a debate on the sale of open spaces by local authorities? Those are pressing problems in some areas, and it is high time that the House debated them.
Mr. Biffen: There are times when I think that English cricket is an example of mixed ability sport. The hon. Gentleman raised a fair point, but I am sure that he realises that there will be a number of private Member opportunities for debate before we recess, and I hope that he will consider using those occasions to pursue the matter further.
Mr. Bill Walker: Is my right hon. Friend aware that the Scottish Grand Committee debate in Scotland on Monday on the subject of devolution was notable for the poor attendance of Labour Members and for the extravagant claims about what would happen in any separate assembly with regard to tax-raising and other powers?
As later next week we will debate the Single European Act, which my right hon. Friend has acknowledged has serious constitutional implications for the United Kingdom Parliament, may we have an early debate on the implications of those two matters together with the problem of rolling devolution in Ireland, their impact on our unitary Parliament and the effect on this House?
Mr. Biffen: That is an interesting point. I think that the House more generally may wish to return to the subject of devolution as we approach a general election. I am looking for a topic to hand to the hon. Member for Linlithgow (Mr. Dalyell) so that he can take up anew what he once championed with such success after his current and passing interests have evaporated.
Mr. Tony Lloyd: Is the Leader of the House aware of the decision last week in the International Court of Justice which condemned the United States both for mining the ports of Nicaragua and aiding the Contras? As the Prime Minister has been robust this year in condemning state-supported terrorism, may we have a debate on American action in Nicaragua so that the Prime Minister can express her views on this particular state-supported terrorism?
Mr. Biffen: I must say in all candour to the hon. Gentleman that. I do not think there is the prospect of the
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sort of debate that he seeks. As a good alternative, perhaps he will consider that on Wednesday next week my right hon. and learned Friend the Foreign Secretary is top of the list for questions.
Mr. Tony Banks: Is the Leader of the House aware of the great concern felt by the staff of the Palace of Westminster about the date of the summer recess? Can he tell the House whether we shall go into recess on 18 or 25 July?
Mr. Biffen: I have nothing to add to the opaque words I have just spoken. I have already noted, however, that one hon. Member thinks that we should be around in early August to see what is happening at the Commonwealth Conference.
Mr. James Wallace: I noted the concern for Scottish Members which the Leader of the House showed in his response to my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan). I hope that his concern will be translated into action. Bearing in mind that we shall be sitting next week, and the decision of the House of Lords Appellate Committee in dismissing the appeal of depositors of the Trustee Savings Bank, can he arrange next week for a Treasury Minister to make a statement on the Government's future proposals, and to give an undertaking that the bank will not go ahead with flotation until such time as their Lordships' detailed judgment on the ownership of the bank has been considered?
Secondly, in anticipation of the statement that is to be made by the Home Secretary, may I ask whether the Government intend that there should be a full-day debate on the Peacock report in good time?
Mr. Biffen: One thing is certain: if we have a debate on the Peacock report in good time, which would be during this month, it will make it more difficult — [Interruption.] I am glad that the hon. Gentleman is being corrected by his hon. Friend the Member for Cambridgeshire, North-East (Mr. Freud). There will be a debate on the Peacock report after there has been proper time for the House to consider these matters some weeks hence. I shall most certainly look into the House of Lords decision and draw the attention of my right hon. Friend the Chancellor of the Exchequer to the hon. Gentleman's anxieties.
Mr. Jeremy Corbyn: Has the Leader of the House seen early-day motions Nos. 1040, 1044 and 1049?
[That this House believes that the decision of the United States Congress to vote money to the Contra for their attack against Nicaragua constitutes a further act of aggression; believes that the Government of Nicaragua is democratically elected and has suffered continued destabilisation by the United States of America; lends its full support to President Ortega and the people of Nicaragua in their legitimate defence of their country; and calls upon the British Government to denounce the United States policy at the United Nations to support the World Court decision and to offer aid to the Government of Nicaragua.]
[That this House notes the judgment of the International Court of Justice concerning military and paramilitary activities against Nicaragua; notes further that the Court found against the United States of America on various charges, including the mining of Nicaraguan ports and the

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financing of terrorism through aid to the Contra forces; is conscious that the Court found no merit in the United States counter-claim of self-defence; supports the decision of the Court in ordering reparations to Nicaragua; and looks forward to Her Majesty's Government condemning this state-supported terrorism and insisting that the United States of America recognises and acts on the Court's decision.]
[That this House supports the objectives of the National Civil Assembly of Chile, which is calling for a return to democracy and an end to military dictatorship in that country; and deplores the repression of political opposition and dissent being carried out by the military rulers of Chile.]
Does the Leader of the House agree that there should be an expression of opinion in the House concerning the differences in Government policy when they allow the United States to destroy a democractically elected Government in Nicaragua by sponsoring state terrorism against that country while at the same time they are prepared to sell arms to and provide military equipment for Chile and use Chilean military bases as a means of supporting the most vile fascist dictatorship seen anywhere in Latin America? Do not these matters merit urgent debate in the House?
Mr. Biffen: I am sure that the House would not expect me to endorse the hon. Gentleman's terminology. The point that he is making is not dissimilar to the one made by his hon. Friend the Member for Stretford (Mr. Lloyd). I have to say to him that my answer must be substantially the same.
Mr. Clive Soley: Will the Leader of the House expand on his answer to my hon. Friend the Member for Easington (Mr. Dormand)? Was he really saying that there is not to be a debate on Member's secretarial allowances, or was he trying to tell the House that the allowances are not to be increased? Alternatively, was he trying to tell us that he is going to try to reduce the allowances?
Mr. Biffen: As I said to the hon. Member for Easington (Mr. Dormand), there is as I judge it no Government time available to debate Members' pay. The hon. Gentleman is right to draw specific attention to secretarial allowances. I said some weeks ago that the matter would be remitted for the four-yearly consideration. That is exactly what will happen, and before we go into recess.

BBC Financing (Peacock Report)
4.5 pm
The Secretary of State for the Home Department (Mr. Douglas Hurd): With permission, Mr. Speaker, I should like to make a statement on the report of the committee on financing the BBC, under the chairmanship of Professor Alan Peacock, which was published today. I should like to record my deep gratitude to Professor Peacock and his colleagues for their industry in pursuing their inquiries and for their efficiency in completing their work and producing this report in 12 months.
The committee puts forward a number of interesting and constructive proposals for replacing the present system of financing the BBC in a few years' time. However, it rejects the proposal that the BBC should at present be funded wholly or in part by advertising and concludes that at this stage the licence fee, with some modifications, should remain as the principal source of funding for the BBC. The committee argues that, since spectrum is still scarce, and there is as yet no way in which the consumer can pay direct for the programme of his choice, the introduction of advertising would reduce the effective range of choice open to viewers and listeners. Given the original work which the committee undertook and commissioned on the economics of the advertising market and on the relationship between advertising and broadcasting services, we cannot lightly put aside its assessment of this point. However, before reaching any conclusions the Government would welcome comments on the committee's analysis.
The committee's view is that our present system of public service broadcasting has provided the best means of securing diversity of choice and programmes of quality under the prevailing market conditions. The committee sees a need for this system to remain in being for some years, though with important modifications, but argues that, under pressure for inevitable technological change, it must and should give way to arrangements where, as channels multiply and customers find means to register their own preferences directly, a genuinely competitive broadcasting market develops. The committee believes that this will take time, but in a few years, in preparation for this, payment for BBC services should be made through subscription, leading to the end of the licence fee system. In the longer term, perhaps through the provision of a national cable grid, a genuinely competitive market in television services could be brought about so that the current arrangements, dependent on the duopoly, would no longer be needed. There would be scope for greater diversity of programmes and a wider choice for consumers, who would have much greater freedom than is now possible to decide which programme services they would like and at what price. Special arrangements are envisaged to ensure that public service programmes are available which, though needed, the market might not produce unaided.
The Government see much merit in this approach, which fits well with our general philosophy. All the committee's proposals, which have profound implications for all broadcast services, and the institutions which provide them, deserve and will receive careful study. We shall reach final views on the report only in the light of parliamentary and public reaction; and we would welcome

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any comments from the public and other interested parties. However, there are four matters on which I should like to make some comment now.
First, there is the proposal by four members of the committee that IBA contracts should be awarded by a competitive tender, with the IBA required to make a full public and detailed statement of its reasons if it decided to award a franchise to a contractor other than the one making the highest bid. The Government have reached no conclusion on this recommendation. However, they are anxious that the option for change should remain open. This would not be the case if the IBA proceeds to arrange new ITV contracts to take effect from the beginning of 1990 for eight years. Accordingly, we are considering with the IBA the relationship between this timetable and the committee's recommendation. We do not propose to disturb the work that the IBA has in hand to make a contract for the provision of direct broadcasting by satellite services.
Secondly, there is the question of the regulation of the content of broadcast programmes. The committee suggests that broadcast services should be subject only to such regulation as is provided for all material in the general law of the land, as is the case for the print media, and that in the long term there should be no prepublication censorship or vetting of any kind of broadcasting. Our present arrangements reflect the view that the peculiarly intrusive nature of broadcasting, and in particular television, continue to require special regulatory arrangements to ensure certain standards in broadcast services. For this reason we have broadcasting authorities to enforce controls on such matters as taste and decency in broadcasting, which are much stricter than applying to the print media, or than could easily be accommodated in the criminal law. The present regulatory regime, and the institutions to give effect to it, are certainly not sacrosanct, but the Government believe that any future arrangements should he no less effective than those now in place.
Thirdly, there are the recommendations on radio. Professor Peacock's committee recommends that the BBC should have the option to privatise radios 1, 2 and local radio in whole or in part and that the IBA regulation of radio should be replaced by a looser regime. Five of the committee's members went further and said that Radio I and Radio 2 should be privatised and financed by advertising and that further radio frequencies becoming available should be auctioned to the highest bidder. I have already announced my intention to publish a Green Paper looking at the existing framework for the provision and regulation of radio broadcasting as a whole. I believe that it would be helpful for this consultative document to examine further services at national, local and community level, and that the future of BBC radio services and of those provided by the IBA should be looked at in the light of the Peacock's committee's recommendations.
Fourthly, we see merit in a number of the committee's shorter-term proposals designed to pave the way for the free broadcasting market which it wishes to create, including, for example, the recommendation to increase the proportion of television programmes supplied by independent producers. The best way of achieving this will need careful consideration.
I welcome the committee's report and the many stimulating ideas that it contains. It is a challenging piece
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of work, as hon. Members will find when they read it. We look forward to the constructive public debate about the future of broadcasting which I am sure it will encourage.
Mr. Gerald Kaufman: In the jumble of evasive verbiage, one thing that the Home Secretary might have spared the House was his ritual tribute to Professor Peacock. For the past couple of weeks Mr. Bernard Ingham's character assassination machine has so single-mindedly devoted its attention to Professor Peacock that one might have thought the poor man was a member of the Cabinet. This is a particularly ungrateful attitude, considering that Professor Peacock was vice-chancellor of a university that awarded an honorary degree to the Prime Minister.
The report is a classic example of "ask a silly question and one gets a silly answer", except that the silly answer does not even answer the silly question. The massive report cost the taxpayer £268,000. As it is a complete waste of that money, I suggest that the right hon. and learned Member for Richmond, Yorks (Mr. Brittan)—the man who brought us not only this disaster, but those of Westland, British Leyland and the Shops Bill— should be surcharged for that amount.
Fifteen months after the Peacock committee was set up, the problem of financing the BBC remains precisely as it was on 27 March 1985. Even the Prime Minister's pet solution of advertising on the BBC has been turned down. A collection of trusties, handpicked to give the required answer, have failed to oblige. There will he a few empty places in the next honours list.
The report, in most of its recommendations, goes wildly beyond its terms of reference and seeks, arrogantly and impertinently, to restructure the whole of broadcasting— television and radio, BBC, ITV and IBA. Let me make clear the attitude of the Labour party to the main proposals. We reject the plan for BBC TV as a subscription service. That would either turn the BBC into the television equivalent of junk food, or drive it into a cultural ghetto with no guaranteed income to make plans for even the minority audiences to which it would be limited. In the end, such a system would destroy the BBC.
We reject the proposal to privatise TV during night time hours. This could introduce a completely unregulated system of television which could become a playground for pornography and violence. We reject throwing ITV franchises on to the market to go to the highest bidder. That would be to cast away the high standards achieved by many ITV companies and replace the present unsatisfactory system of awarding franchises by one that would be completely unacceptable. We reject the proposed new status for Channel 4. Why meddle with something that works brilliantly as it is?
We reject the plans for privatising and commercialising BBC, Radio I and Radio 2. Such a scheme would prevent the BBC from providing a full range of services catering for a wide spectrum of tastes. It would threaten the viability of many local commercial radio stations. It would, for one year only, bring in only a fraction of the revenue that the BBC needs every year.
We reject the indexing of the licence fee. Such a system would be unrelated to the BBC's financial needs, while perpetuating the present licence system as a regressive tax that bears most heavily on those on the lowest incomes. We reject the proposal for a £10 licence for car radios. Such a system would be hard to enforce, would

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discriminate for no good reason against one group of radio users, and would bring in little more than a quarter of the present licence income. We are dissatisfied with the proposal for free TV licences only for pensioners on supplementary benefit. That is completely inadequate.
The report is a mess. We warned against the setting up of the committee. Our warning has been vindicated. I tell the Home Secretary plainly that it would be unacceptable for the proposals to be implemented at the tail end of the Parliament. I make it clear to the House that the forthcoming Labour Government will phase out the licence fee for all pensioners. The forthcoming Labour Government will re-examine the financing of the BBC in a way that seeks to address itself to the problem of the licence as a regressive poll tax. The forthcoming Labour Government will ensure that the BBC, as a great national institution, internationally respected, is not only preserved, but is protected from interference by Governments of any party. Meanwhile, the proper place for the report is not a pigeon hole, but a wastepaper basket.
Mr. Hurd: It will not take me long to answer the right hon. Gentleman's questions. It is not the first time that he has read too many newspapers. His analysis of the Government's reaction to the Peacock report is wide of the mark. As I have said, the analysis fits well into our philosophy. It is odd that, having attempted to protect the committee, the right hon. Gentleman piled a number of wholly unfair epithets upon it.
The announcement of policy which the right hon. Gentleman has just made, after some hours of consideration of a report which took 12 months to complete, show a deeply depressing and backward-looking approach. It shows no sign of understanding the immense range of choice which technical change will open up to the customer or the effect that it is bound to have on broadcasting. I thought that the right hon. Gentleman's approach was deeply reactionary. It will be a bleak future for broadcasting, and all the talent that it contains in this country if the right hon. Gentleman's blind and blinkered approach were ever in control.
Mr. Leon Brittan: Does my right hon. Friend agree that, in spite of the characteristically trivial and dinosaur-like nonsense emanating from the right hon. Member for Manchester, Gorton (Mr. Kaufman), the report amply justifies the hope that looking at the finances of the BBC would lead to radical and imaginative proposals for the future of broadcasting generally? Does my right hon. Friend also agree that although nobody would accept all the recommendations, especially some of the short-term ones, the central thrust of the proposals putting forward the concept of a BBC funded by subscription, but supplemented by an Arts Council-like body funding those programmes whose ratings alone would not keep them going, combines the highest possible degree of choice for the consumer with the central features of public service broadcasting as we have known it? Will my right hon. Friend therefore conclude that, although of course there should be full discussion of the report's details, far from being something that should be pigeonholed, the report provides a springboard for action and should not be a pretext for delay?
Mr. Hurd: My right hon. and learned Friend did a good job for British broadcasting when he set up the committee.
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The quality of its work justifies his faith in it. I am interested to note that my right hon. and learned Friend, like me, is personally attracted by the general philosophy that comes through in the report. Of course, we shall need time, and in some cases a good deal of time, to weigh the detailed recommendations that flow from the analysis. I hope that, despite the Opposition's dispiriting initial reaction, they will play some part — at least as individuals—in that constructive debate. We shall then be able to reach decisions on the detailed points arising from the analysis.
Mr. Clement Freud: Does the Home Secretary accept that my right hon. and hon. Friends will thank Professor Peacock for a well-documented and well-presented report that shows that one cannot take financial considerations in isolation? Does the right hon. Gentleman accept that we welcome the rejection of advertising, that we are alarmed at the possibility of splitting Radio 1 and Radio 2 from Radio 3 and Radio 4, which might well turn the BBC into a cultural ghetto, that we are as relaxed as he is about bringing in extra controls, of which clearly there are already enough, and that we would be bemused by Professor Peacock's recognition of a Government commitment to community radio? Will the right hon. Gentleman accept that there is no connection between broadcasting costs and the retail prices index? Will he look again carefully at his decision to index the television licence in accordance with the RPI?
On the subject of free licences, which we welcome, does this mean that the Government now accept the concept of poverty or need based on cultural deprivation or need for communication? Will this be applied more generally by the Government to anti-poverty policies?
Mr. Hurd: I am grateful to the hon. Gentleman for his comments, which I shall note with care. He is momentarily inaccurate in saying that there is some decision about the indexation of the licence fee. This is a proposal which Professor Peacock put forward. One should always be a little chary of organisations that argue that, for some God-given reason, their costs are always bound to rise substantially faster than costs as a whole. One must regard such special arguments carefully, as we know from other examples.
I should like to study the philosophical question in the last part of the hon. Gentleman's question, because I do not entirely at the moment capture its full wisdom.
Sir Paul Bryan: Having wisely rejected advertising on BBC, presumably on the ground that it would lead British broadcasting down the road towards the American model, is my right hon. Friend surprised that the Peacock committee advocates the auctioning of television franchises, which really leads in much the same direction? Is my right hon. Friend aware that over the next two years there will be tremendous international developments on satellites, cable television and the like, and that the ITV and BBC are already deeply involved in this? Does he agree that in the next few years they will have plenty of opportunities, and plenty of competition too?
Mr. Hurd: My hon. Friend is right on both points. I think that the committee had a bit of a tussle on its recommendation on the auctioning of future IBA contracts. A good deal of care will have to be taken. I have announced that we are in touch with the IBA, with a view

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to ensuring that we do not become effectively locked into the existing system until 1998. The Government may wish to put forward changes on that front. We do not want to be debarred from taking action because the machinery has rolled on and therefore not have flexibility in 1998.
My hon. Friend is perfectly right on his second point. It is precisely the internationalisation of broadcasting through technical change that makes the next decades in broadcasting so important and exciting.
Mr. Merlyn Rees: Of course there will be great changes in radio and television in the next five, 10, 15 or 20 years, and no one can deny that. Does the right hon. Gentleman understand that the committee's terms of reference were far too narrow to generate a philosophy that could encompass all those changes? I should like to follow the point raised by the hon. Member who used to represent the constituency of Howden. I am afraid that I have forgotten which constituency he now represents.
I should like a clear answer from the Home Secretary to this question. Competitive tendering will cause great changes in the IBA's role. What does the right hon. Gentleman have in mind? It is not a matter of just reading the report. The issue of competitive tendering has been around for five, 10 or 20 years, so this is not a first thought. It is worrying that the Government look with approval on this. We should like to know what the Government have in mind. What will happen to the IBA next year? The advertisements were to start next October. Is the right hon. Gentleman now saying that that will be slowed down? This will happen at the time of the general election. The IBA's role must be made clear to it. The Home Secretary gave only a brief summary of what he had in mind, and this is worrying.
Mr. Hurd: The right hon. Gentleman need not be worried. This is not the first time that an intelligent committee has leapt a little outside its terms of reference. I do not think that we should complain about that, because the result is stimulating. The right hon. Gentleman has much experience of the IBA franchise and knows that the IBA has ideas on changing the present system. There is a good deal of criticism—some of it technical and some of it more philosophical—of the way in which the present system operates. I have said that we are in touch with the IBA; that we want to avoid being locked into the existing timetable. We do not want to find that we cannot make any changes which are effective before 1998 because as the right hon. Gentleman accurately said, the machinery begins to roll in the autumn of next year. Under the existing system, new franchises will be in place by 1990 and sacrosanct until 1998. I chose my words carefully, because we have not worked out with the IBA how the timing problem will be solved. Obviously I shall need to keep the House informed.
Mr. Tim Brinton: Has my right hon. Friend noted that the right hon. Member for Manchester, Gorton (Mr. Kaufman), in his attempt to rubbish and deride the excellent and thoughtfully drawn up report, managed to offer a free television licence to Lord Grade? We should consider that carefully. Will my right hon. Friend consider two points of paramount importance? First, will he consider the urgent need to decide the method of allocating franchises next time, especially bearing in mind the remark by the IBA chairman that there must be
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a better way? Secondly, will thought, care and adequate time be given to considering television broadcasting? Will there perhaps be a Green Paper on television, as my right hon. Friend has announced a Green Paper on radio broadcasting? Does my right hon. Friend agree that we must consider the whole scope of television as well as of radio?
Mr. Hurd: I agree with my hon. Friend's first point. The Peacock committee, although admirably unpartisan in almost all its utterances, goes out of its way specifically to reject the Labour party's policy of giving £325 million to unspecified persons—that bribe to pensioners, which the right hon. Member for Manchester, Gorton (Mr. Kaufman) has again confirmed today. That is specifically rejected by the committee, which offers an alternative proposal.
My hon. Friend is right to remind us of the urgent need to clarify the position of ITV franchises. Clearly that must be one of the first decisions to be made.
I note my hon. Friend's point about having a general review of television as well as of radio. I am reluctant to say yes to that today. Let us see how we get on with examining the television aspects of the Peacock report. On radio, many proposals are coming together— the IBA's proposal for an independent radio, the concern of the independent local radio about its present position, the prospect of community radio and Professor Peacock's proposals for Radio 1 and Radio 2—and they need to be looked at together, not decided piecemeal.
Mr. Joseph Ashton: Is the Home Secretary aware that, despite the scathing criticism of the report, there is one excellent recommendation, which is that pensioners on social security—not all pensioners, who may be MPs or affluent pensioners—should get a free television licence paid for by a £10 tax on the car radio, which would mean the affluent members of society contributing to the less affluent? In my mind that is a good recommendation. Is there any chance of the Government introducing it?
Mr. Hurd: We will consider both wings of the Peacock committee's recommendations on that point. The hon. Gentleman will have to sort out his differences with his own Front Bench. I am not rejecting that line of approach totally today. However, it is costly and will require much thought to see whether anything worth while can be done.
Mr. Tim Rathbone: Will my right hon. Friend accept that the absolute rejection of this report by the Opposition Front Bench must add credibility to the recommendations of the report, remembering, as we all do, the way in which the Labour party stood against commercial television and radio before they were launched?
My right hon. Friend will have noted that it says in the report that radio is
"'in a different category from television'. The problem of spectrum shortage is less acute and this lessens the need for detailed regulation."
Therefore, will my right hon. Friend reconsider his plans for a Green Paper on radio and turn that into a White Paper, in order to allow consumer sovereignty on radio, free speech and consumer choice locally as well as nationally and internationally, especially in community radio, which has sadly now been postponed?
Mr. Hurd: My hon. Friend is right on his first point. I fear that all those who are genuinely involved with and interested in the future of British broadcasting will have been temporarily dismayed by the outburst of the right hon. Member for Gorton and his negative tone. I note that my hon. Friend would like us to get on with the radio aspect rather more quickly, but there are different strands, which I listed in a previous answer. They have not been looked at together. One must proceed fairly steadily and with some caution, even on radio. We will try to produce a Green Paper in the autumn, and there should be a period for some discussion after that.
Mr. Jack Ashley: Does the Home Secretary agree that the political independence of the BBC, in addition to its financial independence, is of cardinal importance for its future? Will he make a big effort to avoid being contaminated by the prejudice and hysteria that characterise the Prime Minister and the chairman of the Conservative party in their dealings with the BBC? His own reputation, no less than that of the BBC, will be on the line in the way that he deals with this report. Will he also bear in mind that the suggestion of privatising BBC1, BBC2 and local radio is fatuous and damaging to the BBC and public broadcasting as a whole?
Mr. Hurd: I note the right hon. Gentleman's second point. On his first point, when individuals or groups feel that they are aggrieved or unfairly treated on television, it is reasonable that they should make a protest. It has nothing to do with the Home Secretary or the Home Office, but it is a legitimate activity.
Mr. Ivan Lawrence: Is my right hon. Friend aware that many people are apprehensive that these changes in broadcasting could open the floodgates to even more vulgarity and morally offensive material than can be checked merely by an extension of the existing laws of obscenity? Can my right hon. Friend be a little more resolute and a little more reassuring about that aspect of the matter?
Mr. Hurd: I thought that I had been particularly resolute on that, because it was one of the four points which I thought needed to be tackled today in a statement which is, on the whole, a holding statement. I specifically said that we did not accept the analysis of the Peacock committee that there is no need for regulation going beyond the law of the land. The nature of broadcasting is such that, perhaps not indefinitely, but for the time being, such additional protection for the public is needed.
Mr. Don Dixon: While studying the report, will the right hon. Gentleman bear in mind that since his party was elected in 1979, 7,561 pensioners in the south Tyneside district, which I represent, have had their concessionary television licences stolen from them by his Department? Will he accept that recommendation 6 does not go far enough in exempting certain pensioners? what is required, as my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman), said, is a phasing out of television licences for all pensioners.
Mr. Hurd: During the lifetime of this Government we have somewhat extended the scope of the concessionary 5p licence. I am not in the least bit happy about the state of the concession. There are all sorts of borderline cases and grievances that arise out of it. I accept that. It has proved
1188
much easier to identify the difficulties than to make improvements. However, I do not think that the answer is to open the floodgates as the hon. Gentleman suggests.
Sir David Price: Does my right hon. Friend accept that there is simply not enough advertising to finance the BBC, the IBA and the press? Will he also accept that direct broadcasting by satellite will become a feature of television broadcasting and that at that point we must think of our arrangements for financing television broadcasting, not purely in United Kingdom terms, but in wider international terms?
Mr. Hurd: I have always felt a little reluctant to be absolute about the total volume of advertising. Free newspapers without any particular Government encouragement or policy have sprung up and gained a great deal of advertising, which perhaps the experts would not have supposed existed. Therefore, one has to be a little cautious about that argument. My hon. Friend will notice the careful analysis of the Peacock committee on the question of advertising, not so much the volume, as the relationship between advertising and consumer choice. I entirely agree with my hon. Friend's second point and it is something that we must never forget.
Mr. Robert Maclennan: Will the Secretary of State recognise that those who are concerned to see that the new technologies allow greater choice and the retention of high standards of public service broadcasting will be dismayed by the attitude expressed by the right hon. Member for Manchester, Gorton (Mr. Kaufman), which betrayed nothing but a deep conservatism and commitment to the status quo? Will he also recognise that there is a need for a Government response to these far-reaching and imaginative proposals and that although there are some matters that need to be debated, and some that are unacceptable, it would be unacceptable if the matter were kicked into touch until after the next election. It has been widely suggested in the press that that is the Home Secretary's intention. Will the right hon. Gentleman say something about the rolling review of television franchises, which he has not mentioned, which is one of the suggestions that have been referred to?
Mr. Hurd: The Peacock report is an analysis on which is festooned a whole series of practical recommendations which have different times for decision on them —different opening times, if one can put it that way. Some of them need speedy decisions, and one of them, as the hon. Gentleman and one of my hon. Friends pointed out, is the next round of ITV licences. I accept that. How that is handled is not a matter that can be postponed indefinitely. There are other matters on which the Peacock committee puts a longer time scale, as it divides its recommendations into three stages. Therefore, I do not think that there will be a moment when the Government take decisions on the whole range of recommendations simultaneously. That is not what will happen. There will be a series of decisions. Some of them will be needed fairly soon, and some will not be needed for several years. We will take those decisions after listening to the views expressed.
Mr. Anthony Nelson: Is it not apparent that the Peacock committee, which was set up largely because the licence fee was high and rising, has totally failed to grasp the nettle? In fact, it has recommended an

1189
increased licence fee through indexation and significant conversion costs for every television in the land. As the licence fee is expensive, costs over £50 million a year to collect, and is inequitable, will my right hon. Friend leave open the door to introducing advertising? If there is a shortfall in the financing of the BBC, will he ensure that the cost comes from the general body of taxation, so enabling, in the course of time, the licence fee to be abolished for everybody?
Mr. Hurd: I note my hon. Friend's views. The Peacock committee looks forward to the eventual abolition of the licence fee, but not through its replacement by advertising, let alone as a call on general taxation, which I doubt any Chancellor of the Exchequer is likely to smile on as an idea. My hon. Friend's views, which I note, come out of considerable study of the matter. I am sure that he will find opportunities to develop them further when the House debates the report.
Mr. Tony Banks: Is it not a fact that the Peacock committee, rather like the Widdicombe inquiry before it, was set up by the Government to produce evidence to support the Government's own prejudices, and that both have failed, which is why both are effectively being sidelined? Will the Home Secretary tell the House whether the Conservative party intends to drop its politically vindicative and malicious campaign against the BBC a campaign now being spearheaded by the gauleiter for Chingford? Does not the Home Secretary want to defend public service broadcasting, which is one of the finest things that we have in this country, or is he intent on still trying to get the same level of objectivity on the BBC as we see in The Sun, the Daily Mail and the Daily Express?
Mr. John Stokes: On a point of order, Mr. Speaker. Is it in order to refer to an hon. Member as a gauleiter?
Mr. Speaker: It is an inelegant phrase.
Mr. Hurd: The BBC will not bless the hon. Member for Newham, North-West (Mr. Banks) for defending it in those terms. He does the cause in which he believes no good by acting in that way. If one appoints people of that quality to a committee, one does not do so because one knows the answers that they will come up with. That would be absurd. My right hon. and learned Friend the previous Home Secretary did not do that. The committee has not come up with an answer that will cause delight to any established interests or institutions, and probably all the better for that. It is in the good tradition of public service committees and investigations in this country.
Mr. Nigel Forman: As one who has not yet had an opportunity to read the Peacock report, may I ask my right hon. Friend to summarise briefly, for the benefit of the House, the reason why the report came down against advertising? I have a feeling that I shall share that conclusion. Furthermore, does my right hon. Friend agree that if there were to be competition in future between a BBC financed by subscription and independent television financed by advertising, that would not be fair to the BBC?
Mr. Hurd: On the first point, on the whole the report agreed with the point of view of my hon. Friend the Member for Eastleigh (Sir D. Price) about the total volume of advertising. It went on to make a philosophical
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point, that if one were looking carefully at the way to get consumer choice, one would probably not do it through advertising, but through ways in which the consumer can directly choose and pay for what he wants. I am sorry, but I missed my hon. Friend's second point.
Mr. Forman: It was about subscription, and the unfair competition between subscription finance for the BBC and advertising finance for independent television.
Mr. Hurd: When my hon. Friend reads the report, he will see that that is treated as part of its investigation further into the future. We shall have to look carefully at the question of subscriptions and also at the sorts of measures that might be needed fairly soon to make it possible to move towards subscription; for example, the sorts of fittings that might be needed on sets.
Mr. Max Madden: Is the Home Secretary aware that he has looked and sounded a very sad and forlorn figure at the Dispatch Box this afternoon'? Could it be that, as the Peacock committee has not said things that the Prime Minister wanted to hear, he recognises that the Government have no broadcasting policy? Are not the Government's problems vividly illustrated by yesterday's announcement that the chairman of the Conservative party is in a bunker monitoring the broadcasting media for bias, which he defines as anything against the Conservative party, against the Government or against the Prime Minister? As the report is destined for the wastepaper basket, will the right hon. Gentleman salvage one good thing from and give a free television licence to all pensioner households, which at least would be some compensation for the paltry way in which the Government have treated pensioners over the past few years?
Mr. Hurd: In fact, I was made considerably cheerful by the Peacock report. Any momentary gloom that may have settled on me was as a result of the ignorant and blinkered reaction that it received from the Opposition Benches. It is an excellent report. I believe that for many years to come people will look back on it as the necessary stimulus to the next stage in British broadcasting. I have already answered the other two points that the hon. Gentleman made. Individuals in groups are perfectly entitled to muster their complaints against broadcasting authorities. Many people do that. If my right hon. Friend the Member for Chingford (Mr. Tebbit), in his other capacity, set that in hand, there could be no possible objection to it.
Mr. Edward Leigh: Does my right hon. Friend not think it strange that the Labour party should so comprehensively reject the choice that subscription should bring? Does he also not think it strange that the Labour party should favour a poll tax on the poor and elderly, which is what the licence fee is? Has my right hon. Friend noticed the finding on page 87 of the report, that an overwhelming majority—69 per cent. — think that the introduction of advertising would not reduce the standards of the BBC, as well as the finding, a few pages later, that the introduction of advertising on the radio would allow radio to take a quantum leap in terms of expenditure? Does all that not add up to a substantial case for advertising to be brought in, at least on local radio, and Radio 1 and Radio 2, which are only popular programmes?
Mr. Hurd: The committee accepted that case with regard to Radio 1 and Radio 2 and, to some extent, local radio. That is one of the points that the Government and the House will want to consider.
Mr. Andrew Faulds: Instead of setting up a limited inquiry, which was expected and supposed to pursue the Prime Minister's whims, is it not the case that what the BBC needs is the appointment of another son of a manse with the standards of Lord Reith, to jettison the competitive nonsense of breakfast television and the rubbish of local radio, and to return to the BBC's prime purpose of cultural excellence and political independence?
Mr. Tony Banks: And jobs for Andrew Faulds.
Mr. Hurd: If the hon. Gentleman is making the suggestion that I think he is, and suggesting a candidate for that post, he has many of the necessary qualifications, but I am not sure whether he has all of them.
Mr. Stokes: Is my right hon. Friend aware that our discussions this afternoon will scarcely be understood by most people in this country, whose main concern about the BBC is its utter lack of patriotism and continuing Left-wing bias? Is my right hon. Friend aware that producers are entirely out of hand and are trying to brainwash much of the population, and that no other nation or Government in the world would put up with that except ours? My right hon. Friend should do something about that.
Mr. Hurd: Parliament and the law, fortunately, have given the Home Secretary no power to intervene in the sorts of matters that disturb my hon. Friend and many of my right hon. and hon. Friends. The remedy for the aggrieved citizen or group is to gather together the facts and evidence and present them to those to whom Parliament has given responsibility—the governors of the BBC and the Independent Broadcasting Authority. My view is that the more that is done, the better.
Mr. Chris Smith: Is it not the case that the main drive of the report, despite its welcome rejection of the principle of advertising on the BBC, is to undermine the fundamental principles of public service broadcasting, with the possible introduction of large elements of commercialism, scope for deregulation and bringing in the philosophies of the market economy to BBC broadcasting? Would that not be a sad day for the principles of public broadcasting, which have served this country so well for decades?
Mr. Hurd: The report has got behind the established familiar and rather weary battle lines between public service broadcasting as the BBC knows it and those who believe that it should be done with advertising. It has moved beyond those battle lines and tried to tease out a way in which the individual can make a choice of programmes. The committee has done a good job in making that analysis.
Viscount Cranborne: Does my right hon. Friend accept that many people will accept his summary of the report's recommendations and welcome them on the ground that they will strike a blow against the smugness and arrogance of so much of the BBC's domestic broadcasting, born as it is of an organisation that has its foundations in the old-fashioned 1940s corporatism, which is no doubt why the Labour Front Bench admires it so much?
Mr. Hurd: I note my hon. Friend's analysis. I had better be cautious in endorsing it.
Mr. Dennis Skinner: Is the Home Secretary aware that we have got his drift that the controversial decisions in the report will be left to one side until the votes have been counted? Is he further aware that if, in the pursuit of untrammelled market forces applying to the BBC and the media generally, an ex-Home Secretary had written some serious drama in that environment, he would not have a cat in hell's chance of getting it in that media if it was subjected to those market forces, because the media would be searching for the lowest common denominator?
Mr. Hurd: If the hon. Gentleman is referring to me, I can tell him that I have already had substantial difficulty under the existing system in getting my works in the media. The hon. Gentleman will not tempt me in that way.
Mr. Roger King: I congratulate the committee on producing a substantial report, which of course one cannot fully digest in the short time that it has been available. Does my right hon. Friend express any immediate regret at the fact that a more courageous step has not been taken in relation to sponsorship of many of the existing television programmes? I can see no reason why sport should not be sponsored. We would then solve the ludicrous problem that arises when we switch on television during the World Cup and see commercials and state organisations vying with each other to bring us the same pictures.
Mr. Hurd: That was certainly a mess. I agree with my hon. Friend on that point and it may lead to more interest in the line of thought that he has developed.
Mr. John Powley: There are many important points in the recommendations which I welcome. However, may I draw my right hon. Friend's attention to recommendation 5 and the rather dubious recommendation of imposing a tax on those who buy motor cars, simply to subsidise the licence fee? The retail trade, of which I was a member, welcomed the abolition some years ago of the car radio licence fee, for good reasons. It would be a retrograde step to bring it back in any form. If we applied the logic of the imposition of a tax on motor vehicle purchases, why not impose a tax on the purchase of other commodities to subsidise the television licence fee?
Mr. Hurd: I note my hon. Friend's point. I am sure that many people will share that view. We will have to examine carefully the section of the report which covers the twin proposals to which my hon. Friend has referred.
Mr. Peter Griffiths: Does my right hon. Friend agree that, whatever the merits of the long-term proposals for television, the great disappointment is that the essentially negative and blinkered attitude of the BBC has meant that there is no prospect of any early relief for my constituents and the constituents of other hon. Members who find the TV licence fee a burden? Does my right hon. Friend accept that that is evidence that those of us who divided the House over the last rise in the television licence were correct to do so and that we may be called upon to do so again?
Mr. Hurd: The report obviously does not conceal the view that the days of the BBC licence fee system are

1193
numbered. We must all consider the analysis of the report carefully and see whether we agree with the conclusions. If we do, we should work out what steps should be taken in that direction. I am not sure how my hon. Friend would tread that path, and the Government have taken no decisions on that. However, we must first consider the analysis and then the recommendations.
Mr. Christopher Chope: Will my right hon. Friend thank Professor Peacock for producing a report that is far more radical than many of us had thought possible? Will he also confirm that the Labour Opposition's attitude confirms how hostile that party is to any consumer interest? Will my right hon. Friend, since he has so warmly endorsed the report's goal of making the consumer king, say when he intends to implement recommendation 1 for peritelevision sockets in all new television sets?
Mr. Hurd: That is one of the technical decisions to which I referred earlier. We must decide whether the technical argument is correct anti whether a change in the law is needed, as the report suggests. However, my hon. Friend's basic point is correct. Over recent decades the Opposition have fallen into a trap in their contempt for the principle of consumer choice. They have shown that contempt again today.
Mr. Peter Bruinvels: Does my right hon. Friend accept that £58 is far too much for what is offered on the BBC? Will he accept that we should be hearing today not that the fee will be reduced over the next two or three years, but that it will be reduced immediately? Any delay will be seen as a victory for the BBC. The programmes offered on the BBC at the moment are pretty boring, to say the least.
Encouragement should be given to promote BBC local radio. If "pay as you view" comes in—and that sounds like a good idea — very few people will want to pay anything for what the BBC is offering in the current schedules.
Mr. Hurd: My hon. Friend has given us the benefit of a wide range of his reactions to the report. He will leave the House to pick and choose among these reactions and no doubt we shall hear more about them.

Scottish Power Stations (Coalburn)
4.56 pm
Mr. John Home Robertson: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the immediate threat to the Lothian coalfield arising from the agreement between British Coal and the South of Scotland Electricity Board to cut the annual coalburn at Scottish power stations by 1·4 million tonnes."
It was announced yesterday that British Coal and the SSEB have agreed to slash the coalburn in Scottish power stations from 6·25 million tonnes last year to 3·6 million tonnes in 1987. That massive reduction in the use of coal seems likely to have disastrous consequences for Scottish mining communities, including several towns and villages in my constituency.
This situation together, with the aggravating conduct of the colliery manager at Monktonhall, means that morale in the Lothian coalfield is at an all-time low. It;is worth mentioning that only a few months ago the manager at Monktonhall said that his work force was at an irreduciable minimum of 950. However, this week he appears to be offering voluntary redundancies to all comers. That must raise serious doubts about the future of that pit.
The matter is specific because it relates to yesterday's agreement. It is important not only because of the threat to employment in the Lothian area, but because of the need to maintain the viability of the Scottish coalfield. There are massive coal reserves around Monktonhall and Bilston Glen, including the Musselburgh bay reserves, which are as large as those in the Selby coalfield. It would be criminal to abandon such a coalfield because of the short-term impact of cut-price oil and excess nuclear capacity in Scotland.
This matter should have urgent consideration in the House because of the refusal of the Secretary of State for Scotland yesterday to accept his responsibility to intervene to protect the long-term interests of the Scottish economy and to safeguard the employment of hundreds of miners from East Lothian, Midlothian and Edinburgh.
Mr. Speaker: The hon. Member for East Lothian (Mr. Home Robertson) asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
"the immediate threat to the Lothian coalfield arising from the agreement between British Coal and the South of Scotland Electricity Board to cut the annual coalburn at Scottish power stations by 1·4 million tonnes."
I have listened with care to what the hon. Gentleman has said. He knows that my sole duty in considering an application under Standing Order No. 10 is to decide whether it should be given priority over the business already set down for today or for Monday. I regret that I cannot find that the matter he has raised meets all the criteria laid down in the Standing Order, and I cannot therefore submit his application to the House.

Design Drawings (AOR1)
4.58 pm
Mr. Nicholas Brown: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the continuing delay on the part of the Ministry of Defence in sending design drawings of AOR1 to Swan Hunter."
The matter is urgent and immediate, Mr. Speaker. It was only this morning that I learnt or could have learnt that the Ministry of Defence will not release these crucial design studies until August or September. The implications of this are very serious indeed.
On 24 April the Prime Minister wrote to me about the AOR1 order and gave me an assurance that Harland's bid had been "comprehensively costed" by the Government. That "comprehensive" costing could only be based on the Harland designs. In the same letter the Prime Minister said that the Secretary of State for Defence
"prefers the Harland's tender on grounds of design."
Thus, the Prime Minister assures me that the Harland designs are being "comprehensively" reviewed prior to the placement of the AOR contract.
I learnt today from a letter sent to me by the Under-Secretary of State for Defence Procurement that, according to Mr. Peter Levene, these designs are still being reviewed by the MOD prior to issue to Swan Hunter. What on earth can there be to review? Surely the review was "comprehensively" carried out before the contract was placed? Certainly, Mr. Levene gave the Select Committee on Defence the clear impression that these designs were already with Swan Hunter when he gave evidence before that Committee on 15 May. He led any reader of the published minutes to believe that Swan
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Hunter had been given a definite price—and the designs—to enable it to bid for the AOR2. That is not the case, and Mr. Levene now admits that it is not the case. His own interpretation and apology are published today by the Select Committee.
The implications of all this are serious. Why can Harland and Wolff's designs not be made available to Swan Hunter? The Ministry of Defence must state its reasons or leave us to conclude that there is something to conceal. Are the designs incomplete or faulty in some way, or is scrutiny incomplete? The implication is obvious: whatever is incomplete now was incomplete when the AOR1 was ordered. Some 1,000 men on Tyneside have already lost their jobs because that order was placed with Harland and Wolff, and there are more redundancies to come.
The sense of injustice in the north-east is considerable. If the House is unable to discuss this matter now, may I urge the Select Committee on Defence to send for the designs and designers—in confidence, if necessary—to discover exactly what was completed and when, what remains in Harland's designs to be reviewed by the Ministry of Defence, and why?
Mr. Speaker: The hon. Gentleman asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
"the continuing delay on the part of the Ministry of Defence in sending design drawings of AORI to Swan Hunter."
I have listened with the greatest care to what the hon. Gentleman has said and I well understand his concern about this matter. I regret that I have to give him the same reply as I gave to his hon. Friend. I cannot say that this matter is appropriate for discussion under standing Order No. 10.

Radiation
5.2 pm
Mr. Frank Cook: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the current availability of information, hitherto unpublished, which indicates high levels of radiation in grass, vegetables, animals and milk in areas of the country other than those in which animal movements and slaughter have recently been restricted."
My time is short so I shall be brief. The subject is complex, but I shall try to be clear and to the point. The statistics displayed in this copious report of 50 closely typed pages are almost guaranteed to create anxiety, but I seek merely to alert, rather than to alarm, the House generally and the country at large.
The matter is specific because it relates to the publication by the Welsh Office of statistics relating to grass, cauliflower, cabbage and other vegetables and to yogurt, milk and meat from cows, sheep and goats which display levels of radiation in some areas of England that are far higher than the radiation levels displayed in similar commodities during the same period in Scotland, Wales and Cumbria where controls have been imposed on slaughter and movement of animals.
The matter is important because these statistics display a situation—admittedly over a limited period—which must be improved. Although the sampling was random, indications in sheeps' milk should have provoked a much more searching investigation over that time.
The matter is urgent because the statistics clearly display our lack of readiness for events caused by Chernobyl and its aftermath and show the need for a much more careful programme of preparation for the public.
We readily prepare for death and sickness in war. Surely, for pity's sake, we should be allowed the opportunity to discuss the preparations for life and health during peace.
Mr. Speaker: The hon. Gentleman asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
"the current availability of information, hitherto unpublished, which indicates high levels of radiation in grass, vegetables, animals and milk in areas of the country other than those in which animal movements and slaughter have recently been restricted."
Again, I have to give the hon. Member the same answer as I have given to other hon. Members. I regret that I do not consider the matter that he has raised as appropriate for discussion under Standing Order No. 10, and I cannot submit his application to the House.

EUROPEAN COMMUNITY DOCUMENTS
Ordered,
That the draft proposals by the Commission of the European Communities on sugar from French Overseas Departments and on sugar from African, Caribbean and Pacific States described in the Ministry of Agriculture, Fisheries and Food's unnumbered Explanatory Memoranda dated 24th June 1986 and:14th May 1986 be referred to a Standing Committee on European Community Documents.— [Mr. Sainsbury.]

Public Accounts
Motion made, and Question proposed,
That this House takes note of the 26th to 38th Reports from the Committee of Public Accounts of Session 1984–85, of the 1st to 14th and 16th to 18th Reports of Session 1985–86 and of the Treasury Minutes on those Reports (Cmnd. 9696, 9743, 9755, 9776 and 9808), with particular reference to the following Reports:—

1984–85:

28th

The torpedo programme

1985–86:

1st

Role and responsibilities of nominee directors

3rd

Sale of Government shareholding in British Telecommunications plc

8th

Nexos

11th

Proposed Defence School of Music

14th

Nursing Manpower.—[Mr. Norman Lamont.]

5.6 pm
Mr. Robert Sheldon: The last debate that we had on the Public Accounts Committee report was in October 1985. It was unusual to have that debate so late in the year. The reason was that we had an extra report that merited special consideration, the De Lorean report, on which we took evidence at much greater length than we normally do.
We come to this debate with fewer reports before us —only 30 as opposed to 51 last time. I assure the House that our enthusiasm has not abated; it is just that the time interval has changed. We had seven replies from the Treasury and we have put before the House six special reports for consideration. Those should form the basis of our debate; but, of course, that does not preclude any hon. Member—and it certainly does not preclude me — from dealing with any of the other matters that we have debated during the year and which form the basis of our further reports.
My first pleasant duty is to thank my fellow members of the Committee. Their assiduity is quite remarkable. I note the presence of the hon. Member for Scarborough (Sir M. Shaw), my hon. Friends the Members for Walthamstow (Mr. Deakins), and for Coventry, North-East (Mr. Park), the hon. Members for Horsham (Sir P. Hordern) and for Rutland and Melton (Mr. Latham) and other members of the committee. They all played a prominent part in the work of the Committee during the year. The task used to be largely delegated to the Chairman, who did all the work while the other members used to come in from time to time. I am happy to say that that no longer applies. The members of the Committee do an immense amount of reading and put many questions to the witnesses that no one person would find it within his capacity to ask.
We had an increasingly busy programme with much hard work and good questioning. I have great pleasure in welcoming to the Committee the Financial Secretary to the Treasury. He has a standing invitation to come to the Committee when he has the time. We do not expect him to be a regular attender, but he is welcome to come before us. We also welcome him to his new post. We were pleased to hear of his appointment.
The Financial Secretary and the Committee have many things in common. It is for all of us to make sure that we get value for money in Government expenditure. Our duty is to ensure that when Parliament votes money for any purpose, that money goes to the persons and to the projects for which it is intended, and that the work is

1199
carried out in an economic, efficient and effective manner. There have been a number of instances of that scrutiny, and I shall speak about them in due course.
It is a great pleasure to offer the thanks and gratitude of the Committee to the Comptroller and Auditor General and to the National Audit Office. Their role continues to develop and expand, and the Knight report dealt with some of those matters. We note that the move to the new premises will take place later this year, and we look forward to seeing the development and work of the Comptroller and Auditor General and the National Audit Office.
Before speaking about one or two aspects of that, I should like to thank the Treasury Officer of Accounts, Mr. Judd, the Clerk to the Committee, Mr. Rose, and the Accounting Officers and other witnesses who come before us. We know full well the enormous demands on their time that attendance before the Committee necessitates. We are aware that they devote themselves to briefing sessions before coming before us to enable them to answer most of our questions — some of which surprise even us. The questions are relevant and important and it is right that the Accounting Officers should treat them seriously.
We have expressed concern about the wastage rates at the National Audit Office. It costs a lot of money to train the accountants who work in that office. There are some difficulties in recruiting the correct number of staff of the right quality. The recruitment policy has altered. Many of the staff are recruited directly into the office rather than through the Civil Service machinery. That was a good move and there has been a marked improvement in the quality of the staff. Wastage also concerns the relationship between the certification procedures and getting value for money.
Certification work ensures that money goes to the right places and that it is properly accounted for. That is important. There are many countries in which fraud and corruption are regarded as inevitable. The detection of such fraud must be the first call upon the work of the National Audit Office. Once a number of people in a particular Department regard it as normal to undertake certain actions and procedures, whereby some of the money disappears, demoralisation subsequently occurs and it is difficult to reassert the standards and procedures of incorruptibility. It has been our great privilege to enjoy and take almost for granted that incorruptibility. However, we can never take that for granted, and neither can the National Audit Office. We are rightly proud of our standards, but we recognise that there is a greater challenge to them now than in the past because of problems within the Civil Service relating to pay and so on. Indeed, there is a certain amount of demoralisation. We must not underestimate that; but neither should we exaggerate it. Such demoralisation can have an influence upon incorruptibility.
Mr. Michael Latham: Will the right hon. Gentleman confirm that the work that is undertaken by the Public Accounts Committee is by no means theoretical or inherited from Gladstone? Within this Parliament we have had to address ourselves to and report upon specific examples of corruption.
Mr. Sheldon: I am grateful to the hon. Gentleman, because his work is notorious in the Committee. He does
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his work with great assiduity, and I express my indebtedness to him. The hon. Gentleman is correct. There were one or two cases, especially in the Property Services Agency, where incorruptibility had not been accorded the importance that we attach to it. We have made it clear that public money is not the same as private money. Ira certain amount of corruption occurs in the private sector we may deplore and condemn it as much as we like, but it is different when it occurs in the public sector. When we raise money through taxation, taxpayers have a right to expect that that money will be used for the purposes that Parliament intends. The money may not go efficiently or effectively, but at least it should go for those purposes and not be used to line someone's pocket. That must always be our highest priority.
We aim to get value for money, and that is also an important priority. We hoped that there would be a 50:50 split between the work of the National Audit Office in getting value for money and the undertaking of certification procedures. We thought it was possible to get such a split. Unfortunately, because resources have not been available and because the expansion in the work and staffing of the National Audit Office has not occurred as quickly as we hoped, there is now a one third to two thirds relationship. Two thirds of the work ensures that the money goes for the purposes intended by Parliament and one third of the work ensures that value for money is achieved. We must get a 50:50 basis. To do that we must have the staff we require, and we must retain them.
That brings me to the question of pay. The National Audit Office must have pay scales to enable it to compete successfully with other employers. There is a great deal of wastage. We are aware that a number of people in the National Audit Office have been tempted to the private sector. In a sense, that is a tribute to the work of the office. It is within the recollection of the hon. Members for Scarborough and for Horsham and my hon. Friend the Member for Walthamstow that, at one time, there was no such wastage because the staff were not required by private accountancy firms. It is a mark of the quality of the people in the National Audit Office that they are actively sought by private firms. We discussed all these matters in our report and concluded that the estimates for the National Audit Office were realistic and we believe strongly that they represent good value for taxpayers' money. That is vital.
The Committee has a considerable impact upon those Departments which are called before it. We do not throw our weight around and our task is to improve the standards of administration and the effectiveness of operations. We do not study the policies—it is not for us to decide that — but once a policy has been announced it is for us to ensure that the money goes for the right purposes and that that is done in an economic, effective and efficient manner. Frequently a concession is made to our expected line of questioning even before the Department's accounting officer comes to Room 16 in the Upper Committee Corridor, where we meet every Monday and Wednesday.
An example of such a concession occurred when the Committee decided to examine the charges to private patients in National Health Service hospitals. The Department of Health and Social Security stated that it was commissioning a report to examine these charges and that it would present it to the Committee. The Department had dealt with the matter before our investigations began.

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We do not complain of that. To a certain extent, the Department has shot our fox. However, we are not in the business of chasing particular Departments but we are interested in results. We look forward to that report meeting some of the criticisms that we have made in our examination of the matter.
How should we evaluate the effectiveness of the work which is carried out by the Departments we investigate? We have a very simple procedure—it is the easiest task in the world: we ask the Department what it is trying to achieve and whether, at the end, it has achieved it. We compare expectation with the outcome; but the work of producing that outcome is more complicated. At the beginning of any programme we want the objectives—the estimates and the financial expectations—set out in some detail. At the same time, we want to ensure that a monitoring exercise is established so the Department can judge how a programme is proceeding. If matters do not turn out as planned, we have the earliest possible warning. As a result of this method, the Committee should be able to compare the performance with the objective. In that way we are able to evaluate the success or otherwise of the programme.
In some cases none of that was implemented for schemes costing many millions of pounds. The classic case is of premature retirement in the National Health Service which we debated last year. There was no clear objective for the number of people who were expected to retire prematurely, and no means of monitoring the number of those retiring. At the end of the day we could not establish how many people had retired prematurely and at what cost. That is a case history of how not to proceed. In the effective grapevine that operates throughout Whitehall the message about these types of assessments and an understanding about what we are seeking to achieve gets through. We are grateful that people with responsibilities understand how we operate and try to accommodate us accordingly.
We have 30 reports and seven replies, and we have selected six because they show some of the more interesting and important lessons that we can best learn and some of the things that went seriously wrong. I shall deal first with the 28th report of the Committee in the 1984–85 Session on the torpedo programme. Some hon. Members, including the hon. Members for Horsham and for Scarborough—indeed, they are my hon. Friends—have lived with this problem for many years. There is also my hon. Friend the Member for Fife, Central (Mr. Hamilton), who is no longer a member of the Committee but who has had long experience of these matters and is as dissatisfied and disgruntled as anybody can be at the progress of this weapon system.
Mr. Peter Griffiths: The right hon. Gentleman turned away as he made the last part of his comment, but I understood him to say that the hon. Member for Fife, Central (Mr. Hamilton) was "as disgruntled as we are." If that is so, I take the strongest exception. The report refers to historical circumstances, and other hon. Members have had long and close associations with the torpedo programme and would take a different view of the present position from that of the report.
Mr. Sheldon: It would be difficult to deny my feelings of disgruntlement at the expenditure of £5,000 million over the past 20 years. I shall come later to the fact that there are signs of some improvement.
Mr. George Park: The hon. Member for Portsmouth, North (Mr. Griffiths) talked about disgruntlement. Why should we not be disgruntled, having spent millions on torpedoes which do not work?
Mr. Sheldon: I shall deal with some of these points later.
The torpedo programme is one of the most important matters that has come before the Committee this year. There are three types of torpedo. The heavyweight torpedo is the major armament of our submarine forces, and it is important for their effectiveness that the weapon be successfully brought into use and integrated into the total underwater weapon system. The lightweight torpedo is the main anti-submarine weapon of ships, aircraft and helicopters, and substantial resources are involved in its development and production. The total estimated costs to the middle of the 1990s of the present three major programmes — the Mark 24 Tigerfish, Sting Ray and Spearfish torpedoes — is more than £5,000 million at constant 1984 prices. We are spending about double that on Trident. Great claims are being made for Trident. Can anything remotely like those claims be made for torpedoes? What do we get for the expenditure of these large sums? The Committee and previous Committees over many years have been concerned about problems associated with torpedo development. They were last considered by our predecessors in 1980, and we welcomed their report as a basis for taking evidence from the Ministry of Defence on the report of the Comptroller and Auditor General.
The Mark 24 Tigerfish development began in 1959 and was eventually taken over by Marconi. When it first began it was expected that it would come into service in 1967, but due to development and engineering problems a limited version with much less capability than that which had been anticipated came into service in 1974 and received fleet weapon acceptance only in 1979, 20 years after the development began. The improved version has been developed since 1972 by Marconi, acting as the principal contractor for production, and it, too, has encountered technical and managerial problems. There were four Ministry of Defence investigations between 1969 and 1982 into the problems. At that time no one person was in charge of the total weapon system. There was no prime contractor to draw the weapon system together in the industry and there were problems in the relationships between the different authorities in the Ministry of Defence, the Navy and industry.
The lightweight Sting Ray was unsuccessful and abandoned by the MOD. Subsequently, they have placed contracts with Marconi for the development and production of a Sting Ray lightweight torpedo. It successfully entered service with the Royal Navy and the Royal Air Force in 1983 on time and within costs. The project is now in the difficult transitional stage between development and production. We questioned the Ministry of Defence about the sense of proceeding with a substantial main production order before all the problems had been solved. The MOD told us that the problems were not serious, that comparatively simple and cheap solutions had been identified, that the problems could be overcome,

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and that the contract work was to be at a fixed price, so that it would not pay for the contractor's problems. The Committee welcomed the initiative on the Sting Ray. If there are any problems in introducing that weapon, the MOD will not pay for them, but the contractor.
The Spearfish is a heavyweight torpedo which is to supersede the Tigerfish. Its development was authorised in February 1980. The MOD told the Comptroller and Auditor General that current progress on development was generally on schedule, although there had been problems. It did not feel able to assure us that it would arrive on time.
We are happier now that there is to be some competition at sub-contractor level and that there is to be prime contractorship. When Mr. Levene told us about that, we welcomed it and found it encouraging. However, we must set out the context in which this has developed. Paragraph 10 of our report states:
"We note MOD's assurances concerning the progress made with Sting Ray and Spearfish including the use of fixed price contracts to contain costs, and that Tigerfish is now expected to be a usable weapon. However Tigerfish has been under development for more than 25 years and has cost about £1 billion at constant 1984 prices; further sums in excess of £800 million had been spent up to 31 March 1984 on Sting Ray and Spearfish, neither of which is yet in full production. Taking into account also the earlier torpedo development failures, we are dismayed"—
that is about as strong as the PAC gets—
"at the poor value for money which has been obtained in the past from the surprisingly large resources invested in torpedo development."
We thought it right to put our feelings about the matter clearly on the record.
We know about the improvements in prime contractor-ship where one person and one firm will be responsible. The Ministry of Defence told us that many of the past problems with torpedo development had stemmed from the lack of a prime contractor with responsibility for the entire weapons system rather than the committees and the interchange of views which took place before. The Ministry said that in future it intended to deal with industry on a commercial basis and that it must try to ensure that the monopoly supplier acted as the prime contractor with the sort of responsibility which should have been established from the beginning of this sorry tale.
The Ministry of Defence also told us that, although there was no alternative to a monopoly supplier, its intention was that competition should be exercised at the sub-contractor level. That is sensible and it impressed us. We still await the results of that decision, but the way in which it was set out made sense to the Committee. We look forward to examining the progress of those matters in due course.
No one can doubt that the money we spent on that weapons system has been wholly disproportionate to the value even if it had been successful. We considered the possibility of international collaboration on components and modifications, on partial systems, and on a complete new weapons system. We also considered the United States in this context. We are disappointed at the lack of progress on international collaboration and on overseas sales and we look forward to improvements.
Mr. Nicholas Soames: In congratulating the right hon. Gentleman and his Committee on the
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extraordinarily great service that they have rendered to the House in drawing its attention to what is, by anyone's standards, one of the greatest procurement scandals of the century, may I ask him whether be believes that, as it is so difficult for the House properly to supervise the spending of public funds in the Ministry of Defence, bearing in mind the £8·5 billion that is being spent on procurement this year and the 100,000 extant contracts, an annual procurement report in the fullest detail should be made available to his Committee and then to the House so that he and, later other hon. Members, may have a better chance of supervising the stewardship of those funds?
Mr. Sheldon: The Committee in the previous Parliament did not have the benefit of the National Audit Office which we now have. The standards of the reports that it produces have improved enormously. The report used to be based upon the appropriations accounts. It was necessarily rather brief and did not go into all the details. It was compiled by a body which did not have the confidence of possessing the expertise of the National Audit Office. It is now generally recognised throughout Whitehall, London and the United Kingdom that the National Audit Office has an understanding of those problems which is generally accepted in the auditing world. It deals with the problems with much greater confidence. Our relationship with the National Audit Office is close and continuing. We are building confidences across those areas. The hon. Gentleman is right. We shall be returning to those problems regularly. We have the procedures to do that.
Mr. Eric Deakins: Is not the answer to the important point made by the hon. Member for Crawley (Mr. Soames) that by picking out, through the National Audit Office, some substantial contracts where things have gone wrong we and the Ministry together could learn lessons which could be applied over the entire range of much smaller contracts? We are concerned about principles rather than with analysing every contract in detail. There, the National Audit Office and the Public Accounts Committee could do a valuable job for the Ministry of Defence and possibly for other Departments which procure resources from outside.
Mr. Sheldon: My hon. Friend is right. Lessons in procurement have been learnt by the National Audit Office and the PAC and they are being learnt by the Ministry of Defence. The relationship between a body which meets twice a week to discuss and examine those matters will bring to bear upon those responsible the outcome which we seek.
We take keenly and strongly our responsibilities in those matters. We shall pursue them not only in this area but, as my hon. Friend the Member for Walthamstow suggested, in other areas.
The first report of the Public Accounts Committee in 1985–86 examined the role and responsibilities of nominee directors. The report stemmed from our report and examination of the De Lorean fiasco. We discovered that the nominee directors of De Lorean were by no means mainly responsible for its disaster. We also discovered that this area had not been examined sufficiently. We considered how the monitoring of the De Lorean venture had proceeded.

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Paragraph 72 of our 25th report in Session 1983–84 which dealt with financial assistance to De Lorean Motor Cars Limited, stated:
"The objective of monitoring was to see that the public funds invested in the project were applied prudently and in accordance with the master agreement and the nominee directors … were one important means of achieving this. NIDA therefore had a responsibility to ensure that its nominees were of the calibre necessary to discharge, amongst other duties, the task of representing the taxpayers' interests to highly professional directors, who were unlikely to be accustomed to the constraints of public accountability."
Of course, we had De Lorean himself in mind.
The report continued by saying that the Northern Ireland Development Agency had a responsibility to insist that the De Lorean companies
"briefed the nominees so that they would be able to participate fully in decision-making. It is our view, that NIDA did not effectively meet these responsibilities in that the nominee directors failed to recognise that certain courses of action proposed by Mr. De Lorean and his colleagues were not in the best interests of either DMCL or the taxpayer. The acquiescence of the nominee directors in DMCL's funding of the total cost of development of the car, and in the making of interest-free loans to DMC"—
the American branch of the De Lorean company—
"are examples of this. N1DA also failed to secure for its nominees the service which they were entitled to expect as members of the Board. The habit of changing the dates of Board meetings and the failure to supply papers in advance are examples of what has been described to us as 'absolutely unacceptable practice'."
That was the start of it. We started to consider how many nominee directors we have. How many do we appoint? What are their terms of reference and what is their purpose? In the public sector, we discovered that the term "nominee director" is confined to those cases where the appointment of a director is arranged by a Government Department or a non-departmental public body. That is how they are defined in the Treasury memorandum for which we asked, once we decided that there was a person such as a nominee director about whose tasks and responsibilities we were unclear.
We received a Treasury memorandum which stated that nominee directors were appointed to help Departments. The definition of their work was
"to safeguard strategic interests, to protect the Government's financial interest in a company, and to provide an independent view of the quality and performance of the company's Board."
We were disturbed to learn that no written guidance was available for nominee directors before August 1984 when we took up the matter. However, we were not satisfied that the written guidance issued by the Treasury took full account of our concern about nominee directors, as expressed in our report on the De Lorean venture:
"The main problem is that the August 1984 guidance note was expressed in such general terms."
Today, I received the latest guidance note, which I have not had time to read. It contains an elaboration, and is a recognition, of the importance of the point that we made in the report.
The report continues to discuss the tasks of the nominee directors:
"We consider it important for regular reports to be made on the progress and financial position of investee companies"—
companies in which the Government and the company have invested—
"including the security of the public funds invested. We were
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therefore surprised to learn of the relaxed, informal arrangements for nominee directors to report hack to Departments and NDPBs — with only WDA apparently requiring their appointees to submit written reports."
Of course, there can be advantages in informal talks with nominee directors, but these should he supplemented by written reports which provide an accurate basis for understanding how the company is proceeding, and how the interests of the Government and taxpayer are being protected.
The four non-departmental public bodies — the Scottish Development Agency, the Highlands and Islands Development Board, the Welsh Development Agency and the British Technology Group—have appointed more than 100 nominee directors. We examined their purpose. They did not do their work in the De Lorean case, and until the De Lorean report there was no written guidance.
There will now be much more developed written guidance, and I look forward to seeing how far it meets the points and the criticisms that we raised in our report. For example, we recommended audit committees, wholly or mainly non-executive, which are required under Canadian law, and for companies listed on the New York stock exchange.
We recognise the helpful attitude of the Treasury in the formation of the new guidance rules, although the answer to our third report was not quite so helpful.
Mr. Deakins: Does my right hon. Friend agree that an important issue of principle has not yet been resolved, and, I suspect, it has not been resolved in the new guidance? It is the conflict of loyalty of nominee directors between the firm to which he or she has been appointed and the agency which has nominated them. It is not only a conflict of loyalty; it is a legal conflict. The advice that we received in our earlier investigations from the Treasury, the Solicitor-General and the Attorney-General was that nominee directors are under a legal obligation to the firms on whose boards they sit. Confidential information is sometimes presented to a board of directors, and the organisation that appointed the nominee directors may feel that their legal obligation as directors prevents them from adequately fulfilling their monitoring functions. The Committee may need to reconsider that point later.
Mr. Sheldon: We examined the issue and understood that there could be a conflict in some cases. We also understood that there may be a problem as to how far nominee directors deal with a supporting body. But within those limitations, much more could be done, as the Treasury note suggested. We look forward to the written reports, bearing in mind the limitations, but if some of the limitations seem excessive we shall not have an opportunity to see that until we have read the new guidance notes. We may wish to return to them because they are very important.
I was about to discuss our third report, entitled "Sale of Government Shareholding in British Telecommunications plc" in Session 1985–86. Our concern was the way in which BT had been privatised. In our 17th report of 1983–84, we recommended a review of the arrangements to minimise the risk of future sales which have allowed large profits to be made at taxpayers' expense. We suggested that the need for underwriting the new issues should be kept under review, especially in cases where the share price was set at a level intended to offer a firm prospect of full take-up of the shares. We accepted the measures that were taken to get proper advice on the

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price at which the shares would be put on the market, but we warned against the exceptionally heavy reliance on merchant bank advisers who would have an underwriting interest in the sale. This was a serious matter as so much of the advice came from underwriters who were involved in the sale and who had specific interests in it.
In 1981, the telecommunications business of the Post Office was transferred to the new British Telecommunications. It was considered that the management of BT's business could be conducted more efficiently outside the public sector. The sale of the shares was to be undertaken in accordance with the Government's policy to reduce the size of the public sector. The Department of Trade and Industry had three main objectives in organising the sale: successfully transferring the company to the private sector, maximising the net sale proceeds, and achieving wider share ownership.
In preparing for the sale, the corporation's main accounts up to 31 March 1983 were prepared under the historic cost convention. The auditors had informed the Department of Trade and Industry that they agreed that the changes in the basis of the valuation of the company were necessary to reflect fairly the state of the business and its results. The corporation's accounts stated that if the revised accounting bases had been effective in 1982–83 the profits for that year would not have been £365 million, which were the announced profits, but £1,031 million.
We had no objection to the revision of the figures, which we understood would bring the accounts into line with methods in the private sector, but it is a pity that the changes had to be made. If the revision was necessary, that fact should have been clearly understood from the beginning. I shall return later to how we can ensure that private and public sector valuations remain in line, or could be brought into line.
The main options considered for the sale were a single offer or phased sales in two or more tranches by either fixed price or tender. Convertible loan stock was considered, although I shall not discuss that now. The phased sale was rejected when the feasibility of selling shares by single offer was established. On 16 November 1984, Kleinwort Benson, acting on behalf of the Secretary of State, offered for sale shares representing slightly more than 50 per cent. of the company's ordinary equity.
The report comments on the rates of commission. They were high and covered not only the functions performed in the United Kingdom by the underwriters and sub-underwriters, but the selling role in relation to individual investors. Having seen the costs and results of the overseas sales, the Department of Trade and Industry agreed that for future flotations it would consider whether to place shares overseas case by case and in the light of the size of the issue. That is absolutely right.
We go on to say that when one comes to restructuring the accounts of any nationalised industry, or public body, that is due to be sold on the market, if the nationalised industry finds it necessary to change its accounting policies on privatisation, this raises questions about the basis on which it prepares its accounts. There should be a proper comparable basis. We regard this as important, and we say so in paragraph 24. We regard it as the appropriate provision for asset replacement, and we intend to return to the matter in due course.
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We recommend — this owes very much to the hon. Member for Horsham, whose expertise, interest and involvement we very much appreciate — that further consideration be given to the phasing of sales. When I had the honour and privilege of being Financial Secretary to the Treasury, I did what I assume the right hon. Gentleman himself is doing or will do: I took a very close interest in the price at which one sells gilts in the market. I used to make the trip to the City to ensure that the 1 per cent. or whatever it was the finest rate that one could get. After all, we have responsibilities to the taxpayer, and it is up to us to get the highest price possible for the debt that we are selling.
Over the past few years, the amount of Government debt sold has been between £4 billion and £10 billion a year. When one was talking about privatisation involving, say, £100 million, or £50 million, one got the price a bit wrong it was a pity, but it was not serious. We are now talking about privatising to the extent of £5,000 billion a year, in the same area as the amount that one gets for gilts. The rules, the close interest and the disciplines that we have established over many years for making sure that the taxpayer gets the last penny one can devise for the sale of one's gilts now has to be applied—in slightly different circumstances, no one can deny that, but the principle must be to get the highest possible price for the taxpayer. When we are talking about broadly comparable amounts of money, that must be one of the most important aspects of the sale of our assets.
In the two previous reports, we wanted to review the arrangements to minimise the risk of large profits at the taxpayer's expense and make sure that merchant bank advisers with an underwriting interest did not get too much out of the sale, and we wanted to examine the need to underwrite these new issues. We felt that the commission rates were set too high. The proceeds of sale amount to £3.863 million, and we do not think that sufficient consideration has been given even now to the phasing of the sales. This is wrong. Why do we have to sell it all so quickly, as if we are selling uncertain fruit on a Saturday night in the open market? We have time.
People can understand the Government's intentions if they phase it and sell off a tranche at a certain price with the understanding, which can be unequivocal, that they will be selling off the rest in due course. If one gets the price a little wrong, there is still time to sell more. When one sells gilts, one does not unload them all on I January; one takes one's time, one sizes up the markets and one introduces the securities at certain times for certain amounts in different ways in order to get the maximum amount possible for the taxpayer. I am obviously against selling these off, as the House knows, but that is not the point that we are dealing with here. We are dealing with the need to ensure that the taxpayer gets the maximum benefit from the sale.
We have questioned in the report the allocation of shares to certain financial institutions. There is much more to be looked at here. There was money available to the taxpayer that the taxpayer did not receive. These are serious matters, and I hope that they will have the serious attention of the Minister when he replies.
I deal next with Nexos. This company was set up by the National Enterprise Board in 1979. It was part of the British Technology Group, and was set up in January of 1979 to develop a market and office system based on word processors, facsimile machines and voice systems. In 1981 the NEB decided to wind down the company. It was finally

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put into liquidation in May 1983 with a then estimated loss of about £31 million. An investigation was undertaken by the Department of Trade and Industry. We took evidence on the report in July 1985. We have had a great deal of help from some hon. Members regarding the operations in the company, and I certainly have been grateful for the elaboration of some of the matters that I have received from the Department of Trade and Industry.
The NEB had a strategy for the office equipment industry. It thought that it would develop and produce key elements for office systems of the future. This was at a time when the NEB was a vigorous body receiving Government funds and hoped to establish a new company to take over the marketing and support of office machinery products and to co-ordinate them. However, between then and the subsequent failure, there was a change of Government. The new Government obviously were not quite so enthusiastic about the work of the NEB, and there were resignations from the NEB and a lack of direction at the change-over from which certain problems resulted.
The NEB was going to take a minority shareholding in the company. Between 1979 and 1980 it discovered that the facsimile machines and word processors were relatively inadequate and obsolete, and there was a major shift of emphasis from selling existing products to the development of new ones. It decided to expand at the wrong time, just when there was a lack of interest in this area both by the Government and within the industry. It hoped to make these new products available for sale by July 1980. It had various other schemes in mind. It commissioned a number of feasibility and design studies, and it had other development projects. At the end of 1979—it could not have been a worse time—it started a rapid build-up of a large sales and marketing operations for all these new products.
The investigation that came at the end of it all— I will not go into details, which I am sure will be dealt with by the hon. Member for Amber Valley (Mr. Oppenheim), who has been very helpful—concluded that the principal reason for the failure of Nexos was that its management tried to do too much too quickly, creating a much larger organisation with higher outgoings than was justified either by sales or by the amount of approved funding by the NEB. The comment was made that Nexos had embarked on a business plan which was critically dependent on the early market success of just one product, its word processor, but had failed to recognise and plan for the possibility of unforseen delay in the development of that project, and there was delay. As anybody in this rapidly expanding and growing industry knows, delay in the marketing of such articles can be fatal.
While the Department of Trade and Industry was considering the October 1980 application to increase Nexos funding to £35 million — it was awaiting the outcome of the board's effort to attract private sector finance — the company was provided with drip-feed funding, the worse kind of funding, enough to keep hopes alive but not enough to make the company change the plans to something more realistic.
The Committee went on to say:
"There is little doubt that the decision to drip-feed Nexos undermined potential customer confidence in the company. It was unfortunate therefore that the DTI took so long to reach a final decision on whether to provide the additional funding up to the level requested by Nexos — it was now clear from events that the Board's monitoring of Nexos was unsatisfactory. Given the drastic changes in the NEB Board
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over the period of the Nexos investment—four chairmen and three chief executives with an entirely new Board of Directors from November 1979"—
few things can be worse than that for a company—
"and taking account of NEB's other, more important tasks — the rescue operations for British Leyland and other companies—the Department though that the NEB's failure to monitor adequately what was happening in Nexos, though not excusable, was understandable."
The Committee added that there was a loss of confidence within the NEB with the high turnover of staff.
Thus the Committee emphasised its concern and was obliged to ask the Department of Trade and Industry to carry out an investigation into Nexos. Although the prime responsibility of the Comptroller and Auditor General is to audit public expenditure, he has no right to look at the accounting and other records of Nexos or the NEB. That is quite unsatisfactory. We took the view that when public funds have been misused Parliament has the right to expect the Comptroller and Auditor General to undertake direct investigations. He should not investigate at second or third hand, but should undertake direct investigations, and report his findings. We said that bodies that are in receipt of public funds must be accountable to Parliament, through examination by the Comptroller and Auditor General.
The PAC would not always want to look at the detailed accounts. The Comptroller and Auditor General should have that power. He represents Parliament and is a servant of Parliament. He was not before, but he is a servant now, as a result of the National Audit Act 1983. As a servant of Parliament, we should afford him the power to ensure that what drips through those various other bodies and organisations is less diluted than it is at present.
I turn to the 11th report of the PAC concerning the proposed defence school of music. From time to time, the subject has caused a certain amount of amusement. I am sorry that the hon. Member for Twickenham (Mr. Jesse]) is not with us because, as Chairman of the PAC, I accorded him a rather special place of privilege when we took evidence. I placed him so that he had an excellent view of the proceedings, and ensured that he was equipped with all the documentation that he required. I think that he was duly appreciative of that, and I know that he would have dearly wished to take part in this debate.
There are 80 bands in the three Armed Services, and they employ 2,600 people. The Ministry of Defence had planned to move the Royal Marine school of music to Eastney, near Southampton, in 1987–88—
Mr. Michael Hancock: Portsmouth.
Mr. Sheldon: I am grateful to the hon. Gentleman for that information.
There is also the Army junior school of music at Kneller hall, Twickenham, in the constituency of the hon. Member for Twickenham. Adult musicians are trained at the RAF's music centre in Uxbridge, where advanced training is also carried out. The cost of running those three schools of music was about £2–9 million. In December 1981 the Ministry of Defence started an investigation into the Service schools. It wanted to see whether it could obtain better value for money through rationalisation and privatisation. I must admit that I never quite understood that. The study group on musician training reported in

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March 1982 that all the accommodation and facilities associated with it at Deal and Kneller hall were substantially under-utilised.
In 1982, the Ministry of Defence commissioned a study group to look into the various options in order to assess music training and facilities required. Out of three potential sites — Deal, Kneller hall and Eastney — the study group concluded that Eastney was the best option on the basis of cost and the availability of accommodation. In March 1983 the Ministry agreed to the establishment of a defence school of music and asked the study group to prepare plans for the building structure and the courses to be provided, and to cost the three options. Deal was not included, because the married quarters were likely to be insufficient. Eastney was found to be the only suitable site. Kneller hall was considered to be too small, with the cost being too high, and there was also a shortage of married quarters in the area.
In December 1983, it was decided that a defence school should be established at Eastney. In the same month, the Secretary of State endorsed the establishment of a defence school of music, but asked that other locations should be considered, preferably north of Birmingham. The Redford infantry barracks in Edinburgh were considered a possible site, and that was included in subsequently costings. Later, Deal was included as a possible location, following representations by the right hon. and learned Member for Dover (Mr. Rees). At that time, he was Chief Secretary to the Treasury. That raises several questions, but I shall not go into them now.
A report on the cost comparisons between Deal—which had now come into the picture — Eastney and Redford in May 1984 showed that Eastney was still the cheapest option and that Redford was the most expensive. Subsequent work showed that the cost of providing additional married quarters for a defence school of music, and consequently for the RAF, could make the building of the school at Deal significantly the most expensive choice. Ministers concluded that the cost comparisons should be regarded only as "indicative" of the order of ranking rather than as reliable guides to precise costs. They thought that wider issues had to be considered, including the levels of unemployment in the three areas. Having taken account of all such factors, the Secretary of State decided to locate the defence school of music at Deal.
However, having looked at the financial evidence available at the time, the accounting officer with responsibility to the House felt obliged to tell the Secretary of State that the Ministry should not be settling on Deal. He pointed out that the Ministry had not at that point carried out a full investment appraisal, which he acknowledged should have been done in late 1983 or early 1984. At the end of 1984 a new estimate was available to the Ministry for the disposal value of Eastney. The higher the disposal value, the greater the case for moving out of Eastney. It was found that the disposal value of Eastney had increased from £800,000 to £5·5 million.
Mr. Hancock: Would the Chairman of the PAC say that he was happy with the evidence for the change in valuation, and with the way in which it was arrived at? Has the PAC looked further into the source of that valuation and into its sincerity? Has it investigated the source of the original valuation from Portsmouth city council? As far as
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I can ascertain, no one of senior rank within the city council now acknowledges ever giving such information to anyone.
Mr. Sheldon: The hon. Gentleman may know more about these matters than I do, but the increase from £800,000 to £5·5 million was said to reflect the possibility that Portsmouth city council would take a more favourable view of how the site could be developed. I have no further information about any discussions that may have taken place between Portsmouth city council and the Ministry of Defence.
However, in July 1985 the working party reported that its financial appraisal showed that the advantages of establishing a defence school of music were considerably less than originally expected, although a modest saving was still implied. A reappraisal of the extra facilities and complement recommended in March 1985 is now being carred out, with a view to reducing the costs of the defence school of music. The Committee concluded:
"We are gravely disquieted that the MOD should have decided on a DSM at Deal, which could have entailed expenditure of around £10 million, and would inevitably cause considerable disruption to the present arrangements for training Service musicians, before carrying out a full investment appraisal."
We were glad to hear that the Department will now be carrying out such appraisals whenever a financial investment is contemplated and that results will be reported to Ministers before a decision is made.
As to the decision to establish the defence school of music, we note that the Ministers took social factors into account when Eastney had consistently appeared to be the best option on financial grounds. We were concerned with the social factors, and asked the Government what the difference was between social and political factors. Social factors were not reflected in the investment appraisals and, to the best of my knowledge, not announced to Parliament by Ministers before our investigation. Although we recognise that there are difficulties in quantifying such factors, we would have expected the Ministry of Defence to make every effort to do so, especially as they varied from one location to another.
The Ministry of Defence said that its original objective was rationalisation to make financial savings. We are sceptical that this objective will be met. In paragraph 22 we say:
"In the light of these very material points we have no confidence that the appraisals carried out to date provide justification for the MOD's decision. In this connection we welcome the Treasury's firm statement that they are not happy with the MOD's figures."
We were disturbed by the
"fact that it was not until we questioned MOD on their final investment appraisal that they discovered it was incorrect by a factor of £2·3 million."
It is not the task of the Public Accounts Committee to form a view as to whether there should be a defence school of music and, if so, where it should be sited. It is reasonable that there should be a proper appraisal of the finances so that it can be justified and be seen to be justified. I have a great affection for our three schools of music. I like their very diversity. I am not sure that uniformity at one site is something that I would necessarily encourage. This is purely a personal observation. Unless it can be shown that there are substantial financial advantages, I should prefer to leave things as they are. I repeat that they are personal observations that should not intrude on those of the Committee.

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The last of the six reports before us is the one on "Control of Nursing Manpower". the 14th report of the current Session. We have looked at the control of the National Health Service manpower on a number of occasions in recent years. In 1983–84, about £3·5 billion was spent on nursing and midwifery, and this represented some 45 per cent. of the total costs and 34 per cent. of the revenue expenditure of the NHS.
The Comptroller and Auditor General found that there was uneven distribution of nursing staff in the health authorities. For example, the number of nursing staff per 1,000 of population ranged from 696 in the Oxfordshire region to 928 in the North-East Thames region. Therefore, we question what action the DHSS has taken to ensure, if not exact equality, the removal of some of the imbalances.
We heard from the Royal College of Nursing that 35 per cent. of nurses in training do not qualify. It considered this to be a significant waste of resources. Against this background, it went on to say, the demographic trends show that the number of young women entering the profession was likely to reduce, so threatening a major shortage of nurses. As nursing manpower planning was an issue for the health authorities we questioned whether the DHSS was concerned at a national level about the intake and the wastage rates of nurses.
As we know, the health authorities have the main responsibility for planning the demand for and the supply of nursing manpower. However, the Department seemed reluctant to admit any responsibility for this, and it concerned us that it does not have the information to say whether there are too many or too few nurses employed by health authorities. We strongly condemned this laid-back policy.
When our predecessors in an earlier Parliament examined this matter, they commented on this, and we find it disturbing that there has been no advance in 17
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years. Therefore, it is not before time that the DHSS, we understand, is seeking to ensure that the decision as to the number of nurses will in future be taken within a proper planning framework provided at all levels in the NHS to decide on nursing manpower, planning, performance and needs in general.
The DHSS must not try to control the number of nursing staff in each authority, but it is only it which decides on the overall view of demand and supply and makes sure that the number is adequate on a national basis. We were particularly concerned about the numbers lost to the service because of those who depart during training. As well as the obvious loss of value for money, there is the prospect of a shortage of nurses, both qualified and in training, and this is a serious matter of direct importance to patients. We asked that the Scottish Home and Health Department should take note of the initiative in Wales, where we found an imaginative and potentially beneficial attitude.
Those are the six reports that we have singled out for special mention in the debate. Our work does not end there. We have a number of reports on which we could have gone into as much detail as, and possibly more, those that we have selected. Our task today is to give the House a bit of a snapshot of the work of the Committee. We take our work seriously. We meet twice a week throughout the year. When I first became a member of the Public Accounts Committee, we started in January and finished in July. Now we have sessions in the early spillover part of the parliamentary year, and the enthusiasm of my colleagues remains unabated. I am grateful to them and for the work done by the officials concerned. We hope that part of our agenda will decrease as and when the improvements of the administration increase. We are sceptical of this, and so we look forward, without surprise, to a continuing and heavy work load, acting as we do on behalf of the House.

Water Authorities (Privatisation)
6.17 pm
Dr. John Cunningham: On a point of order, Mr. Deputy Speaker. The Government have just announced, in a written reply, the abandonment of a central plank of their political and economic strategy—their proposals to privatise Britain's water assets. The disgraceful and cowardly manner of the announcement is as despicable as the original proposals. It demonstrates the contempt with which the Government treat the House and the country.
The Government announced in a Green Paper their intention to privatise Britain's public water assets, and as recently as last week the proposals were confirmed in a debate in the House, in which the Minster with responsibility for these matters in the Department of the Environment said that he would reaffirm the Government's intentions. It is scandalous that the Secretary of State for the Environment has chosen not to announce this most important decision, which so damages the Government's credibility — indeed, the whole position of Ministers in his Department—that perhaps he should review his position.
Millions of people—indeed, the majority of people in Britain—will regard this as very welcome news, not only because it abandons what were in the first place ill-founded, ill-prepared and unacceptable proposals but because it heralds the increasing decline of this Government and their ultimate defeat at the next general election. We believe that there should have been a major statement on the issue. I ask you, Mr. Deputy Speaker, to safeguard the interests of the House.
Mr. Deputy Speaker (Mr. Ernest Armstrong): I think that I had better make it clear to the House that the fact that there has been a written answer is not a matter for me. There has been no point of order so far upon which I can rule.
Several Hon. Members rose—
Mr. Deputy Speaker: Order. We cannot have "Further to the point of order" on something that was not a point of order.
Mr. Allan Roberts: On a point of order, Mr. Deputy Speaker. The written answer of the Secretary of State for the Environment has been published late today, Thursday, and many hon. Members have left the House for their constituencies. In their written answer the Government have given no reason for changing their policy. They have treated the House of Commons with contempt. All that the written answer says is that, after consultation with the chairmen of the water authorities, it is not possible to proceed with privatisation. However, consultations with the water authorities took place before the Government announced that they intended to proceed with privatisation. The House has a right to know the real reasons for the Government's backing down.
Mr. Dennis Skinner: On a point of order, Mr. Deputy Speaker. You will recall that earlier today an important statement was made that took up nearly an hour of important parliamentary time, and that dealt with the Government's response to the Peacock report. Despite all the questions, we were unable to ascertain correctly the Government's position. My hon. Friend the Member for
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Copeland (Dr. Cunningham) has now told the House that the Government have responded in this contemptible fashion. It has been made quite clear that the lady is for turning. We want to know why. The Secretary of State for the Environment was proved to be wrong on more than one occasion when he was Secretary of State for Transport. Why has he not got the guts to come to the Dispatch Box to explain why this policy has now been turned on its head?
Mr. Deputy Speaker: The method of giving information to the House is not a matter for the Chair. So far no point over which I have any jurisdiction has been raised.
Mr. Stuart Bell: On a point of order, Mr. Deputy Speaker. A different situation has now arisen. The Secretary of State for the Environment, who has so far evaded his responsibilities to the House, is now on the Treasury Bench. The Leader of the House is also present. It is outrageous that, other than the Prime Minister, the one Minister in this Government who is most committed to privatisation has not had the guts to come to the House and make a proper statement at that Dispatch Box.
Mr. Deputy Speaker: All the matters that have been raised so far may be important, but they are matters for debate and there are ways and means of raising them. Until now no matter has been raised on which I can help the House.
Mr. Alan Williams: On a point of order, Mr. Deputy Speaker. As the Leader of the House has just arrived in the Chamber, may I suggest that he should now prevail upon the rather tentative and reluctant Secretary of State to make a statement either later this evening or tomorrow morning.
The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): I am sure that my right hon. Friend the Secretary of State for the Environment needs no compliments from the right hon. Gentleman — [interruption] The nature of the right hon. Gentleman is such that he could not deliver an insult without it sounding like a compliment. I take account of the point that has been raised. It is a matter that can be looked at through the usual channels.
Mr. Walter Harrison: On a point of order, Mr. Deputy Speaker. I listened intently in an effort to hear what was said by the Leader of the House. No hon. Member was more intent than I, but I could not hear what he said. Some of my hon. Members have told me that they, too, could not hear what he said. I want to raise a point of order on the issue, because I have been very concerned about the privatisation of the water industry. Therefore, I should like the Lord Privy Seal to repeat what he said.
Mr. Biffen: I think that it would be for the general benefit of the House if we looked at this matter through the usual channels.
Mr. Harrison: On a point of order, Mr. Deputy Speaker. I am very concerned about this important issue having been raised in this manner. As is well known, I made my second major speech on the subject of water.
Mr. Brian Sedgemore: It was brilliant, Walter.
Mr. Harrison: I thank my hon. Friend. I never let any question on the water industry pass. That is why I listened

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intently to the Leader of the House. I do want more than an assurance that this matter will be dealt with through the usual channels. On the night of the Liberal party's debate on the water authorities—a Monday—I said that there had been banditry, but it was not even recorded in the Official Report. [HON. MEMBERS: "Oh!"] Of course I said that from a sedentary position. My hon. Friend the Member for Bolsover (Mr. Skinner) accosted the Leader of the House, who gave him good advice about how to raise a subject on a subject on a subject. I am so concerned about this takeover and banditry—
Mr. Deputy Speaker: Order. The right hon. Gentleman knows more than most hon. Members how the usual channels operate. He also knows that the merits or demerits of any announcement are not matters for the Chair. I am waiting for him to raise a point of order with me.
Mr. Harrison: I have always given full support to the Chair. On occasion, I have been the only one from my party in the Lobby against my hon. Friend the Member for Bolsover (Mr. Skinner). On this occasion, the House has not been afforded the courtesy that it should have received on such a major issue as the privatisation of the water authorities. This matter is not just for the usual channels. That is not acceptable. There should be a proper statement, and negotiations should take place through the usual channels as to when a debate should take place.
Mr. Tony Banks: On a point of order, Mr. Deputy Speaker. This is a procedural matter. It has become a regular occurrence that major statements are made by the Government at times when that causes maximum inconvenience to hon. Members. I realise that neither you nor Mr. Speaker have any control over the timing of Government announcements, but surely it is in the interest of all hon. Members, and therefore of the House generally, for the Chair to advise Ministers that important statements should be made at times when all hon. Members with constituency interests in the subject can be present. Therefore, it is unacceptable for an announcement to be made late on a Thursday when, for a variety of reasons, hon. Members have left town to go to their constituencies. It is also unacceptable to suggest that a statement will be made on Friday, when hon. Members will still be out of town. If you cannot rule on it, at least you or Mr. Speaker could advise Ministers how to behave.
Mr. Deputy Speaker: I certainly cannot rule on the time when Ministers should make statements.

Public Accounts
6.29 pm
Sir Michael Shaw: Perhaps we may now resume our quiet but thoughtful debate on the affairs of the Public Accounts Committee. It occurred to me, Mr. Deputy Speaker, that it might have been advantageous if we had been discussing a report of the Select Committee on Procedure, when we could have reflected on recent events.
I welcome, as does any member of the PAC, the opportunity to follow the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) and to thank him for the way in which he conducts our affairs, week after week, in a fair and thorough manner that gives us all the opportunity to ask questions and to formulate our reports.
The work of our Committee becomes more and more important. I was rather upset by the initial announcement of the debate, because it gave no indication of what we would discuss. However, I now welcome the way in which the motion for the debate was finally tabled on the Order Paper, because it indicated the scope of the debate and headlined the reports that we felt were most important. This debate also gives hon. Members who have a special interest, but who do not serve on the PAC, an opportunity to air their views.
The work of the Committee is so important that occasionally it should benefit from the wider audience of the Chamber — even if not so large an audience as we had momentarily a few minutes ago. As a general rule such debates falls within the province of Front-Bench spokesmen and members of the Committee, though we have tried to attract a larger audience. I welcome the fact that the motion has been tabled in a way that encourages hon. Members to participate. Unfortunately, most hon. Members look at the Order Paper, reach for a railway timetable and look up the times of the trains to their constituencies. That has always been so, and I am afraid that it will continue to be so. Nevertheless, it is important that these debates continue to be held.
In addition to commenting on individual reports, it is right that we should discuss the general work of the Committee and the impressions gained from our studies. There have been developments in our work and in the methodology of Departments that deserve close scrutiny and public comment. I wish to say a few words about the general nature of our work and to deal specifically with the Nexos report.
I suspect that many people think our work to be rather dull — certainly not glamorous, although I believe the word "sexy" is the current jargon. We certainly do not seek to hit the headlines, and I hope that that will always be so. Our work involves a great deal of reading and preparation.
Now that the Comptroller and Auditor General has been established in his new role under the 1983 act, together with a new and enlarged team, the complementary role of the PAC has never been more important. It is vital that there are not frequent changes in the membership of the Committee. If a subject arises that has been dealt with previously, it is helpful to have served on the Committee for some time and heard the arguments especially if the accounting officer was not involved previously. We are not easily beguiled by accounting officers if we have such experience. Therefore, when hon. Members join the PAC it is wise, as far as it is possible,

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for them to decide to stay with it for some considerable time. It is nice to see an old boy here this afternoon. The hon. Member for Fife, Central (Mr. Hamilton) spent many years on the PAC exercising his forceful mind on the issues before it.
My first comment on our work relates to the checking of the financial and value-for-money considerations involved in departmental decisions. If decisions are taken for political reasons we make no comment, even though we must be free to examine any financial and value-for-money considerations that may arise later. If, however, decisions are said to have been taken for financial or money-for-value reasons, we must determine whether those reasons are sound.
I believe that our scrutiny must be more searching than hitherto, and examples of that can be found in the reports. I give a warning to future accounting officers that if financial and value-for-money reasons are given as the basis for a decision, they must be fully justified. Certainly in one instance that reason crumbled under peremptory examination and a further investigation had to be made.
My second comment is on the lack of effective controls where Government money has been committed to projects. Too often there has been a lack of clarity in the programmes and responsibilities, or where nominee directors have been appointed their duties have not been properly considered and defined. The right hon. Member for Ashton-under-Lyne discussed that point in some detail. It is right that the Committee considered that matter, because a feeling has developed that to be a nominee director is a cushy job at the end of one's career. It is a tough, demanding and very responsible job, because many people and their money depend upon a nominee director carrying out his task properly.
The encouraging feature is that there are clear signs that the lessons brought out in our earlier inquiries and reports are being learnt. I am not saying that without the PAC, without our hearings and without our reports, no such progress would have been made in the Departments. I recognise that significant changes are taking place within the Departments. I am saying that without the extended role of the Comptroller and Auditor General and the close examination of the departmental accounting officers by the PAC, these changes would not have come about as quickly as they have done.
On the evidence given to us, several of the PAC's reports still disclose an acceptance of past shortcomings, but that is coupled with an assurance that lessons have been learnt and that things will he better in future. That is encouraging as far as it goes, but the PAC looks forward to future inquiries so that we will have facts that will fulfil the promises that have been made.
Nexos is an especially unhappy example that cost the taxpayer about £32 million. The company was formed in 1978. That is when the NEB decided to make equity investments in certain companies in certain sectors. I can do no better than quote from the main findings of the PAC. Paragraph (b) of the summary of main findings and conclusions reads:
"The principal reason for the failure of Nexos was that its management created a much larger organisation, with higher outgoings, than was justified by either sales or the amount of funding approved by NEB."
Paragraph (d) states:
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"NEB negotiated supply and marketing agreements with Nexos's main suppliers which were deficient in a number of important respects."
Paragraph (f) is as follows:
"the investment by the NEB in the companies who were the main suppliers of Nexos created a potential conflict of interest".
Paragraph (k) states:
"It is unacceptable that the C&AG was unable to investigate and report on the Nexos loss. This case reinforces the view expressed by previous Committees that all bodies in receipt of public funds should be accountable to Parliament through examination by the C&AG".
I entirely agree with that. I return to paragraph (h), which reads:
"We strongly endorse the lessons on monitoring identified by the DTI."
In the course of questioning Sir Brian Hayes during one of our sessions I put the matter to him directly. I asked Sir Brian—this is question 2966:
"One can only ask what lessons have been learned from this little incident?"
Sir Brian replied:
"A number of lesssons. The lesson that the present Government would draw is that this is not the sort of activity it is sensible to conduct, that in fact the National Enterprise Board's attempt to set up wholly in the public sector a new company to plug a gap which was believed to exist in the economy was a misguided one. But of course that is a matter of general policy and the fact is that the National Enterprise Board was operating in 1978 when this story began under another Government and under quite different policies."
He continued:
"The second lesson is that the monitoring of a company and of an investment is a very difficult business which needs a large amount of attention and may not have attracted all the attention it needed from the National Enterprise Board for very understandable reasons during the difficult days of 1979 and 1980. The third lesson I would draw is that in general it is better that the people who monitor investments should not themselves be involved in the actual management of those investments."
That leads me on directly to nominee directors. Initially, Nexos had as its first chairman the head of the NEB division responsible for monitoring the investments itself. It had also a member of his staff, who was also made a director. They later resigned. It seems, from all the evidence, that all the important decisions about the new company were taken by the NEB and not by the new company. It is no wonder that Sir Brian concluded:
"in general it is better that the people who monitor investments should not themselves be involved in the actual management of those investments."
The oddest feature of all is that, having learnt that lesson, the DTI proceeded to put another £13 million into the company. It agreed to do so only after a new independent chairman and two new independent non-executive directors, who were not in any way connected with the NEB, were appointed. In answer to a question from the right hon. Member for Ashton-under-Lyne— this appears on page 102 of the report— Sir Brian replied:
"Ministers were also influenced"—
that is in making further payment to Nexos—
"by the fact that they were informed at the meeting they had on 19 February that an independent chairman and two independent non-executive directors were being placed on the Board of Nexos and that these would be able to take a clearer view than had been possible up to that date of the management of Nexos itself and the problems it faced. It was in fact in the light of that knowledge that Ministers authorised the additional funds that were to be made available."
The mysterious thing is that, having placed such faith in the appointment of an independent chairman and two

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additional non-executive directors, it appears from the evidence that we received that no advice was taken from them. In paragraph 24, our report modestly states:
"It is of concern, however, that in spite of the confidence placed by DTI in the new Nexos directors, their views seem, from the evidence received, never to have been sought with regard to subsequent events".
That seems to be inexplicable. So far as one can see, events proceeded with the NEB still making all the major decisions, without the advice of the new directors, on whom the DTI had placed such faith, being taken in any way.
This sorry experience shows exactly how non-executive directors and outside directors who are brought in for special purposes should not be used. I hope that the lessons have been learnt. When we make these appointments, the conditions of service and the objectives must be clearly laid out and those who are appointed must be in a position to act to save taxpayers' money and to make the enterprises of which they have been made directors flourishing and prosperous for the future, rather than sinecures for those who have left their main jobs.
6.50 pm
Mr. George Park: I wish to comment on the first, the third and the 14th reports from the Public Accounts Committee. It may be my misfortune that my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) touched on all three reports during his opening speech. It is the habit of members of the Public Accounts Committee to make their contributions in their own way. I doubt whether my slant will be the same as that of the Chairman.
The first report is entitled "Role and Responsibilities of Nominee Directors". There was, and probably still is, a general assumption, which I share, that nominee directors are appointed to bodies which receive public funds to see that such funds are put to good and proper use. If that is not the case, they should alert the body that appointed them. The report highlights the fact that their first responsibility is to the body to which they are appointed, and they have no duty to make regular reports to the Government unless that is written into their terms of reference. As the Chairman of the Public Accounts Committee said, the only instance of such a requirement is the Welsh Development Agency. For the remainder, reliance has been placed on informal chats with the accounting officer.
Prior to the De Lorean debacle, no written guidance was issued by the Treasury. The Treasury accepted that that was remiss of it, and it partly started a review to improve the instructions to nominee directors. One organisation which exists for the promotion of non-executive directors — PRONED — considers that independent reporting back by nominee directors is wrong in principle, and that all such reports should be made through the company chairman. I wonder what effect that would have had in the De Lorean case. I should think that it would not have had much effect. Today I received—as did the Chairman—a copy of the guidance note. It is a massive document. I shall refer to three parts of it. Paragraph 10 says:
"While the chairman of the company should provide the principal point of contact for discussion of the company's trading performance and strategy, the director may be asked by the department or NDPB about these matters, and also asked to express a view on Board appointments and management performance."
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Paragraph 11 states:
"the director should consider whether, given his fiduciary duties to the company, he is able to make the information available to the body."
That is, the body that appointed him.
"If this is not the case, and the development is deeply prejudicial to the body, the director must consider whether to resign."
The point that I like best—I hope it will be insisted on—is in paragraph 13. I should like to think that the 100 nominee directors — that figure was mentioned earlier—and the bodies on which they sit will be advised of the new guidance and asked whether they are prepared to accept it. The paragraph says:
"the department or NDPB should seek an agreement"—
the words "should seek an agreement" are underlined in the original—
"with the company on the role and activities of the nominee director, in particular in relation to monitoring and reporting, normally as a condition of providing financial assistance."
I hope that measure will be implemented.
The third report is entitled "Sale of Government Shareholding in British Telecommunications plc.' In my view, and in the Committee's view, the major conclusion is that there are serious lessons to be learnt from the arrangements and results of this large sale of BT shares. The Committee recommends, in view of the Government's plans for further privatisation, that the Treasury, together with the Department of Trade and Industry and other Departments likely to be concerned with future sales, should thoroughly review the arrangements for and results of the sale. In other words, the Committee did not think that the proper value of BT was obtained.
That was not the first time that the Public Accounts Committee had drawn attention to the need to review the arrangements for selling off publicly-owned companies. In the 10th report in 1981–82, and the 17th report in 1983–84, the Committee recommended a review to minimise the risk of future sales allowing large profits to be made at the taxpayers' expense, and warned against too heavy a reliance on merchant bank advisers with an underwriting interest in the sale. Although the Treasury said that the Government's objective would be to obtain the best price, that objective was not reached.
In the run-up to the sale, the Government, as usual, did some window dressing. The method of accounting was changed from the historic cost convention, and BT ceased to charge supplementary depreciation. It shortened the estimated lives of a number of fixed assets and charged to revenue expenditure certain assets that previously had been capitalised. If that new method of accounting had been used in 1982–83, the reported profits for that year would have been £1,031 million instead of the stated amount of £365 million—a difference of £666 million.
The auditors said that the changes were necessary to reflect fairly the state of affairs of the business. I suppose it could also be said that it whetted appetites for an enhanced killing when the shares came to the market. The Department of Trade and Industry took advice from leading merchant bankers and stockbrokers, who approached the matter with all the caution of a fox approaching a hen coop—it can see a good meal but it does not want to get caught.
A phased sale was ruled out, and sale by tender would be appropriate only if demand was likely to exceed supply, and that was considered unlikely with BT shares. The issue was considered too large for a sale by tender. Finally, it

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was agreed that the shares should be sold by a fixed price offer, although the Treasury warned that that made the pricing decision crucial. However, that was only after it was further agreed that there should be a higher than normal commission. That cost £294 million — about three times the cost that would have applied elsewhere. Arrangements had to be made for selling some of the shares overseas. Ultimately, those shares were sold in America. They quickly returned to the United Kingdom market, no doubt making a quick buck in the process since the price was down by at least 4p or 5p. I know it can be said that that is a matter of hindsight. However, the Public Accounts Committee warned about it.
Once again, as in 1982–83, there are serious lessons to be learnt, such as expecting leading merchant bankers and stockbrokers to act as gamekeepers and poachers at the same time. At the third time of asking, will the Government take heed of the warnings of the Public Accounts Committee, or, in their haste to dispose of valuable public assets, will we see further feast days for the City?
The 14th report concerns the National Health Service and is entitled "Control of Nursing Manpower". The Committee found that the DHSS did not know whether there were too many or too few nursing staff in the United Kingdom as a whole. The DHSS believed that that was a question for local decision. That lack of knowledge did not stop the Department, in 1983, from imposing from the centre reductions in NHS manpower overall with a consequential reduction in the nursing work force. There was no mention of assessments being made of the effects of this reduction, althought we all know the position in our localities. Clearly, the decision was taken on the basis that, as the NHS work force accounted for 73.5 per cent. of its costs, they had to be contained within the limits set by Ministers, irrespective of the effects on manpower and patients.
The report of the Comptroller and Auditor General showed that there was an uneven distribution of nursing staff in health authorities, which ranged in 1983 from 696 per 100,000 population in the Oxford region to 928 per 100,000 in the North-East Thames region. We were told that these discrepancies would become evident during the reviews of the NHS management board, but no examples were available of any action taken, and, finally, once again, it was a matter for the regions and districts to solve within available resources. That was the nub of the question.
It was thought that there would be improvements as general managers settled in over the next three years, but, in its important evidence, the Royal College of Nursing was concerned whether the products of this greater efficiency brought by general managers would find their way back into direct patient care. Managers complain that there is no incentive to alter ratios of nursing staff when the products of any savings will simply be used to make up budget shortfalls. The Royal College of Nursing drew atttention to the fact that 35 per cent. of nurses in training do not qualify and there is a high wastage rate among those who do qualify —about 20 per cent. in the west midlands.
It is extremely difficult to attract qualified nurses back into the service they have left, due in part to the conditions of work and wages, the use of unpaid breaks as handover
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periods and the proportion of time spent on duties other than nursing, and in the mentally ill areas they see no future due to changed policies which discharge these patients into a community already constrained for resources.
These problems are known to exist, but the DHSS does not know how many nurses are attracted back into the service. The amount it does not know is astonishing. Despite the devolving of decisions to the regions and districts, the DHSS must accept final responsibility for standards of nursing care in England, because over the whole NHS there is significant scope, as the report says for the more efficient and effective deployment of nurses. There is room, too, in making the service more attractive, to retain those qualified nurses we have and to encourage others to join them. Only then will waiting lists be reduced and the service once again become one of which we can be proud.
It is clear from the reports of the Public Accounts Committee that there are many areas where money has been wasted, where it has not been used to the best advantage and where the true value of public assets has not been realised. The Government have a long way to go to remedy those faults.
7.3 pm
Sir Peter Hordern: I should like to join those hon. Members who have congratulated the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), the Chairman of the Public Accounts Committee, on his leadership over a long period. He sets a fine example to us all. He is always extremely diligent and thorough in the way in which he takes witnesses through examinations. The Chairman's role has become more important, partly due to the change in the nature of the PAC from dealing strictly with accounting matters — when Departments have spent too much money or when there has been some peculiar aspect in their accounting—to being concerned much more with value for money. Subjective judgments must be and are made by the National Audit Office. It calls for much finer judgments and much more careful assessment than in the past. The right hon. Member for Ashton-under-Lyne brings to these matters great perspicuity, and he has the backing of us all.
There are a number of reports before us, and I shall consider only two. I have noticed, as one who has been a member of the PAC for some time, the way in which one topic after another repeats itself. Some of us who, I am afraid, have become old lags on the Committee have become somewhat world weary with the excuses made from time to time as the same topic appears before us in yet another version. We are always given optimistic accounts of how things have changed: "We have turned the corner; we have taken careful notice of the PAC's criticisms; we have covered all these aspects and I am glad to say that we are confident that the mistakes will not happen again." Yet within two or three years we are back, always with a different accounting officer, but with the same old story.
Some programmes are very wasteful compared with others. The hon. Member for Coventry, North-East (Mr. Park) referred to one programme and my hon. Friend the Member for Scarborough (Sir M. Shaw) referred to the Nexos programme. These are important matters. My hon. Friend said that Nexos cost about £32 million. Of course

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that is serious, but it is not so serious when compared with some of the programmes which continue to go wrong, year after year.
Why, when these programmes continue and severe losses continue to be suffered, do the Government — I am not especially concerned with their political nature — not take heed of the warnings and their many years of experience? The present practice is that the public expenditure programme is rolled forward every year for the next three years. This means, inescapably, that the same mistakes are likely to be made, unless a radical appreciation is made of each programme, one against another. This process is never undertaken, although to my certain knowledge, the matter has been raised year after year. I shall give two examples showing how things have gone wrong and why the Government should change their view of public expenditure and measure much more carefully one programme compared with another. Instead of trimming the edges of virtually every programme, they should ascertain whether one programme merits more attention than another.
I should like to pick up one point made by the hon. Member for Coventry, North-East on British Telecom and underwriting arrangements. The Government receive expert advice on underwriting matters, but I suspect that they will go to the same sort of people for advice as they have in the past. No doubt their judgment will be excellent, but I should remind the Government that we are about to enter a period of great competition in the City of London, and not before time. I believe that the hon. Member for Coventry, North-East mentioned a figure of £140 million —it may have been more—as the commission that had been paid.
At the end of October there is to be intense competition for commissions. I cannot understand why the Government should not put not only British Gas but the commission out to tender. Some large and important participants have appeared in the City of London recently who have considerable capital resources. If the experience in the United States is any experience at all, there will be considerable competition for that business. I hope and trust that the Government will take advantage of it. In my opinion there should be no underwriting at all. The Bank of England should underwrite the lot and then see what tenders there are for commission. As I understand it, there is now to be rather less privatisation than there was to be a few hours ago so perhaps the matter is not quite as important as it was.
I shall deal with two aspects of the reports: first, the common agricultural policy; and, secondly, torpedoes. There are important priorities which have now assumed greater importance. The National Health Service is one, arising partly from the need to reorganise it, but I believe that education, especially secondary education, has come to play a much more important role than previously. Any international comparison of secondary education, especially the middle and lower ranges, shows that a serious situation exists in the basic knowledge of the core subjects. The figures and evidence show that children in France and West Germany, for example, have substantially better results than we do.
Whatever the evidence—1 know that there may be dispute – I have no doubt that in a post-industrial society of the sort that we have we shall have to spend more to retain and attract better teachers into the profession. When I say this sort of thing, I am often asked
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where the resources will come from. I shall name two places. The first is the common agricultural policy and the second is a mundane thing called torpedoes.
The common agricultural policy now absorbs two thirds of the Community budget. In 1980 we contributed £600 million net to the Community. Since that time the wheat price has reduced in real terms by about I2 per cent., and one would think therefore not only that the cereal farmers have been efficient, which is certainly the case, but that their incomes have been stabilised. In fact, there has been a growth in productivity of nearly 30 per cent.
The supply of milk in the European community still exceeds demand, even after the imposition of the quota system, by 15 to 20 per cent. We now have the extraordinary situation that milk has been formed into mounds of butter so that it may be fed back to the cows at a fraction of the price that it costs to produce in the first place. That is the situation to which we have had to resort, and a more absurd system it would be impossible to imagine. However, there is a case for dairy farmers, because of the large number of them, and the fact that if they are all run out of business they will inevitably have to move towards the towns to find work.
In my belief, the same does not apply to the cereal farmer. In early 1985, 4 million tonnes of cereal were held in intervention. I understand that the fear of the Ministry of Agriculture, Fisheries and Food is that if by chance the cereal price is cut, which it has asked for, and if there is some form of social subvention, the United Kingdom might be a net financial loser if the income aid to poorer farmers were provided by the Community because, it is said, we have a large number of efficient cereal farmers who are very effective producers. What has to be pointed out is that the whole lot is subsidised, whether produced by large cereal farmers or by small cereal farmers. We would do the people of this country a great deal of good if we stopped producing cereals and started to import cereals from other countries. We would also do the Third world a great deal of good if we were to do that. The reality is that some of our millionaire cereal farmers— that is what some of them are—may not get as much of our taxpayers' money in subsidy as they do now if the system were to change.
I believe that the common agricultural policy is the worst feature of the European Community. I was in the United States a fortnight ago and trade experts said that what they resented most when talking to the European Community on trade matters was that we spend all our time talking about farm prices and steel, and we never talk about space, technology and things of the future. If the European Community does not get together and work towards a proper reform of the common agricultural policy, I believe that that policy will do more damage to the Community in the long run than anything else.
The torpedo programme appears to be the largest single waste of money that I have known over some years on the Public Accounts Committee. The report that we are considering identifies total expenditure up to the mid-1990s of £5,000 million on torpedoes. I start with this proposition, which is a comparatively simple one. If you, Mr. Deputy Speaker, had to ask your constituents what was the best way to spend £5,000 million, I do not know, but I do not think that you would choose to persuade them that spending it on torpedoes was the best and most

1227
efficacious way of using the money. We looked at this and found that the Sting Ray torpedo was started in 1969 after early development within the Ministry of Defence itself.
Mr. Peter Griffiths: I noticed the tense my hon. Friend used very closely. He said "we looked at this" as opposed to "we are looking at this". I thought that he might have added another sentence — "that if the Committee had been looking at it today it would have come to different conclusions."
Sir Peter Hordern: I shall deal with a little history first, because it is important. I shall certainly come to the present position and future prospects a little later.
The work continued on the Sting Ray project until 1976, when the programme had to be completely revised due to the emergence, we were told, of further technical problems. At that time the Ministry learnt that the United States was developing an improved version of its mark 46 torpedo, which offered a number of Sting Ray's characteristics for about half the cost, and with an earlier in-service date. I do not know whether this is known, because I do not think that we refer to it in our report, but at that time we bought some of those mark 46 torpedoes ourselves. In fact, we bought quite a number — over 1,000.
The Sting Ray project was reviewed in 1977 and again in 1978. Having possessed some of the American mark 46 torpedoes in some quantity, the Ministry of Defence, for some reason, must have been dissatisfied with them or felt that there was a better opportunity to develop a new range of torpedoes offering a much higher specification. I imagine that that must have been behind the Ministry's thoughts.
What happened was that the expenditure on Sting Ray reached £700 million, which was some £450 million higher than the estimated cost of purchasing the same requirement of the improved mark 46 torpedo. In 1980 we questioned the Ministry closely on the reasons for going ahead with Sting Ray, the estimated cost of which had now risen to £920 million, compared with £200 million for buying some improved mark 46 torpedoes from the United States. We asked the Ministry for further estimates of the cancellation cost and were told that it would amount to £161 million. The employment consequences of cancellation were estimated to be negligible.
The argument that is being put strongly by those who have defended the torpedo record is that of the disastrous effect on employment locally. I dare say that those arguments will be used again, but we were told something different, that the employment consequences of cancellation were estimated to be negligible.
The right hon. Member for Ashton-under-Lyne dealt with Spearfish, and I shall not follow him on that one. However, I remind the House that the Tigerfish torpedo has been under development for over 25 years and has cost about £1,000 million at constant 1984 prices. Up to March 1984 we had spent over £800 million on Sting Ray and Spearfish, neither of which was yet in full production in May last year. We reported that we
"remain concerned that the arrangements which have operated in the past have resulted in MOD bearing all the additional costs arising from failures while the main contractor appears not to have suffered any financial
1228
penalties and, in the case of Tigerfish, now has a further substantial contract which is partly to remedy deficiencies related to earlier contracts."
I realise that the position is now different. We have taken as optimistic a view as we can, because the contracts that are now with Marconi are fixed-price contracts. However, the torpedoes that are available to us are not the only torpedoes available to the West. There are other torpedoes, too. To claim that because there is a fixed-price contract the taxpayer has good value does not have any validity. If one puts the price high enough on a fixed-price contract, the taxpayer still stands to lose. Therefore, I should like to refer to another matter.
It is of some consequence to look at the total amount of our expenditure on defence equipment purchase. My right hon. Friend the Secretary of State for Defence claimed great credit for that, and a great deal is due. In the defence debate at the beginning of this week he said:
"Our defence budget is running at a level about 20 per cent. higher in real terms than it was in 1979. That is not all. Within that much larger budget, equipment has risen from 40 per cent. to 45 per cent. We spend a higher proportion of our budget on equipment than everyone else in NATO."
I do not doubt that that may be thought of as a positive achievement. We are spending a significant amount of money, but all that means is that the need to see that that money is being spent efficiently and effectively is all the greater. 01 course, my right hon. Friend was perfectly correct, and so was Sir Clive Whitmore, who came before us to tell us about the improvement in efficiency and competitiveness in drawing up contracts. I understand that the amount of competition for contracts is now well over 60 per cent. In fact, the witness before us said that it had gone up to 65 per cent. However, there remains a hefty 35 per cent. of business placed by the Ministry of Defence for which there is no competition.
In his speech at the beginning of the week, my right hon. Friend the Secretary of State also said:
"We are continuing to transfer resources from the tail to the teeth — for example, about two thirds of naval manpower is now in the front line. Naval support staff numbers have been cut by about 6,000 … Ten years ago, there were 79 civil servants to every 100 personnel in the regular forces; five years ago there were 69, and today the figure has come down to 53."—[Official Report, 30 June 1986; Vol. 100, c. 712.]
Looking at that figure, I should have thought that it was a remarkable achievement, and there cannot be anything like so many people in the Ministry of Defence purchasing department as there were before. However, on looking at the public expenditure White Paper and at the question tabled by my hon. Friend the Member for Crawley (Mr. Soames) a few days ago, I notice that the number employed in the Ministry of Defence in 1986 in purchasing equipment is 36,500. That is a great number of people employed in that direction. It is important that the Government should ask themselves at the end of every year, "Is this the best possible use of our national resources? Are there not other priorities that are now beginning to assume greater importance than this one of buying equipment in the Ministry of Defence, in the way we do?"
It is important to underline our responsibilities in defence. As my right hon. Friend the Secretary of State said in the White Paper, our contribution falls into four areas: first, our independent strategic nuclear deterrent; secondly, the defence of the United Kingdom itself; thirdly, our land-air contribution to the European

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mainland; and fourthly, maritime operations in the eastern Atlantic and the Channel. In the defence White Paper my right hon. Friend said:
"We thus maintain a wider spectrum of capabilities than any other NATO ally except the United States and France."
We provide 70 per cent. of the ready NATO maritime forces. That is a remarkable achievement for a country with considerably less productive capacity than the West Germans or the French. We must keep under consistent review whether our defence strategy is right to take on such large burdens, but even if it is accepted that that is always right, and we must continue, in all circumstances, to have such heavy responsibilities, is it necessarily right that we should seek to pursue those objectives while spending an enormous amount of money on one particular form of weapon that we make exclusively for ourselves? That is an important question, which the Ministry of Defence will have to look at closely.
I shall now look at the alternatives, because we have not heard much about them. I said that we already possess a substantial number of mark 46 torpedoes. I understand that those torpedoes are now also being bought by West Germany, France, Spain, Italy and most of the NATO countries, but I also understand — it may not be generally known—that the United Kingdom has done the work for both West Germany and the Netherlands on bringing up to date the mark 46 torpedo to what is called Mod. 5, although we have not done that for ourselves. That option should be examined.
The expenditure of £5,000 million is by no means a small amount. I understand that the Americans are now working on a mark 50 torpedo, which will not be available for another few years. The Government say in the Treasury minute:
"The cost and complexity of modern torpedoes is such that it is unlikely that any of the four European countries with a torpedo capability will attempt to proceed alone with the development of the next generation of weapons."
I am glad to hear that that is so. The time has come to put a stop to the idea of our proceeding alone with the development of torpedoes. I see that the Americans are developing the new mark 50 torpedo. Why is it that we talk so much about co-operation and working with the Americans when we are not working with them on that torpedo? Why are we not doing that or insisting that they should take part in our torpedo programme? I decline to believe that the threat to this country posed by the Russian or any other navy is such that we must have our own distinctive torpedo programme compared with what is available to the United States. Why at least can we not get together with other NATO countries and thereby save a great deal of expense?
I am sorry that I have spent so much time on this subject, but I believe that expenditure of £5,000 million over a very long period is expenditure that we can ill afford to ignore. If we do, it will merely mean that some other programme will be considered sacrosanct, and any suggestion that things can go on as they are because so much is being spent is a false economy. If the defence White Paper and the statements by my right hon. Friend the Secretary of State on the matter mean what they say, the expenditure on front end technology in defence equipment must be done more in conjunction with our NATO partners, whether in western Europe or in the United States.
In this area, this country can no longer afford to go it alone. When one compares the expenditure of that amount
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of money with the national priorities that we must have in a post-industrial society to see to it that young people are given the opportunity to he trained and taught in our schools to a higher standard, I for one have no doubt which is the higher priority.
7.29 pm
Mr. Michael Hancock: I should like to discuss two of the reports, both of which concern my constituency, and the employment prospects of the people living in the city of Portsmouth and the surrounding area. I should like to consider the torpedo question later, as Marconi is situated in the Portsmouth area and is the largest employer there. I therefore have a significant interest, if not in the history, in the future of torpedo development.
I wish to consider the implications and the saga behind the school of music. Eastney is in the heart of my constituency. For a long time it has been the ambition of the members of the city council, of all political parties, that Eastney should once again be used as a service establishment, hopefully as the school of music for the Royal Marines.
I am grateful to the Chairman of the Committee and to the other Committee Members for recounting what they see as the history of the problem. I should like to detail events again, as certain significant events occurred during the discussions on Eastney about which I do not believe the Public Accounts Committee was told the whole truth. In some instances the Committee was not given the correct and most up-to-date information. Because of that, the Ministry of Defence and the Public Accounts Committee have either sought to mislead the House or have inadvertently done so because of a lack of information.
The discussions within the MOD in 1982 came to fruition in the sense that a decision was taken that there would be a single defence school of music. At that time, Deal and Kneller hall were considered but Eastney was not. In 1982, three potential sites were examined. Eastney was then included and was found to be the cheapest option. The most expensive option considered was to continue the current system of a fragmented approach to military music.
In March 1983 plans were drawn up. Once again Portsmouth — Eastney — was included and Deal was excluded. Eastney was the only viable site. Deal was too expensive and Kneller hall was too small. In December 1983, the Secretary of State rejected that report out of hand. He wanted a site north of Birmingham to be considered and Redford barracks came into the reckoning. Deal was also brought back into the reckoning, following, we are led to believe, representations made by the local Member of Parliament who at that time shared Cabinet status with the then Secretary of State. One can only believe that he used considerable pressure because on two previous examinations Deal was considered not to be viable on several counts.
Following that investigation covering the whole country, it was reported in May 1984 that Eastney was once again the cheapest of the locations under consideration. On 18 July 1984, Deal was chosen, based on certain factors which included the wider ramifications of the decision.
The Public Accounts Committee considered the unemployment position in Deal and in Eastney in some

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detail at that time. It is interesting that the report refers only to Eastney and not to Portsmouth. The statistics quoted in the report suggest that the unemployment position in Deal was 16·1 per cent. and that in Eastney it was 12·1 per cent. The unemployment statistic for Portsmouth—not the travel-to-work area but simply for Portsmouth—was more than 14 per cent. The figures given were therefore inaccurate.
I can suggest several reasons why the figures were inaccurate. The figures quoted for Deal cover the Deal and Dover travel-to-work area. Portsmouth embraces a much wider travel-to-work area and includes areas which are more prosperous than the city and which are better in employment terms. At present, unemployment in the Portsmouth travel-to-work area is 12·5 per cent. Unemployment in the Dover travel-to-work area is 12·7 per cent. In 1984, when the report was produced, the travel-to-work area statistic for Portsmouth was 12·5 per cent. There was clearly a discrepancy in the figures. A like-for-like examination of the figures should have involved the unemployment rates in the two areas. In that event Portsmouth was undoubtedly worse off than Deal. The wider implications went further than a simple examination of the figures. The figures were misinterpreted.
There was also a problem over the married quarters. When this matter was actively considered in July, there were more than 1,000 empty married quarters in the Portsmouth area. The Minister's former companion in the MOD, the present Under-Secretary of State for the Armed Forces, answered a parliamentary question on 9 June and said that there are still 728 empty married service houses or flats available in the Portsmouth area.
The argument about accommodation does not hold water. Portsmouth was the primary site. Nevertheless, an amazing decision was taken. After three trawls through the system Eastney proved to be a viable, the cheapest, and most appropriate site. Yet, in the face of that, the ludicrous decision was taken that Deal should be the site.
A separate examination was made of the financial position. At that stage the comparisons in valuation were drawn to the attention of the Public Accounts Committee and the MOD. The figures quoted in the report suggest that at one stage the site valuation at Eastney was £800,000. It now appears that at some time during the discourse on the wider implications, by some magic coincidence, the attraction of Eastney became such that it rose in value from £800,000 to £5·5 million.
Mr. Peter Griffiths: I am grateful to the hon. Gentleman for giving way as we share an interest in the city of Portsmouth. Does he agree that these two figures—£800,000 and £5·5 million—are so different that it is reasonable to assume that no one of any seniority in Portsmouth city council would have given either of those figures to the Ministry of Defence, certainly not to the latter knowing that the policy of the city council was to attract the school of music and that such a figure could be used only to destroy Portsmouth's case?
Mr. Hancock: I could not agree more with the hon. Gentleman. I should like to take this opportunity to suggest how the position arose. At the same time as the Public Accounts Committee and someone within the MOD were told that the valuation had jumped so
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dramatically, the chief executive of Portsmouth city council wrote to the PSA which was acting on behalf of the Ministry of Defence. The letter states:
"Some land has already been released for residential development but following the news that the Joint School should not come to Portsmouth, we have taken the opportunity to look carefully again at the Barracks in order to assist you in arriving at a satisfactory answer for the future. I must say immediately that the City will expect full protection to be given to the Ancient Monuments, the Listed Buildings and the Conservation Area. I must also emphasise most strongly that proper attention must be paid to the general setting in which the monuments and buildings stand in addition to the general value of the Conservation Area. In particular the Parade Ground, with its surrounding buildings (the Officers' Houses, the Barrack Blocks and the Museum and HQ Block) form an essential feature of the Eastney area and the City Council now looks for firm proposals to bring these buildings up to a good condition and into a proper use. If modest parcels of land are to be sold off the City would be happy to discuss their best use."
It talks about modest parcels of land being sold off.
When we exclude from Eastney the area about which the city council wrote to the Ministry of Defence, there is nothing left except very small parcels of land which would not raise even £800,000 if they were sold. That letter was written by the chief executive of Portsmouth city council. It was a follow-up to a letter sent to Lord Trefgarne, who was then the Under-Secretary of State for the Armed Forces. That letter was sent by the Conservative leader of the council, Councillor Ian Gibson, who set out the importance to the city of this site. He described its special setting close to the seafront and the conservation area with the buildings that offered opportunities for the city and the Ministry of Defence.
I have been a member of the city council since 1971, and I have been on the planning committee since 1976. During that time I cannot recall a time when an officer asked the planning committee or the political bosses of the city their opinion about the disposal of land at Eastney. It was never discussed because everybody took it for granted that the site was far too important to be sold for a massive housing estate or for any other purpose.
I pay tribute to the hon. Member for Portsmouth, North (Mr. Griffiths) and also to the leader of the council, Councillor Gibson, his predecessor Councillor Marshall and all the other councillors of all political persuasions whose driving ambition for Eastney has always been to bring hack the training centre of the Royal Marines band.
It is amazing that the report suggests that Portsmouth city council officers have made statements which would lead the House and the Ministry of Defence to believe that they had an asset worth £5·5 million. This week I spoke to the chief executive, the chief planning officer, the planning chairman and the leader of the council. They all deny right down the line that they have ever been involved in any negotiations at this level about the disposal of the site. Nobody in the city council has admitted giving that information to anybody at any level.
Perhaps if the doorkeeper at the civic hall were questioned it might turn out that he was the one who suggested that Eastney was to be a prime site for development. Perhaps Taylor Woodrow, when it was looking at other sites in Portsmouth, or Laing or Wimpey all suggested that this was the valuation of the site. I have yet to find anybody who can speak with the voice of authority in Portsmouth who had any part to play in

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making those statements. That casts grave doubts over the validity of that information given to the Committee by senior officers.
Let us look at the cost of building. In March 1985 the report suggested that the cost of building at Deal had risen from £5·8 million to £10·6 million. We were also told that the same rise in costs had occurred in Portsmouth. That ignored the fact that Portsmouth had 700 empty houses and that there would be no need to build married quarters. Those comparisons are incorrect, and once again we have been misled by people who seem to have reasons other than finding the most effective and efficient way of dealing with the problem of locating the Royal Marines school of music or the defence school of music.
I draw the attention of the House to the problems that we face in Portsmouth. The people there do not rush to complain that they have been treated badly, but in 1948 about 40,000 people were directly employed in Ministry of Defence work in Portsmouth. That has now dropped to 6,000 and the city has suffered badly because of the way in which successive Governments of all parties have continued to cut the defence commitment in the Portsmouth area. That has forced more and more people to find alternative work and that has proved difficult.
It has been difficult to get land released to attract other developments and one piece of land never discussed for development was Eastney. That was because the Ministry of Defence has always said that it had ambitions to use that site. As recently as a few weeks ago, the Ministry of Defence said again to the city council that it needs the land at Eastney and certainly the playing fields, because of its intention to relocate HMS Mercury. Wherever it takes place, that relocation will necessitate the Navy holding on to at least the playing fields at Eastney and they make up a large proportion of the land area there. That leads me to believe that if a reasonable decision is to be made about the school of music it must be in favour of Eastney.
The facts speak for themselves. Measured against every other location in the country Eastney is the cheapest site. It has the ready-made asset of married quarters and a large recreational facility with playing fields and swimming baths. In addition, the headquarters of the Royal Marines training unit is already there and for those reasons nothing should stand in its way.
I should like to draw the attention of the House to page 13 of the 11th report, in which Sir Clive Whitmore says:
"The Royal Marines are not particularly wedded to staying in Deal; they are living in buildings there which have not had a great deal of money spent on them in the way of maintenance. I am sure if you got a marine on his own he would say he was only too glad to get out of Deal."
If that information is coming from the Marines and is put forward by the permanent secretary, surely the Marines should be given an opportunity to see which site they find most attractive. Neither the Royal Marines nor the Royal Navy has any commitment now in that part of Britain. The home of the Royal Navy is traditionally in Portsmouth and I envisage the Royal Marines school of music being based in Eastney. I urge any hon. Member who has any influence on this decision to come out strongly in favour of Eastney barracks being used.
Mr. Toby Jessel: I apologise to the hon. Gentleman for being out of the Chamber at the start of the speech. Is he aware that the current reappraisal by the Ministry of Defence includes not only looking at the option for putting the whole of the so-called defence
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school of music in one place, but at the prospect of the three different services remaining in different places as at present?
Mr. Hancock: I am sure that the hon. Member Twickenham is speaking in defence of his own constituency interest and I appreciate his argument. I am suggesting that if we cannot have the defence school of music then at least we should have the Royal Marines school of music, because I am sure that the Marines would welcome the opportunity to go to that area.
The Chairman of the Public Accounts Committee should look carefully at the Government's response to his report which was published in April. On page 14, paragraph 64 says:
"The Department has however instructed the Property Services Agency to invite the chief planning officer in each of the areas to consult the chairman of his planning committee informally about the prospect of development of surplus land."
Despite the time that has elapsed and the obvious importance of that decision, no such consultation has taken place. Once again the appropriate questions have not been asked and the House is expected to believe that the issues were looked at fairly and squarely. I do not believe that, and I suggest that many other hon. Members share my view.
Mr. Terry Davis: Is the hon. Gentleman telling the House that the chief planning officer in Portsmouth has not even heard from the Property Services Agency?
Mr. Hancock: I am saying that the chairman of the planning committee in Portsmouth told the chief executive and the leader of the council yesterday that he still had not been consulted about these propositions. I have no knowledge about whether the planning officer himself has been consulted because I was unable to contact him yesterday. I imagine that, if he had been asked, his first step would have been to accede to the instruction and consult his chairman and, in time, I am sure that the chairman would have consulted his members. No such consultation has taken place. I can only surmise, as I am sure many other hon. Members will do, that Deal is still the favourite son because of other reasons which have still to be brought out. In spite of its great efforts, the Public Accounts Committee, regrettably, has still not got to that important question.
An hon. Member asked whether it was part of the Committee's duty to look at the political implications, and went on to suggest that it had a role to check that political decisions were made for the best financial reasons. I suggest that if, at the end of the day, Deal is still chosen it will be chosen because of political expediency. The job of the Public Accounts Committee will be to find out why it is chosen when the financial reasoning behind such a decision falls so short of the Committee's expectations of getting value for money.
It has been said that it is a national scandal that £5 billion has been spent on developing a torpedo. Every hon. Member would agree with that. It is a national scandal that we, as a maritime nation with a long history of naval warfare, can spend such a sum of money over 25 years. What do we get at the end of it? I spoke to Marconi today and was informed, with great pride, that the Tigerfish fired at the moored HMS Lowestoft, with a single hit, managed to sink it in less than 17 minutes. [HON. MEMBERS: "It was

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stationary".] That was no mean feat after 25 years of development and considering the amount of money that had been spent. We should be grateful that the torpedo sunk HMS Lowestoft—albeit that it was stationary at the time and in calm water. Another successful test led to the sinking of a tethered submarine by a Sting Ray torpedo which was dropped from a Nimrod. The submarine was unable to avoid it, but none the less the torpedo did its job. We should be grateful that, after such expenditure, we have had two major successes. At last we have a tried and tested system—successful at hitting stationary, moored vessels.
It is easy to score silly points and make people laugh, but the serious question is why £5 billion has been squandered over 25 years. If we could cry over spilt milk, we would have already drowned in the Chamber today.
Successive Governments have allowed such spending to go on. Some Governments threw the towel in at a late stage and suggested that others could take control. It was only at a late stage that Marconi was given the opportunity of being its own master in the development of these torpedoes. I am proud to say that Marconi is convinced that it has the matter under control and that the systems it is engaged upon are now working well and will be effective as armaments needed to defend this country. It is working within time and within cost, and, in its opinion, it is bang on target.
We can only believe what we are told today. Surely the question to be asked is that raised by the hon. Member for Horsham (Sir P. Hordern) — why was it allowed to happen and drag on over such a long period? Successive Ministers of Defence could have stepped in and said, "Enough is enough." Why was the project not re-examined when we were told that an American torpedo was available, off the shelf, which could do the job that we wanted to be done, for half the price that we had already expended? Yet we continued to put good money after bad.
I wish Marconi well for the future. Many jobs in my constituency are tied up with Marconi and its developments. The PAC has a vital job to ensure that we never have a repetition of this situation. The roll-up procedure—the rolling on of policies over a three-year period — needs to be re-examined. Project analysis should be carried out to make sure that it is not cheaper to say no and start again from scratch rather than allow some projects to drag on.
I wish my colleagues well and I hope, at long last, that the Royal Navy has the weapons that it needs. I hope that the House will consider future similar projects carefully. This is a national scandal because that vast sum of money could have gone on many other much needed projects which are dear to hon. Members. Let us have the Royal Marines school of music at Eastney, if not the defence school of music, and let us give a proper lead in the way in which defence contracts are controlled.
7.55 pm
Mr. Michael Latham: I intend to follow most of the points which have just been made by the hon. Member for Portsmouth, South (Mr. Hancock).
One of the problems in a debate of this kind—apart from the fact that we are considering things which have occurred in the past—is that everybody starts by paying a tribute to everyone else and saying how hard they have
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worked. It can easily become a back-slapping operation. Nobody will pay more of a tribute than I do to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who does a marvellous job.
The point of this exercise is not just to say how hard we have all worked but to try to leave in the Minister's mind and those of his officials the fact that we do not want to hear the same things when we are back here again in 12 months. My hon. Friend the Member for Horsham (Sir P. Hordern) said that we tend to do just that. The hon. Member for Fife, Central (Mr. Hamilton), who served on the Committee for many years, must have heard these points being made over and over again—scandalous examples of waste, mismanagement and taxpayers' money going down the drain.
I shall deal first with the defence school of music. I am especially glad to see my hon. Friend the Member for Twickenham (Mr. Jessel) in the Chamber because he has worked so hard on this matter. My hon. Friend put a memorandum to the Committee and attended the meeting of the Committee when it took evidence on the matter. I listened to the discussions and took part in the questioning of the accounting officer, Sir Clive Whitmore. I have no axe to grind in the matter—none of the three places in question is in my constituency—and I began to wonder how we could possibly get into this extraordinary position. I do not think I have ever heard a worse performance before the Committee than that of the accounting officer, the permanent secretary. It was absolutely dreadful, not because he is not a brilliant man—of course he is—but because he had no satisfactory case to make.
I honestly thought that the Ministry of Defence had been making up the figures as it went along. It was only as a result of a question that I asked that the Ministry discovered that it had made a significant miscalculation in the figures it had given to the Committee. If that question had not been asked, perhaps we would have never known that the Ministry had made serious factual errors. That is all revealed in appendix 2 of the report. It is extraordinary that the Ministry could come before the Committee in that state.
We also had the important testimony of the Treasury officer of accounts, Mr. Judd. At the end of the discussion I asked:
"Mr. Judd, you have read the papers, you have heard all the evidence. Are the Treasury really happy with all these figures?"
Mr. Judd, an extremely honest and capable official, replied:
"No, I cannot say that we are happy with the figures shown in the paper. The proposition has never actually been put to us. It may need to be put to us if the expenditure remains as high as it appears to be now. At that stage we shall of course want to look at the figures which are then current as a result of the reappraisal that Sir Clive is telling you about."
In questions 518 and 519 the permanent under-secretary admitted that the Property Services Agency, which is to an extent responsible for this ramshackle state of affairs, had not even decided whether it wanted a new building at Deal or to renovate the existing one. How could it possibly have done any costings on that basis with which it could appear before the Committee or before the House?
When such a state of affairs exists—when there are totally unsatisfactory costings which completely fall apart under examination by the National Audit Office and

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subsequently by the PAC — it reflects poorly on the Ministry. I hope that my hon. Friend on the Treasury Bench will make it absolutely clear that such a situation will never occur again, with figures of such an unsatisfactory nature being put to the National Audit Office.
The hon. Member for Portsmouth, South made a perfectly proper defence of the situation in his constituency, and I expect my hon. Friend the Member for Portsmouth, North (Mr. Griffiths), if he catches your eye, Mr. Deputy Speaker, will do the same. The Committee's job is not to judge between any of these sites or indeed to decide, as my hon. Friend the Member for Twickenham would doubtless say, that the situation should remain as it is. That would be a perfectly proper view for my hon. Friend to take in view of his constituency interest. We simply want the most cost-effective solution, and we have not yet seen any figures to give us any indication of what that might be.
There is a lot of merger mania in the Ministry of Defence. There are examples of that in my constituency and I have questions about it on today's Order Paper. The MOD wants to merge the Royal Army Veterinary Corps' dog training school with Royal Air Force Newton's operation. They are similar in the sense that they both employ dogs, but not in any other respect since the purposes and training of the dogs are completely different. I have referred that to the National Audit Office because I am not satisfied with the costings. I believe that they will fall apart when they are properly examined. I understand that an internal report has been prepared on this matter—I have not yet read it, but I have seen a copy of it—which suggests that the figures are far less satisfactory than they had originally appeared to be. One of the questions on the Order Paper this afternoon deals with that, but I have not yet had a response to it.
In another example from my constituency the MOD wants, in effect, to take substantial operations away from RAF North Luffenham and to move them to RAF Henlow. I shall need a great deal of convincing that the upfront expenditure, which is tremendously heavy, will be commensurate with the so-called gains from the merger. I strongly suspect that that will not be so, and I have already seen Ministers to tell them so. If the performance on the defence school of music is anything to judge by, the way in which these matters are worked out in the MOD is pathetic, and we must keep a careful watch on that.
Several hon. Members have addressed the important matter of torpedoes. This has been — I use the words "has been" in deference to my hon. Friend the Member for Portsmouth, North, who has twice intervened to point out that this is a past matter—a shameful story. If anybody is in any doubt about that, they should look at the back evidence of the transcripts in the report. I commend to the House the extremely informative question 2106 in which both the reply from Mr. Peters, the deputy accounting officer, and my question are heavily asterisked for exclusions. I state:
"The purpose of torpedoes, obviously, is to sink the enemy's warships but you have only ever used Tigerfish twice *** in the Falklands War. In the whole of its history it seems to me to have an absolutely appalling record. In the period June to September 1983 even then only *** per cent. of the weapon firings were successful."
The question continues in the same vein.
I want to he satisfied on that matter. Marconi has put forward publicity saying that the corner has been turned.
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I do not mix my metaphors in that regard because the torpedoes are supposed to work properly. If that is so, thank heavens for that. We must wish the company well in future. The PAC must ask how it can be that all that money has been wasted over so long when most of the time the programme was under the direct control of the MOD? I ask myself, who took responsibility, who was to blame and what happened to them? I suspect that the answer is that nobody took responsibility, nobody was found who was to blame and they got promoted.
Mr. Willie W. Hamilton: They are probably in the House of Lords.
Mr. Latham: They may, indeed, be in the House of Lords. That is the deficiency in our accountability system. The accounting officer changes, the Secretary of State changes and the Government change, but the impetus of the bureaucracy continues and increasing sums are wasted until at the end of the day we have spent £5,000 million on a torpedo the history of which I cannot relate because a whole load of asterisks delete what happened in the Falklands war.
Mr. Hamilton: The hon. Gentleman will concede that the PAC decides what will be sidelined and what not. Presumably he was a party to the sidelining about which he is complaining?
Mr. Latham: The hon. Gentleman must not misinterpret or misquote me. I am not complaining about the sidelining. It was agreed by the PAC. We were told that it was in the interests of national security and one must accept that. I am merely pointing out that there was sidelining. Those of us on the Committee know what was behind the sidelining. The Chairman said:
"Paragraph 2.4 is really quite an appalling paragraph; one of the worst that we have seen."
Indeed it was. Members of the Committee know that that was an appalling position. We are glad to have assurances that matters are now improving and that Marconi has them under control.
The more I see of the Committee—I have served on it for only three years, unlike some others who have served longer — and the more I see of the work of the Comptroller and Auditor General and the National Audit Office, the more convinced I am that it is absolutely essential for the country. One thing about the NAO and, indeed, the reports of the PAC is that they set the fear of god into the mandarins in Whitehall. There is nothing that a permanent secretary less enjoys than appearing before the PAC to answer a ropey case, such as that of the defence school of music, and Parliament must capitalise on that. It should not really be necessary because we should get all that information from Ministers on the Floor of the House. However, it must be done by the detailed case work of the NAO and PAC, to which the NAO reports.
For many years, literally billions of pounds have been wasted, and that has come to light in the PAC's reports. When we return in 12 months I have no doubt that we shall talk about more deplorable situations because that happens all the time. The job of my hon. Friend the Minister is to ensure that there are a great many fewer such cases as the years go by.
8.6 pm
Mr. Willie W. Hamilton: It is a pleasure to follow the hon. Member for Rutland and Melton (Mr. Latham). When the PAC was dealing with the defence

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school of music I sat in and listened to his forthright condemnation of the position. The House and the country may look on him as a kindly inoffensive-looking hon. Member, but he is a brutal and fearsome interrogator. I would not like to be an accounting officer in any Department, knowing that he would cross-examine me. He is no mincer of words and he has a tongue like a whiplash. Long may he continue in the duties he is performing on behalf of taxpayers. I associate all the other members of the Committee with that.
My right hon. Friend the Member for Ashton-Under-Lyme (Mr. Sheldon), who is Chairman of the PAC, is too little appreciated by the House and the nation for the services that he and the Committee perform for taxpayers. When we talked about televising the House I thought that it would be better first to experiment with televising the PAC. At least it does not go on Cook's tours, but stays at Westminster and its work is all the more effective for that. All the other Select Committees wander round Japan, and, while they do not have many trips to Iceland, they are attracted to Miami and Hong Kong. The PAC remains here, which is partly why its reports are as damning as they are.
The hon. Gentleman speculated about what has happened to those responsible for the colossal waste of money. Nothing has happened to them. They have probably been promoted. There is a case for examining the possibility of surcharging Ministers and civil servants for their crass inefficiency, their crass negligence and their crass incompetence in the same way as we surcharge local councillors. Local councillors are surcharged and even suspended from holding public office for a period of years if they are discovered to be mis-spending public money, yet top, highly paid civil servants and Ministers go scot free although they have perpetrated extravagances which are peanuts compared with the sums that local councillors handle.
I shall not spend too much time on torpedos. Every hon. Member who has spoken has criticised Marconi. The hon. Member for Portsmouth, North (Mr. Griffiths) is in a minority of one in the House when he seeks to defend Marconi. For years, Marconi has enjoyed a dripping roast from the Ministry of Defence. Whatever its mistakes and whatever rubbish it may produce, it never loses a penny. It is never penalised for any wrong that it has done. The taxpayer foots the bill every time.
I was amused by the comments of the hon. Member for Rutland and Melton—I am glad that he has stayed—who was forthright about the torpedos. Remember that they will cost the taxpayer £5,000 million until the middle of the 1990s, at 1984 prices, so by that time the cost in cash terms will be substantially higher. That works out at about £400 per household in the United Kingdom for three torpedos—one little bit of our defence effort. The hon. Member for Rutland and Melton said that two of the shots were fired in the Falklands. They both missed, or were not fired in anger. The hon. Gentleman said in Question 2108 of the minutes of evidence:
"They certainly did not sink a ship."
They cost £5,000 million and they missed.
The Government always lecture us about getting value for money. We spent all that taxpayers' money. I must say to my constituents, "You must put your hand in your pockets to defend the country from the wicked Soviet
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people. If we spend £5,000 million on three torpedos that do not work, that is too bad. That is the run of bad luck that we have had."
I wish to say a kindly word about the hon. Member for Horsham (Sir P. Hordern) in his absence, although it is invidious to single him out. The hon. Member for Scarborough (Sir. M. Shaw) has been a noble worker in the cause for many years on the Public Accounts Committee. The hon. Member for Horsham made a valid point that must be considered by the Government. When I was a member of the Public Accounts Committee, we talked about Sting Ray. The Committee adopted a chauvinistic attitude to supporting Marconi because it was a British firm. We did not wish to have much to do with the American mark 46 torpedo, even though it was half the cost. We were told that it did not do the job.
Mr. Peter Griffiths: That is right. It did not do the job.
Mr. Hamilton: What are our torpedoes doing? They are missing. The two which were fired in the Falklands did nothing. We have constantly talked about NATO cooperation in defence procurement. Britain simply can no longer afford to go it alone in the provision of such equipment. I do not know what good will come of this debate. I suspect not very much. That is the sad thing about such debates. We all get worked up, and if there was a Division tonight on the torpedo project there would be a massive vote against proceeding along this line. But there is no Division and we shall all be going home soon for the summer recess. The Government carefully time these debates at the fag end of a session on a Thursday night, with no vote, when they know that the House will be thinly attended and there will be no great headlines in the newspapers tomorrow about the £5,000 million paid for something which did not work. It will be about Gatting and the test match rather than about £5,000 million wasted.
Mr. Peter Griffiths: Would the hon. Gentleman not continually repeat that £5,000 million has been spent? Less than half that has been spent. That is the total cost of the complete programmes, and of the torpedoes that we shall get.
Mr. Hamilton: I was just about to make that point. I have just asked my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) whether there is a figure to show, if the clock was to stop now, how much taxpayers' money has already been taken. The figures I quoted were figures given in the Public Accounts Committee's report, which show that £5,000 million will be spent by the mid-1990s at 1984 prices. In question 2093, the hon. Member for Horsham asked:
"Can you tell us now what you think Sting Ray is going to cost the country altogether?"
The answer referred to the figure in appendix 1 on page 2 of a secret report, so I do not know what that figure is. The hon. Member for Horsham continued in Question 2095:
"Can you tell me what the original estimate was when the project was first started?"
Mr. Levene replied:
"I can take you back to May 1981 … The total cost of completion then was estimated at £920 million at 1980 prices."
Mr. Levene expanded his answer. I wish the Hansard reporters to get this correct, because it is an astounding statement:

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"We then come into the rather strange vagaries of Government accounting, to which I have started to become accustomed"—
this was the great wizard boy, Mr. Levene, just beginning to get accustomed to the strange vagaries of Government accounting—
"where we are not in fact dealing entirely with real money. In other words—to try to simplify it—if the development cost was completed in 1981 and cost in real money terms £250 million, when we then uprate it to 1984–85 we get a figure of £602 million. This does not actually mean that it cost us £602 million, it means that if you bring all the cost levels up to the same level, in other words the 1985 level, you get a figure which was in real terms paid out at £250 million suddenly becoming £602 million. I have over-simplified it."
There I had better leave it. The House will have gathered the gist of what he said. Mr. Levene said that Government accounting was so strange that he was only just beginning to grasp what it was all about. This is how we run our defence services.
The hon. Member for Horsham (Sir P. Hordern) talked about the colossal sums which defy the unerstanding of the ordinary citizen. It becomes meaningless to talk about thousands of millions of pounds. The hon. Gentleman said that, when we are dealing with that quantity of money, we must rapidly reach the stage when we should urgently re-examine our national priorities. That exercise is taking place in the Cabinet and in the Star Chamber, where the battle is being fought as to how we should decide on the level of public expenditure, and how much we should reduce it in order to cut taxation in the forthcoming Budget.
My right hon. Friend also mentioned the 14th report, on the control of nursing manpower. The cost of nursing and midwifery staff constitutes a high proportion of the National Health Service expenditure. The 1983–84 figures, quoted in the report, were £3·5 billion or 45 per cent. of the total staff costs, and 34 per cent. of the revenue expenditure of the NHS, excluding family practitioner services expenditure. In 1983, the total number of nurses and midwives was about 397,000 whole-time equivalents. The Government make great play of the fact that there has been a substantial increase in numbers since they took power, and I accept that there has been an increase. However, no one seems to know whether the overall number is too great or too small. The Government imply that, if the number of nurses is increased, the service must automatically improve. On the face of it, that might be a reasonable proposition, but no one knows whether that figure is too large or too small for present needs.
The issue is further complicated by the great regional variations, as the figures quoted by by right hon. Friend show. There is an enormous variation in the number of nurses per 100.000 of population between Oxford and one of the Thames areas. However, the difference between Oxford and Scotland is even greater. There are 696 nursing staff per 100,000 of population in the Oxford region, as compared with 1,100 in Scotland. There seems to be no simple reason for that. At any rate, no one in the Department could give simple or clear reasons for the disparities.
However, some points that emerge from the report must concern the Government, the House and the country. The Royal College of Nursing said that 35 per cent. of trainee nurses do not qualify. I have gone into the matter in some detail, and many reasons emerge as to why girls leave their training before completion or why they fail to qualify. Of the 65 per cent. who qualify, a high proportion
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leave the NHS after their expensive training. Again, there are many reasons for that, but there is no doubt that it means a considerable waste of public money.
Another undeniable fact is that demographic trends are likely to reduce the numbers of young women entering the nursing profession, which will mean that within a measurable period there will be a shortage of nurses in the Health Service. What comes across loud and clear from the report is that the Government's claim, that an overall increase in nursing staff provides unquestioned proof that the service is doing well, is far from the truth.
The community nursing services include district nurses, health visitors, midwives, community nursing for mentally ill and handicapped people, school nursing and other specialist nursing services. It is difficult to know whether, at any time or in any place, the numbers quoted are adequate or whether they are surplus to requirements. As long ago as 1972, the DHSS provided several yardsticks by which this might be measured. The general guide, although not a hard and fast rule, is one health visitor for every 4,300 people and one district nurse for every 2,500 to 4,000 people. Those yardsticks are still used. Had we used them in September 1983, 65 per cent. of all health authorities in England would have failed to meet the health visitor target, and 80 per cent. would have failed to meet the district nurse target.
When the DHSS was questioned about this, it took the view, and still does, that such complex problems are best left to the local health authorities, which are aware of the problems in their areas. That is a sensible proposition, and I do not complain about it.
In March 1985, the DHSS set up a review team to study the matter. Perhaps the Minister can tell us what progress has been made. A written answer was given to my hon. Friend the Member for Wolverhampton, North-East (Mrs. Short) relating to the membership of the review team. Can the Minister give us an idea as to the timetable for the review, and when the House can see the report?
The problems of community care, in numbers and expense, are daily becoming more acute. Since the Government now consider that the 1972 yardsticks are out-of-date and irrelevant, the DHSS should withdraw those guidelines—the Committee made this point—and make it clear that health authorities should not be hound by them. If the local health authorities are to control their problems, those 1972 yardsticks should be ignored, and if the Government are prepared to pay, they should get the staff if they can.
I have paid enough tributes to the PAC, but I shall make a final point on the Health Service generally, and this report in particular. The Committee, perhaps properly, does not see fit to go into the pay and conditions of nurses, doctors and other staff.
I suggest that it might examine the personnel memorandum PM(86)17 issued on behalf of the DHSS concerning
"Arrangements for remuneration and conditions of service"
of the new managers in the National Health Service. I need not labour the point too much, but all these general managers are now promised an incentive bonus which will be gauged by the speed with which they can close hospitals. That is one of the criteria laid down. Another is the speed with which they can get people out of hospital to community-based provision, which is what is happening now. Thousands of men and women, usually mental

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patients, are being discharged from mental hospital into the community apparently so that taxpayers' money can be saved by closing those hospitals, and the mentally ill or mentally disabled are then thrown on to the community, which simply does not have the staff, money or wherewithal to look after them. This is creating an increasingly serious problem. I think that the Public Accounts Committee would do well to have a good look at that new contractual agreement with the Department.
I end by quoting something that appeared in The London Standard only last Tuesday:
"A Government Minister has pledged more consultation with parents and relatives before homes and hospitals are closed and thousands of mentally ill people are 'dumped' in the community."
That followed a lobby of Parliament by the National Society for Mentally Handicapped People in Residential Care and a meeting with Baroness Trumpington, the Minister responsible for services to the mentally handicapped. The chairman of that society said:
"We have stressed to the Minister that the possible closure programme is turning into a national scandal … Assurances she is receiving from health authorities that parents and relatives of mentally handicapped people are being consulted are just not true."
Baroness Trumpington promised that she would go back and make sure that consultation would take place in the future before those patients are 'dumped' on the community.
I hope that the PAC will have another look at that, but above all keep up the excellent work that it has done, especially so far as torpedoes are concerned, and I wish the hon. Member for Rutland and Melton (Mr. Latham) good health, good fortune and increased vigour.
8.33 pm
Mr. Phillip Oppenheim: I want to talk about the sad, sorry and rather shabby case of Nexos, and I will do my utmost not to ramble on for half an hour or so.
I first came across Nexos when editing an information technology report in 1980. In 1982, I conducted investigations for that report into Nexos. More recently I am pleased to say that the sad subject of Nexos has been the subject of a Public Accounts Committee report.
What was Nexos? Nexos was set up by the last Labour Government as the United Kingdom answer to IBM—a fairly ambitious project, I think it would be agreed. Unfortunately, this rather ambitious project went bust ingloriously in 1982 at a cost to the taxpayer of close on £40 million. In between those two dates, expensive salesmen were head-hunted by an overpriced headhunting agency to run Nexos.
During its brief and inglorious career Nexos consistently succeeded in making substantially larger losses than its total turnover. Indeed, its most successful venture was in importing and distributing large amounts of Japanese-made office equipment. One of the biggest problems was that it concluded a series of totally untenable deals with other companies, usually involving its ending up buying expensive equipment through middlemen. In fact, Nexos was such a totally unmitigated disaster that most people in the information technology industry were amazed that it lasted as long as it did.
What were the main reasons that Nexos ended up such a disaster? First and foremost, I believe that the whole
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concept of an information technology company dreamed up by politicians and civil servants was almost inevitably doomed to failure from the word go. After all, if it had been a viable project, surely private industry would have done the job itself.
The second problem was that the National Enterprise Board insisted that Nexos make deals with NEB-backed companies. I will talk briefly about only three of these deals. First was the deal with Logica VTS to supply Nexos with word processors. Normally, if a company agrees to market another company's products, that company does not pay the producing company a fee for marketing those products. On the contrary, the producing company is almost invariably delighted that some company is actually there to market its products, but not so with Logica VTS and Nexos.
The NEB first made Logica VTS invest a sum of more than £1 million in Logica's development costs. There were no time limits imposed on Logica VTS as to how long it could take to produce the word processor. When it finally did so, far later than the initial estimate, the word processor did not at first work. It was an extraordinary state of affairs, and Nexos had absolutely no redress either from Logica or from the NEB.
A second agreement was made between another NEB-backed company, Systene, and Nexos. Again, the Systene computer that it was meant to be supplying to Nexos was late and did not work when it arrived. Fortunately, the Nexos management had included a clause in the contract insisting on substantial penalties if the Systene computer was not delivered on time. Unfortunately, the NEB stepped in and pevented Nexos from taking Systene to court to get damages from that company because, of course, Systene was another NEB-backed company.
Perhaps the worst of a pretty poor series of deals that Nexos had foisted on to it by the civil servants at the NEB was the deal with Muirhead Office Systems Limited. Through this deal, Muirhead was to act as a middleman to buy Japanese facs machines which Nexos was then forced to buy at an inflated price from Muirhead. In fact, Nexos could have gone to any one of a large number of Japanese facsimile machine manufacturers and bought similar—indeed better—machines at far cheaper prices, but, no, the NEB insisted that Nexos went to Muirhead Office Systems Limited and bought the machines from it, acting as a middleman importer of Japanese machines and insisted that it paid an inflated price for the facs machines. Nexos was clearly from the word go tied by the NEB into a series of ludicrous, untenable commercial deals.
The third reason for Nexos's problems was that almost invariably the deals were concluded on a totally uncommercial basis. One of the main tenets of the NEB deals seemed to be that almost invariably they were the cost-plus type of deal, quite uncommercial but typical, unfortunately, of the way that Governments operated in the 1970s.
The fourth reason why I believe Nexos went bust was because much of the management was totally incompetent. This led, for example, to vast over-ordering of equipment. At one point, the Nexos management ordered more facsimile machines from Muirhead than the whole of the British market could have absorbed in a year—clearly a poor commercial decision.
The fifth reason for the failure of Nexos involved muddled lines of communications and limited management control. One example of that will suffice. In 1981,

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when the Government were weighing up whether to wind up Nexos or to try to keep it going a little longer in the hope of finding a buyer, the Nexos management, realising the untenability and uncommercial nature of the deals into which it had been tied by the NEB, tried to contact the then Secretary of State for Industry to tell him that there was absolutely no point in committing further Government money to the company until the nature of those deals had been sorted out by the NEB.
Unfortunately, the NEB, in its wisdom, refused to pass on the management's views to the Secretary of State, and the Nexos management was eventually forced to send a message round by hand to the Secretary of State at the House. Unfortunately again, that message was ignored. I suppose that one's first reaction might be to blame the then Secretary of State for Industry, but I believe that he was blameless, and I shall say why.
The whole idea of asking a senior Minister, who is obviously extraordinarily busy, to act as a non-executive director of 30 or 40 hare-brained NEB companies is nonsense. We cannot expect Ministers and civil servants—most of whom have no business experience whatever—to make such judgments and decisions. Even if they had the time, they would not he qualified to make them. Sadly, the NEB, or the British Technology Group as it had by then become, could not even inter the corpse of Nexos in 1982–83 without making a series of monumental cock-ups and splashing around yet more public money with glorious abandon. When it became clear, in 1981–82, that Nexos simply could not survive, it was decided to sell off the company.
Heads of agreement were at one point signed with a major British office equipment company, Gestetner. However, unfortunately, the NEB decided at the last moment, after the heads of agreement had been signed, to pull out of the deal. It then decided to sell off various parts of Nexos to a variety of other organisations. The way that those divisions was sold off is beyond belief. For example, it gave the marketing rights for the Logica VTS word processor, which was by now working, back to Logica for nothing, even though Nexos has invested £1 million in Logica VTS to develop the word processor in the first place.
The marketing rights for the stock of Ricoh Japanese word processors were given to a consortium of ex-Nexos service engineers, although a far higher sum could have been raised by disposing of them openly on the market. Indeed, I understand that most of those word processors ended up unsold, rotting in a warehouse in Swindon. Finally, and possibly most amazingly, a stock of about 1,000 Japanese facsimile machines, over-ordered by Nexos from Muirhead Office Systems Limited—for which it had paid in excess of £1 million—was sold back to the middleman importer, Muirhead Office Systems Limited, for £1. Thus, 1,000 machines which were worth more than £1 million were sold for just £1. Muirhead said, "Thank you very much," and proceeded to sell off the machines for between £1,000 and £1,500 apiece.
As a final act of bureaucratic backside covering, the chairman of the BTG, as the NEB had by then become, totally denied that the sale had taken place and threatened legal action against anyone who said that it had. However, the PAC report revealed that that sale had taken place and that the machines were sold for £1.
What are the lessons to be learned from the Nexos fiasco? The obvious lesson is that civil servants and
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politicians cannot set up viable industries, and will inevitably end up wasting taxpayers' money if they try to do so. That is not to say that there is not some role for Government. This Government have led the world in their pump-priming help for the electronics industry and others, and in creating the conditions in which new businesses can spring up and prosper. But sadly that is not a lesson that has yet been taken on board by Opposition leaders.
I understand that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) has committed his party, if it ever gets back into government, to setting up not another NEB but, this time, a British enterprise board. Clearly the lessons of history have not been learnt in some quarters.
8.44 pm
Mr. Peter Griffiths: I am not an excitable man, and I do not often intervene in the speeches of other hon. Members. I prefer to let them say what they have to say and then to make my speech. The fact that I have intervened four times today should not be taken to mean that I am in any way critical of the PAC or of its members. Indeed, I pay tribute to them for the excellent work that they did over the defence school of music. As the hon. Member for Portsmouth, South (Mr. Hancock) pointed out, the Committee's report makes it crystal clear that, at each stage of the investigations into the costings for a defence school of music, Eastney was the cheapest option, and if it was decided not to go ahead with such a school but to retain separate service schools, the cheapest option for the Royal Marines was to leave unsatisfactory accommodation at Deal and to go to vacant accommodation at Eastney in Portsmouth.
As the hour is late, I shall not pursue that point, other than to make a suggestion, with due modesty, to the Committee. The Committee carefully examines the costings of programmes and the way in which they may have been overrun, but it may not always question those who offer the best estimates about the basis of them. For example, the report says that the Committee was told that the best estimate that the Ministry of Defence could offer was that the value of the site at Eastney, which had once been valued at £800,000, could be revalued at £5·5 million because of its improved development potential.
It would have been highly desirable if a member of that Committee had then asked who had said that, or who had provided those figures. As my colleague, the hon. Member for Portsmouth, South has said—he is a member of the district council — no one on the council will admit to having produced such figures. The only possible way that the figure of £5·5 million could have been reached is if, by some stretch of the imagination, the whole of the existing Royal Marines barracks, the parade ground and everything else had been cleared, and the whole thing had been available as a prime housing site overlooking the Solent. Only under those totally inconceivable conditions could that figure have been valid.
However, the cause of my great excitement today has been the 28th report of the PAC on the torpedo programme. When the programme was originally published, I became somewhat agitated. I pressed the Ministers responsible at the Ministry of Defence urgently to contact their colleagues in the Treasury so that there would be a vigorous Treasury response. There was a Treasury response; it was modestly vigorous, although nothing like as vigorous as I might have wished.

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During my interventions today, I wanted to point out something. The date of the Committee's report is 15 July 1985. In other words, it was published a year ago. The Committee took evidence during the session 1984–85, so it must be a document of historical significance rather than of immediate significance for today, if the subject matter under consideration is a continuing programme. If, as in the sale of a particular company, an event took place in the past, comments today might be even more valid than those made two or three years ago. In the torpedo programme, the situation now is completely different from that when the report was made and published, and certainly different from that which existed when the evidence was being taken.
In my intervention to the hon. Member for Fife, Central (Mr. Hamilton) I made a point that I would like to have made as well to the hon. Member for Portsmouth, South, who fell into the same trap of saying that £5 billion had been spent. In fact, rather less than half that money has been spent. That £5 billion is the total cost of three programmes running through to the middle of the next decade providing us with the equipment that we need.
In any production programme, whether one is making torpedoes or sprockets, in the early days a great deal of money will be spent, but there will not be many torpedoes or sprockets. It is only at the end of the programme, when the production process is under way, that results are shown. Therefore, it is unfair to talk about £5 billion having been spent, and even worse to say that it has been wasted. At the end of the day, we shall have the weapons.
I accept that it can be argued that £5 billion is too much to be spent on three torpedoes. I do not know how one decides the appropriate amount. Torpedoes, in the terms used in this document, are nothing like those which members of the public tend to have in their minds when they think in such terms. They picture a world war 2 film, with torpedoes fired from submarines, or an old Swordfish airborne torpedo. None of these weapons bears any resemblance to those at all, and as one looks further through the programme from Tigerfish to Sting Ray and Spearfish, so the difference becomes ever greater. It is wrong to suggest that we are simply modestly updating something that already exists. It is equally wrong to suggest that there have been, or that there are, any American alternatives to the torpedoes that are discussed in this programme, and available in sufficient quantities when they are required and operationally successful.
The report is concerned with three torpedoes, of which the first is Tigerfish. This was the one that, at the end of its deliberations, the Committee felt was the greatest story of disaster. So it was, in its early days. The programme was begun and designed in house by the Ministry of Defence. When, in 1972, the Ministry could not produce a heavyweight torpedo, matters were passed on to Marconi. Marconi inherited not a programme but a project, together with a systems of subcontracting that was byzantine, involving, as the report points out, "several hundred contracts". Those contracts had been placed not by Marconi with firms with which it wanted to deal but by the Ministry of Defence, and left to Marconi. Even British Leyland, at its worst, with all its subcontracting in the west midlands, did not have to deal with 200 contractors that it did not choose itself. No one could run
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a programme satisfactorily in that way. It is a remarkable achievement that Marconi Underwater Systems has managed to produce a workable torpedo from this project.
We have already heard about the sinking of the Lowestoft, but I remind the House that before the exercise using the warhead against the Lowestoft, there was a fringe trial in an American range off Florida. Some 50 Tigerfish torpedoes were fired, of which 49 ran and targetted 100 per cent. successfully. I know that the Chamber is not full, but I challenge any hon. Member with knowledge of defence equipment to tell me of any existing torpedo of that complexity with a higher level of successful firing. That is evidence of what we have now. The sinking of the Lowestoft was merely an example of firepower. It was not intended to prove that one could hit a tethered ship.
The programme with which I have been involved the longest is that for the lightweight torpedo Sting Ray, which is dropped from a helicopter or aircraft. I took to see my hon. Friend the Minister a group of trade union representatives from Marconi, who were pressing for the adoption of Sting Ray. It is now a fully developed weapon. It bears no resemblance to the American airborne mark 46 torpedo. The American torpedo is less accurate, has a shorter range, is grossly noisy, is easily distracted by defences and does not have so powerful a warhead. I do not know at what point the comparison is being made with that torpedo, but it is a grossly unfair comparison.
There has also been reference to the sinking of a submarine by a Sting Ray. It is true that the submarine was stationary, but it was in shallow water, and an air drop into shallow water is the most difficult task that one can present such a torpedo. It was brilliantly successful.
Finally, there is the Spearfish. It is the largest of the projects and was only in the early stages of development when the Committee began its deliberations. The report says that the Committee did not know whether the torpedo will be on time. I put it on the record that, as from today, Spearfish is ahead of target and it is expected that the costs will be well within those budgeted for by the prime contractors.
I make such a fuss not because of the total cost of the torpedo programme but because the Committee spoke about overseas sales. At the moment, the United States navy, which does not have a heavy-weight torpedo, is looking around the world to find one. The prime contender, as my hon. Friend the Under-Secretary of State for Defence said only yesterday, is the Tigerfish. Why should we rubbish one of our products, which the Americans cannot match, just when they are considering it? It beggars belief that we should do so.
Sales of Sting Ray are also likely to be damaged if people continue to criticise the weapon using outdated evidence. There are potential sales in South America and Australasia, and actual sales in Asia. This is evidence of what can be done. There is no doubt that these programmes are successful, and will be successful.
Should there be any suggestion that any of the programmes should now be abandoned, the theory that there will be no employment implications is no longer true. If Sting Ray were to be abandoned now, that brand new plant at Neston would be valueless and the workers there would become unemployed. What may have been true a year ago, or two years ago, is no longer true. This country has a torpedo programme that has come to fruition. Marconi Underwater Systems has done this country

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proud. We should be grateful. It would be helpful if hon. Members did their best to ensure that we get overseas sales for our fine weapons, because that is the potential which is available to us now.
8.59 pm
Mr. Toby Jessel: Neither you, Mr. Deputy Speaker, nor the House will be much surprised when I say that I intend to speak on the implications of the 11th report of the Public Accounts Committee for the defence school of music, so-called.
In just under three weeks British military bands will march through the streets of London on the joyous occasion of the wedding of HRH Prince Andrew and Miss Sarah Ferguson. Army bands will play, as they always do, a magnificent part in the glory and majesty of the royal procession. That procession will pass in Whitehall the splendid equestrian statue of HRH the Duke of Cambridge, the son of Queen Victoria, commander-in-chief of the British Army in the mid-19th century. He decided that the standard of British Army bands in the Crimean war was so abysmal that he would set up a band training scheme for the Army. He bought the country house which was formerly occupied by the great painter, Sir Godfrey Kneller, in Whitton, beside Twickenham, and there set up the Royal Military School of Music at Kneller hall, where it has flourished ever since for 128 years.
During that time Kneller hall has become the pride of Twickenham, the pride of the Army and the pride of Britain. The hands that are trained there are the envy of the world. In an Adjournment debate that I initiated on 25 October 1983 I said:
"They have a high standard of excellence. They lift the spirits of the nation. Who does not feel uplifted by the sight and sound of a British Army hand on one of our royal or state occasions? They are without doubt one of our finest traditions." —[Official Report, 25 October 1983; Vol. 47, c. 259.]
In paragraphs 2 and 3 of appendix 1, in a memorandum that I sent to the Public Accounts Committee, I wrote:
"These exceptional standards, as part of the traditional British scene, help to attract visitors whose spending generates employment and income and yields tax to the Government. Thus the military, traditional, musical and sentiment aspects of Kneller Hall also confer some economic benefits, which cannot be measured, but which should not be overlooked by a financial committee. These assets should not be put at risk unless there is a substantial and certain cost saving with guaranteed upholding of standards."
Yet that is what is at risk.
Two years ago, in July 1984, my right hon. Friend the Member for Henley (Mr. Heseltine) announced that Kneller hall would close. His announcement is contained in annex 1 of the 11th report of the Public Accounts Committee. It says:
"A period of consultation will now begin on plans to establish the new Defence School of Music at Deal, with an intended completion date there in about 1988".
That decision, and the way in which it was taken, is the subject of the 11th report of the Public Accounts Committee.
It is a remarkable report. I pay tribute to the Committee, its Chairman, the hon. Members who served on it and its officers. I was deeply impressed when, on 4 December, as my hon. Friend the Member for Rutland and Melton (Mr. Latham) said, I witnessed the work of the Committee when it interviewed Sir Clive Whitmore, the accounting officer at the Ministry of Defence. I was deeply impressed by the penetrating questions that were put by
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the Chairman, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), by my hon. Friends the Members for Scarborough (Sir M. Shaw), for Rutland and Melton and for Uxbridge (Mr. Shersby) and by the hon. Member for Workington (Mr. Campbell-Savours). They had mastered a complicated subject matter.
Considering the huge work load that the Public Accounts Committee carries, it was a very impressive performance by the Committee. It was completely on the ball. Its report is very thorough. It seems to me that if it can produce reports of this kind the Public Accounts Committee is working just as the House and country would wish it to work.
The decision of my right hon. Friend the Member for Henley has aroused deep feeling in both my constituency and in neighbouring constituencies. Kneller hall is greatly cherished. As I said in the Army debate on 30 January, 5,000 people attend the best of the summer concerts, and 3,000 to 4,000 people attend the smaller ones. Those people are drawn from all over west London.
The band from Kneller hall performs at schools, for old people, on civic occasions and in local high streets for Christmas shopping crowds. Kneller hall itself is a listed building, standing on the only hill in the area, and flies the Union Jack. It is a profoundly British institution, part of our heritage, and people love it. It is not surprising that 18,679 people from my constituency and neighbouring ones signed a petition that I presented, first to the Prime Minister in January, and then to the Secretary of State in March.
Nor is it surprising that the views of people in west London were echoed by right hon. and hon. Members when no fewer than 164 Conservative Members signed early-day motion 397, which refers to the excellent report of the PAC and expresses the hope
"that band training will long continue to flourish at Kneller Hall, Twickenham"
for the Army, and for the Royal Marines at Deal and the Royal Air Force at Uxbridge.
The views of the House and of residents of west London were endorsed in a debate in the House of Lords on 5 February, when five peers—Earl Cathcart, Lord Mulley, the Earl of Cork and Orrery, Lord Westbury and Lord Graham spoke strongly in favour of retaining Kneller hall as the Royal Military School of Music. No one spoke against that, although Lord Trefgarne, who replied for the Government, spoke in somewhat guarded terms—
Sir Michael Shaw: Surprise, surprise.
Mr. Jessel: Quite, but I always want to be polite—even about those with whom I disagree.
Kneller hall is greatly beloved of the Army and respected in the music world. The great conductor Sir Charles Groves, who recently was a guest conductor at Kneller hall, is a stalwart supporter.
The PAC said in paragraph 19 of its report:
"We are gravely disquieted that the MOD should have decided on a DSM at Deal, which could have entailed expenditure of around £10 million, and would inevitably cause considerable disruption to the present arrangements for training Service musicians, before carrying out a full investment appraisal."
It then said in paragraph 22:
"we have no confidence that the appraisals carried out to date provide justification for the MOD's decision. In this connection we welcome the Treasury's firm statement that

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they are not happy with the MOD's figures. We trust that they will scrutinise any MOD submissions on this subject very closely."
Following the publication of that report, I wrote to the Chief Secretary to the Treasury drawing his attention to that passage. I asked him to confirm
"that the Treasury will continue to make its views known to the MOD."
He replied on 6 March:
"I can, therefore, assure you that the Treasury views will most certainly be made known and that the request in paragraph 26(iv) of the PAC report will be met."
The decision of my right hon. Friend the Member for Henley was not only unsound financially, as the PAC report shows, but lacked sentiment and soul. He failed to allow for the strength of feeling in Whitton, Twickenham and the whole of west London. The reappraisal deals with costs, but I hope that the Government, having originally ignored costs, will not make the opposite error of assuming that costs are the only factor. It should consider not only costs, but the strength of feeling to which I have referred.
The importance of Kneller hall is not confined to Twickenham and neigbouring constituencies. It is of importance to the entire country, which values the high standards of military bands. I hope profoundly that my right hon. Friend the Secretary of State for Defence will decide to save Kneller hall not merely for the next three years, which is what has been decided so far, but thereafter to save it permanently, so that for generations to come the glorious sounds of the finest military bands in the world will continue to reverberate throughout the nation.
9.10 pm
Mr. Terry Davis: As usual, our annual debate about the work of the Public Accounts Committee has been poorly attended. Unusually, we have heard several contributions this afternoon and evening from hon. Members who are not members of the Committee. I cannot remember hearing so many stimulating and interesting speeches from hon. Members on both sides of the House who are not members of the Committee on matters about which they have special knowledge, either for constituency reasons or, in the case of the hon. Member for Amber Valley (Mr. Oppenheim), for reasons that attach to previous work before coming to this place. The debate has been especially stimulating and interesting for that reason.
A regular feature of this annual debate are the tributes which are paid by hon. Members on both sides of the House to the Chairman and members of the PAC. It is not a matter of ritual to reiterate our appreciation. The fact is that they undertake work which is often unpublicised, and which is certainly unglamorous. It is especially important, however, as the Committee acts as the watchdog of the House over Government Departments. I associate myself with the tributes which have been paid to the members of the Committee, and especially those directed to my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon).
As my right hon. Friend explained, the work of the Comptroller and Auditor General and the National Audit Office has several facets. First, it is intended to prevent corruption, and it is fair to say that there is nothing in the reports before us that identifies corruption. Secondly, their
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work is designed to seek to obtain value for money. It was disturbing when my right hon. Friend the Member for Ashton-under-Lyne told the House that the NAO has been able to devote only one third of its time, instead of one half, to projects involving the test of value for money, as distinct from ensuring that the accounts are accurate. I hope that the NAO will be assisted by the Government to recruit enough staff to change the present imbalance.
It is a fact that the PAC, assisted by the Comptroller and Auditor General and his staff, has found much inefficiency in several Government Departments. We must all be concerned about what has been uncovered. My hon. Friend the Member for Coventry, North-East (Mr. Park) said that the PAC has identified many instances where money has been wasted. I suppose that the most serious allegations, at least in scale, have concerned the torpedo programme. We have been told that the programme will cost £5 billion by the mid-1990s, and my right hon. Friend the Member for Ashton-under-Lyne asked what we shall get for that expenditure. The relevant report tells us that we have obtained "poor value for money". Those are the precise words that appear in the report.
The hon. Member for Horsham (Sir P. Hordern), who has great experience in these matters, told the House that in his opinion it was the largest single waste of money that he has ever seen. I regard that charge as being extremely serious. The hon. Gentleman asked, for example, whether we should continue to bear the burden of the programme. The truth is that we do not know how much money has been spent or wasted on it. As I have said, the total cost will amount to £5 billion by the mid-1990s, and the hon. Member for Portsmouth, North (Mr. Griffiths) told us that less than £5 billion has been spent at present. I think he said that half that amount has been expended.
However, we do not know exactly how much has been spent, let alone how much has been wasted. This information has been blanked out in the PAC's report. I refer especially to the answer to question 2108 from the hon. Member for Rutland and Melton (Mr. Latham). The question was asked and an answer was received. The Members of the PAC may have that information, but the rest of us are not aware how much money has been spent on the programme.
Only the hon. Member for Portsmouth, North seemed to disagree with the suggestion that the torpedoes do not work. However, not even he tried to suggest that all the money had been spent wisely and nothing had been wasted. He seemed to accept that there were grounds for criticising the Ministry of Defence, if not Marconi. What has happened to civil servants in the Ministry of Defence who are responsible for what the hon. Member for Horsham described as the largest single waste of money he has ever seen? That is a serious matter. Ministers have changed from time to time, but the waste of money has continued under Governments of both political parties. However, civil servants do not change that often. The question must be asked: what is being done about those civil servants who are responsible for waste of money on that scale?
The hon. Member for Amber Valley dealt in some detail with Nexos. I thought that his contribution was interesting. There is a lot to learn from his experience and comments about the reasons for the failure of Nexos, even though I would not agree with the hon. Gentleman's political views. He agreed that there had been incompetent management at Nexos. He said that the National

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Enterprise Board had been largely responsible for insisting that Nexos should make a series of poor deals with other NEB-backed companies. He also told us that a large measure of responsibility rested with the NEB.
The hon. Gentleman drew the conclusion that no Government, no politician and no civil servant should ever attempt to set up new companies or new industries. That is where I part company with the hon. Gentleman. On that basis, no industrialist or business man would ever set up a new company or industry, because it is not unknown for business men, industrialists or merchant bankers to make mistakes and to have failures. I disagree most strongly with the hon. Gentleman's conclusion, but I am concerned about some of the information that he put before the House.
It seemed, from what the hon. Gentleman said, that there were grounds for criticising the civil servants at the National Enterprise Board who were responsible for dealing with Nexos, and perhaps those in the Department of Trade and Industry. That also came from the report of the Public Accounts Committee. The people at the top of the company lost their jobs. From what we have read between the lines of the report from the Public Accounts Committee, I suspect that many people employed at Nexos also lost their jobs when it was wound up and split up. But what happened to the civil servants who were partly responsible for that failure—those who decided to "drip feed" Nexos, as the Public Accounts Committee put it? What has been done as a result of those examples of inefficiency in the Civil Service?
The hon. Member for Scarborough (Sir M. Shaw) made two other points about the Nexos report. First, the hon. Gentleman argued that there were grounds for criticism of the relationship between the Government and Government-appointed non-executive directors on the Nexos board. Similarly, he said that there were lessons to be learnt from the contents of the report on nominee directors — an investigation which arose from the De Lorean case.
It is clear from the Treasury response to the Public Accounts Committee report, and from the contribution of my right hon. Friend the Member for Ashton-under-Lyne, that the Government have responded by issuing a new guidance to nominee directors as a result of the PAC report. It is interesting to see in the report that many of those nominee directors are former civil servants. I hope that those civil servants responsible for the torpedo project and Nexos have not been appointed nominee directors by any of those NDPBs.
But what about the other directors? As I understand it from the report introduced this evening by my right hon. Friend the Member for Ashton-under-Lyne, the directors of British Leyland and Rolls-Royce are not included on the list of nominee directors. The Treasury seems to regard them as special directors, for reasons which I do not understand, although I have read the report several times.
The Government have a shareholding of nearly 100 per cent. in both British Leyland and Rolls-Royce. What guidance is given to the directors? We are told, it seems that the directors are appointed by a self-perpetuating elite. The chairman of BL, the chairman of Rolls-Royce and existing directors scout about for people they think will be good, congenial directors, and then make recommendations to the shareholders—the Government — for endorsement at some annual general meeting. That is not good enough.
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I hope that at some time in the future the Public Accounts Committee will go on to consider the relationship between the Government and those directors who are not covered by the report about nominee directors. What are the duties and responsibilities of these other directors who deal with much bigger companies and enterprises in important industries compared with the directors who are the subject of the report? What is the relationship between those directors and the Department of Trade and Industry? We should be told.
The hon. Member for Scarborough made a second point in relation to the Nexos report. He argued, rightly, that political considerations had been involved in the decision to establish Nexos and that political lessons should be learnt from that experience. Again, the lessons will vary according to one's political views.
The Nexos report is not the only one that we need to read with political views in mind. As my hon. Friend the Member for Coventry, North-East made clear, political considerations were involved in the way in which the sale of Government shareholdings in British Telecom was handled. That sale was strongly criticised by my right hon. Friend the Member for Ashton-under-Lyne, who asked why there was such a rush to sell everything at once, because that was bound to depress the price and affect the income received by the taxpayers through the Government. My right hon. Friend argued that the Government had not received as much money as they could have done from the sale, and that the taxpayers had lost. He asked several times: why was there a rush? The answer — which perhaps we should not expect the Chairman of the PAC to give us—is "political reasons". The Government had to rush through the sale of BT to finance their deficit. The whole of the Government's strategy on public expenditure and income is based on the sale of assets. The Government rushed the sale — regardless of getting the best possible price for BT—for political reasons.
That brings me to the report on the proposed defence school of music, the implications of which are the most disturbing of all these reports. The hon. Member for Twickenham (Mr. Jessel) questioned the fundamental decision on the amalgamation of three existing schools of music. I think that he will be pleased to learn that the Treasury has agreed that that fundamental decision will be reviewed. It has said also that there will be other investigations, reconsiderations and reappraisals of the economics of where the merged school will be located.
My right hon. Friend the Member for Ashton-under-Lyne told us that if there was to be a merger of those schools of music, it was clear that Eastney was the best site and that Deal was less suitable and more expensive than Eastney. Then why was Deal chosen as a site by the Ministry of Defence? The hon. Member for Rutland and Melton told us that the paper was the "least convincing" one he had seen in all his time on the PAC.
The hon. Member for Scarborough went as far, or further, in the examination of Sir Clive Whitmore. It is important to put on record what the hon. Gentleman said:
"Reading this document one gets the clear impression, which has been borne out by your answers so far, that the decisions were not made on financial grounds and that after the decisions had been made, then a financial investigation was carried out in the hope that perhaps the decision already taken could be justified."

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Having read that report, I think that the way in which the hon. Gentleman put that point was justified. That is the impression one gets from the wriggling that went on in trying to answer the Committee's questions.
The PAC concluded that it viewed the decision with "grave disquiet". It reminded me of some of the decisions I saw when I worked as an auditor. Decisions were taken for non-commercial reasons and then an economic justification was prepared. Not surprisingly, the results did not match the economic justification, and eventually the chickens came home to roost. If people had said at the beginning that they were taking the decision for noncommercial reasons, there would have been much less criticism and no blame would have been attached to it.
It sounds as though this decision may be more serious. The hon. Member for Portsmouth, South (Mr. Hancock) made a series of serious allegations, and there are some serious points to be answered by the Financial Secretary, or perhaps by the Government on a later occasion.
The question is whether the decision was taken for political reasons. My right hon. Friend the Member for Ashton-under-Lyne told the House that Deal was included on the list only as a result of representations by the right hon. and learned Member for Dover (Mr. Rees) who, at the time, was Chief Secretary to the Treasury. But the question raised by the allegations of the hon. Member for Portsmouth, South is whether there might be some other reason for the decision having been taken — a reason which would be regarded by everyone in the House as being even more serious. I am not clear how we will he assured that there has not been an example of the sort of corruption that we all fear to find in the public service. The Financial Secretary owes the House a statement on how the Government intend to proceed to ensure that the public interest has not been betrayed.
It is clear from the report that both inefficiency and political considerations have been involved in the control of nursing manpower. My right hon. Friend the Member for Ashton-under-Lyne and my hon. Friends the Members for Coventry, North-East and for Fife, Central (Mr. Hamilton) fastened on to that report and explained how the Department of Health and Social Security imposed centralised controls over the numbers of staff being employed in the National Health Service without knowing whether the right numbers of nurses were being employed in the first place and, indeed, without knowing whether they needed to increase the number of nurses. Obviously that is a matter of political consideration. It is clear that, by any managerial test, it was a grossly inefficient decision to take.
I end on a point with which I began. The prospect of an examination by the hon. Member for Rutland and Melton may frighten permanent secretaries, as my hon. Friend the Member for Fife, Central suggested. The reports of the Public Accounts Committee may be as damning as my hon. Friend called them. However, as my hon. Friend asked, what has happened to the people who were responsible for this waste of money? What happened as a result of the 1980 report by the Public Accounts Committee on the torpedo programme? What has happened as a result of the latest report published a year ago? We should be told whether civil servants are expected to be accountable for their inefficiency.
9.27 pm
The Financial Secretary to the Treasury (Mr. Norman Lamont): I have to confess that this is the first time that I have had the pleasure of attending a debate on reports of the Public Accounts Committee. I am slightly embarrassed to make that admission, because it is only a few months ago that I was standing here admitting that it was the first time that I had attended a debate on the Army. The response then was much the same as it is now. I thought that I should make that admission before going on to make any ritual noises about how sad it is that more hon. Members have not joined in the debate. However, I agree with the hon. Member for Birmingham, Hodge Hill (Mr. Davies) that one of the interesting things about the debate is the number of Members who are not members of the Public Accounts Committee who have participated and contributed to the debate.
I now find, rather suddenly, that I am a member of the Public Accounts Committee. I thank the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) for writing to me no less, and inviting me to attend the sessions of the Public Accounts Committee. As a good Conservative I have sought precedents in this matter, and I believe that that has not happened much in the past. I shall certainly bear his kind invitation in mind.
Being a stranger to these debates, I was somewhat puzzled when, as the right hon. Member for Ashton-under-Lyne was finishing his speech, the Chamber filled up with about 50 hon. Members, all of whom appeared deeply concerned about the defence school of music. I found it a puzzling phenomenon. However, it later became clear why they had arrived.
Even if I have not attended these debates before, as a Minister I am certainly extremely aware, and have always been aware, of the effectiveness of the Public Accounts Committee and of the importance of its recommendations. I can certainly say to the right hon. Member for Ashton-under-Lyne that its recommendations have a considerable impact on Departments and Ministers.
My hon. Friend the Member for Rutland and Melton (Mr. Latham) said that the Public Accounts Committee struck terror only into mandarins. I can assure him that it strikes terror not only into mandarins. It has a far wider impact than that.
My hon. Friend made an outstanding speech. I think that everybody who was here to hear it will agree with that. We became a little alarmed at the force of my hon. Friend's attack on back slapping. I thought that he was going to go in for a bit of back stabbing, instead of back slapping, such was the vitriol of his attack. I became a little alarmed about the friendship that seemed to be growing up between the hon. Member for Fife, Central (Mr. Hamilton) and my hon. Friend. It seemed as though, in his mellowing and ripening years, he felt that he had found a good successor on the Public Accounts Committee, but I can assure the hon. Member for Fife, Central that, having known my hon. Friend for some 25 years, despite his acid remarks, he is a very nice person, although he is an effective member of the Public Accounts Committee.
I think that everybody is agreed that the function of the Public Accounts Committee is of enormous importance. Obviously it is a matter of public interest that the influence and scope of the Committee should be increased, as it has been increasing. There is one measure, which perhaps is not adequate, of how that has been happening, and that

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is the number of reports coming from the Committee. In the current session the Committee has already passed the 1984–85 total of 38 reports. Of course, it is not just the quantity of reports that matters, but it shows that the area of accountability and the ability of the Committee, supported by the National Audit Office, has been widening, which is a welcome development.
As a newcomer to the debate, I pay tribute to the right hon. Member for Ashton-under-Lyne for his work as Chairman of the Committee. Even in the short time that I have been in the Treasury, seeing the paperwork, and having access to all the papers that go before the Committee, I know that it is a demanding job, and that it is one to which the right hon. Gentleman has given an enormous amount of care and dedicated attention. The House is very much in debt to him for the way in which he has done that.
The dilemma for a person in my position responding to the debate is normally the difficulty of having to reply to so many different subjects with which the Financial Secretary is unconnected. Perhaps my problem is different. I am slightly embarrassed at the extent to which I have been in the Departments that are connected with the reports. I am relieved to say that, as far as I can see, in none of them have I had direct, intimate and immediate involvement, but I have been skirmishing around them.
Two defence subjects have been raised in the debate. One is simple and one is complicated. The simple one is torpedoes and the complicated one is the defence school of music. I feel that I have been extremely close to that, first by being in the Ministry of Defence, and secondly by being a parliamentary neighbour of my hon. Friend the Member for Twickenham (Mr. Jessel).
This may be only the 11th report, but it must be at least my hon. Friend's 12th speech on the defence school of music. I pay tribute to the tremendous campaign and assiduity of my hon. Friend in his determination to see the school in his constituency retained. Although I am his neighbour, I confess that I have never had the pleasure of visiting the Kneller hall school of music. Alas, I have found that in public life it is sometimes necessary to angle, even in public, for invitations, and I look forward—
Mr. Jessel: My right hon. Friend will be extremely welcome to visit Kneller hall, provided that the Government take the right decision.
Mr. Lamont: That seems to be a somewhat conditional response. It does not fit very well with my hon. Friend's normally very generous, open and spontaneous nature.
I agree with the hon. Member for Hodge Hill that serious issues have been raised in the report and in the debate. The central and obvious point is that the Government have accepted the Committee's recommendations and taken its points extremely seriously. Because of that, the decision is being reconsidered and a fresh and full evaluation of the best way to proceed is now being undertaken. As my hon. Friend the Member for Twickenham stressed, that evaluation, which includes the use of professional accountants outside the Department, will include the option of leaving the present schools where they are. I can assure my hon. Friend that the Treasury will have to be satisfied about the finances of the chosen solution. The reassessment is not yet completed, but my right hon. Friend the Secretary of State for Defence will announce the decision as soon as possible.
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The hon. Member for Portsmouth, South (Mr. Hancock) raised a serious point. I do not think that the hon. Member for Hodge Hill chose to follow that up, but he would agree that that point was serious. The hon. Member for Portsmouth, South asked whether there had been contact with Portsmouth council about the valuation of the land. It was made clear in Sir Clive Whitmore's evidence to the Committee, on page 11 of the report, that the PSA had been asked by the MOD and had informally consulted city council officials. That is, it had consulted not members of the council, but city council officials. That is what happened.
The hon. Member for Portsmouth, South—who has explained the reasons for his absence from the Chamber to me—referred to the differential unemployment rate. It is true to say that unemployment in Deal was higher than in Eastney, although not higher than in Portsmouth as a whole. The hon. Member for Hodge Hill asked why Deal was chosen. As I understand the position, when the former Secretary of State considered the matter, one of the factors that he took into consideration was the number of defence establishments in the Southampton-Portsmouth area. That is one of the reasons why he wanted to look elsewhere and why, with his well-known passion for devolution and regional development, he wanted to look for a site in the north of England. However, when no suitable site could be found there, the decision was made in favour of Deal.
The employment position was considered, on the ground that although the investment appraisal favoured Eastney, it was only just so. My right hon. Friend the former Secretary of State felt that when one took into account the employment position, the balance was swung in favour of Deal.
Mr. Terry Davis: As the Financial Secretary to the Treasury appears to have concluded his remarks about that report, may I press him further on that point? I did not choose to pursue the issue raised by the hon. Member for Portsmouth, South (Mr. Hancock), as the Financial Secretary said. I do not have the intimate knowledge of that subject that the hon. Member for Portsmouth, South has. However, he made several allegations about the dubious nature of the valuation of land, and that was endorsed by the hon. Member for Portsmouth, North. The hon. Gentleman questioned whether anyone had given misinformation about the value of the land. He also commented on what had not happened since the Treasury minute was issued.
The whole thing leaves a lingering smell. I am not criticising the right hon. and learned Member for Dover (Mr. Rees). Even the former Chief Secretary to the Treasury is entitled to press his constituency interests, but the House should be assured that there is nothing more serious here at a lower level in some branches of the Civil Service. I am not saying that there was any truth in the allegations, but they were serious and should be investigated. We cannot leave the matter in this way.
Mr. Lamont: I shall certainly follow up other things that were said by the hon. Member for Portsmouth, South. I felt it right to comment on some of the things that he said even though the hon. Member for Hodge Hill had not pressed them, because I felt they were important. I hope that no aspersions will be cast on the actions or motives of my right hon. and learned Friend the Member for

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Dover (Mr. Rees). I know that the hon. Member for Birmingham, Hodge Hill did not do that. I knew that I would be responding to this debate, and when I inquired, one of the things that I was told immediately was that when my right hon. and learned Friend the Member for Dover was Chief Secretary he asked that he should play no part in the Treasury on any decisions taken on this matter, because he wished to be free to press his constituency interests.
Mr. Terry Davis: I have already made it clear that I am not raising any questions about the former Chief Secretary, for whom I have a high personal regard. The allegations made by the hon. Member for Portsmouth, South deserve to be answered. They cannot be answered now from the Dispatch Box by the Minister, who had no notice of those questions, and I do not expect him to deal with them now. I am asking him for an assurance that those allegations will be investigated by the appropriate people.
Mr. Lamont: I had hoped and thought that I had given that impression. If I did not, I now give the undertaking that I will look into the matters.
I shall now move from the subject of the defence school of music to another subject that was raised by the right hon. Member for Ashton-under-Lyne and by the hon. Member for Coventry, North-East (Mr. Park). I think that it was also touched on by my hon. Friend the Member for Scarborough (Sir M. Shaw) when he talked about Nexos. It is the whole question of nominee directors, which has arisen out of a few cases. I say a few, but that is not to say that they are not important cases, because they include the De Lorean case and the Nexos case, in which the argument has been advanced that where the taxpayer is investing money it is right that he should be represented by nominee directors.
As the right hon. Member for Ashton-under-Lyne said, we have issued a revised and expanded guidance note on the appointment of nominee directors. Copies of that were sent to the Committee. I am sorry that the right hon. Gentleman received one only today. I understood that it was sent yesterday, and while I appreciate that that is short notice, I had a choice of either sending it at short notice or delaying it until after this debate and opting for a comfortable life. I thought that it was a good thing that it should be available for the benefit of the Committee. I hope that when the right hon. Gentleman has had an opportunity to study the note in greater detail he will find that it meets many of the anxieties put forward by the Committee.
The prime responsibility for appraising projects and for monitoring lies with the sponsoring Department, the agencies or the non-departmental public bodies concerned. One has to strike a balance between commercial freedom and accountability. The guidelines we have issued do not mean that the funds invested in a commercial business will always be protected by a nominee director. The Department or the non-departmental public body will have to consider in each case whether the appointment of a nominee director is appropriate, bearing in mind the size and nature of the investment. The guidance note draws a distinction between large listed companies, where perhaps the Government have a residual shareholding following
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privatisation, and companies which are having funds invested in pursuit of regional or inward investment policies or for selective assistance.
In the former case — residual shareholding in the large company — detailed monitoring is not usually required. The role of the nominee director in such a company is to keep a general eye on the value of the Government's investments. He may be concerned with things like the golden share. Careful monitoring is certainly required when it comes to companies where money has been invested in pursuit of regional or inward investment policies. In this case the nominee director may be required to strengthen the board and to provide certain skills.
The hon. Member for Walthamstow (Mr. Deakins) put his finger on one of the points of concern to the Committee. The director of a company, as we are all aware, cannot just represent an interest, and a nominee director has the same responsibilities as any other director of a company. The problem that we face is how to reconcile what the PAC wants with the obligations that are placed by law on directors. We have reached the conclusion that, where assistance is provided, there should be agreement between the company and the Government, agency or sponsoring Department about the degree of monitoring and the freedom of the director to report back.
The hon. Gentleman asked whether companies would be free to decide not to accept the financial assistance offered on such terms. The answer is yes. People will be asked whether they wish to accept the terms on which this monitoring will take place.
My hon. Friend the Member for Scarborough identified the problem of a conflict of interests. I agree that one can have a conflict of interest if a director is the person responsible for deciding on assistance within a Department or within a Government agency. That is not a desirable situation, and in my view it should only occur exceptionally. When such conflicts arise, we intend that the appointment should require the agreement of the permanent secretary as well.
Another question which has been raised in the debate concerns nursing manpower and whether there is a formula for the right number of nurses for a complex organisation such as the National Health Service. The Government believe that this is a matter for the health authorities in the context of their own needs and strategies. When one reflects on the problem, one realises the degree of nursing for a given standard of medical care can vary in different parts of the country, because of morbidity rates, the pattern of services and the cluster of mental illness and mental handicap hospitals in certain areas. The sheer mathematics of a formula for the entire country does not make a great deal of sense.
It is right, however, that within a region there should be a formula, and one ought to be able to make an assessment within each region. A short time ago we did not have a formula in any region for making an assessment of the right number of nurses. Although we have not reached the position whereby each regional health authority has such a formula, we are moving to the situation where most of the health authorities have one or are planning to adopt one. That is the way the Government see it, rather than having an overall formula for the country.
The hon. Member for Fife, Central asked when the Cumberlege report would be available. I am afraid that the only information that I have is that it will be available later

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this year. I shall find out whether I can get anything more precise, and if so I shall communicate it to the hon. Gentleman.
A certain amount of time was taken up with the privatisation of British Telecom. A question was raised concerning the basis for the accounts and why we have moved from current cost accounting to historic cost accounting prior to privatisation. I am sure that many hon. Members will recognise that there are strong reasons why one needs to have current cost accounting in nationalised industries, where often there is heavy investment in old assets. In contrast, current cost accounting has not been generally adopted by the private sector. The policy that we followed at the time of privatisation was to have accounts on both bases available because we were aware that investors would want to have the type of accounts that are most commonly used in the private sector.
The right hon. Member for Ashton-under-Lyne asked whether we could not have accomplished the sale of equity on a bit-by-bit basis. I was not sure whether he was not advocating drip feeding of the type condemned when applied to Nexos. We have looked at the matter, but phasing of sales is not favoured because, leaving aside the fact that the political objective of privatisation would not be achieved, there is a problem of the overhang of the stock on the market.
The right hon. Gentleman contrasted the position of the gilts market with that of the equity market on privatisation. With respect, there is a difference between the two markets. Although it would be a simplification to say that gilts are much alike and although it would be wrong to say that there is no room for relative price movements, it is a fact that the overhang of stock in one particular company tends to have an effect on the prices of that one company rather than on the wider market, which is the effect of a tap stock on the gilt market. The effect of phasing would have been adverse on the price.
The hon. Member for Coventry, North-East talked about the terms of privatisation, the fat cats in the City and the commissions that are being earned. Sometimes one hears that the Government are driving a hard bargain on commissions and privatisation. Following the British Telecom sales there have been some secondary sales, including Cable and Wireless, British Aerospace and Britoil, in which the commissions have certainly been lower than those negotiated for BT.
We want to negotiate a good price and the best and keenest commission that we can possibly get, but the BT sale was the biggest share offering ever, and when arguing over commissions we had to bear in mind the natural anxiety about whether the issue of the share could be guaranteed to be a success. Obviously that was a major factor in the negotiations of the commission.
The hon. Members for Fife, Central, for Hodge Hill and for Portsmouth, South and my hon. Friends the Members for Portsmouth, North (Mr. Griffiths) and for Rutland and Melton rightly talked about the torpedo programme. No one could disagree with the general dismay at the problems that have been encountered in the development of Tigerfish, and no one could quarrel with the fact that it has been expensive and that there has been a long delay. It is the function of the PAC to identify that and to investigate why it has happened. But I agree a little with my hon. Friend the Member for Portsmouth, North. We must identify the cost overruns and where things have
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gone wrong, but it is wrong to imply, even if a project has had cost overruns and things have gone wrong, that a weapons system which we are desperately anxious to export is not working when it is working. The hon. Member for Portsmouth, South went somewhat far in his condemnation of the Tigerfish torpedo. It has been successfully tested and the Royal Navy has professed itself well satisfied with the results of the test.
The hon. Gentleman seemed to think it rather odd that a torpedo should be tested on a stationary ship. I am not sure what other sort of ship it could be tested on. Perhaps it is a new version of scrap and build, which is, I know, a way in which people always like to aid the shipbuilding industry. It seems rather odd to think of having a moving ship with men on it in order to test our weapons. The Royal Navy has professed itself well satisfied with the Tigerfish torpedo. The new development incorporates some of the technology in the Sting Ray torpedo, which was the point made by my hon. Friend for Portsmouth, North. As a number of foreign countries have the torpedo and we are anxious to export more, I think we ought not to be ashamed to say that those who have bought it have a good product. The right hon. Member for Ashton-under-Lyne and the hon. Member for Fife, Central are right, of course. It is a matter of enormous concern that we have had the problems that we have in the development of this torpedo.
Some of the points raised go back a long way, to the early 1970s and, in terms of the price and contractural arrangement, we have a very different situation today. All the contracts now are fixed-price contracts—that applies to Tigerfish, Spearfish and Sting Ray. It is true that we do not have a prime contractor for all three torpedoes. There is a prime contractor for Tigerfish, for the weapons handling system and for the torpedo. The problem is that Sting Ray is fired from several different platforms — helicopters, aircraft and ships—and one cannot have a prime contractor that covers the lot. The Ministry of Defence said that it would consider whether the prime contractorship could he widened in the case of the Spearfish contract. That is being considered. No decision has been made on it. It was felt that it would not be commercially right to disrupt the existing fixed-price contract to go for primary contractorship across the board.
Various hon. Members raised the question of competition for torpedos in future. It is intended that when Spearfish has finished its development there should be a contract for production. I assure my hon. Friend the Member for Rutland and Melton that there will be some vigorous competition at the subcontract level. Three quarters of Sting Ray will be subcontracted and two thirds of that three quarters is being placed by competition. I am assured that companies outside the GEC group are filling a large part of that. I think that there is a real prospect for competition there.
The hon. Member for Fyfe, Central raised the question of collaboration on a future generation of torpedoes. I entirely agree with him. This is the logical way to go. His logic applies not only to torpedoes, but to many other weapons systems.
Mr. Terry Davis: The Minister has not answered the important question about what happened to the civil servants who were responsible for the waste of money on

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the torpedo programme and also partly responsible for the waste of money on Nexos. If the Minister does not know the answer, will he find out and write to me?
Mr. Lamont: I am willing to write to the hon. Gentleman. When I was a Minister at the Ministry of Defence, I can well remember that I asked exactly the question that the hon. Gentleman has put to me. Trying to find out which civil servants dealt with a programme stretching over 25 years is a pretty difficult and lengthy thing to do. I assure the hon. Gentleman that people's performance is taken into account, but it would be wrong to think that only a very small group of people are connected with the project. It would be quite wrong also to think that all the fault lies with civil servants. As a number of my hon. Friends and Opposition Members have indicated, much of the fault lies also with British industry.
The method adopted in the debate, of concentrating on about six subjects, has proved extremely worth while and has targeted the debate most usefully. I therefore thank all those hon. Members who have participated in it.
Question put and agreed to.
Resolved,
That this House takes note of the 26th to 38th Reports from the Committee of Public Accounts of Session 1984–85, of the 1st to 14th and 16th to 18th Reports of Session 1985–86 and of the Treasury Minutes on those Reports (Cmnd. 9696, 9743, 9755, 9776 and 9808), with particular reference to the following Reports:—

1984–85:

28th

The torpedo programme

1985–86:

1st

Role and responsibilities of nominee directors

3rd

Sale of Government shareholding in British Telecommunications plc

8th

Nexos

11th

Proposed Defence School of Music

14th

Nursing Manpower.

Orders of the Day
  OUTER SPACE BILL [LORDS]
  As amended (in the Standing Committee), considered; read the Third time and passed, with amendments.
  STATUTORY INSTRUMENTS, &c.
  Motion made, and Question put forthwith pursuant to Standing Order No. 79(5) (Standing Committees on Statutory Instruments, &c.)
  STATUTORY INSTRUMENTS, &c.

    ROAD TRAFFIC
    That the Motor Vehicles (Variation of Speed Limits) Regulations 1986, dated 21st May 1986, a copy of which was laid before this House on 3rd June, be approved.— [Mr. Neubert.]
    Question agreed to.

  ESTIMATES
  Resolved,
  That this House agrees with the Report [26th June] of the Liaison Committee.—[Mr. Neubert]

Water Authorities (Privatisation)
10.1 pm
The Secretary of State for the Environment (Mr. Nicholas Ridley): With — [Interruption.] — permission, Mr. Speaker, I should like to make a statement.
My consultations on privatising the water authorities have shown that, while preparations for their privatisation are well under way, more time is needed to prepare the necessary legislation. I have therefore concluded that we are unlikely to be able to introduce the Bill in the next Session.
I understand that further powers may he needed to enable water authorities to prepare themselves for privatisation.
I reaffirm the Government's intention to proceed with water privatisation as soon as practicable.
Dr. John Cunningham: Apparently, at least for once in a while—judging from the noise coming from the Conservative Benches— this is the news that the Conservative party, like the rest of the country, wanted to hear. Is the Secretary of State aware that this is a scandalous way for him — [Interruption.] — and his Cabinet colleagues to behave, as a statement has had to be dragged out of them at 10 o'clock on a Thursday night. At that, it is a pathetic and inadequate statement to meet the information needs and requirements of the House and to meet the needs and requirements of those responsible for managing the industry, those who work in it and the public. It is a pathetic performance, and a humiliating introduction to the Secretary of State's tenure of his high office.
Will the Secretary of State make it clear that several major legal questions, which are unanswered, and which the Government are currently unable to answer, lie behind this humiliating climb down? Will he confirm that the Government have no legal title to those assets, and are unable to sell them for that reason alone? Will the right hon. Gentleman also confirm that the water authorities have no legal powers to prepare themselves for privatisation in the way that this Government have been urging them, or indeed pushing them, to do? Will he further confirm that privatised water authorities would not be recognised as competent authorities by the EEC, could not, therefore, be acceptable to the Community, and would not he eligible for the sort of Community investment that is currently being made in order to try to clean up the pollution, for example, in the Mersey basin?
Will the Secretary of State also make it clear that his friends in the City have told the Government that there is no way in which the water authorities can be sold effectively for any realistic price, given the pending prosecution of Her Majesty's Government by the European Economic Community, because the quality of bathing water on dozens if not hundreds of British beaches does not match the minimum requirements? [Interruption.] Given that these proposals were at the heart of the Government's future programme and their legislative intentions, it is amusing to see how light Conservative Members are making of the retractions. They will not be laughing when they start looking for money for the tax cuts in the next Budget.
Is it not clear that the creation of private monopolies would fail completely to provide any realistic safeguards
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for consumers? In that respect, among others, the Government have failed to provide any convincing rationale for their proposals[Interruption.]
Mr. Speaker: Order. This is a very serious statement.
Dr. Cunningham: I can understand why Conservative Members are anxious to get this over as quickly as possible. How could the Government have ensured the necessary regulation of privatised water authorities, which may well have major shareholdings of some of the biggest polluters in the country, to guarantee that they would meet the requirements for environmental protection that millions demand and expect?
Has not this whole episode been an example of how a reckless and despondent Prime Minister was willing to gamble with the health and well-beingofthe people ofthis country in a desperate grab for cash to bail out yet another election promise? We make it clear that, like the vast majority of people, we warmly welcome this recognition of the abject failure of the Government's thinking. We shall go on opposing these proposals if ever, or whenever, they return.
Mr. Ridley: I find the hon. Gentleman's mood a little difficult to interpret. I cannot discover whether he is angry or pleased. Some of his concern seems to be thoroughly misplaced. He said that the statement had been dragged out of me, but it was not a bit like that. I am all eagerness, but only a few days ago the Labour party was asking for the Bill to be postponed. I quote his words when he was told that we were proceeding with the Bill. He said that the Government's
"motivation is a crude, desperate grab for cash to buy votes." —[Official Report, 5 February 1986; Vol. 91, c. 289.]
Now, when we have abandoned that immoral technique for a year, he seems to be thoroughly disappointed. I cannot help thinking that the hon. Gentleman is a little sad because he thinks that we may have shot his fox.
There is no suggestion whatsoever that we do not have legal title to sell these assets. Although the legal powers are utterly adequate for what the water authorities have done so far in co-operating to further the cause of privatisation, as flotation comes nearer their powers to plan and prepare for their operations as a private company are not entirely without doubt. For that reason, I included in my statement an undertaking that we would remove any such uncertainty so that in due course we may continue with the policy when we are returned to power after the next election.
The hon. Gentleman had further contradictions to put before the House. He said that he thought that the water authorities were unsaleable because of the state of the beaches in certain parts of the country. Then he went on to say that what we had done was to deny ourselves massive tax cuts. He cannot have it both ways. He was all over the shop tonight. I have never seen such a deplorable performance, and I know why: because it is the last time that the hon. Gentleman will be able to make the kind of silly speech that he made tonight.
Mr. Michael Colvin: Will my right hon. Friend acknowledge that it is a little unfair to make a statement like this at 10 o'clock on a Thursday evening, because Opposition Members normally enjoy a four-day weekend? For them to be expected to be here on a Thursday evening to listen to a statement like this is really asking a little bit too much.

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However, as Conservative Members are here in strength, I should like to ask my right hon. Friend to give an undertaking to the House that he will think again about the disbursal of the proceeds from the liquidation of these assets. When the water authorities were originally set up, certain water boards that provided water, such as the Andover borough council, had their assets sequestered and no compensation has been paid to them. When my right hon. Friend comes to decide how the proceeds from the privatisation of the water authorities are to be disbursed, I hope that he will bear in mind the original owners of those water assets.
Mr. Ridley: I agree with what my hon. Friend says about the impending departure of the sleepers, which has caused and will continue to cause me to keep my answers as short as possible, so that the weekends of Opposition Members are not truncated and made short. I do not believe that there is a case of the kind that he mentioned relating to who owns the assets. However, a little time will enable us to examine all such questions, and I am sure that my hon. Friend is grateful that we shall do so.
Mr. Simon Hughes: I congratulate the Secretary of State on responding so promptly to the points that we made to him when we initiated a debate on the subject about 10 days ago. We told him then that his plans would not succeed. Will the next election manifesto contain a reference to water privatisation, unlike the previous one, so that if the Government wish to proceed with privatisation they will have a mandate for it, for a change, if they are elected?
Secondly, given that the Secretary of State's Department has now abandoned rates reform, local government structure reform and rent decontrol reform, does the Department of the Environment have any other plan left to bring out on this side of the general election?
Thirdly, has the Secretary of State made any estimate of how much the Government will have to find from another budget in terms of additional revenue, since the prime motivation appeared to be financial gain to the Government from privatising the water authorities?
Lastly, when was it that the Government realised that what was always bound to be a several stage process lasting several years could never be completed within the maximum remaining length of this Parliament? To the rest of us, it was obvious a long time ago. Did it take the Secretary of State to make clear what was clear to the rest of us a long time ago?
Mr. Ridley: I must confess that when I heard the hon. Gentleman's speech in the recent debate on privatisation I thought that perhaps we ought to look again at the case for proceeding with it even more quickly.
I believe in the privatisation of state assets just as much as I believe in the privatisation of water. However, I actually believe it important to get it absolutely right so that when the Bill comes before the House, as it will, although the hon. Gentleman probably will not be here because it will be after the next election, and perhaps will be included in our manifesto—he will not be able to find one part that does not fully satisfy the House in all reasonable quarters.
I assure the hon. Gentleman that my right hon. Friend the Chancellor will not lose revenue that could have been
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available for tax cuts this side of the election. The great advantage is that there will be even more revenue available for tax cuts after the election.
Mr. Roger Sims: Is my right hon. Friend aware that Conservative Members who warmly supported the policy of privatisation are disappointed that he has found it necessary to make this statement? However, I assure him that we realise the complexity of this legislation and are anxious that, when it comes forward, it is comprehensive. We welcome the reaffirmation of his adherence to the policy of privatisation. When he brings forward the legislation, it will have the wholehearted support of Conservative Members.
Mr. Ridley: I am grateful to my hon. Friend, to whom the information was first imparted because it was he who inquired about this matter not long ago. I am also grateful for his support for both the principle of privatisation and the obvious need to ensure that we get all aspects of this massive and complicated matter correct before presenting proposals to the House.
Mr. Michael Cocks: I congratulate the Secretary of State on maintaining his reputation for always making the worst of a bad job. Since the motivation for privatisation is mainly political, what bearing will his announcement have on the timing of the next general election?
Mr. Ridley: I do not quite understand whether the right hon. Gentleman welcomes my statement or is against it. He appeared to be somewhat ambivalent. Many Conservative Members, and quite a few Opposition Members, believe that the Government have taken the right decision to present proposals that are fully worked out and correct.
The right hon. Gentleman must reach his own conclusions about the timing of the general election. On a personal note, I hope that it is a long time away so that we can have the pleasure of the right hon. Gentleman's company a little longer.
Sir John Page: Is my right hon. Friend aware that the country will find the bogus indignation of the Opposition absolutely absurd? Does he appreciate that the captain of the Opposition ship that is sailing tonight has produced a unique feat of navigation by running into both Scylla and Charybdis on the same statement?
Does my right hon. Friend accept that all sides of the water industry will be grateful to him for giving a little more time to study the complications of privatisation before it occurs?
Mr. Ridley: I entirely agree with my hon. Friend on all but one point — I do not think that the Opposition's indignation is bogus, I think that it is genuine. I believe that the fury unleashed by the hon. Member for Copeland (Dr. Cunningham) is because he wants us to proceed with the Bill. I cannot think of any other reason for there being so little welcome for my statement.
Mr. Dafydd Wigley: Does the right hon. Gentleman accept that any prolonged period of uncertainty cannot be good for those who work in the industry and that there needs to be clarification as quickly as possible?
In view of the difficult legislative position to which the right hon. Gentleman referred, will there be any paving legislation during the next 12 months? If not, will there be

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more than one parliamentary year in which it will be necessary to introduce legislation before the matter is concluded? If so, will it not be a period of three or even four years before the matter is satisfactorily concluded?
Mr. Ridley: I can assure the hon. Gentleman that there is no uncertainty. The water industry will be privatised as soon as the general election is over and it will he done by a Conservative Government. The hon. Gentleman can assure his constituents that they have no need to worry about returning to the dead hand of state ownership. All necessary steps will be taken to ensure that when the legislation is presented it is in complete shape and perfectly proper. I cannot go beyond what I said in my statement earlier about any necessary changes beforehand.
Mr. Patrick Nicholls: Does my right hon. Friend agree that, far from this being a humiliating climb down, it is no more than what might have happened given the reply which the Minister of State made in response to the debate on water privatisation? When responding to doubts that had been expressed by Conservative Members, he said that the Government would listen.
Does my right hon. Friend agree that it is possible, if we are now to take further time to consider the privatisation proposals, to decide to abandon the proposals entirely once the exhaustive examination has been completed?
Mr. Ridley: Although my hon. Friend is right to say that this is not a climb down, perhaps he exaggerates. This is neither humiliating nor exhilarating. I do not think that we need the extra time to review whether we shall continue with our policy. I tried to tell the House that it would be necessary to come to a conclusion on many important and complex matters in an extremely short time scale. It might be better to take a little longer to ensure that we get the right answers to the questions.
Mr. Willie W. Hamilton: Does this statement imply a U-turn? If not, why should it be made at 10 o'clock on a Thursday night?
Mr. Ridley: It does not imply a U-turn. That is why it would have been perfectly proper not to make a statement. However, the House wanted me to make one. I have done so.
Dr. Keith Hampson: Does my right hon. Friend accept that for some of us there is genuine concern and not bogus indignation? That is partly because many of us have recently been defending the Government's privatisation policy. We have been defending the Government's policy on the royal ordnance factories as well.
Is my right hon. Friend aware that it caused some concern when he did not come to the House earlier to make a statement? The statement which he has made is less extensive than the written answer which was arranged. In that written answer he talks about extra powers being necessary to take part in privatisation. What are the necessary extra powers? It would have been much better for us all if a statement had been made honestly, frankly and in detail earlier today.
Mr. Ridley: I much admire my hon. Friend's efforts to convince people that the policy of privatising water is right. I hope that he will continue to defend that policy. There has been no change made to that policy and we have not abandoned it. I do not think that it is necessary for the
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Government to make a statement every time that they have not changed their policy. All that I am saying is that we are not able to see a proper way to bring a Bill forward for the next Session. I think that there was a general expectation that we would be able to do that. It is right in the interests of all concerned that I should make that abundantly clear. I think that that can be done just as well by means of a written answer as by making a statement.
Mr. Peter Snape: May I tell the Secretary of State—I add my sincere congratulations on his statement—how much we miss his sure-footed political agility in transport matters? Does he agree, fresh from his triumphs in that Department, where he managed to lose three court cases and not privatise British Airways, that not to privatise British water is entirely consistent, and could he regarded as the glittering pinnacle of a distinguished career? Bearing in mind that at the time of the right hon. Gentleman's recent promotion the Prime Minister said that he had been promoted because he was a man who gets things done, should the House, at the very least, start questioning the Prime Minister's ability as well as the right hon. Gentleman's faculties?
Mr. Ridley: The hon. Gentleman is a welcome convert to the privatisation squad. I may not have achieved anything else other than to persuade him that it is desirable to privatise both British Airways and water. I greatly appreciate his support. I shall even have a word with his leader to see whether I can arrange for him to have preferment as I have had.
Mr. Spencer Batiste: Does my right hon. Friend agree that the spectacular success of the Government's privatisation programme can be maintained only if each measure is considered at the right time and in the right way instead of trying to meet some pre-arranged arbitrary timetable? If as a result of his consultations he is satisfied that more work needs to be done before the important measure can proceed, he will be widely supported.
Mr. Ridley: I entirely agree with my hon. Friend. I am grateful to him for making the point that the policy of privatisation requires that we get each individual industry or company absolutely right before we offer it to the market and ask the House to approve its privatisation. I think that my hon. Friend will have noticed that in the queue for privatisation are gas, British Airways, British airports and Rolls-Royce. I should have thought that that was a sufficient programme to convince the House of our determination to proceed.
Mr. Allan Roberts: In view of the fact that the Secretary of State claimed that one of the reasons why he wanted to privatise water authorities was to allow them to borrow in the open market—to raise funds to do things such as cleaning up the Mersey basin—will he release the publicly owned water authorities from the restrictions that are imposed on them by the Government? The restrictions prevent them from raising money to do necessary work.
Will the Secretary of State give an assurance that money will not be taken from the Mersey basin project in order to clean up beaches in the north-west area, such as Blackpool beach, which is terribly polluted, but that extra money will be made available either from the private sector or public expenditure? Does he accept that if the high priest of Thatcherite monetarism turns heels and runs in

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the face of opposition from all the trade unions in the water industry — the public opinion is that the Government are doing a U turn and that privatisation has not been postponed, it has been cancelled because a general election will intervene — it will be one of the industries that the next Labour Government will not have to take back into public ownership?
Mr. Ridley: We are doing awfully well tonight. We have another recruit in favour of water privatisation in the unlikely figure of the hon. Gentlemam, as well as the hon. Member for West Bromwich, East (Mr. Snape). Do the Opposition want, or do they not, the Government to privatise the water industry? When we said that we intended to do so, they criticised us. When we said that, unfortunately, we had to postpone it, they criticised us for postponing. They really are all over the shop. The desire for opposition seems to have got the better of their judgment. I had better not reply at great length because I do not want the Opposition to miss their sleepers, which is the best thing that could happen to the House.
Blackpool beach may be polluted, but it is not polluted with radioactivity as the MEP, Mr. Huckfield, keeps saying. I think that it is disgraceful for him to make such accusations to try to frighten people away from the beaches of the north-west. Those beaches are the finest in the land. I encourage everyone to spend their holidays there.
Mr. Peter Bruinvels: My right hon. Friend is a very dear friend. I must say that I am disappointed to hear of the delay, as someone who has campaigned for water privatisation and raised the matter in business questions today. Will my right hon. Friend assure the country that water privatisation will take place and that it will be a commitment in the Conservative manifesto? Will he assure the House also that, in the meantime, a full explanation will be given for the delay by his Department to Roy Watts and the Thames Water Authority, because Mr. Watts has been a great supporter of water privatisation?
Mr. Ridley: Yes, Sir. We shall proceed with privatisation. There is little doubt about that, because I believe that we shall be in a position to proceed with it after the next election. I understand that Mr. Watts was on television tonight showing his complete understanding of what the Government are doing and agreeing that it is right to ensure that the Bill is correct rather than introduce legislation that is not yet in proper shape.
Dr. John Marek: Will the Secretary of State be a little more specific and say whether, if the proposals are not enacted by the next general election, they will be part of the next Conservative manifesto? If he cannot answer that question with a simple yes or no, will he say whether he personally will fight to ensure that they do become part of that manifesto?
Mr. Ridley: The anwer is yes.
Mr. Edward Leigh: The hon. Member for Copeland (Dr. Cunningham) talked about pathetic behaviour. Is not the only pathetic thing his attempt to make a mountain out of this molehill of a statement? The hon. Gentleman rushed into the Chamber at 6.30 today in a lather demanding a statement. He had
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to be dragged off his sleeper to come here tonight. All he found was that the Government, in a sensible and pragmatic way, have listened to the people's representations and intend to carry on with denationalisation as early as possible. Should we not be asking the hon. Member for Copeland: where is the beef?
Mr. Ridley: The hon. Member for Copeland would have been wiser if he had caught his sleeper and gone away tonight.
Mr. Martin Flannery: Will the most arrogant Minister in the Government now talk reality to us and tell us what has dragged him kicking and screaming at 10 o"clock on a Thursday might to the most monumental climb down we have heard for years? Will the right hon. Gentleman finally admit that the Government — [Interruption.] The laughter of the Leader of the House, so feigned and obvious, shows that I am telling the truth. Will the Secretary of State now admit that the Government are in a terrible mess and do not know where they are going?
Mr. Ridley: I do not know where the hon. Gentleman comes on the arrogance table, but I do not think that he is at the bottom of that league. If the Government take a sane and sensible decision — first, to listen on the privatisation matters which worry people and, secondly, to give enough time to get the answers right—it is, as has been said, very worrying to the Opposition parties
Mr. Tony Marlow: I totally share my right hon. Friend's, commitment to water privatisation I am interested, as is my right hon. Friend, to hear the commitment of that relatively moderate member of the Labour party, the hon. Member for Bootle (Mr. Roberts), to renationalisation in the unlikely event of a Labour Government ever being returned. I wonder whether my right hon. Friend can find an appropriate adjective to describe the hon. Member for Copeland (Dr. Cunningham), who said that he was scandalised about the sensible decision which my right hon. Friend took this evening, but would have gone on to say that he was scandalised if we had proceeded with water privatisation?
Mr. Ridley: We must look at this point. Labour Members want the water authorities to have the freedom to spend capital as though there was no limit. Of course, the only way in which that can be done is by privatising those authorities. It is clearly impossible in a planned public sector economy to have freedom to spend capital—the two are totally inconsistent. We are increasingly seeing from the Labour party a recognition of the importance of private capital, which of course means private ownership. I welcome that. I am sure that Labour Members will join me in supporting the Bill as they sit in opposition after the next election.
Mr. Dave Nellist: If the privatisation of the water authorities is not now to take place during the life to this Parliament, will the Secretary of State produce figures on the costs of the appointment of J. Henry Schroder Wagg as bankers and Touche Ross as the accountancy firm? When those estimates have been produced, will he send the bill for this exercise so far to the place that should pay it—Conservative Central Office in Smith square?
Mr. Ridley: No. We have had excellent advice from those banks and advisers, and I am sure that more advice

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will be needed as we move towards privatisation. I cannot believe that the hon. Gentleman would want us to advance in this matter without taking the proper advice.
Mr. Gary Waller: Is my right hon. Friend aware that many of those who espouse the principle of privatisation in general look for certain pre-conditions—for example, that the enterprises to be privatised will market their products in as competitive a way as possible and will require as little control and regulation as possible? They recognise that the situation in the water industry is different from that in many other industries. Before new proposals are brought forward, will careful consideration be given to those factors?
Mr. Ridley: I agree with my hon. Friend. Those are important considerations which require proper study. That is why it would be difficult for me to complete the Bill in time for early introduction next Session, and that is all I have said.
Mr. Andrew Faulds: Does not the postprandial performance on the Tory Benches and the inane grin on the face of the right honourable Tewkesbury cat prove that the Government have yet again had to retreat from a most embarrassing, ill-judged and disastrous policy?
Mr. Ridley: No, Sir.
Mr. Harry Greenway: Will my right hon. Friend confirm that in this, as in all things, the Government will put the consumer and the people first? Has he noticed that in all the exchanges tonight no member of the Labour or Liberal parties has mentioned the consumer and the people of Britain? They do not care, and never have cared, about the consumers or the welfare of our people.
Mr. Ridley: Yes; and it can only be described as an uncaring party that opposes the Bill and then opposes its delay.
Mr. Ray Powell: Has the right hon. Gentleman consulted the Secretary of State for Wales—one of the most ardent supporters of privatisation about abandoning the privatisation of the water industry? Perhaps the Government's reasons for abandoning the idea will he explained to the people of Wales. I welcome the right hon. Gentleman's assurance that the matter will appear in the next Conservative election manifesto, because that will represent a rare occasion on which the people will have been consulted on a major issue before action has been taken. On that occasion the electors of Wales will give the Conservatives a vote similar to that which the House gave the proposed Sunday trading legislation.
It is high time that the right hon. Gentleman came clean and admitted that he has been persuaded to drop the idea of privatising the water industry by the arguments of the 10,000 workers in the industry and the statements of local authorities throughout the country.
I assure the hon. Member for Ealing, North (Mr. Greenway) that the consumer's interest was well represented at a recent conference in London, when those concerned with the water industry made it clear that in no way would they support the privatisation of the industry.
Mr. Ridley: I have the full support of the Secretary of State for Wales in what I have said tonight. He feels, as I do, that proposals that we present to the House must be correct. The hon. Member for Ogmore (Mr. Powell) and his hon. Friend the Member for Copeland do not seem to be speaking with one voice tonight.
Mr. Max Madden: if the right hon. Gentleman claims that his statement does not represent a climb down or a U-turn, will he accept that most people will see it as a Government cock-up? He owes it to the public to explain whether he inherited the decision that he has made or whether it is all his own work.
Mr. Ridley: The hon. Gentleman may not have heard my statement. I said that we were not able to proceed in the next Session of Parliament but would certainly proceed with the legislation, if necessary, immediately after the election. I do not see how that changes the policy in any respect.
Mr. Robert N. Wareing: Is not the accident-prone right hon. Gentleman admitting that, in view of the fact that there was a commitment in the Queen's Speech only a few months back that there would be privatisation of water, the Government did not do their homework and are now having to cancel this not just for one Session but for two? Is it not also the case that he has had umpteen representations from people with expertise, including Tory councillors, saying that privatisation was ideology, not reality? Should not the message of the House this evening to the consumers and workers in the water industry be "rejoice" because the industry is now safe and there is no chance of privatisation because the Government will not win the next general election?
Mr. Ridley: I am afraid that it is the hon. Gentleman who has done his homework wrong. He should look at last autumn's Queen's Speech: he will find no mention of water privatisation.
Mr. John Home Robertson: Thankfully, the Government never threatened to inflict this lunatic idea on Scotland, but, since the right hon. Gentleman is apparently writing the next Conservative party election manifesto here this evening, can he give us an undertaking that the idea will be excluded from the manifesto as it affects Scotland?
Mr. Ridley: No, Sir.
Mr. Alfred Dubs: Whatever the Secretary of State thinks the position is tonight, by tomorrow morning his statement will be seen by the majority of his supporters as a humiliating climb down and, at the very least, what he has said tonight is an indication of utter incompetence by the Secretary of State and his Department? Opposition Members who are utterly opposed to water privatisation are naturally pleased that there will be a delay, but will the Secretary of State have a bet with me that it will never happen?
Mr. Ridley: I think that the headlines tomorrow morning will be: "Labour party in turmoil; split down the middle"; "Totally incompetent Front-Bench position, backed up by idiotic statements from the Back Benches"; and, finally, to the House's relief, "All departed for sleepers".

Finance Bill
Mr. Terry Davis: On a point of order, Mr. Speaker. May I remind you that during business questions today I asked the Leader of the House to explain why the Government were insisting on taking the Report stage of the Finance Bill next week in spite of the fact that the Government have not tabled all their new clauses and amendments to the Bill? I also remind you that
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the Leader of the House was kind enough to express some concern. May I, through you, Mr. Speaker draw the attention of the Leader of the House to the fact that tonight the Government have tabled another 68 amendments to be taken on the Report stage, which begins next Tuesday?
Mr. Speaker: That is not a matter for me. The hon. Gentleman prefaced his remarks by saying that he had raised the matter at business question time.

Bedford Commercial Vehicles (Redundancies)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Lennox-Boyd.]
10.47 pm
Mr. David Madel: I am grateful to have this opportunity of initiating a short debate on the consequences of the recently announced redundancies at Bedford Commerial Vehicles .1 am especially pleased that my hon. Friend the Minister of State, the hon. Member for City of Chester (Mr. Morrison), will reply to the debate. I am also grateful to my next door neighbours, my hon. Friends the Members for Luton, South (Mr. Bright) and for Luton, North (Mr. Carlisle) for being present.
This is a depressing time for Dunstable and Luton with General Motors' plan to reduce the work force by 1,700 employees. My hon. Friend the Member for Luton, South and myself were most grateful to my hon. Friend the Minister for seeing us on the day the announcement was made.
In my view, if the merger talks with British Leyland had been successful — successful to me would have meant that Dunstable had a secure and proper place for the continuation of production of commercial vehicles as well as Luton—we would not now be having this debate on the redundancies. I do not want to spend too much time answering the critics of General Motors and the merger talks, some of whom, alas, are in the parliamentary Conservative party, but running through their criticisms is a thread of considerable ignorance about the activities of General Motors in the United Kingdom. The sort of things that critics of General Motors forget are as follows. They forget the contribution by General Motors to this country's war effort between 1939 and 1945, in the enormous production of vehicles to help the British Army. They especially forget 1939 to 1941, when America was neutral, and we were virtually on our own, yet General Motors continued with its production in this country, thereby completely contradicting the argument that somehow or other General Motors cannot do anything unless the American Government tell it to.
Secondly, critics forget 1956. We shall learn a lot about that this year, 30 years from Suez, when there was a tremendous row between the American and British Governments, but that in no way disturbed General Motors' production and investment in this country. Thirdly, people forget Vauxhall's move to Ellesmere Port in the early 1960s, to a black spot unemployment area, with considerable investment, providing brand-new jobs. My goodness, were not certain of my right hon. Friends pleased to be able to say at the 1964 general election how delighted they were that Vauxhall had moved to Ellesmere Port. Critics also forget the heavy losses that Vauxhall and Bedford Commercial Vehicles have, alas, sustained over the years, yet General Motors continues to stay with us, and very welcome it is, too.
The present situation is grave. It is summed up by part of the information bulletin given to employees last week at Bedford Commercial Vehicles, at both Dunstable and Luton. The announcement says that General Motors
"have now announced the 1985 net losses of £73 million, up from £62·4 million in 1984 and £52·5 million in 1983.
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Bedford's losses continue to run at around Ell million per week and further urgent action must therefore be taken to reverse this trend."
In spite of that, I believe that General Motors is here to stay. I want it to stay in Dunstable and Luton in a big way, and so do the people of Bedfordshire, who have confidence in the company as employers.
The present situation poses two challenges for management and unions. For management, maximum information on investment and product development plans, especially how Bedford Commercial Vehicles will now fit into General Motors' worldwide operations, is absolutely vital for the employees at Dunstable and Luton. For the unions, the challenge is that there must be continuing full co-operation with management to work to turn the company round to profitability. I have already mentioned the losses which have been drawn attention to in the information bulletin. They are serious, and they must be reversed. In my view, they can be reversed with the full co-operation and commitment of management and unions.
In that grave situation, the challenge to us three Members of Parliament representing Bedfordshire is to make some suggestions as to what we think can now be done to help Bedfordshire. First, we should be using Dunstable college as a base for further training and training opportunities. Local employers express great confidence in what Dunstable college does on training. I want to see additional places on the courses, and new courses set up to help. As I said, local employers have confidence in the college. I believe that we can build on that and help people who are being made redundant.
Secondly, there is Bedfordshire's structure plan. The emphasis now must be on industry. Where we in Bedfordshire can successfully and sensibly develop land, the emphasis must be on developing that land for industry that will provide new jobs. That is not just me and my hon. Friends who are saying that because the councils are also saying it. Just the other day I had a communication from mid-Bedfordshire district council in part of my constituency. It wants to see sensible industrial development to underpin the community and to provide new jobs.
Thirdly, south Bedfordshire district council has raised a considerable sum of money from its policy of selling council houses. I would like to see a large portion of that money released so that the council can get on with the vitally needed modernisation programme on its council houses. That would provide new jobs and give people confidence and opportunities.
We have just heard quite a to-do on water. The Anglian water authority must look carefully at the amount it spends in Bedfordshire to make sure that it is not denying us the infrastructure needed for industrial development. We do not want to lose jobs and curtail the expansion of industry because the Anglian water authority cannot provide the necessary supplies and drainage that will allow new industry to come in and develop and provide new jobs.
Each time we have more scheduled airline services at Luton airport it provides welcome new jobs. Luton airport is a major employer in Bedfordshire and things must be done by the Civil Aviation Authority and by others to provide more scheduled services. As I say, the more scheduled services there are in the airport, the more jobs are created, and that helps our area.

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I welcomed yesterday's statement on TVEI by my right hon. and learned Friend the Paymaster General. He said:
"We also need to improve the vocational qualifications system to encourage more people, young and old, to improve their skills when they have left school."—[Official Report, 2 July 1986; Vol. 100, c. 1004.]
That obviously means that the Government are moving to provide more opportunities for Bedfordshire. The "Action for Jobs" publication by the Manpower Services Commission is sub-titled, "Opening more doors". I appeal to the Government to make sure that all doors in Bedfordshire are open to provide those opportunities.
In my short speech, I have called for maximum cooperation in the county because I want to see people working together to get us out of this difficulty. My final plea to the Government is please to do all they can by their economic and purchasing policies to encourage and help General Motors. Through the Government helping and working with General Motors we can start to turn around this difficult unemployment situation.
General Motors is a most welcome employer in Bedfordshire. We want to find more opportunities for new employers and industries to come in and help us out of our difficulties, but above all we want to do things that will make General Motors say that the United Kingdom, and especially Bedfordshire, is a good bet for investment and that it intends to increase its investment in the county of Bedfordshire.
10.53 pm
Mr. Graham Bright: I am grateful to my hon. Friend the Member for Bedfordshire, South-West (Mr. Madel) for the opportunity to take part in this debate. The bulk of the redundancies announced by General Motors, some 1,000, were in my constituency. We face the unpalatable prospect of losing 660 jobs in the van plant and 340 from the press shop.
There is chronic overcapacity in vehicle production in Europe and that has been known by the trade and by the House for many years. There are too many vehicle producers competing in a depressed market and Bedford Commercial Vehicles has suffered badly. Until 1979 it was profitable, but in 1980 it incurred a record loss of £83 million. Since then, it has lost a further £300 million and losses are currently running at £1·5 million a week.
Bedford Commercial Vehicles and its parent company General Motors recognise the scale of the problem and have acted to meet it. They have invested over £70 million since 1983 restructuring the whole of the van operation in Luton and reorganising heavy truck production at Dunstable. Bedford's heavy vehicle production capacity has been reduced and two imaginative new light vans, the Midi and the Rascal, have been introduced, both at the Luton plant. The company has been actively seeking partners and I thought that it was an extremely imaginative idea that it should join forces with Leyland to produce a base in the United Kingdom commercial vehicle market of some 26 per cent. The company has also been talking with MAN and Renault in an attempt to get together for future operations. None of those ideas have come to fruition.
I still hope that we get General Motors and Leyland back together. I believe that that is the only solution which will help United Kingdom limited. I fully support GM's
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efforts in seeking deals because it must get together with someone else. As my hon. Friend the Member for Bedfordshire, South-West has said, GM has played a major part in the British motor industry and it has sustained the economies of Luton and many other towns in both good and bad times. Many other companies would have been driven out of the United Kingdom as a result of the losses it has endured both at Vauxhall Motors in the 1970s and now at Bedford since 1980. However—and I stress this—GM has kept faith in Britain. It has put its industrial relations, product range, and marketing for Vauxall Motors right. I am sure that the same can be done for Bedford Commercial Vehicles.
The first steps—tighter control of manpower, better stock control and greater production efficiency — are under way. These will restore the company to profitability. It would be a grave mistake to underestimate GM's determination to rationalise its heavy truck and van operation. It is perfectly capable of reviving them and taking first place in the European truck and van market, just as we have seen it revive its motor car section in Britain.
Unfortunately, the re-shaping of the GM strategy is likely to he at the expense of others. The deal which the Government sought a few months ago — to transfer Leyland Trucks and Range Rover to GM—would have ensured that Britain was the centre piece of the company's European production. The marketing and the production resources of the companies would have meant an overall increase in jobs, not to mention the prospect of new engines being designed and produced in Britain.
Because of short-sighted and ill-judged criticism, that opportunity has been lost. I have no doubt that, sooner or later, Bedford will find another partner, if it is not BL. If the partner is French, the design, manufacturing and the new range of trucks that GM requires—let us remember that it abandoned its world truck concept only last week —could shift to the continent.
I believe that Luton and Dunstable will continue to build vans and trucks, but I wish to issue a warning about the after-effects of the failed GM deal. It may well happen that the component manufacturers situated in the Birmingham and midlands area will lose their trade if a source of manufacture was started on the continent and the centre of gravity moved to France. Those Members and the people who scuppered the GM/Leyland deal could suffer far more than we have in Luton.
Leyland is too small to survive on its own indefinitely and it will be left out in the cold. In Luton we have paid the first instalment of the price to be met for rejecting the Bedford/Leyland merger … Other companies will have to face the realities of not supporting that deal. I regret the fact that that has happened and only hope that there is a chance of getting GM to base itself in Britain with possibly, Leyland, as its partner.
10.58 pm
Mr. John Carlisle: I am grateful for the opportunity to make a short contribution in support of my hon. Friends the Members for Bedfordshire, South-West (Mr. Madel) and for Luton, South (Mr. Bright) in this important debate.
The absence of any representative of the Labour, Liberal or SDP parties is regrettable. Indeed, we would not be gathered here, on this sad day for the Luton and Dubstable district, but for the posturings of the right hon.

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and learned Member for Monklands, East (Mr. Smith). He was one of the prime movers in scuppering the deal that was laid out between General Motors and British Leyland. For the right hon. and learned Gentleman not to have the courtesy to the House, to the people of Luton and Dunstable and to the unions from which he so regularly sought advice at the time of the intended merger, to be present tonight is disgraceful. He should be here to make a speech or, at least, to hear about the anger and frustration of our constituents at General Motors having to lay off 1,700 men because of the decision made. There is no doubt in my mind, nor, I think, in the minds of my constituents, that that is a direct result of the fact that the merger did not take place.
I am sure that my hon. Friend the Minister will share our disappointment that the Government did not see fit to go ahead with the original recommendation. Although I understand the pressures that they were under from Opposition parties and from Conservative Members, particularly my right hon. Friends the Members for Old Bexley and Sidcup (Mr. Heath) and for Henley (Mr. Heseltine). it is to he regretted that the jobs were lost because the merger did not take place.
At the time we were extremely worried about the antics of the right hon. and learned Gentleman. Having had the nerve to turn up at Ellesmere Port in a Japanese car to talk to the unions at General Motors, he had the utter cheek to come to Luton to stir up the unions to such an extent that many of their members who came to lobby in the House turned up with pro-BL and pro-Land Rover stickers. In effect, it was like turkeys voting for an early Christmas. Now that Christmas has arrived in Luton and Dunstable, the results of his efforts and those of the Opposition parties is that we could well see the end of the United Kingdom truck industry as we know it.
My hon. Friend the Member for Luton, South gave a warning. I repeat the warning that I gave in an Adjournment debate some weeks ago that there is now a real chance that that industry will disappear. The Opposition parties do not care about the needs of their members which is why we are present to help our constituents and to help rectify the matter. It is good to see my hon. Friend the Minister in stout defence of what we have sought to do in the Luton and Dunstable area, and I thank him for the assistance that he gave us at that difficult time.
There is still a chance for our truck industry if the Government would go back to GM and say, "All is not over". If GM returns to the table with the sort of genuine proposals which it made at the time, something could be salvaged from this sad affair. It seems that those 1,700 jobs may have gone for ever, but we have absolute confidence in GM making an extremely generous settlement to those unfortunate people who have lost their jobs because that is it's history as an employer in our area.
We face an overcapacity market and extreme difficulties, and GM will need every assistance. That is why I fully endorse the comments of my hon. Friend the Member for Bedfordshire. South-West when he asks the Minister, if it is within his power, to provide every opportunity for more training, investment and assistance from the Government to our area to help those who have lost their jobs and, more important, those who now will not have the privilege of working for GM.
We are not downhearted, but, obviously, extremely disappointed. We look forward to the future with great
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optimism, but the Minister's help and guidance will be imperative if we are to survive these traumatic times and put GM back where it belongs, at the top of the motor and truck industry.
11.4 pm
The Minister of State, Department of Trade and industry (Mr. Peter Morrison): I am glad that my hon. Friend the Member for Bedfordshire, South-West (Mr. Madel) has had the opportunity to raise this difficult, awkward matter on the Adjournment this evening. Nobody could do more for his constituents than my hon. Friend and my hon. Friends the Members for Luton, North (Mr. Carlisle) and for Luton, South (Mr. Bright). I am grateful to my hon. Friend for his kind remarks about my meeting with him. He has been very helpful to me in the nine months for which I have held my present position in terms of keeping me fully abreast of the position in his constituency and in Bedfordshire as a whole. For that I am grateful. Indeed, I hope and that he and his constituents, and the constituents of my hon. Friends the Members for Luton, North and for Luton, South will be aware that their calls and their concerns are constantly brought to the attention of the Department of Trade and Industry.
My hon. Friends have reminded the House of the long and important history of General Motors in the United Kingdom. My hon. Friend the Member for Bedfordshire, South-West asked me to do all that I can to encourage General Motors. Of course I will do everything that I can to encourage General Motors — how could one do otherwise. Vauxhall, for example, as my hon. Friends the Members for Luton, South and Luton, North will know, was established in 1903, and it was merged in 1925. so that its history in the country is very long and significant.
I believe that I am right in saying that some 3·5 million commercial vehicles have been built in Britain for worldwide markets. But, as my hon. Friend the Member for Bedfordshire, South-West reminds us, it remains a major supplier of trucks to the British Army. That supply has gone on through what have been awkward and difficult periods in the course of the previous decade.
We forget at our peril that over 80 per cent. of the content in Bedford Vehicles is United Kingdom sourced. Vauxhall's United Kingdom content is increasing to 6(1 per cent. this year, while 64 per cent. of the cars and vans sold here in 1986 will be built in the United Kingdom. Not only does General Motors' investment in the United Kingdom continue; it has gone on for a long time, and General Motors currently employs directly some 27,000 people.
Like my hon. Friends, I very much regret that the redundancies have proved necessary. But, as my hon. Friends have reminded the House, I regret to say that in the European truck industry there is some 40 per cent. overcapacity so that rationalisation is necessary.
I agree with my hon. Friend the Member for Luton, South that, listening to what happened in debates and at Question Time in the earlier part of this year, one would not have noticed that the Opposition realised that rationalisation of the truck industry was at all necessary. I regret to say that they are burying their heads in the sand if that is what they continue to believe. Rationalisation — and I am sorry that no Opposition Members are present this evening in what is an important debate—however it comes is bound to come, and it is bound to be better if it is on a planned and rational basis rather than as a result of putting off what will be awkward and

1283
difficult decisions. Redundancies are bound to be unpleasant, but in terms of getting rationalisation they are part of a total package. That package includes lower inventory costs, the raising of efficiency and better marketing.
The final solution—as all my hon. Friends who know the Bedford and Vauxhall situation will agree—is that management and work force act and co-operate. I have no doubt that that can and will be the case, despite the fact that the industry has a difficult and complicated decision to take. I understand that a considerable number of applications have been made for voluntary redundancies. Given that quite a considerable number of the workers are aged over 55, I hope that the company will be able to meet its job reduction objectives without having to have recourse to involuntary redundancies.
My hon. Friends have mentioned at some length the general employment position in south Bedfordshire. I agree about the schemes that have been installed there, not least because in a previous incarnation I had something to
1284
do with the youth training scheme, the community programme, with the original launch of the TVEI, and with the adult training programme.
Like me, my hon. Friend the Member for Bedfordshire, South-West has considerable confidence in Bedfordshire's future. Given what the public sector is doing through the Manpower Services Commission to help with training and education, and the entrepreneurial initiative that has always been evident in Bedfordshire, I am sure that the county will continue to grow. My hon. Friends have raised a matter that is very important to them. This debate has not come as a surprise to me, because we have already had endless discussions, letters and telephone calls, as all my hon. Friends take their constituents' position very seriously, and wish to keep me fully informed of what may be best for the future. I can assure them that I shall do everything that I can, having carefully considered the advice that they give me.
Question put and agreed to.
Adjourned accordingly at twelve minutes past Eleven o'clock.

PRIME MINISTER
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  Drinking and Driving
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Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Chichester): The LORD CHANCELLOR on the Woolsack.
Lord Blyth—Sat first in Parliament after the death of his father.

Zimbabwe: Detention of British Citizens
The Marquess of Salisbury: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps they are taking to secure the release from prison in Zimbabwe of Philip Hartlebury and Colin Evans, both British citizens who have been detained without trial for more than five years.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, my right honourable and learned friend raised those cases when he visited Zimbabwe in January 1985, as did my honourable friend the Minister of State in June this year. The High Commission in Harare has also continued to make clear to the Zimbabwean authorities our hope that Mr. Hartlebury and Mr. Evans can be released soon. Their appeal against detention is due to be heard on 30th July.
The Marquess of Salisbury: My Lords, I thank the noble Baroness. Is she aware that there have been several previous appeals against detention but that they have all been turned down? Is she aware also that, as yet, there have been no charges made against the men in question, although they were informed two years ago that they were about to be released? Can the noble Baroness say what treatment they have received during their detention?
Baroness Young: My Lords, their detention is regularly reviewed by the tribunal, as laid down in the Zimbabwean constitution. Since June 1973 three separate review tribunals have been convened, but none has recommended the release of the men. On 13th March this year the men claimed in the High Court that the proceedings of the tribunal were unfair. In March of this year that petition was dismissed. An appeal to the Supreme Court will now be heard on 30th July. I must make clear that the case is therefore sub judice.
So far as concerns the men's treatment, our High Commission consular staff have paid regular visits to Mr. Hartlebury since he was first arrested. Mr. Evans was until recently a Zimbabwean citizen also, and therefore we had no consular standing in his case, but as he has now allowed his citizenship to lapse, he has been regularly visited by the High Commission staff.
Lord Cledwyn of Penrhos: My Lords, is the noble Baroness aware that we fully support the representa-tions that have been made by her right honourable and learned friend and by the Minister in this matter? Can she say whether or not the family of Mr. Hartlebury are still in Harare, and whether it is the case that Mr. Hartlebury's assets have been taken away? If that be the case, can the noble Baroness say what assistance his family are receiving to enable them to live? Can the noble Baroness also say a word about Dr. Frank Bertrand, a British citizen who has also been detained in similar circumstances? What treatment is being meted out to him?
Baroness Young: My Lords, as to the second point of the noble Lord's question, I shall have to write to him because I have no information to hand. As to the first, Mr. Hartlebury is a British subject, as I have indicated, and to the best of my knowledge and belief his immediate family were until recently resident in Harare. Because he is British, he is visited regularly by consular staff.
Lord Orr-Ewing: My Lords, my noble friend's earlier remarks implied that our diplomatic represent-atives are not very closely in touch with these men. Can she say whether they are regularly visited and whether their families are regularly visited? Is their situation unique, or, given the intention of Dr. Mugabe to form a one-party state, are other people being detained without trial, and kept in prison? Surely our diplomatic representatives ought to be in close touch with those problems and reporting back, so that this House and another place know what is happening.
Baroness Young: My Lords, I very much regret it if anything that I said might have been construed in the terms that my noble friend has suggested. The men have been regularly visited by our consular officials. If they were not British citizens, then of course our locus standi would be very different. As I have explained, Mr. Evans was also a Zimbabwe citizen until recently, but has now allowed that citizenship to lapse. Both men are now regularly visited and we have been in touch with the families under those circumstances.
So far as concerns any other British subjects, there are, as I understand it, two other British citizens held under the same regulations. Charges have not yet been laid against them, but they, too, would be visited regularly.
Lord Elwyn-Jones: My Lords, are those men legally represented and have they the resources to be legally represented?
Baroness Young: My Lords, their cases, unquestion-ably, have been taken up, and they have lodged an appeal to the Supreme Court. As to their expenses, I am not in a position to comment, but their case is being heard. Perhaps I may say to your Lordships that in these cases, which have been taken up by both my right honourable and learned friend and by my honourable friend Mrs. Chalker in another place, it is sometimes in the best interests of the people involved if matters are not necessarily talked about across the Floor of the House. We all of us wish to do what we can in the best interests of the men concerned.
Lord Gladwyn: My Lords, what are the crimes that these men are supposed to have committed?
Lord Broxbourne: My Lords, a question from this side, I think. Does my noble friend appreciate that she has not answered the very important question that was put to her by the noble and learned Lord, Lord Elwyn-Jones? Is it not necessary that in proceedings before the Supreme Court the gentlemen referred to in the Question of my noble friend should be adequately, properly and professionally represented? Will Her Majesty's Government do what in them lies to ensure that that is the case?
Baroness Young: My Lords, I understand the point made by the noble and learned Lord, Lord Elwyn-Jones, and by my noble friend Lord Broxbourne. The information that I have is that the cases have been reviewed and that there is to be an appeal to the Supreme Court. Obviously the men cannot do that unless they have been able to support that appeal. I assure the House that our consular officials and the High Commission will do what they can under the circumstances.
Lord Mellish: My Lords, how can a case be sub-judice—
Noble Lords: Order!
Lord Gladwyn: My Lords, what offences are the men supposed to have committed? Of what are they accused?
Baroness Young: My Lords, the two men were originally charged with contravening the Zimbabwean Official Secrets Act and the Emergency Powers Maintenance of Law and Order Regulations. On 28th January 1983 they were acquitted because the court ruled that certain prosecution evidence was inadmis-able. They were re-arrested under the country's emergency power regulations, which were created many years before the present Government in Zimbabwe under regulations passed by the former Rhodesian régime.
Lord Nugent of Guildford: My Lords, is my noble friend the Minister aware that discouraging exchanges across the Floor of the House on this matter hardly seem fit in this case? These people have been in prison for five years. Is my noble friend aware that it is an outrage to human freedom that men should be treated like that? Is she further aware that this calls for the utmost influence to be used by Her Majesty's Government to get justice for these men?
Baroness Young: My Lords, once again, I much regret that my noble friend should feel that the men are not being helped. We have used what influence we have. My right honourable and learned friend visited Harare and there have been other ministerial visits. We have used our influence through our High Commission and by regular visits. I have explained the situation. It is a matter for the Zimbabwean legal system, ultimately, to determine what shall happen. Of course, I note the very strong feelings in all parts of
1028
the House on this matter, and what we all have to determine is how best we can help in this situation.
Lord Cledwyn of Penrhos: My Lords, may I further pursue the extremely important question of legal representation raised by my noble and learned friend and by the noble Lord, Lord Broxbourne? The House will fully understand that the noble Baroness may not have the details in her brief, but will she be good enough to look into the matter and inform my noble and learned friend and the noble Lord whether or not solicitors and counsel have been instructed in this case?
Baroness Young: My Lords, I shall of course do as the noble Lord asks. As I am writing to him on the other matter, I shall also advise him on this matter. I can say that under the constitution in Zimbabwe there is provision for such detentions to be regularly reviewed by a tribunal. Although it would be true to say that there has been some administrative delay, the procedure has in the main been followed.
Lord Harris of Greenwich: My Lords, is the noble Baroness aware that gratified though we are to learn that the tribunal exists, the fact is, as her noble friend pointed out, that these people have been held in custody for five years? Is it not quite intolerable that this situation continues in circumstances where, as the noble Baroness recognises, there is widespread concern in all parts of the House?
Baroness Young: My Lords, I have taken the point made by the noble Lord. We are speaking about an independent country, Zimbabwe. We can only make the representations that we do. We have to consider all the factors involved. We have made our representa-tions, as I have already said in answer to an earlier question, and we are not in a position, because it is not the United Kingdom, to do more than make these representations in the course of justice in another independent country.
Lord Tordoff: My Lords, is it not true that we have a duty to make sure that these people are properly represented? That question has been asked a number of times from all sides of the House. To my mind, it is astonishing that the noble Baroness is not able to give a simple answer to this simple question: have they been properly represented?
Baroness Young: My Lords, to the best of my knowledge and belief they have been properly represented and the procedures are taking place. However, we have to recognise that we are, as I have said, speaking about an independent country and one must recognise the limits of what we, as another independent country, can actually do in the circumstances.
The Marquess of Salisbury: My Lords, is it not correct that these regulations were produced when there was an emergency and they have been continued when presumably no such emergency exists? Is it not an offence against human rights to continue in this way?
Baroness Young: My Lords, there is of course something in what my noble friend says. The regulations which were introduced by the former Rhodesian regime were produced at a time when the situation was not as it is today in Zimbabwe. However, whether or not these regulations are repealed is a matter for that Government.
Lord Mellish: My Lords, the noble Baroness said that the matter is sub judice. How can that be when there has not been a trial?
Baroness Young: My Lords, the appeal to the Supreme Court is to be held on 30th July. It was originally fixed for 28th June but was delayed as the defence counsel was not available. In those circumstances it is right to recognise that this whole long procedure—it is the end of a long procedure—is still sub judice.

Trading Codes of Practice
3.15 p.m.
Baroness Burton of Coventry: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government, whether, further to their reply to the Baroness Burton of Coventry's Starred Question on 7th June 1984 (H.L. Debates, col. 770), they are now able to state the expected date of publication by the Director General of Fair Trading of his discussion paper dealing with trading codes of practice.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth): My Lords, I understand that the Director General of Fair Trading plans to publish next month his discussion paper on the concept of a statutory general duty to trade fairly.
Baroness Burton of Coventry: My Lords, is the Minister aware that I am glad we have managed to get somewhere after two years, although I appreciate the delay has not been the Government's fault? However, can the Minister go further? Does he recall that way back on 7th June two years ago I stressed the concern about enforcement of codes of practice and asked whether it would be helpful in general if there were to be an extension of these codes of practice negotiated with trade associations? Furthermore, can the noble Lord tell the House whether the discussion paper that is to be published soon covers that aspect and also the general consideration of the concern felt about traders who are not members of associations?
Lord Lucas of Chilworth: My Lords, I do indeed recall the exchange way back in June 1984. Although I do not know the total content of the paper, I understand that it will review relevant areas of law and the experience of the Office of Fair Trading with codes of practice. The paper will also consider parallels for a general duty both in domestic and overseas legislation.
1030
It will also outline options on how a general duty might be framed and enforced.
As regards enforcement on companies or traders who are not within a trade association. (I should perhaps put in parenthesis that there are 20 codes already in practice) the director general has powers to seek assurances from companies or traders who infringe and has further powers in the event of those undertakings not being kept.
Baroness Burton of Coventry: My Lords, may I help the Minister a little more with the Question? Does he recall that the noble Lord, Lord Belstead, in answering my Question on 7th June two years ago, said that both these matters to which I had referred he understood to be matters which the Director General of Fair Trading is considering? Has the noble Lord the same information and will he confirm it?
Secondly, if the proposals from the director general necessitate legislation, will the Government let the House have a statement as to their reactions on the report when it is published?
Lord Lucas of Chilworth: My Lords, on the first point, I have explained that I do not know entirely what the paper will contain, and since it is to be published next month it is a little late for me to direct the attention of the Director General of Fair Trading to the point raised by the noble Baroness this afternoon.
On the second point, the Government await the publication of the discussion paper with interest. We shall of course consider very carefully any proposals that it contains and any proposals that emerge from the director general's consideration of the response he receives to that paper.
Baroness Gardner of Parkes: My Lords, can my noble friend the Minister inform me whether the discussion paper will cover further the items which we discussed recently when this House passed the Consumer Safety (Amendment) Bill, which he agreed was just a first step in this matter? Will this paper on fair trading cover this matter in a wider aspect? If it does, is my noble friend aware how welcome that would be?
Lord Lucas of Chilworth: My Lords, I can only say to my noble friend that I do not know exactly what is contained in the paper. It is a paper on fair trading. It is certainly not a paper on consumer safety, so I imagine that the safety elements will not be included. The paper is about fair trading and about codes of practice.
Lord Bruce of Donington: My Lords, is the noble Lord aware that the production of this discussion paper has taken an unconscionable time? Can he give some indication as to the extent, if any, that the collaboration of officials within his own department and from the Office of Fair Trading has contributed toward the delay? After all, we are only dealing with a discussion paper and not proposed legislation. Will the noble Lord define a little more closely the date of publication? He said "next month". Is it to be the

1031
beginning of the month or the end of the month? Does the noble Lord know that?
Lord Lucas of Chilworth: My Lords, in reply to the first question from the noble Lord, I said to the noble Baroness, Lady Burton, on 25th March this year that the Director General of Fair Trading has needed a lot of time and has devoted a considerable amount of time to studying what he felt was a very complex matter. There were consultations with many interested parties. I do not believe that there has been any delay that could have been avoided in the director general's consideration. As regards the noble Lord's second question, I am afraid that I cannot tell him any more than "next month".
Baroness Burton of Coventry: My Lords, I am sure that the Minister wishes to be helpful, and I do, too. But I think perhaps he did not quite understand the point I put to him a minute ago. Was the answer that he gave to the House that it was too late to ask the Director General of Fair Trading to include something in the report? I told him that the noble Lord, Lord Belstead, informed me two years ago that these matters were in the report. I wonder whether he would care to alter his answer.
Lord Lucas of Chilworth: My Lords, I have not seen the report. I cannot tell the noble Baroness what is in the report. My noble friend Lord Belstead may very well have said that. I have a copy of Hansard in front of me. I cannot add to what I have said. I have not seen the report.

Fuel Use and Atmospheric Effects
3.22 p.m.
Lord Campbell of Croy: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what weight they attach to theories that, unless care is taken in the choice of the main fuels used in the world, the atmosphere could be so changed as to produce a greenhouse effect with serious results for most forms of life.
Lord Skelmersdale: My Lords, the Government recognise that international scientific opinion now accepts the probability that the continuing accumulation of carbon dioxide and other so called greenhouse gases in the atmosphere will lead to an increase in global temperature. Somewhat over half these gases result from fuel combustion. Best current estimates are that a rise of 0·5 degrees centigrade may already have taken place and that a further increase of about 3 degrees centigrade may occur by the middle of the next century. The processes are complex and the implications for sea level, rainfall distribution and local climate are still uncertain. For this reason the Government are supporting co-operative research through the world climate programme. It is too soon to consider specific policies to mitigate possible effects.
Lord Campbell of Croy: My Lords, I thank my noble friend for his reply. Has he seen reports from the United States that such a development would be considerably more dangerous to life than radioactivity arising from nuclear accidents? As the greenhouse condition would be caused by excessive use of fossil fuels, notably coal, is there not a pressing need for international co-ordination of all sources of energy?
Lord Skelmersdale: My Lords, I have not seen such wide-ranging reports from the United States as described by my noble friend in his first supplementary question. I have seen the article by John Gribbin in the New Scientist of 15th May reporting on the four reports of the United States Department of energy which have just been published. I agree with the foreword of those reports, which says:
"The citizens of today's nations have the responsibility for the stewardship of all the Earth, including their actions which may affect climate. Exercising this reponsibihty requires an understanding of atmospheric carbon dioxide and its effects Once understood, stewardship then becomes nurturing rather than unrecognised neglect".
So in regard to exercising this responsibility, I agree with my noble friend's second point.
Lord Renton: My Lords, is my noble friend aware that 30 years ago this country, under a Conservative Government, set a splendid example to the rest of the world with our original Clear Air Act? Will he ensure that the advantages obtained for this country and the experience gained as a result of the administration of that Act are given world-wide publicity, so that other nations may benefit from our example? Will he also say to what extent it is considered that deforestation, especially of the rain forests of Central Africa and South America, has a bearing on this important matter?
Lord Skelmersdale: My Lords, yes, I believe with my noble friend that this country can be justly proud of the Clean Air Act 1956, which of course went a long way toward reducing atmospheric pollution. But I should point out that we are a long way from total understanding of the relevant chemical interactions in the atmosphere. I certainly agree that the effects that the Act has had in this country should be published world-wide.
So far as concerns tropical forests, they are of course generally important in the cycle of atmospheric carbon dioxide. The destruction of forests reduces the rate at which carbon dioxide is removed from the air. Burning obviously produces carbon dioxide as well. Reafforestaton of crop growth partly reverses the process. Overall, deforestation is thought to contribute considerably less (about 10 per cent. to 20 per cent.) to atmospheric carbon dioxide than fuel combustion.
Lord Jenkins of Putney: My Lords, does the noble Lord agree that while no doubt this development needs watching, the suggestion that it is probably more dangerous than nuclear radiation is one that a number of us would hardly like to support? No doubt there are things about which all of us are alarmed and others about which we are not alarmed, and if the human race wants to continue it had better keep a fairly close eye on all of them. Does the noble Lord agree?
Lord Skelmersdale: My Lords, I agree with the noble Lord that nuclear power has its own particular problems, but raising the sea level is not one of them.
Lord Rea: My Lords, is the noble Lord aware that renewable sources of energy would be free from this particular problem? Is he further aware that there has been widespread criticism of the Government's reduction in funding for resarch and development of wave power, which is potentially a huge source of energy, particularly on the Atlantic coast off Scotland? Does he not think that the Government should change their policy on this matter and perhaps put a little more money into this promising development?
Lord Skelmersdale: My Lords, I agree with the noble Lord that of course renewable sources would be free from the particular problem of the greenhouse effect. Some years ago this Government had a policy of reviewing all forms of possible renewable energy; since when, having conducted that review, they have put their greatest research effort and money into those which look the most promising. I think that the House will agree that this is the right way to perform.
Baroness Nicol: My Lords, can the noble Lord assure the House that the level of support for the Natural Environment Research Council is sufficient to deal with what research can be done in this country? For example, is he aware that at the moment there is no director of atmospheric research? Has he any comments to make on that fact?
Lord Skelmersdale: My Lords, the NERC does not take the lead in this particular form of co-operation and research so far as climate is concerned. This is done by the Meteorological Office. The cost of the programme in 1984–85 was £7.7 million.

Royal Ordnance Factories: Privatisation
3.29 p.m.
Lord Graham of Edmonton: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are satisfied that the plans for the privatisation of the Royal Ordnance factories are proceeding in accordance with the programme of disposal previously announced.
The Minister of State for Defence Procurement (Lord Trefgarne): My Lords, the Government announced last October that we hoped that Royal Ordnance plc would move to the private sector in mid-1986, subject to the usual caveats of trading performance and stock market conditions. As your Lordships already know, in the event we decided it was not possible to proceed with these plans and we are now considering further how best to achieve privatisation.
Lord Graham of Edmonton: My Lords, may I first ask the Minister to accept from me that I wish to withdraw without qualification any implication that I may have made on Friday last that he had misled the House in this matter? Is he aware that he must reconcile his statement of intent, which was given on Second Reading, that the 13 factories which were to be floated would be floated in divisions of three and four together with the clear impression gained from recent announcements that factories such as the Enfield small arms factory can be sold separately? Is he further aware that in Enfield there are 1,200 workers who, according to the local press, fear for their jobs as a result of what they perceive as a change in Government policy? Will he give the workers at Enfield an assurance that their fears are groundless?
Lord Trefgarne: My Lords, I can perhaps do no better than quote the words which I used on 19th July 1984. I entirely accept the noble Lord's correction to the remarks he made when we were considering this matter the other day. On 19th July 1984 I said:
"Inevitably, the setting up of subsidiary companies will facilitate, if this course is proven to be desirable, the disposal of divisions of the ROFs separately to the private sector We have made clear that if this proved attractive, such a possibility has always been on the cards. However, as seen at this moment, the most likely course for privatisation will be a flotation of shares in the enterprise as a whole. Again, the company structure we have proposed will enable either course to be followed".—[Official Report, 19/7/84, col. 1641]
That is what I said then. We are now reviewing the policy in the light of the matters to which I have referred.
Lord Diamond: My Lords, the noble Lord did not give any clear indication of the matters he keeps talking about. Will he tell the House exactly what has happened? Why are we in this totally different situation? All the proposals made when the Bill was being considered were rejected by the noble Lord because there was no time to protect the future of the industry or the interests of Parliament due to the need to rush through the legislation. What has happened to make that a nonsense in the two years which have passed?
Lord Trefgarne: My Lords, perhaps again I can do no better than to quote my right honourable friend the Secretary of State for Defence, who said in another place on 18th June that although,
"substantial progress has been made in the process of transforming Royal Ordnance into a fully fledged commercial entity, it has not been possible to take this far enough and to have in place all the features necessary … for a successful flotation this summer".— [Official Report, Commons, 18/6/86; col. 1034]
Lord Dean of Beswick: My Lords, is the Minister aware that the kind of fears expressed by my friend and colleague on the Front Bench, the noble Lord, Lord Graham of Edmonton, about the group of workers at that factory are also expressed by the workers at the Royal Ordnance tank factory at Barnbow in Leeds? May I take it that the workers at the tank factory at Barnbow in Leeds can carry on on the understanding that in the foreseeable future there will be no change in their circumstances or ownership?
Lord Trefgarne: My Lords, I do not believe that I can add to what I said in the original Answer when I said that we were considering how best to achieve privatisation.
Lord Harris of Greenwich: My Lords, is the noble Lord aware that he is merely repeating a bland statement made by his right honourable friend in another place? He has given no clear indication as to why this has been delayed. Why has it been delayed?
Lord Trefgarne: My Lords, I am indeed aware that I have given no clear indication. The reason for that is that the Government have not yet decided the way forward.
Lord Graham of Edmonton: My Lords, in his response the Minister repeated earlier indications that the factories would be floated either as a whole or in divisions. We are now faced with rumour, innuendo or something stronger that it is possible that individual factories such as the Enfield small arms factory will be floated separately. The employees, whether or not they are right, believe that their interests will be worsened if that happens. Will the Minister confirm that what I have heard—that there is a possibility of the factories all being bought by one purchaser, Vickers—is correct? Will he also tell the House what are the levels of performance or achievement that the Government have in mind before they float an individual factory? At what level do the interests, future and careers of the employees equate to the Government's intentions to float the factories at any price?
Lord Trefgarne: My Lords, I am firmly convinced that the best interests of the employees lie in the moving of their company into the private sector, whether it be in one entity or more than one. That is what we are seeking to achieve.
Lord Hunt: My Lords, will the Minister enlighten someone who is ignorant about these matters? Will the status of the Ordnance factories as Royal factories be affected by privatisation, and if so, how?
Lord Trefgarne: My Lords, clearly the position would be slightly changed. That problem was of course addressed during the legislation's passage through Parliament.

Business
3.36 p.m.
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon, my noble friend Lord Glenarthur will, with the leave of the House, repeat a Statement that will be made in another place on the publication of the Peacock Report on the financing of the BBC.
It may be for the convenience of the House if I announce that the Committee stage of the Building Societies Bill will be adjourned at approximately 7 p.m. for approximately one hour and that during this adjournment the Lord Chancellor's Salary Order 1986 and the Second Reading of the Crown Agents (Amendment) Bill will be taken.

Business of the House
The Lord President of the Council (Viscount Whitelaw): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That Standing Order 38 (Arrangement of the Order Paper) be dispensed with to enable the Gas Bill to be further considered on Report before the Motion standing in the name of the Lord Swansea on Wednesday 9th July.—(Viscount Whitelaw.)
On Question, Motion agreed to.

Company Directors Disqualification Bill [H.L.]
Read a third time, and passed, and sent to the Commons.
Insolvency Bill [H.L.]
Read a third time, and passed, and sent to the Commons.
Parliamentary Constituencies Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

Family Law Bill [H.L.]
3.38 p.m.
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Family Law Bill, has consented to place her interest, so far as it is concerned on behalf of the Crown, at the disposal of Parliament for the purpose of the Bill.
Bill read a third time, and passed, and sent to the Commons.
Lord Elwyn-Jones: My Lords, may I be permitted to congratulate the noble and learned Lord on his noble pilgrimage?
The Lord Chancellor: My Lords, I am obliged to the noble and learned Lord, who has been this way before.

Building Societies Bill
3.40 p.m.
Lord Brabazon of Tara: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Brabazon of Tara.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clause 1 [The Building Societies Commission]:
Lord Houghton of Sowerby Lord Houghton of Sowerby moved Amendment No. 1:
Page 1, line 11, leave out ("subject to subsection (3) below").
The noble Lord said: I beg to move Amendment No. 1. This amendment is linked with Amendment No. 4, which is the substantive amendment. This is not a very important point, but whenever I see a Bill making provision for someone to do as they may think fit, I view that with a certain amount of suspicion. Clause 1(3) of the Bill, which concerns size of the Building Societies Commission, states:
The Treasury may, by order made by statutory instrument, increase the maximum number of members of the Commission to such number as they think fit".
The number provided for in the Bill is contained in subsection (2), which stipulates that not more than 10 and not less than four members shall be on the commission. So I wish to inquire why provision should be made to increase the number of members on the commission without, presumably, any limit being prescribed. I think there are reasons why the numbers may vary from time to time, but to have unlimited scope for increasing the number of members on the commission, when the Government are regarded as safeguarding the public interest on the size of quangos and similar bodies, seems to me to provide an undesirable flexibility concerning the size of the commission.
What I propose to do is to delete the proviso that the numbers may be increased by order. I have no doubt that the Minister will have reasons why that should not be done, but I fear at times that Bills are drafted with an eye on almost every conceivable possibility so that the administration may be free to go beyond the bounds of statute law if they so wish by means of statutory instrument. I am not sure that that is desirable, especially when one is fixing the size of a commission of this importance and standing and making provision for its duties. I think that the Government should be very clear about the numbers they want and that those numbers should be specified in the Bill and should not be exceeded. I beg to move.
Lord Brabazon of Tara: To begin with perhaps I should explain that as currently foreseen it should not be necessary to increase the number of members beyond the statutory limit set out in subsection (2) which specifies 10 members. In order to cater for the unexpected it was considered appropriate to provide the Treasury with the ability to increase the membership by means of statutory instrument. However, in the light of the points made by the noble Lord, Lord Houghton of Sowerby, with which I have a great deal of sympathy (particularly concerning the growth of quangos), I am able to say that the Government will accept his amendment in principle.
There is one slight problem, and that is that this amendment will also necessitate deletion of subsection (4) on page 2 of the Bill in order to make the amendment complete. I am advised that to fail to do that at the same time could cause difficulty, but I am able to give a guarantee to the noble Lord that I—or perhaps the noble Lord himself—will bring back
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amendments at the next stage of the Bill to deal with these points.
Lord Barnett: I am sure the Committee will be delighted with the response. If this is the way the Government propose to proceed with all or our amendments, we shall make very rapid progress.
Lord Brabazon of Tara: I hope we shall make rapid progress, but I cannot give a guarantee that we shall proceed along these lines all the way through the Bill.
Lord Houghton of Sowerby: I am very grateful for that response. May I make a comment in passing? I think it is always unwise for members of the Opposition, upon getting a concession, then to ask whether it is the first of many. It does not auger well upon getting one concession to ask for more. However, I am grateful for this one. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 2:
Page 1, line 11, after ("members") insert (", of which 8 members are").
The noble Lord said: In moving this amendment I should like to speak also to Amendment No. 3. The Bill, as drafted, marks, as I think the Committee will recognise, a major step forward in legislation governing building societies. In particular, it extends the activities of building societies into sectors over which hitherto they have not been allowed to trespass. The problem that faces us is how building societies can be properly monitored in their activities.
The amendment seeks to ensure that the commission has in its membership two people, out of whatever the number may be as a result of the previous discussion, who are expert in two particular sides of the financial services business. One area is banking supervision and the other area is what might be broadly regarded as other financial services to be covered when your Lordships come to debate the Financial Services Bill. Because we have not had an opportunity of debating the Financial Services Bill, Amendment No. 3 specifically refers to two appointments to be made by the Bank of England. I had to use this expression because as yet the Securities and Investments Board—which is a preview, as it were, in terms of the Financial Services Bill—has not yet passed into any sort of statute and indeed has not been discussed in your Lordships' House. I hope the noble Lord the Minister understands the reasons for my use of the words "Bank of England" in both senses.
What we are asking for is a commitment that the commission will itself contain one person who is expert in banking supervision and one person who is expert in the other financial services into which the building societies may feel they ought to enter. We are very pleased that Mr. Sidney Procter has been appointed, as the noble Lord, Lord Brabazon, mentioned on Second Reading. This seems to us to auger well for the banking side of the commission. We should like to see a similar appointment on the other, financial services, side of the commission. We should also like to see that enshrined in statute on the face of the Bill, as we believe it is only in that way that we will

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get a continuing and proper supervision of building societies in their new role. I beg to move.
Lord Brabazon of Tara: The noble Lord, Lord Williams, has rightly drawn attention to the need for the new Building Societies Commission and the Bank of England to co-operate closely over the general principles of the prudential supervision of deposit-taking institutions, and in the day-to-day course of business. Their paths will cross at working level on many occasions, and it is obviously right for there to be some formal link at the top. As the noble Lord pointed out, this has already been recognised by the appointment of Mr. Procter, and I am glad that the noble Lord has welcomed that appointment. It would certainly be the Government's intention that, when Mr. Procter retires, there should be a further appointment of somebody with experience of banking and banking supervision.
Nevertheless, it would be wrong, I believe, to build into statute a requirement for the bank to appoint part of the commission. The commission will be an important body and there should be direct answerability to Parliament for appointments to it. While that clearly points to the power staying with the Treasury, I have no doubt that there will continue to be informal consultation with the bank about those appointments. As to the other point the noble Lord made about a possible representative from the future SIB, I shall certainly draw the noble Lord's remarks to the attention of Treasury Ministers. It is, I know, their firm intention that the composition of the commission should reflect the close links between its functions and those of banking supervision and that sort of thing. I would not wish at the moment to build this rigidly into the legislation. I regret that on this occasion therefore I cannot accept the noble Lord's amendment.
Lord Williams of Elvel: I am most grateful to the noble Lord for his reply. Clearly, we have to be satisfied with ministerial assurances on this matter. I would ask the Minister to go a little further and to assure us that, assuming that the Securities and Investments Board is created, it is the intention of the Treasury to ensure that at least one member of the commisssion will be on the general financial services side, which is within the remit of the SIB, just as Mr. Sidney Procter is going to be on the banking supervision side. If the noble Lord will give that general assurance, I shall be happy to withdraw the amendment.
Lord Brabazon of Tara: I am afraid that I cannot give that specific assurance this afternoon. I said that I would draw what has been said to the attention of Treasury Ministers. I certainly undertake to do that. However, that is as far as I can go at the moment.
Lord Williams of Elvel: I understand that the noble Lord cannot go further at this stage. This is a matter to which we may wish to return on Report should there be no further progress in the interim. I hope, however, that there will be some further progress in the interim
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with new appointments. In the light of that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 3 not moved.]
The Chairman of Committees (Lord Aberdare): Amendment No. 4 is, I believe, not moved.
Lord Houghton of Sowerby: I beg to move Amendment No. 5.
The Chairman of Committees: I am dealing with Amendment No. 4 which is, I believe, not moved. I call therefore, the noble Lord, Lord Houghton, to move Amendment No. 5.
Lord Houghton of Sowerby: All right. We will get it right this time. Not moved.
Lord Brabazon of Tara: With respect, the noble Lord does, I think, wish to move Amendment No. 5.
[Amendment No 4 not moved.]
Lord Houghton of Sowerby Lord Houghton of Sowerby moved Amendment No. 5:
Page 2, line 8, at end insert—
("and the alleviation of hardship imposed upon borrowers by the unavoidable misfortunes of life or brought about by other adverse changes in their ability to fulfil their obligations under the mortgage deed ")
The noble Lord said: I apologise for what has just occurred. It is a very hot afternoon. The fact that the first clause of the Bill sets up the Building Societies Commission with wide functions and responsibilities is an indication of the need for some overall surveillance and, if necessary, control or regulation in order that the new powers of building societies may be exercised with a full sense of responsibilty and efficiency. The first of the general functions of the commission as set out in subsection (6) are
"to promote the protection by each building society of the investments of its shareholders and depositors"
The amendment proposes to add at the end of that description of the first duties of the Building Societies Commission the words,
"and the alleviation of hardship imposed upon borrowers by the unavoidable misfortunes of life or brought about by other adverse changes in their ability to fulfil their obligations under the mortgage deed"
This is a proposal to bring building societies into what I would describe as the poverty circuit. It can be related to the decision of the Government recently to alter the conditions upon which mortgage interest shall be covered by supplementary benefit for the first six months where borrowers are in need of help, get supplementary benefit and hitherto have got an allowance for their mortgage interest that could be regarded as the equivalent of the rent allowance for people in rented accommodation.
The restriction to one half of the mortgage interest payable by people who are to receive supplementary benefit can, of course, add to their difficulties. It seems to me that here the building societies should come in. In conditions where the Government are virtually making home ownership the only option for many people seeking accommodation and when the building

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societies, on the whole, are those who are providing the service to the borrower to acquire a home on a mortgage, then the state and the building societies jointly have some responsibility for what may happen to those who are suffering hardship. That is why I believe that part of the duties of building societies is to look after borrowers in trouble and relate their difficulties to what the state may be doing in the way of additional help through supplementary benefit or, later on, the social fund.
I am not at present bringing into the discussion the terms of Amendment No. 70 because I would like a response on the general approach to this matter. It seems to me that what I have in mind is not fully and clearly covered by subsection (6)(a) on page 2.1 want that to be made absolutely clear. We cannot envisage that this problem will become less difficult. It is likely to be the other way round. I cannot see that in the period ahead we shall have fewer cases of difficulty. It would be better therefore to formalise the position of the building societies in regard to the help to be given to their borrowers.
The debate that took place in another place on 25 th June covered a good deal of the ground here without any clear indication being given by the Government that to bring the building societies into this area was in their minds. There were, however, numerous references to what some building societies are doing in respect of insurance against redundancy and what insurance policies were available for cases involving this kind of difficulty. But the amendment is seeking that the commission should have a duty to make this provision general among building societies, to provide a scheme under which it can be done, and to make a levy on building societies to finance it. It would not require building societies to bear the cost wholly out of their own funds. They might very well impose a levy on borrowers as a form of insurance in their own scheme of things.
When, years ago, I was chairman of the Civil Service Housing Association we had the advantage of our arrangement with a building society to lend money at half per cent. lower than they were lending generally, because of the secure quality of civil servants as borrowers. With that half per cent. difference we were able to bring into the scheme of mortgages hedging arrangements to cover certain risks in life, and hardship was one of them. So it was really a social fund provided by the borrowers on a levy paid throughout their mortgage life and the building society's own resources where they were needed.
Something of that kind should be considered by the commission. I think it would be unsatisfactory to have a Bill of this importance, and this wide coverage of new duties and opportunities, without looking at this matter, because it is bound to be serious in many cases. So I sincerely hope that the Government will respond to this amendment.
Unfortunately, we are in what I saw described recently as a debtor culture, when it has never been easier for people to get money and never easier to get into debt. The Citizens' Advice Bureaux are talking about the number of cases that they have where there are money troubles, and the amount of indebtedness
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involved is very large indeed. We are therefore in a society where the borrowing of money is easy, creating financial difficulties, especially for young people, who may be induced to take on more than they really should.
A great many of the people who are borrowing money through building societies are comparatively young and some of them have family responsibilities with a mortgage on top. It is not surprising that, if they lose their jobs, fall ill or have an injury and there is a loss of wages they are soon in difficulties. The building societies find no difficulty in deferring repayments of capital, but the payment of interest is regarded by them, naturally, as of some importance.
Are we going to cover the borrower, in the same way as the person in rented accommodation paying rent? If social security is not going to do that, building societies should come in and discharge some responsibility of their own. So I beg to move this amendment and hope that the Government will respond to it. Whatever the imperfections in drafting, the whole spirit of the amendment must be clear. I beg to move.
Baroness Turner of Camden: I rise to support the amendment moved by my noble friend Lord Houghton of Sowerby, and I do so for a number of reasons. First, we are now contemplating legislation in this field under which building societies will be taking on a whole number of other financial services duties which they have never had before. This legislation, and other legislation in the financial field, will mean that everybody in the financial services area will be offering all kinds of financial services. This also means that building societies, which, of course, were built up originally as a movement to provide housing loans for people, will be providing a whole range of other services, and in those circumstances it is important that the social aspect of building societies' functions should be emphasised. As I understand it, this is what this amendment seeks to do. It would be a great pity if that were to be lost sight of; and for those reasons I commend the amendment to the Committee.
I think it would be a great pity if we were to pass this Bill without ensuring that there was in it something which emphasised the function of building societies to provide a social service to borrowers and ensured that if borrowers are in difficulty, there is some means by which that difficulty can, to some extent, be alleviated.
Baroness Gardner of Parkes: I rise to oppose this amendment, and I should begin by declaring my position as an honorary vice-president of the Building Societies Association, but that in no way influences what I intend to say on this matter. It would be quite impossible to build a social clause of this type into the building societies' future. I happen to be a member of the London Electricity Board and we went to France to see the situation there. They have none of the social problems attached to their energy authorities that we have in this country. The problems that are created by mixing a financial and business function with a social one are very great.
In this country in the past the building societies have always been very good and they will do whatever they can to help genuine cases of hardship. But to write an

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obligation into a Bill asking that this must be done, and without in any way quantifying the financial commitment involved, is quite wrong. We have to look at the other side of the building societies' issue.
Like many women in this country, I am a great believer in having my little bit of savings in a building society, and the people who rely upon the building society to give them their income in the form of interest might find that they suffered very badly if something of this type was built in. If it was something discretionary that the building societies could do, then I should hope that, so far as possible, they would do it. But to write something of this type on the face of the Bill is to demand an enormous financial commitment and I cannot support that.
Lord Shepherd: I rise to support my noble friend in regard to this amendment and perhaps I may initially reply to the noble Baroness. She, quite rightly, declared her interest. However, I think she would agree that in the past the building societies have been within the friendly societies legislation. That type of organisation has been seen, although it has been commercial—clearly, it has to be commercial—to be an organisation which is providing great service to the community. I agree with the noble Baroness that the building societies—certainly, all those that spring readily to mind—have an extraordinary reputation as regards the way in which they deal with their borrowers who temporarily fall into difficulties. They do it in a number of ways, usually after consultation and examination of the individual's position.
So my anxiety is not so much for the present; my anxiety is not so much for the new borrower who may go to a building society once this legislation has been passed; my anxiety is for the many millions of borrowers who have borrowed from a building society under the existing psychological approach of the managers, and those responsible within the building societies to the borrowers.
My noble friend said that there is a touch of indebtedness. My support for the concept that people should buy their own houses—and that is where building societies have played such a notable part—is based on the belief that this is one of the best forms of saving that is open to any individual. Certainly in recent years, taking account of the rate of inflation, the purchase of a house has probably been the best protection against inflation.
Borrowers have borrowed with the knowledge and experience of the building societies behind them. The Bill will change that situation, although building societies will be required primarily to raise money in most cases for the purposes of lending it to existing depositors. But the concept of the Bill and the new opportunities could well change the attitude of local managers or even the main board of building societies. We may then have a new situation which was not foreseen by the borrower when he took up the loan in the early stages with the building societies.
I think that the noble Baroness will agree that in the past—certainly 10 or 15 years ago—most young people when they went to a building society found it relatively easy to satisfy both themselves and the building society as to their ability to purchase and to
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take out a mortgage. Regretfully, it is not now assured to anyone that he will remain in employment. A man may be a first-class executive, who is performing with extraordinary success within an organisation, but it may be subject to a merger, and he may suddenly find that he has lost his post. There is a touch of instability. But at the present moment people feel that because of their reputation and past record if such circumstances arise, the building societies will take a lenient and humanitarian view of the situation.
However, as my noble friend said, things can change. We are moving into the commercial field where the interests of money become much more important. As the building societies develop into other forms of business, there may always be a clash within the organisation as to the best use of the money: "should we be tolerant to those who have fallen into difficulty or should we put on the squeeze in order to recover the money more quickly or, perhaps more harshly, in order to use the cash flow in other fields?".
It seems to me that the amendment does not lay down a fundamental duty upon anybody except the commission. It does not lay down a fundamental rule or place a duty on the building society. It is to be only a function of the commission. Truthfully, my only anxiety is whether the amendment is in the right place. I believe that it should have been a subsection on its own. Then it would have sat more easily within the framework of the clause. But as to my noble friend's purpose and intention, I think that he is entirely wrong.
Despite what the noble Baroness said, taking into consideration the record of the building societies, such a provision, which only calls for the function of seeking ways to alleviate the problem, would be in the long-term interests of building societies not only in their relationship to borrowers but in fairness to the many depositors who place money in the building societies for reasons other than interest. I hope that the Government will accept the spirit and purpose of the amendment. If they did that, they would be conferring a considerable favour on building societies as a whole; but in particular it would remove some of the anxieties among existing borrowers. I hope that the Government will feel able to accept at least the spirit and intention of the amendment.
4.15 p.m.
Lord Plummer of St. Marylebone: I hope that this amendment will be rejected. I should perhaps first declare an interest in that I am chairman of a building society, and I am also president of the Metropolitan Association of Building Societies.
The noble Lord, Lord Houghton of Sowerby, I shall not say gave the game away but at least made the point that he wanted to bring building societies into the poverty service. It is not the duty of building societies to act as a poverty service. As the noble Lord, Lord Shepherd, said, the building societies have for years taken a most sympathetic attitude towards people who find themselves in difficulty, and I am sure that they will continue to do so. But we are moving into a commercial world. There is great competition from bodies which will not, as I see it, be subject to the provisions in the amendment. If this provision is

1045
imposed on the building societies, I do not see where we stop. For that reason, I ask the Committee to reject the amendment.
Lord Campbell of Alloway: I apologise to the Committee for not being in my place at the time when the noble Lord introduced the amendment. These are words of exhortation—and what excellent words they are! They are noble sentiments, they are most beautifully expressed, and I wholeheartedly agree with them. But what is the effect? What will the courts make of it? Those are the questions that one has to ask before words of exhortation such as those are ever to be included in a statute.
With respect to the noble Lord, Lord Shepherd, it is not understood how, if those words were included, his anxieties would in any way be allayed. Perhaps in another form, perhaps in another place; but assuredly, with respect to the noble Lord, those words would achieve nothing and would not be appropriate for inclusion in the statute in the form in which they are.
Lord Barnett: I should also like to support my noble friend Lord Houghton of Sowerby. I think that it would be fair to say that he is not wedded to the words, and certainly I am not. I have rarely seen in legislation—indeed, I doubt whether they have ever been in legislation—such words
as: "the unavoidable misfortunes of life".
I am not sure how they would be interpreted. I am sure that my noble friend, and those who have supported him, like my noble friends Lord Shepherd and Lady Turner, do not want necessarily to go along with precisely that form of words. As they have all said, it is the spirit of the amendment that we should be concerned with.
Nobody has any doubt that building societies today are helpful and considerate to borrowers who get into difficulties because of the misfortunes of life or for other reasons. They may not be the misfortunes of life in the normal sense of the word, but they may be brought about through no fault of the borrowers, for whatever reason. In my experience, building societies have always helped in those circumstances.
My noble friend Lord Shepherd made an important point. We are moving into a very different era. Indeed, the whole objective of this major Bill is to allow building societies to deal with a whole new financial world into which they are moving. We cannot know how things will work in this new financial environ-ment. It is precisely for that reason that we should understand what underlies the spirit of the amendment. I hope that the Committee will support that spirit. I do not know whether my noble friend has in mind to divide the Committee, but I hope that the Minister, although perhaps not accepting the amendment as drafted, will be able to accept the spirit of what is being said by those who have supported it, including my noble friend. In that way I hope that we shall be able to give a lead in a form of words.
As has been said, we are not here imposing a burden on the building societies as such. We are talking about the functions of the commission. Speaking for myself, I should not be at all happy about the idea of cross-
1046
subsidisation of one borrower by another. Frankly, I do not think that it would ever be necessary. There is in normal circumstances ample equity in a house and the borrowing that is made against it. It would be a very rare circumstance indeed where a borrower who got into serious financial difficulties found himself in due course unable to meet the bill to the building society in full. In terms of the sale and purchase of houses and the involvement of mortgages in my experience we are talking of periods of six or seven years nowadays; or it may be even less. In those circumstances, and given the equity that exists in the house as security to the building society, it is extremely unlikely—if the societies are able to continue to alleviate hardship as they have done so far—that there would ever be a need for cross-subsidisation or that there would be a burden on building societies.
I recognise that many may feel that the wording of the amendment would seem strange in a piece of legislation—strange certainly to a legal mind, which I do not possess. I can well understand that as a lawyer the noble Lord, Lord Campbell of Alloway, may find unacceptable the words,
"the alleviation of hardship … by the unavoidable misfortunes of life".
But I hope that he will accept the spirit of what is being said in this amendment. I hope that the Minister will, too, and that members of the Committee will not show themselves to be as hard-hearted as might otherwise have been thought.
Lord Brabazon of Tara: Perhaps I may start by explaining to the Committee what is the main purpose of the commission. The commission is essentially in the business of prudential supervision. Those who are putting their money into a building society need to be assured that the institutions in questions are solvent if their money is to be safeguarded and the integrity of the financial system is to be maintained. The supervisory function which Parliament has laid on the Bank of England in the case of banks, and which it will shortly give to the Building Societies Commission under this Bill, is directed to that end. Therefore the commission does not relate to borrowers. They are not at risk in the same way if an institution becomes insolvent. The protection of the borrower is hence not a matter for the commission.
However, that was not the main thrust of the argument which the noble Lord, Lord Houghton, introduced and on which we have had a very good debate this afternoon. It concerned the position of borrowers who are facing difficulty in making their repayments rather than the institutional arrange-ments. There are several avenues open to a borrower in this position. The first thing he should do is to approach his building society or other lender to discuss his position rather than to allow arrears to build up without explanation. I think that most noble Lords who have spoken this afternoon have reminded us—certainly my noble friend Lady Gardner of Parkes and the noble Lord, Lord Plummer have—of the building societies' excellent record in the sympathetic view which they take in these cases. I believe, for example, that they allow borrowers to suspend

1047
repayments of principal over a period, and the mortgage interest payments of anybody who has been receiving supplementary benefit for more than six months will be met in full. At the end of the day if a borrower cannot afford the repayments on his loan, he needs to consider very carefully whether he can continue to maintain the commitment.
Several noble Lords have raised the point that the building societies are in competition with a number of other lending institutions nowadays. To put a duty such as this on the building societies alone, where it did not fall on the banks or any of these other competitors now in the mortgage market, would be very difficult.
It is incumbent on building societies to follow prudent lending policies, since nobody benefits from a loan on which the borrower ultimately defaults. This point is particularly important at the present time when there is much more intense competition to lend money than there has been for many years past. Lenders should resist the temptation to advance money without considering properly the borrower's ability to repay. Following prudent lending criteria is the best way to prevent these problems from arising in the first place.
The noble Baroness, Lady Turner of Camden, said that building societies should provide a social service for their borrowers. I think that my noble friend Lord Plummer rejected that. I certainly agree with him that it is not the duty of the building societies to do that. As I have said, they have an excellent record, but it is not their duty to do that. It would be unfair on their other borrowers, or indeed their lenders, to expect them to provide this kind of social service.
For those reasons I am afraid that I am not able to accept this amendment—apart from the reasons given by the noble Lord, Lord Campbell of Alloway, which were very good reasons as to why the amendment was not very suitable. I do not think as a matter of principle that it is right to insist upon the building societies going into the social security field and I must ask my noble friends to reject the amendment.
Lord Houghton of Sowerby: I am very disappointed with that reply. The Government have precipitated this problem through their proposal to discontinue supplementary benefit to cover one half of the interest payments during the first six months. That has sparked off this problem. If people are not to get the full cover for the interest on their mortgages during the first six months, in the same way that occupants of tenanted accommodation get full cover for their rent, what are the borrowers expected to do? The Building Societies Association, in its evidence to the joint advisory committee, has suggested that the probability is that the borrower will want to capitalise the interest that is not being covered by social payment. The regulations apparently already made by the Government provide for benefit to cover interest on capitalised interest. That is a somewhat cynical way of dealing with the difficulties of the borrower. In many cases it will only pile up more indebtedness to the building society and leave him in difficulties later on.
1048
We have to bear in mind that the incidence of this problem is very uneven because of the unevenness of unemployment. That is another aspect of the matter which makes it more difficult for some building societies to provide for it on their own than others in more prosperous areas with less unemployment. This was intended to be a mutual arrangement. I should like any noble Lord connected with a building society to say what is his understanding of the principle of mutuality in building societies. Where is the mutuality in building societies between the investor and the borrower if the investor does not urge his building society to take care of the borrower? If there is not mutuality in this situation, I should like to know where mutuality exists at all in the relationship between investor and borrower. The investor is not making money; he is lending money at a reasonable rate of interest. The mutuality is that any benefit should be shared between him and the borrower. When borrowers get into difficulties it is the clear duty of building societies to do all that they can to take care of them. This amendment is merely an extension of the spirit of the building societies which are already doing that; it is an extension of the spirit of those building societies which are recommending borrowers to take out an insurance policy against redundancies. In those circumstances, I am absolutely amazed at the rejection of a proposition of this kind to give the Building Societies Commission power—it does not say that it "shall"—to take this matter into their functions and to enable them to make arrangements as regards the whole of building societies, if they think fit.
Meanwhile, what will the Government do about the proposition in respect of half of the mortgage interest in the first six months? They are aggravating the difficulties of the borrower by their change in social policy. If the Government are to persist in making more difficulties for borrowers in these conditions, then the building societies, with their traditions of help and generosity towards their borrowers in difficulties, will want to do something themselves and not merely allow borrowers to capitalise interest, then pay interest on capitalised interest and then receive benefit from the social services for that. They want to do the job properly. It can be done properly under the umbrella of the Building Societies Commission. I know of no other way at present in which building societies can all co-operate together under a disciplined and well-organised scheme of this kind.
In the circumstances, I say to those who have interests to declare—as have a number of noble Lords—and who have responsibilities for building societies that they should be counted. Let us know where they stand so that we shall be able to say whether some building societies are not in favour of dealing with this problem in a reasonable manner. We should now strip away from the argument the bare indication of whether building societies are willing to do this or whether they are not. If they are not willing to do it, then it is an added argument for social benefit taking a different direction from that which it takes at present.
Therefore, in the circumstances I am bound to say that I must divide the Committee on this amendment.
4.32 p.m.
On Question, Whether the said amendment (No. 5) shall be agreed to?
Their Lordships divided: Contents, 81; Not-Contents, 119.

DIVISION NO.1

CONTENTS

Airedale, L.

John-Mackie, L.

Ardwick, L.

Kagan, L.

Aylestone, L.

Kaldor, L.

Banks, L.

Kilbracken, L.

Barnett, L.

Kilmarnock, L.

Belhaven and Stenton, L.

Leatherland, L.

Birk, B.

Listowel, E.

Boston of Faversham, L.

Llewelyn-Davies of Hastoe, B.

Bottomley, L.

Lockwood, B.

Brockway, L.

Lovell-Davis, L.

Bruce of Donington, L.

Mackie of Benshie, L.

Carmichael of Kelvingrove, L.

McNair, L.

Cledwyn of Penrhos L.

Mishcon, L.

Crawshaw of Aintree, L.

Molloy, L.

David, B.

Morton of Shuna, L.

Dean of Beswick, L.

Mulley, L.

Denington, B.

Nicol, B.

Diamond, L.

Ogmore, L.

Elwyn-Jones, L.

Oram, L.

Elystan-Morgan, L.

Parry, L.

Ennals, L.

Phillips, B.

Ewart-Biggs, B.

Ponsonby of Shulbrede, L.

Ezra, L.

Rochester, L.

Fitt, L.

Ross of Marnock, L.

Foot, L.

Scanlon, L.

Gallacher, L.

Serota, B.

Gladwyn, L.

Shepherd, L.

Graham of Edmonton, L.

Silkin of Dulwich, L.

[Teller.]

Stallard, L.

Grey, E.

Stoddart of Swindon, L.

Hampton, L.

Strabolgi, L.

Hanworth, V.

Taylor of Blackburn, L.

Harris of Greenwich, L.

Tordoff, L.

Hatch of Lusby. L.

Turner of Camden, B.

Hayter, L.

Underhill, L.

Houghton of Sowerby, L.

Wallace of Coslany, L.

[Teller.]

Wells-Pestell, L.

Hunt, L.

White, B.

Irving of Dartford, L.

Wigoder, L.

Jacques, L.

Williams of Elvel, L.

Jeger, B.

Winstanley, L.

Jenkins of Putney, L.

NOT-CONTENTS

Ailsa, M.

Denham, L. [Teller.]

Aldington, L.

Denning, L.

Alexander of Tunis, E.

Dilhorne, V.

Allenby of Megiddo, V.

Drumalbyn, L.

Alport, L.

Dundee, E.

Ampthill, L.

Ellenborough, L.

Annan, L.

Elles, B.

Auckland, L.

Elliot of Harwood, B.

Beloff, L.

Elliott of Morpeth, L.

Belstead, L.

Elton, L.

Bessborough, E.

Faithfull, B.

Boyd-Carpenter, L.

Fortescue, E.

Brabazon of Tara, L.

Fraser of Kilmorack, L.

Brougham and Vaux, L.

Gainford, L.

Broxbourne, L.

Gardner of Parkes, B.

Bruce-Gardyne, L.

Gisborough, L.

Cameron of Lochbroom, L.

Glenarthur, L.

Campbell of Alloway, L.

Gray of Contin, L

Campbell of Croy, L.

Gridley, L.

Carnock, L.

Hailsham of Saint

Cathcart, E.

Marylebone, L.

Cross, V.

Halsbury, E.

Cullen of Ashboume, L.

Hardinge of Penshurst, L.

Davidson, V.

Henderson of Brompton, L.

De Freyne, L.

Henley, L.

1050

Hill of Luton, L.

Renton, L.

Hooper, B.

Richardson, L.

Hylton-Foster, B.

Ridley, V.

Ilchester, E.

St. Aldwyn, E.

King of Wartnaby, L.

St. Davids, V.

Kinnaird, L.

Saint Oswald, L.

Kitchener, E.

Sandford, L.

Lane-Fox, B.

Savile, L.

Lawrence, L.

Selkirk, E.

Layton, L.

Sempill, Ly.

Lloyd of Hampstead, L.

Shannon E.

Long, V.

Shaughnessy, L.

Lothian, M.

Sherfield, L.

Lucas of Chilworth, L.

Shrewsbury, E.

McFadzean, L.

Shuttleworth, L.

Macleod of Borve, B.

Skelmersdale, L.

Mancroft, L.

Stamp, L.

Maude of Stratford-upon-

Strathcona and Mount Royal,

Avon, L.

L.

Merrivale, L.

Sudeley, L.

Mersey, V.

Swinton, E. [Teller.]

Morris, L.

Teviot, L.

Mountgarret, V.

Thomas of Swynnerton, L.

Mowbray and Stourton, L.

Thorneycroft, L.

Murton of Lindisfarne, L.

Torrington, V.

Newall, L.

Trenchard, V.

Norfolk, D.

Trumpington, B.

Nugent of Guildford, L.

Ullswater, V.

Pender, L.

Vaux of Harrowden, L.

Peyton of Yeovil, L.

Vickers, B.

Plummer of St Marylebone,

Vivian, L.

L.

Whitelaw, V.

Porritt, L.

Wise, L.

Portland, D.

Young, B.

Quinton, L.

Young of Graffham, L.

Rankeillour, L.

Ypres, E.

Reigate, L.

Moved accordingly, and, on Question, Motion agreed to.

4.40 p. m.
Lord Skelmersdale: I think that this is an appropriate moment to take the Statement I beg to move that the House do now resume.
House resumed.

Peacock Report
4. 41p.m.
The Parliamentary Under-Secretary of State, Home Office (Lord Glenarthur): My Lords, with the leave of the House, I shall now repeat a Statement on the Peacock Report which is being made in another place by my right honourable friend the Home Secretary. The Statement is as follows:
"With permission, Mr Speaker, I should like to make a Statement on the report of the committee on financing the BBC under the chairmanship of Professor Alan Peacock which was published today. I should like to record my deep gratitude to Professor Peacock and his colleagues for their industry in pursuing their inquiries and for their efficiency in completing their work and producing this report in 12 months.
"The committee puts forward a number of interesting and constructive proposals for replacing the present system of financing the BBC in a few years' time, which I shall come to. However, it rejects the proposal that the BBC should at present

1051
be funded wholly or in part by advertising and concludes that at this stage the licence fee, with some modifications, should remain as the principal source of funding for the BBC. The committee argues that, since spectrum is still scarce, and there is as yet no way in which the consumer can pay direct for the programme of his choice, the introduction of advertising would reduce the effective range of choice open to viewers and listeners. Given the original work which the committee undertook and commissioned on the economics of the advertising market and on the relationship between advertising and broadcasting services, we cannot lightly put aside its assessment of this point. However, before reaching any conclusions the Government would welcome comments on the committee's analysis.
"The committee's view is that our present system of public service broadcasting has provided the best means of securing diversity of choice and programmes of quality—under the prevailing market conditions. The committee sees a need for this system to remain in being for some years, though with important modifications, but argues that, under pressure for inevitable technological change, it must and should give way to arrange-ments where, as channels multiply and customers find means to register their own preferences directly, a genuinely competitive broadcasting market develops. The committee believes that this will take time but in a few years, in preparation for this, payment for BBC services should be made through subscription, leading to the end of the licence fee system. In the longer term, perhaps through the provision of a national cable grid, a genuinely competitive market in television services could be brought about so that the current arrangements, dependent on the duopoly, would no longer be needed. There would be scope for greater diversity of programmes and a wider choice for consumers, who would have much greater freedom than is now possible to decide which programme services they would like and at what price. Special arrangements are envisaged to ensure that public service programmes are available which, though needed, the market might not produce unaided.
"The Government see much merit in this approach which fits well with our general philosophy. All of the committee's proposals, which have profound implications for all broadcast services, and the institutions which provide them, deserve and will receive careful study. We shall reach final views on the Report only in the light of parliamentary and public reaction; and we should welcome any comments from the public and other interested parties. However, there are four matters on which I should like to make some comment now.
"First, there is the proposal by four members of the committee that IBA contracts should be awarded by a competitive tender, with the IBA required to make a full public and detailed statement of its reasons if it decided to award a franchise to a contractor other than the one making the highest bid. The Government have reached no conclusion on this recommendation. However, we are anxious that the option for change should
1052
remain open. This would not be the case if the IBA proceeds to arrange new ITV contracts to take effect from the beginning of 1990 for eight years. Accordingly we are considering with the IBA the relationship between this timetable and the committee's recommendation. We do not propose to disturb the work the IBA has in hand to make a contract for the provision of DBS services.
"Second, there is the question of the regulaion of the content of broadcast programmes. The committee suggests that broadcast services should be subject only to such regulation as is provided for all material in the general law of the land, as is the case for the print media, and that in the long term there should be no pre-publication censorship or vetting of any kind of broadcasting. There is also a recommendation that arrangements should be made now that the non-occupied night time hours of existing broadcasting frequencies should be sold for broadcasting use and that there should be no regulation of the programme content for such services except in so far as the law of the land, amended as necessary, restricted it. Our present arrangements reflect the view that the peculiarly intrusive nature of broadcasting, and in particular of television, continue to require special regilatory arrangements to ensure certain standards in broadcast services. For this reason we have broadcasting authorities to enforce controls on such matters as taste and decency in broadcasting which are much stricter than applying to the print media, or than could easily be accommodated in the criminal law. The present regulatory regime, and the institutions to give effect to them, are certainly not sacrosanct; but the Government believe that any future arrangements should be no less effective than those now in place.
"Third, there are the recommendations on radio. The Peacock Committee recommends that the BBC should have the option to privatise Radios 1, 2 and local radio in whole or in part and the IBA regulation of radio should be replaced by a looser regime. Five of the Committee's members went further and said that Radio 1 and Radio 2 should be privatised and financed by advertising and that further radio frequencies becoming available should be auctioned to the highest bidder. I have already announced my intention to publish a Green Paper looking at the existing framework for the provision and regulation of radio broadcasting as a whole. I believe that it would be helpful for this consultative document to examine further services at national, local and community level and that the future of BBC radio services and of those provided by the IBA should be looked at in the ight of the Peacock Committee's recommendations.
"Fourth, we see merit in a number of the committee's shorter term proposals designed to pave the way for the free broadcasting market which they wish to create, including for example the recommendation to increase the proportion of television programmes supplied by independent producers. The best way of achieving this will need careful consideration.
"I welcome the Committee's report and the many stimulating ideas which it contains. It is a

1053
challenging piece of work. We look forward to the constructive public debate about the future of broadcasting which I am sure it will encourage."
My Lords, that concludes the Statement.
Lord Mishcon: My Lords, we on these Benches should like to thank the Minister for repeating the Statement made in another place by his right honourable friend. It would be singularly ungracious of us too if we did not thank the members of the Peacock Committee for their industry over the past 12 months. Perhaps I may be permitted to close my eulogy with those words.
The first reaction that I believe many of us would have is thank heavens the report rejects the proposals that the BBC should be funded wholly, or partially, by advertising. The dislike that some of us have is for the words "at present" which appear both in the report and in the Statement. The Government appear anxious from the Statement which has just been repeated to us to keep their options open. These Benches, without any qualification whatsoever, oppose BBC advertising, hook, line and sinker: not least because we believe very definitely that this would have the effect not only of lowering standards—a most important matter—but it would also throttle some of the media including local commercial radio stations.
The Statement goes on to say that the committee would like to see a genuinely competitive market develop and that meanwhile there should be a payment made by subscription, presumably dependent on user. We think that is a very bad idea indeed. If I may alliterate for one moment, it seems to want to make the BBC into the begging-bowl broadcaster. I say that for the obvious reason that it seems to me, if I may say so humbly, that any such suggestion will encourage the public to switch from the BBC as soon as they possibly can presumably to save themselves money; but, far worse than that, will encourage the BBC to produce only the programmes that will be largely in demand, and this will obviously detract from the standards of which we are so proud in relation to the BBC.
The Statement then concentrates on certain matters. The first is that IBA contracts will be awarded by competitive tender with the IBA who would be required to make a full, public and detailed statement of reasons if it decided to award a franchise other than one making the highest bid. I emphasise that that is a recommendation proposed by four members out of the seven-man committee. The Government say that they have reached no conclusions on that recommendation. On behalf of these Benches, I should say that we reached a conclusion immediately: it is that money alone will not be allowed to speak, as far as we are concerned, in the awarding of tenders.
I move quickly to the second item which is mentioned so specifically in the Statement: that concerns the regulations of content of broadcasting programmes. I believe many of us in this Chamber are still anxious about violence and sex as portrayed often in television where some of us feel that young people are being adversely affected. Your Lordships' House has expressed itself strongly from time to time on these
1054
matters. May I ask the noble Lord the Minister what is the position of the code which was under discussion? Can the Board of the BBC be encouraged to take a more lively interest in guiding policy in this connection?
Thirdly, the Peacock Committee recommends for radio that the BBC should have an option to privatise Radio 1 and Radio 2 and local radio in whole or in part. We believe that the BBC must be allowed to cater for all types of people and for all types of taste. From our point of view, we oppose any recommendation to privatise.
I conclude my observations on this Statement and on the report generally. One could go on for a long time, but the House would not appreciate that at Statement time. I envy somebody much wittier than I who, in one sentence, summarised what he thought to be the position of the Peacock Report. He said that this must be the first peacock to be pigeon-holed before it was even hatched. I borrow the Statement and ask the Minister for his comments on it.
Lord Winstanley: My Lords, on behalf of my noble friends on these Benches I join the noble Lord, Lord Mishcon, in thanking the Minister for repeating this important Statement on this very complex and important report.
Many of us on these Benches when the Peacock Committee was first appointed tended to regard the whole exercise as a delaying device; a device intended to postpone rather difficult and touchy decisions, perhaps even until after the next general election. It would seem from the Statement, from promises of further Green Papers and the Government waiting for further comments that it might turn out to be exactly that. However, there are some matters that cannot wait that long.
I shall now refer to matters in the Statement and in the report which from these benches we welcome. First we welcome warmly the statement that the licence fee should remain as the principal source of funding for the BBC. We welcome that, but it is something which cannot wait and in advance of any Green Paper we should like to hear something about a fixed licence fee over a lengthy period, perhaps index-linked, established as soon as possible. On these Benches we have always felt that for the BBC having to go at short intervals cap in hand to the government of the day for an increase in the licence fee has always rendered the BBC perhaps undesirably dependent on the government of the day, whatever government that may be.
Secondly, we welcome the Statement rejecting, for the moment, advertising on BBC television. I think, too, I should like to welcome what is said in the Statement and in the report which recognises what can be done with new technology to enable pay television to become a reality. That would provide enhanced opportunities for minority interests in many ways. With the use of DBS (which has been referred to in the Statement) it is possible that there may come a time when one might be able to choose a particular programme, perhaps an opera from New York or even a boxing-match from somewhere else in the world, and be able to watch that live at three o'clock in the

1055
morning by paying a fee. The technology is available for that, and I am glad to see that that technology has not been rejected.
In relation to the parts of the report and the Statement to which we take some exception, I should say at once that the idea of giving the franchises to the highest bidder surely is absolutely absurd. The only power the Independent Broadcasting Authority has over programme standards is its power to award, to withhold or withdraw a franchise. If the franchises were once sold off to the highest bidder one might as well abolish the IBA the following day. That is something which noble Lords on these Benches would certainly not support.
Also, we have some doubts about Radios 1 and 2 being paid for by advertising and being privatised. Radio is not free; it has to be paid for. It is paid for at the end of the day by the listener. It is my impression that the BBC under its present structure is able to mount Radio 1 and Radio 2 very cheaply indeed. It is my belief that any private company who bought it would find it very much more expensive to provide the same service, and that extra money would have to be provided by the listener.
Finally, I should like to acknowledge from these Benches that it would appear from the comments that have been made by the Home Secretary and by the Statement which has been made here, that Mr. Hurd really is perhaps more deeply committed to the maintenance of broadcasting standards than some of us feared. We look forward very much indeed to debates on the promised Green Paper and to taking a full part in them. We hope that important matters such as the licence fee and making it index-linked over a lengthy period could be dealt with before the time of the Green Paper.
5 p.m.
Lord Glenarthur: My Lords, I am grateful to both noble Lords for their comments on the Statement. I shall endeavour to respond to some of the points that they have raised. Many of those points are points which will have to be taken in the round, with the other views that will be expressed generally on what the Statement contains. To that extent I can assure them that what they have said will be noted very carefully.
The question of advertising was raised by the noble Lord, Lord Mishcon. His view was that he was glad that that was not a recommendation which had been adopted by the committee. Certainly the Government welcome the committee's endorsement of the valuable contribution of the BBC and the IBA, and I think we must accept that the committee has done important and original work on the economics of advertising on television which cannot lightly be laid aside. But I think that nevertheless we must look forward to further discussion on the issues that have been raised before we make up our minds.
As to the matter of subscription, again raised by the noble Lord opposite, the Government certainly welcome the careful technical and economic studies which the committee has undertaken on that issue. My right honourable friend is persuaded that subscription will have an increasing role to play in the financing of
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broadcasting. The Government's plans for direct broadcasting by satellite specifically envisage the possibility of payment by subscription and the transmission standards for DBS are particularly suited to subscription technology. Cable programmes, of course, are already paid for in this way. It is clearly attractive that people should be able to pay directly for those services which they wish to receive and not for others. I am sure that this will have added benefits in making the broadcasters more responsive to public opinion.
However, there are many technical questions to be overcome before we could entirely replace the licence fee by subscription and again we look forward to hearing particularly the views of the broadcasters, the set manufacturers and others who have technical knowledge of this issue before our minds are made up on the right way forward.
I listened with care to both noble Lords' comments on the content of programmes. The noble Lord, Lord Mishcon, asked me specifically about it. My right honourable friend the Home Secretary met the chairmen of the BBC and the IBA in December to draw their attention to the public concern which had been voiced about this question. There is no question but that the broadcasters have taken the concerns very seriously and they have both instigated reviews of their procedures. The IBA in particular has been running an advertising compaign to remind parents of its family viewing policy and the fact that some programmes after 9 p.m. may not be sutable for children and to encourage parents to share responsibility for what their children watch. The BBC has reconvened its internal committee to consider programme standards and I understand that it will be reporting shortly.
So far as the code is concerned, both the BBC and the IBA have been reviewing their codes and how they have been implemented. The noble Lord, Lord Mishcon, opposed the recommendation that a car-radio licence should be introduced. The committee makes a specific recommendation on that point. In the body of its report, however, the committee refers to the desirability of broadening the base of the licence fee by the method that is suggested. There are, therefore, various options incompassed by the recommendation to broaden the whole base of the licence fee. They all have their attractions. They have their disadvantages and advantages. But they inevita-bly introduce new complexities into the collection and enforcement system. Again, this is a recommendation which must be considered in the light of the commit-tee's report as a whole.
As to the matter of the ITV contracts, again, as I said when I repeated the Statement, the current contracts between the IBA and the programme companies terminate at the end of 1989 and we shall be exploring with the IBA what scope there is for action on the committee's recommendation within the IBA's timetable for new contracts.
Lord Mishcon: My Lords, before the noble Lord the Minister continues, is he able on behalf of the Government categorically to say that the mere possession of cash, therefore making possible the highest offer, must not be the criterion for granting

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franchises? Is he not able to make a categorical statement on behalf of the Government to that effect?
Lord Glenarthur: My Lords, I think that I should be very rash to make any categorical statement at this stage with the report fairly new in our hands. What I have said is that my right honourable friend will consider the matter in the way that I described in the Statement. As to the question of selling Radio 1 and Radio 2, the term used by the committee was "privatised". The Green Paper on radio provides an opportunity for us all to consider what sort of radio services we want in future, by whom they should be provided and the nature and extent of the regulation required. So, again, I am afraid that this is a matter which has to be considered in the round, so to speak.
I certainly share the view that the noble Lord, Lord Winstanley, expressed about new technology, summarising briefly his remarks. There is a great deal of complexity in that and I certainly share his other view that the matter which is being considered by the Peacock Committee in a most comprehensive way is an extremly complex matter, as anyone who reads the report will understand. I believe that I have covered most of the points that have been raised. If I have not, I shall correspond with noble Lords.
Lord Parry: My Lords, I should first—
Lord Broxbourne: My Lords—
Lord Parry: My Lords, shall I give way?
Lord Broxbourne: My Lords, it would be courteous for the noble Lord to do so. I cannot answer for the House but it is certainly appreciated by me.
May I direct the attention of my noble friend the Minister in particular to Recommendation 8 at page 142 of the report, which contains what is at first blush the somewhat surprising requirement that within 10 years the BBC and ITV should be required to secure not less than 40 per cent of programmes from what are called independent producers? Will Ministers subject this proposal to careful scrutiny and ensure that there is no derogation from the accepted aim and traditional endeavours, as particularly exemplified in BBC2 and Channel 4, to provide programmes of high quality and distinction?
Lord Glenarthur: My Lords, I note my noble friend's remarks. We have been much impressed by the contribution of independent producers following the introduction of Channel 4 and we recognise that there may be a place for widening their role. But we question whether formal quotas are the right way of doing that. I think I can only say to my noble friend that we look forward to the views of independent producers and established broadcasters on this important question.
Lord Parry: My Lords, as I was saying when I was interrupted by my own own politiness, it is necessary for me to declare my interest as a member of the general advisory council of the BBC and as someone who has spent a very considerable number of years on
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the IBA Committee. I do that because what I shall now say is my own opinion and in no way carries the imprimatur of the committee on which I serve.
I wish to welcome the Peacock Report and the speed with which it has come before the House because in a democracy it is absolutely essential that the people who contribute to it in the media are confident of their own position. There has been a very great deal of indecision among those who produce the programmes and a great deal of indecision in the BBC and in the independent television companies because of the various reviews that have been undertaken. So I welcome the speed and I welcome some of the recommendations.
I particularly welcome, with my own interest, a sentence that I find in paragraph 593 on page 133. It says:
"In practice we have no doubt there will be a distinct and important role for the BBC as far ahead as anyone cares to look".
While the Minister, as he said, is not in the business of giving categoric assurances, I am sure that will carry a great deal of assurance. I hope that the Statement he has been kind enough to repeat to the House gives that sort of assurance to the BBC and that we can all be assured that this fine institution has a long future before it.
I also want to say that in another paragraph reference is made to the controls that exist over the BBC and the IBA in the matter of programmes—controls which do not exist over the press. It is interesting to see that these have been isolated in the Peacock Report and will be subject to discussion in your Lordships' House.
Finally, may I say that I always felt that when the IBA came to consider the granting of new franchises (and there were relatively few occasions when they did that) they had in mind the social obligations to the community as much as anything else. In my own country of Wales, where a notable change took place that set the pattern for the holding of the tribunals and the public reassurances and the examinations that went with them, we were very pleased to see that the system worked well. Personally I believe that if those controls were thrown over simply in order to raise a few extra thousand pounds on putting the thing up to the highest bidder, it would be a very retrograde step. I would urge the Government to consider very carefully all the evidence which we now have of the way in which the IBA's granting of licences and franchises has worked.
Lord Glenarthur: My Lords, I certainly acknowledge the fact that the noble Lord has a great deal of experience and interest in this field. He has mentioned a number of points which of course we shall study carefully during our consideration of the issue over the coming months.
Lord Boyd-Carpenter: My Lords, is my noble friend able to give any indication at this early stage, first, as to the likely date of issue of the promised Green Paper? Secondly, can he indicate the kind of time-scale the Government have in mind, leading up to their final decisions? Here I must declare an interest as a director of a company which applied last autumn, following the invitation extended by the former Home

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Secretary, for a licence for community radio. Is my noble friend aware that the present Home Secretary, in a written reply in another place earlier this week, said that all those applications for community radio were to be put on ice because of current developments, although we had of course expected a reply many months ago?
Is my noble friend further aware that there is very considerable interest in the Government clearing their minds on the major and biggest issues to which the Statement refers, so that those who have, in good faith and at some cost, prepared plans in response to a Government invitation will be able to know where they stand and what to do by way of pursuing their plans which the Government previously had encouraged?
Lord Glenarthur: My Lords, I am grateful to my noble friend. He asked about the date of the Green Paper. I cannot be specific, but I understand that it is hoped to produce it by the end of the year. As to the further timetable, I am afraid I am not in a position to tell my noble friend what it will be.
On the question of community radio, I note my noble friend's declared interest. He will have seen the Statement which my right honourable friend made in another place not so long ago. Certainly the views of all those who have expressed concern about the efforts that have been made by all those who were prospective applicants for licences for community radio will be considered by my right honourable friend. I can assure my noble friend that my right honourable friend will respond more fully to those views, as they are expressed, in due course.
5.15 p.m.
Lord Jenkins of Putney: My Lords, I shall be grateful if your Lordships will allow me to make one single comment, leading to one question. The comment is this. It seems to me that the general drive of the report goes against the pattern which we have established in this country so far as broadcasting generally is concerned. We have established what might be called a "mixed economy" with a public service element and a commercially-sponsored element. No doubt it works so well because it is a vertical division. Each of the two corporations is required to cover the whole range of broadcasting from top to bottom.
What is proposed here seems to me to be a horizon-tal split. I think that is fundamentally a mistake because it is undesirable that the BBC should, as it were, be cut off from the generality of broadcasting, and it is equally undesirable, and possibly even insulting, that the commercial sector should be regarded as capable only of popular broadcasting and not capable of rising to the levels to which we know it can rise. So I think the general drift so far as that goes is wrong, and we need to watch it very carefully. I agree with the comments made from my Front Bench which seemed to me to drive in that direction.
The particular question arising from this concerns the Green Paper; and here I must declare a slight interest in that I have written radio plays for the BBC and hope to write more in the future. It seems to me that the proposal to sell off, or to refinance, Radio 1
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and Radio 2 would be almost as bad as removing them altogether. If you force the BBC to take advertising on these two stations, you then fundamentally alter the nature of the corporation and disturb the delicate balance which has existed in this country and upon which the very success of broadcasting is founded. There are aspects of the report which I think all your Lordships will welcome, but we have to march very carefully so that we do not destroy what has become very precious to us all.
Lord Glenarthur: My Lords, I note the noble Lord's comments. Obviously the committee's recommendations have very wide implications and it would be wrong to reach a snap judgment on any of them until there has been the fullest opportunity for debate within the country and among the particular interests which might be affected. I think at this stage I can merely note the noble Lord's remarks.
Lord Nugent of Guildford: My Lords, I welcome my noble friend's Statement that the Government are to reject the alternative form of finance for the BBC through advertising. I should like to make a short point about the Statement which rejects the recommendation of the report that broadasting standards should be governed by the general law and that instead they should continue to rely—I think these were the words—on the much stricter standards which now exist in regard to the informal obligation which the BBC has. Is my noble friend aware that there are a great many people, including myself, who think that over the last 20 years standards of broadcasting material in the BBC, and the IBA for that matter, have gone steadily downwards and that much material now contains elements of violence and obscenity which are entirely objectionable when they appear in the home—in the kitchen and the sitting room—for the family to see? Is he aware, therefore, that if he is going to rely on that existing obligation he has got to make it a great deal stronger?
Lord Glenarthur: My Lords, I am sure that many people share my noble friend's point of view; I certainly respect it enormously. My right honourable friend, in his Statement, made clear that we do not accept the apparent view of the committee that there is no qualitative difference between broadcasting and the print media. Broadcasting, as I said, is particularly powerful; it is available in people's homes at the turn of a switch and, not least, it can be extremely expensive to produce. It costs nothing to pick up a pen and write, but to produce an effective television programme can require an extensive investment in time and money. For all these reasons we believe that special arrangements will continue to be needed for broadcasting to ensure that there is proper regulation of the content of programmes and that there are opportunities for a genuine plurality of voices, views and subject matter to be expressed. That does not necessarily mean that the present structure should be perpetuated, or that the general law, suitably modified, might not have a part to play. I stand by the remarks that I made earlier in answer to the noble Lord, Lord Mishcon, that those are matters that my right honourable friend has already discussed with the

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chairmen of the IBA and the BBC, and also by my comments on the code.
Lord Mulley: My Lords, I welcome the decision of the Government to produce a Green Paper. In doing so, will the Minister bear in mind the great difficulty that will be presented to the existing independent commercial stations if either Radio 1 or Radio 2, or any other national radio scheme, came to be dependent upon advertising, taking away advertising from the independent local radio stations who are in many cases having great difficulty in generating enough revenue to maintain their services?
Secondly, while I understand the problem that the noble Lord, Lord Boyd-Carpenter, described to the House, concerning those awaiting a decision about community radio, there is also likely to be a considerable problem if community radio stations are permitted without any regulation at all, as apparently may be the case. Will that point be considered along with the possible relaxation of some of the regulations on existing IBA radio stations? Will the noble Lord give the House an assurance on those two points?
Lord Glenarthur: My Lords, I can certainly give the noble Lord an assurance that all factors connected with community radio and with Radio 1 and Radio 2, and with everything else to do with radio, will be examined in the Green Paper. Some of the issues that have been raised by the report will require relatively early decisions. Others, and particularly those that look forward to the second and third stages to which the report refers, can be taken rather more slowly. Certainly those points will be borne in mind.
Lord Annan: My Lords, since noble Lords have naturally been reacting immediately to the recommen-dations of the report, perhaps I may say that my own immediate reaction is very much in sympathy with that of the noble Lord, Lord Mishcon. However, I have a certain affinity with Professor Peacock at this moment. When one issues a report, one implores the public to read it. None of us has had time to read and digest the report.
It seems to me that two points ought to be stressed. The first is that the whole inquiry sprang from the fact that the licence fee was felt to be rising too steeply. There were many complaints from the public, and they were endorsed in many quarters. The BBC tried to defend its position but it was perfectly natural that someone should ask, "Is this still the right way of financing the BBC?" A great deal of the report deals with that particular problem, and that problem we ought to treat seriously. I do not know whether the noble Lord, Lord Boyd-Carpenter, considers that there is much chance of the Treasury agreeing to indexing the licence free. I rather doubt it, but that matter is one that will have to be discussed in Whitehall.
The second circumstance from which the report sprang was a deliberate attempt by members of Professor Peacock's committee to look into the technological future. What will happen when we have satellite broadcasting, cable developed more than it is
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today, and so forth—in other words, when we have a multiplicity of channels that can be viewed in this country? We ought to acknowledge that any committee always has difficulty when it gazes into a crystal ball.
I remember when I was first asked by Mr. Stonehouse to be chairman of the committee on the future of broadcasting in 1970. I was somewhat astonished when he asked me whether I realised that within a few years we would have pictures coming out of the wallpaper. I said that I was interested to hear that. When it actually came to the point, the committee reached the view that the pace of technological change would be rather slower than the Postmaster-General at that time, in 1970, thought was likely.
However, the technology of broadcasting is moving forward all the time. For that reason we ought to be grateful to Professor Peacock and to his committee for trying to cope with the difficult task of trying to forecast what will happen when there is a major technological change. There are many questions I should like to discuss now, but I wonder whether this is the right moment to do so. Will the Government be willing to find time in the autumn, before any Green Paper is published, for your Lordships' House to discuss the Peacock Report? It surely is the collective wisdom of your Lordships' House that ought to be available to influence the make-up of the Green Paper. Would the Minister reply to that particular point?
Lord Glenarthur: My Lords, the noble Lord. Lord Annan, has more experience probably than anybody in this particular field and I readily acknowledge that that is so. So far as concerns studying the report, I agree that it is a complex document that we would all do well to study in great depth. I agree also with the noble Lord that the subject of the licence fee is a legitimate matter to be examined. That is precisely what the committee has done. I share the noble Lord's view, as we all do, about the complexity of the area with which the report deals; and technology is changing with great rapidity. As to a debate, I note the noble Lord's remarks, but such a proposal is a matter for the usual channels.
Lord Harris of Greenwich: My Lords, is the Minister aware that we welcome his remarks about the need to study the report very carefully before reaching final conclusions on at least some of the issues that it raises? Is the Minister aware also that some of us are mildly surprised to hear him say so, given that for the past week we have been reading reports in very nearly every national newspaper in which the recommendations of Professor Peacock and his colleagues have been rubbished in a most systematic fashion?
I have two questions to ask the Minister. One relates to a point that was put to him a moment ago by the noble Lord, Lord Mulley, concerning the question of Radio 1 and Radio 2. Is the Minister aware that in table 6.3 of the report it is stressed that the total estimated profits of independent local radio in the year up to September 1985 were £1·9 million after debit? In the context of that situation, is the Minister not aware that if Radio 1 and Radio 2 were privatised or allowed

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to carry advertising, it is absolutely certain that a substantial number of local independent radio stations would be driven out of business? Is the noble Lord additionally aware that many of us would regard that as wholly objectionable?
Secondly, is the Minister aware that my noble friend put to him a specific question on indexation which, given the number of questions put to the Minister, he no doubt inadvertently failed to answer? Will he deal with that question now?
I draw the Minister's attention to paragraph 624 of the report, where it is stated:
"One of the most important arguments for indexation is that it would bring a measure of insulation of the BBC from political influence".
Is the Minister aware that on the day when we have been told that the chairman of the Conservative Party has set up a special unit in Conservative Central Office to transmit criticisms about BBC programmes, it is particularly necessary that the Government should respond as soon as possible to that particular recommendation? Is he aware also that it is necessary to insulate the BBC from political pressures of that kind when it is suggested, as it often is, that unless the BBC views matters in the way in which the Government want the BBC to view them, there is the risk that the licence fee will not be increased? Given the specific character of that recommendation, will the Minister indicate that the Government will make an early statement on the question of indexation?
Lord Glenarthur: My Lords, perhaps I may expand a little on indexation. The current settlement which was announced in March 1985, runs until 1987 and unless displaced by a different system until 1988. My right honourable friend's predecessor made clear in announcing the present fee levels that the BBC should plan its expenditure for the three years to 1988 on the basis that it must, for that period, live within an income equivalent to that generated by fees at the present level of £58 for colour and £18 for monochrome.
Therefore, there can be no question of any general increase in the standard licence fee before March 1988. I believe that that allows ample time, if required, for consideration and discussion of the basis on which the level of any changes from that date, and beyond, should be determined. In saying that I note the noble Lord's views.
With regard to the monitoring unit referred to, I can say that this unit was recently established by my right honourable friend the Chancellor of the Duchy of Lancaster to examine, among other things, whether the suggestions of bias on radio and television are well founded. There can be no objection, surely, to regular and informed scrutiny of programmes. I can add that the Government receive complaints from both ends of the political spectrum, and from the centre, that broadcasters are biased against them. I believe that the right people to judge these matters are the governing bodies of the BBC and the IBA. They are independent men and women from a wide range of backgrounds who are much better able to judge these matters fairly than are politicians whose own views are perhaps not entirely impartial.
Lord Skelmersdale: My Lords, I think that as the noble Lord, Lord Annan, said and as my noble friend Lord Glenarthur, said also, we are in danger after 50 minutes of turning this into a somewhat less informed debate than those which your Lordships currently conduct Perhaps this would be an appropriate moment to return to the Building Societies Bill.
Sensing the mood of the House, I beg to move that the House do now again resolve itself into Committee on the Building Societies Bill.
Moved accordingly, and, on Question, Motion agreed to.

Building Societies Bill
5. 32 p.m.
House again in Committee on Clause 1.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No 6:
Page 2 line 12 leave out (", primarily from their members,")
The noble Lord said: In moving this amendment, it may be convenient for the Committee if I speak also to Amendment No. 16.
These amendments reflect a discussion that took place on Second Reading of the Bill on the balance that should properly be struck between the retail deposits of building societies and the ability of building societies to raise funds on the wholesale market The Bill as drafted seems to be somewhat restrictive because we can envisage circumstances in the future—and perhaps in the present—where building societies will wish to have regard to the experience of the chairmen of the mortgage banks (if I may quote them in evidence) who raise money at long term in order to perform their proper function, which is lending at long term.
I believe that on Second Reading the noble Earl, Lord Selkirk, mentioned what he regarded as the miracle of intermediation—borrowing short and lending long In an exchange I had with the noble Lord, Lord Campbell of Croy, when he intervened in my speech on Second Reading, I tried to indicate the way that our thinking was going We believe that building societies will wish to have greater flexibility in going into the wholesale market. At the moment I understand that about 10 per cent. of their liabilities are in the wholesale market and the rest in the retail market. That is a figure which I read in a Building Societies Association brief and I take no responsibility for the figure.
The object of this exercise is to make sure that in future building societies should not necessarily be constrained from building up the proportion of their liabilities that come from the wholesale market and, inevitably, allowing to decline the proportion of liabilities which comes from the retail market That does not seem to us to be an undesirable development As I said, the chairmen of the mortgage banks go out of their way to match the maturities of their assets and the maturities of their liabilities.
By putting expression into Clause 1 that a major function of the commission shall be to ensure that the principal purpose of building societies remains that of

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raising funds primarily from their members would appear to inhibit building societies now and, perhaps more importantly, in the future from having access to the wholesale market. The wholesale market is now, and could easily be in the future, a source of funds of a longer maturity and greater stability so that we can get away from the problem that I believe has faced many building societies, and many banks, that the lending rate is determined by the intake of retail deposits.
I hope that the Government will accept the amendment. It gives the building societies greater freedom. I am advised that the Building Societies Association welcomes this greater flexibility. I hope that the Government will feel free to accept both the thrust of what I am saying and the amendment. I beg to move.
Lord Morris: I am most grateful to the noble Lord, Lord Williams of Elvel, for raising this point with his usual clarity, to which we have now become accustomed. I am concerned in only one respect. There is not so much to fear as the noble Lord suggested, because the word "primarily" has been included in the Bill. I may be totally wrong but my interpretation and construction of that is precisely as the clause says—that the societies should primarily raise funds from their members. That does not in any way stop them from borrowing on the wholesale market. I may be wrong, but that is my view.
Lord Denning: I hope the Committee will not accept this amendment. The clause expresses the real character of building societies as they have developed; namely, that their members should provide the money—I use the phrase, the "retail trade". That is the position historically and traditionally. The word "primarily" does not mean that it must be done solely in that regard. The word "primarily" allows them to borrow money on the wholesale market. It is not necessary to have this amendment.
Lord Houghton of Sowerby: I support my noble friend on this amendment and disagree with the noble and learned Lord, Lord Denning. It seems to me that the paragraph concerning the functions of the commission place it under an obligation to secure—the word "secure" is used—that the fund-raising activities of building societies shall be concentrated upon getting subscriptions or deposits from members. I doubt whether that takes full account of the possibility that at some time or other the state and the building societies may be in competition for personal savings.
The national savings movement was directed toward the savings of the mass of the people and the conditions were there to attract them. Building societies are in the same market and I think that more than once the building societies and the national savings movement have been in conflict. If building societies are to be regarded as having an obligation to the same people as the national savings to obtain their money, a build-up of competitive interest in personal savings may occur. More and more the building societies may have to turn to other sources of money
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for lending, because the demand for mortgages is unremitting in its intensity and likely to continue as increasingly the only option for securing accommo-dation is to obtain a mortgage to buy a house. I think that the demand for mortgages will increase and the more the private sector supplies housing needs, the greater the demand on building societies. The contraction of municipal housing schemes combined with the sale of council houses has increased the strain on the resources of the building societies.
I think that this problem of conflict of interest and competition for personal savings may either require building societies to retreat to some extent from their claim upon personal savings, or require the Government to retreat from their claim upon personal savings. The Government may have to borrow elsewhere what they cannot obtain from the people, and the building societies may have to do the same. There is not an unlimited reservoir of personal savings to be obtained by the two rivals who are competitors for it.
In the circumstances I think that one must not put an obligation upon the Building Societies Commission,
"to secure that the principal purpose of building societies remains that of raising (funds) primarily from their members".
That may be an old fashioned idea about building societies and it may to some extent become impractical because the savings are not there.
What about the slump in the revenue of building societies that has occurred in the past few weeks? We are told that it means that any prospects of lower interest rates have flown out of the window. After all, they have only £500 million, or whatever sum it is, compared with much more in the previous months, and they have forward commitments of many millions. This may lead to the building societies having to go on the market. Indeed, some of them already are on the market and supplementing their income from other sources.
So I think that this is possibly an obsolete concept, not in the sense that it is not desirable but in the sense that it is unlikely that building societies can maintain their primary source of income when there are other competitors for the money. It makes no difference to intention, but it makes a difference to what I think is the sense of obligation placed upon the Building Societies Commission.
The Earl of Selkirk: It is only in recent times of course that building societies have gone to the wholesale market at all. This is a new development which I think came up about 10 or 15 years ago.
I am bound to say that I am not absolutely certain what these words mean, but it is suggested—and I think the suggestion is right—that building societies should not lose their local contact with individual people. I do not agree with the noble Lord, Lord Houghton, that we have entirely to give way to the Government on personal savings. This is one of the ways that savings have been undertaken and it is liked by the public. It is merely a suggestion—or not very much more than that—that building societies should continue in this way and should not go into a purely City business, borrowing money as if they were joint

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stock companies and having vast take-overs or whatever. This is not the work of building societies. If building societies lost their local contact with the people throughout the country, I think that something of their character would disappear.
5.45 p.m.
Lord Brabazon of Tara: My Lords, the noble and learned Lord, Lord Denning, and my noble friend Lord Selkirk have reminded us that one of the principal distinguishing features of building societies has always been that they rely upon their members to raise funds. The mutual principle of building societies has always been the raising of money from members for lending to members. These amendments would remove that in one fell swoop. While this legislation seeks to equip building societies to compete effectively in the commercial environment of the late 1980s, the 1990s and beyond, it has never been the intention to dismantle the fundamental bases of their operations. Thus the Government seek to provide that, notwith-standing the new powers, the bulk of building society business will continue to be residential mortgages. The Bill preserves the mutual status of the societies and introduces a series of constitutional changes designed to make mutuality work better.
In due course we shall reach Clause 7 of the Bill and there the Committee will find that societies are being allowed to raise up to 20 per cent. of their money in the wholesale market, and indeed, by order that amount can be raised to up to 40 per cent. in due course. Nevertheless, we believe that the primary purpose should remain as it is, that of a mutual society. If, of course, the building society chooses to go further and further along the lines suggested, it has the option to convert to a plc under a clause which we shall come to later in the Bill.
It is rather interesting that in fact two Members on the other side of the Committee, the noble Lords, Lord Williams and Lord Barnett, have put down a Motion to oppose that clause standing part of the Bill. I always thought that the Opposition regarded themselves somewhat as the protectors of mutuality. Therefore I find these two particular amendments rather curious and I must join with other noble Lords in urging the Committee to reject them.
Lord Williams of Elvel: The noble Lord, Lord Brabazon, has introduced a rather aggressive attitude toward these amendments which certainly are designed to give building societies somewhat greater flexibility—together, I agree, with amendments to Clause 7 which we shall come to later. As my noble friend Lord Houghton has said, none of this reflects upon the mutuality of building societies. On this side we certainly wish building societies to continue to be mutual organisations. All we are trying to do is to envisage circumstances in the future in which building societies may wish to have rather greater recourse to the wholesale market than they have at present.
It seems to me that the Government are being slightly schizophrenic on the issue of mutuality. On the one hand they say that they wish to preserve mutuality, and on the other hand they say that they wish to allow building societies to convert themselves
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into fully-fledged, all-singing, all-dancing banks by conversion to plcs. We are trying to preserve the mutuality concept, but to allow within that concept greater access to wholesale markets than is allowed under the Bill as now drafted.
If I may say so, I am slightly disappointed in some of the reactions of those who are directors or chairmen of building societies in not welcoming what I am saying, which is not a great Labour Party theme or a great social crusade. I am trying to give greater flexibility to building societies than there is in the Bill and indeed, if I may say so, the Building Societies Association regards these amendments with a certain amount of sympathy. However, it seems that the Government have set their face against allowing building societies to expand in a way which I think would be sensible for them to do in the future. We shall read very carefully what the noble Lord has said, and in the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 1 shall stand part of the Bill?
Lord Houghton of Sowerby: I should like to ask the noble Lord a question about subsection (7), which states:
"The Commission shall have power to do anything which is calculated to facilitate the discharge of its functions, or is incidental or conducive to their discharge".
How literally are we to take those words in the Bill? What on earth do they mean? Does that offer the wide, wide world to the Building Societies Commission? It is a strange, loose subsection to have for the commission's general functions. Although I think that in many respects the Bill is well drafted, when one comes to such a clause it seems an extremely sloppy law-making process. May I suggest that the problem we were just discussing might be overcome if the word "secure" were re-examined? The commission's general functions are to promote, to administer and to advise, but subsection (6)(c) wishes to "secure". How can it secure? That is a matter that needs to be re-examined.
Lord Denning: With regard to subsection (7), the law will read it in any way. The clause is better as it stands.
Lord Brabazon of Tara: I think that the noble and learned Lord, Lord Denning, has probably answered the first question that the noble Lord, Lord Houghton, asked. I gather that it is a standard provision in legislation of this sort and has been given to all statutory bodies of this kind since the 19th century. I assure the noble Lord that there is nothing sinister in it.
I had better read what the noble Lord said about the word "secure", and if there is any reason for me to come back, I shall do so.
Clause 1 agreed to.
Lord Barnett Lord Barnett moved Amendment No. 7:
After Clause 1, insert the following new clause:
("Code of Practice

.—(1) The Commission shall, after consultation with the Lord Chancellor and the Director-General of Fair Trading,

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prepare, publish and administer a code of practice with regard to the provision by building societies of conveyancing services.

(2) The code of practice referred to in subsection (1) shall (inter alia) make provision for the manner in which and the standards to which conveyancing services shall be provided by building societies and shall in particular make provision for protecting persons for whom conveyancing services are provided by building societies from conflicts of interest that might otherwise arise in connection with the provision of such services.

(3) Notwithstanding any practice rule made by the Council of the Law Society under section 31 of the Solicitors Act 1974, a building society operating in accordance with the code of practice referred to in subsection (1) above may, subject to such terms and conditions as the Commission may state, provide conveyancing services generally, including the provision of such services to persons to whom advances are made under section 10 of this Act.

(4) A building society not operating in accordance with the code of practice referred to in subsection (1) above may provide conveyancing services, but only to persons other than those to whom advances are made under section 10 of this Act.").

The noble Lord said: The amendment provides a new clause which will allow building societies to do conveyancing for those taking out mortgages with them, but only if they operate in accordance with the code of practice as set out in the new clause. The Committee will recall the promise that was made to my honourable friend in another place, Mr. Austin Mitchell, that the Government would introduce legislation to enable that to take place. After consideration, the Government eventually decided that they could not do so because they felt that there would be a conflict of interest. That is their basic case against introducing the provision.
The case for allowing conveyancing to be done by building societies and banks is surely not disputed. First, consumers want it. In 1984, there was a survey and 81 per cent. of those interviewed said that they would be pleased to have conveyancing services offered to them in a one-stop-package type of housing service operation. Secondly, few can dispute that by doing that there would be greater freedom of choice for the consumer. Thirdly, I doubt whether it could be disputed that greater competition in this area would lead to lower costs. One recognises the conflict of interest argument. The new clause seeks to deal with it directly, although as I said on Second Reading I believe that the case is weak and applies more in theory than in practice.
The Building Societies Association has had some comments to make upon what the Law Society has been saying. It referred to the Law Society maintaining that there is an inherent and insuperable conflict where a lender's employed solicitor acts also for a borrower, and that only independent advice can avoid that. In its evidence to the Lord Chancellor's Department, the Law Society listed 12 areas of likely conflct between lenders and borrowers. They included the calculation of the rate of interest, provisions for early repayment, restrictive covenants in mortgages, third-party guarantees, secret profits, links between lenders and vendors and the purchase price of the property.
The implication was that the solicitor advises on those matters and that if a solicitor is acting simultaneously for the purchaser and for the building society, there is the inherent conflict of interest to which I have referred. The Building Societies Association refutes that argument, and does so very well. It made inquiries
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among building societies. They reveal that it is unknown for the terms of any mortgage offer by a building society to be rejected or even to be varied at a solicitor's instigation. That is not surprising because the terms of mortgage loans made by building societies are fairly standard and generally well known.
There is also the point that at present it is a building society's normal practice to employ the purchaser's solicitor to prepare the mortgage deed. No conflict of interest is seen in such cases although the Law Society argues that at that stage the negotiation between lender and purchaser is complete. In the opinion of the Building Societies Association, that is far too simplistic a vew to take. The solicitor is often not approached until after a house has effectively been purchased and the terms of the purchase and of the loan have been decided.
The Committee does not have to take what might be considered the biased view of the Building Societies Association or even the biased view of the Law Society—not that I dare to accuse the Law Society of taking a biased view. I know that irony does not come out in Hansard, but what I am saying will be clearly understood.
The Committee does not have to take my view on these matters. The question of conflct of interest was considered by the Director General of Fair Trading in a speech in June 1985. He said that he did not see any inherent or unsurmountable conflict of interest were a building society to provide conveyancing services to a purchaser who is also a borrower of that society in that both have a common interest in ensuring that there is a good title. He suggsted that if a lawyer is offering independent advice, that would seem to be more a selling point than grounds for disallowing a building society-employed solicitor from providing basic conveyancing services.
Professor Farrand, who chaired the Government's inquiry on conveyancing services, commented that although solicitors can advice on various matters—for example, relating to the mortgage term—that does not mean that he either does advise or should advise. Professor Farrand commented that what legal authority there was, was that solicitors were under no obligation to give such advice. Those are not my views or those of the building societies but the views of independent people in this field.
In fairness to the Law Society, I feel that I should deal with some of the points that it has raised. It has a brief. I do not know whether it was a mistake, but the Law Society kindly sent me a copy. Perhaps I may comment briefly on some of the points in the brief. First, it says among other things in relation to the background of the proposition:
"Potential clients will often shop around asking both about the service and about the price".
Anyone who knows about these matters will know that it is very rare for anybody buying a house to ask about the service that they will receive in the conveyance. Their primary objective is whether they can have it done cheaper. They do not normally say to a solicitor, "Are you going to see to it that I get a proper title?" I should have thought that they naturally assume that the solicitor acting for them, whether employed by a

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building society or not, would do the job for which he or she was being paid.
The Law Society go on to ask why the Government is now legislating, and they answer the question in this way.
"It can hardly be with the aim of forcing solicitors to be more competitive. The competition could not be more lively. The only reason is to fulfil the unwise commitment given to Mr. Mitchell".
At least the Law Society have no doubt about the commitment given by the Government to my friend in another place about carrying out the pledge to which they had committed themselves. However, I leave that on one side and say that the new clause, which I am sure should be accepted by anyone considering what we propose, would indeed inevitably and obviously increase the level of competition if building societies were enabled, without any conflict of interest, to carry out a one-step housing service for people who wish not simply to borrow money from them but also to buy a house and generally use the kinds of service I would have thought most people would want to see carried out.
The Law Society, in this brief which I have found very helpful, go on to ask why the institutions want to get hold of the conveyancing market. They answer the question in this way.
"Building societies are no longer the friendly non-profit-making institutions they once were. They are now highly competitive and aggressive".
I am not sure whether that is intended to be a derogatory comment but this Committee must take that as I have read it. They go on to say,
"It is clear that the aim of an institutionally owned estate agency conveyancing department will be to be an outlet for the sale of the financial services of that institution. A 'Woolifax' Building Society estate agent or conveyancer will be expected to make profits for the Woolifax by ensuring that house buyers take out mortgages with the Woolifax, that the Woolifax earns commission on the insurance policies placed by the buyer, etc."
One is bound to ask: is it really thought that solicitors acting for a building society or a bank would be any less professional in the way they carried out their duties than they are now in giving what is called independent professional advice? The fact is that, as we all know, solicitors acting independently frequently also act for building societies at the same time. Nobody has ever suggested that that is an inherent conflict of interest that does great damage to potential purchasers of houses or those seeking to take out mortgages. Therefore I do not think the argument holds up.
Finally, perhaps I may quote again from the Law Society's brief under the heading "The threat to the independence of lawyers". It would be very dangerous for me, in this Committee with more than one or two very distinguished lawyers, to propose anything that could or would be deemed to be a threat to the independence of lawyers. With the eye of the noble and learned Lord, Lord Denning, upon me, I should be even less likely to propose any such threat; but the fact is that the Law Society say,
"The consumer would have little protection left. The voice of the independent professional who can dispassionately advise clients on the merits of major transactions affecting house buyers would be effectively silenced".
We all receive representations on many things, and issues and subjects; but I think it is fair to say that that
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is stretching it a bit. The plain fact is that if somebody is seeking to buy a house and wants dispassionate financial advice, with the greatest possible respect to the lawyers in your Lordships' House they should not be going to lawyers.
The Lord Chancellor: I certainly would.
Lord Barnett: If that is the advice that the noble and learned Lord the Lord Chancellor seeks to give, then I am bound to say that my experience of obtaining financial advice would make me feel I would rather find it elsewhere. I do not say that as a legal judgment.
The Lord Chancellor: If the noble Lord reflects for a moment that if he borrowed money on the security of a house, he would lose the house and his money if things went wrong, he might come to a rather less superficial view.
Lord Barnett: With the greatest possible respect, if the noble and learned Lord had heard what I said earlier, he would realise that what I was saying was that professional solicitors acting for a house buyer, whether that buyer is purchasing through an independent solicitor or through a building society, would give precisely that security without the matter necessarily involving a conflict of interest. That was what I was arguing.
The Lord Chancellor: I heard very clearly what the noble Lord was saying. What he did not reflect upon was what would happen to him if he entered into an unwise mortgage and failed to keep up his instalments. The number of repossessions is rather high this year.
Lord Barnett: With the greatest possible respect to the noble and learned Lord, this has nothing whatever to do with the new clause I am moving. I hesitate to argue with the noble and learned Lord on legal matters, but he has begun to widen the area. Although I do not wish to trespass upon any ruling the Chairman might make about widening the discussion, what the noble and learned Lord says now has nothing whatever to do with the clause I am moving. I am simply attempting to make a case which, strangely enough, the noble and learned Lord's Government agrees with, and that is that we should improve competition wherever possible.
As I have said, and as the Law Society concede, it was the original intention of the Government, including the Solicitor-General in another place, that they should introduce a new clause almost identical to the one which I am now moving, because they gave a firm pledge and commitment to my right honourable friend in another place. It was only the conflict of interest argument which stopped the introduction of that, and not the wider area that the noble and learned Lord the Lord Chancellor now seeks to introduce. The plain fact is, as I have indicated and as the building society movement have made quite clear, there is no threat to the independence of lawyers and no conflict of interest if we have a code of practice along the lines of the clause I am moving, and I hope the Committee will accept that.
Lord Denning: Perhaps I may say that in this case I regret very much that a Government gave that promise. It seems to me that, on principle, when you have a borrower and a lender dealing in a conveyancing matter the parties should be represented by different solicitors. Indeed, it has often happened that trouble arises in the courts when both parties have had the same solicitor. Frequently it is done to save expense but time after time judges experienced in these matters have indicated that there ought to be separate representation for the the parties concerned. This has been recommended time after time for the simple reason that there is an inevitable conflict of interest arising. So on principle I would hope that there would not be a single conveyancing system, so to speak, by the building society or bank or any institution of that kind.
I will also go one step further. What is the whole object of this amendment? Is it to save money or to let the building societies be more competitive? Look at the other expenses of estate agents, insurance firms and the like. We are doing nothing whatever in regard to those expenses, and I think that the expense of having separate solicitors to do conveyancing is really a quite small part of the whole expense. Therefore, I would be against conveyancing being done generally by or through building societies or banks. However, the promise has been given. Let it be done, if needs be, by a later clause in the Bill; namely, regulations very carefully and strictly made by and on behalf of the committee. I am against the amendment.
Lord Templeman: This amendment, together with later amendments—I have in mind Amendment No. 105 and Amendments Nos. 247 to 264—raise the same question of what limitation should be placed on a building society that undertakes conveyancing and estate agency work. There should be no more limitations than are necessary in the interests of the public. But two questions arise. There are two interests to protect. The first is the interest of the public in getting the best advice and getting impartial advice. The second interest that I still put forward, notwith-standing the remarks of the noble Lord, Lord Barnett, is that it is in the public interest that the solicitors' profession should be protected not against competition but against unfair competition. It is to those two principles that I address my remarks.
There is a real problem of conflict of interest. It is not simply something dreamt up by chancery lawyers. It is something that has evolved as a matter of practice. It is the question of fairness. I shall give the Committee an illustration. Let us suppose that there are no restrictions at all on the building society. Let us suppose that the building society has a borrower who cannot keeep up with his instalments. The building society is very kind to him and does its best, but he simply cannot keep up with the instalments. The building society says, "We think that you will simply have to sell the house". He agrees and asks the building society whether it will sell the house for him. It says, "Oh, no. We are bound to tell you that that is very depreciatory. You had better sell it". But the society goes on to say, "We do have an estate agent who is a subsidiary. We suggest that you go to him and he will do his best". No doubt he will. His charges will
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be the usual charges of 2·5 per cent. The vendor goes to the estate agent, and they agree on a price. In walks a purchaser. The same estate agent says, "This is a very desirable property. It is on offer at £100,000". That is enough to clear the building society mortgage and to give the first borrower something in his pocket. Acting perfectly properly, the estate agent asks the purchaser, "Would you like to buy this property? By the way, if you do, our parent company is a building society. We shall be able to arrange a loan for you. One favourite method is by taking out an endowment policy. Our society—we make no bones about it—will get a commission on the endowment policy. What is more, we will carry out all the conveyancing for you at a cost of £400".
I venture to suggest that whatever the probity of building societies, there must be some limitation. That kind of conduct must be forbidden. One cannot have a spider at the centre of a web, however well meaning a spider and however able it is in its affairs, pulling on every strand of the web, acting for vendor and purchaser, borrower and lender, and acting also as an estate agency as well as dealing with conveyancing and insurance. There must be some limitation. I should like to explain those limitations. It seems to me that the amendments proposed by the noble Lord, Lord Foot, Amendments Nos. 247 to 264, are sensible amendments that will allow the building societies to compete but will prevent the societies being in the conflict of interest position that I have outlined.
There is another factor to be taken into account from the point of view of the borrower and the lender. Nowadays one has to pay £80,000 for a house that was built at a cost of £800. It is the most important financial deal that any man enters upon. In most cases a purchaser or vendor will be well advised to consult a solicitor. One does not want to see solicitors thrown out of the window and everything taken over by building societies. The solicitor is about the only person who can say, "Do you really want to buy this house?", and "How will you get the money?" I know that the noble Lord says that a solicitor will act for a building society. Of course, he does. But he acts for several building societies. He is not wedded to one. Before acting for the building society on the conveyancing he sits down and considers with his client the pros and cons of whether to buy, how much to pay and everything else. He does more than that. He considers his client's matrimonial affairs, whether the property should be in the name of the wife, and whether the man should make a will. A good solicitor is under a duty to act as a father confessor and friend to his client. A good solicitor is worth his weight in gold. One does not want to see him eliminated altogether. The noble Lord looks cynical—
Lord Barnett: No.
6.15 p.m.
Lord Templeman: I am not here to defend each and every solicitor. There are 45,000 solicitors scattered throughout England, most of them in firms of three, four or five. Those in the country know the whole of the country. They know the people who live there and those they are dealing with. They know how to advise old ladies; they know how to advise the spendthrift.

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That is not the task of a building society. The building society is there to lend and to borrow. It is kind and gives certain advice. But it is not there to give the kind of family advice that a solicitor gives. It would be a very great pity if, in the interests of competition, conveyancing was taken over largely by building societies and small firms of solicitors ceased to be consulted, ceased to have that practice to the extent that they were put in great straits and ceased to carry out the services they perform now.
There is bound to be unfair competition in a certain way between building societies and solicitors. It is competition that solicitors must put up with. It is unfair in so far as the building societies have millions and millions of capital. The building society can afford to tell someone that it can do his conveyancing cheaply. The building society can afford to advertise. Most of the two-men or three-men solicitors do not possess the capital to do that. They cannot stand up to, or at least they will have difficulty in standing up to, the building society competition. I am not asking for this competition to be ruled out. It is something that Government and Parliament in their wisdom have said shall take place. So solicitors have to bear that competition. It must not, however, be unfair competition. When solicitors practise they are operating under certain rules in respect of accounts and behaviour. All those rules should be imposed on the building societies so that they are not in any better position than the solicitor. On reaching Amendment No. 105 and Amendments Nos. 247 to 264 the Committee will find that these provide that there shall be accorded to building societies the same limitations as those imposed on solicitors. The overriding limitation is that building societies should not be put into the kind of conflict of interest situation that I have mentioned.
I beg the noble Lord, Lord Barnett, to believe that this is not a plea. I have no brief on behalf of solicitors. I have never been a solicitor. I know a lot about solicitors. I have indulged in a good deal of criticism of solicitors. I have criticised more solicitors than I have building societies. I ask the noble Lord to believe that this is not a professional money-grabbing series of amendments. This is a very serious problem that we shall fudge at our peril. At the end of the day I should like to see solicitors still able to flourish, giving conveyancing advice and every other advice, and competing with building societies. I should, however, like to see building societies restrained from competing where there is a conflict of interest that operates against the interests of the public and where they might otherwise have an advantage over solicitors.
I make those observations because, owing to public and other duties, I shall be unable to stay to take part in the debates on all the amendments put forward by the noble Lord, Lord Foot. I pray earnestly that the Minister and the noble and learned Lord the Lord Chancellor, will not have regard to the question, "Shall we beat the solicitors over the head? Is this a favourable opportunity for getting the legal profession to yield up one of its restrictive practices?" I know that they will appreciate that we are not in that field at all. We are in the field of safety for the public and fairness to the solicitors' profession.
Lord Campbell of Croy: I intervene very briefly to make one point only and not to enter into the arguments that have been put so clearly on this amendment. I want to ask the noble Lord, Lord Barnett, whether he realises that this new clause is drafted to apply to England and Wales and not to Scotland, with its references to the Lord Chancellor, which would of course be the Secretary of State for Scotland where Scotland is concerned, and with its references to the Law Society, which would be the Law Society for Scotland.
There is an important fact relating to this amendment and it is a complicating one. In Scotland, there are not many estate agents and it is firms of solicitors who mostly carry out the tasks, such as advertising property and so on, which are done south of the Border by estate agents. That is a complicating factor and I simply wanted to register that what is being said about this clause would have different applications north of the Border.
Lord Jacques: For too long, consumers have suffered from the monopoly charges inflicted by solicitors for conveyancing—charges based upon the value of the property and not upon the work that is being done. The only excuse we have had for this charge in recent years is that it creates a fund from which there can be a cost subsidy to other work done by the solicitors. That may be so, but that is not the way in which the public should be charged.
What we need is a service for which the public are charged according to the value of the work which is done, and not according to the value of the property; work in which there is some competition to ensure that we get that. I believe that we can get that, or at least take a first step, by giving a power of conveyancing to building societies under proper control; and this amendment gives that kind of control. The conflict of interest in conveyancing is between buyer and seller, not so much between buyer and mortgagee. They are on the same side. In my opinion, that plea of conflict of interest is to a considerable extent an excuse and there is no great merit in it.
Lord Morris: With the greatest respect to the noble Lord, Lord Jacques, in this regard he is miles out of date. This practice was changed some years ago. I intervene at this stage, not because I support this amendment, for in many respects it has considerable lack of merit, but because I wish to support the noble and learned Lord, Lord Templeman, in his vigorous and most effective argument in regard to conflict of interest, when I come to my rather more draconian amendment at Schedule 8.
But I cannot fail to mention the point made by the noble Lord, Lord Barnett. With respect, I think he has missed the fundamental point here. He was quite right to point out that very often the purchaser's solicitor acts on behalf of the mortgage society on the acquisition of a property. But the point is that it is the mortgage society agreeing to use the purchaser's solicitor, and not the purchaser using the mortgage society's solicitor.
There is the very important point here that the interest of the lender is very much more restricted than the potential interest of the purchaser of the property.

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The interest of the lender of the funds is in the value and in security for the loan. The interest of the purchaser goes a great deal wider than that; for instance, and not least, the contract of sale itself in which the lender has no interest whatsoever. I do not want to develop the argument any more, but it is important to point that out to the noble Lord.
Lord Brabazon of Tara: We have had an interesting debate on this subject, which was debated at length in another place during the Committee stage. May I first say that my noble and learned friend the Lord Chancellor would have very much liked to reply to this debate, but owning to state duties in connection with the visit of the President of the Federal Republic of Germany he may not be able to stay until the end of it.
May I first deal with the suggestion of the noble Lord, Lord Barnett, that the Government have breached a commitment made to his honourable friend Mr. Mitchell? That is not the case. In February 1984, the Solicitor-General said in a Written Answer to Mr. Mitchell:
"we will shortly issue a Consultation Paper on how best to ensure that conflicts of interest and anti-competitive practices do not arise when solicitors employed by banks, building societies and other organisations are permitted to undertake conveyancing for their employers' customers. We hope to bring forward legislation committing building societies to offer this service next Session."
That quote was from Hansard of another place for 17th February 1984, col. 347.
That answer merely indicates the intention to proceed if the conflicts of interest could be avoided. It did not commit the Government to the introduction of a conveyancing free-for-all, come what may. What came out of that consultation was that there were genuine worries about the conflicts of interest that might arise. We paid careful heed to these comments and concluded that it would not at present be appropriate to allow institutions to offer conveyancing services to customers to whom they were also providing a loan.
Our consultations with the various interested parties did not produce any solutions. It would have been dishonourable to ignore these findings and to allow something which was so clearly against the public interest. Our commitment was to examine the possibility, in the hope that we could permit institutions to offer these services to their borrowers. That has not yet proved possible.
It has further been suggested that this Government are trying to protect the solicitors' profession against the prevailing spirit of competition. This Government's record of encouraging competition is second to none. Last Session's Administration of Justice Act brought forward the provisions needed to implement the Farrand Committee's recommendations on licensed conveyancers. The Council for Licensed Conveyancers has been meeting regularly and I understand it is making good progress.
This Bill will permit not merely building societies but banks, other financial institutions, subsidiary companies and estate agents to offer conveyancing services. Solicitors are now advertising their services and are competing vigorously with each other; and I
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say to the noble Lord, Lord Jacques, in particular, that the cost of conveyancing has dropped by one-third since this Government came into office. Where is the evidence to suggest that we are protecting the cosy monopolies of the solicitors' profession?
The Government are concerned, however, to protect the consumer from any adverse effects of this new spirit of competition. There must be safeguards which will be included in the recognition rules made under Schedule 21. Naturally my noble and learned friend the Lord Chancellor will consider what those safeguards must be, and ensure that they do not necessarily restrict competition while still protecting the interest of the consumer.
This new clause requires the commission, after consultation with the Lord Chancellor and the Director General of Fair Trading, to prepare, publish and administer a code of practice to cover the provision of conveyancing services by building societies. The chairman of the Building Societies Association has provided my noble and learned friend with a draft code of practice. The association suggests that this would be one way out of the difficulty. The code is clearly the product of much useful and conscientious thought.
However, my noble and learned friend said, in his reply to Mr. Cox on 17th May, that the Government are not satisfied that it meets our concerns. It sets out procedures that should be followed where there is a conflict and distinguishes between major and minor conflicts and precribes different procedures for each It is not clear when a conflict is minor and when it is major. Moreover, I doubt that it is right to leave the client without impartial advice in this situation. I he procedures envisaged will clearly lead to additional confusion and delay.
That is not to say, however, that no code will overcome the problem. If it can be overcome in the future—and, as my noble and learned friend the Lord Chancellor has said in his letter, he is always willing to consider further revisions—then a code could be incorporated easily within the provisions of Schedule 21. Noble Lords will have noted that Schedule 21 is drafted in wide and flexible terms. Recognition rules may easily be altered to include a code, should we be persuaded that it resolves our particular problem. This new clause is therefore unnecessary and inappropriate to institutions other than building societies. In the light of all that I have said and of the debate that has taken place I invite the noble Lord not to press the new clause.
6.30 p.m.
Lord Barnett: I say at once that I appreciate and understand why the noble and learned Lord the Lord Chancellor was unable to speak in the debate. I am glad that it did not prevent him intervening occasionally. It made me feel that I was back in another place. If I may say so, in another place I debated with lawyers long before they had reached the distinguished stage in their careers that they have reached when they arrive in this place. But I have enjoyed both.
I shall come in a moment to some of the points made by others in this brief debate. Let me say at once

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to the noble Lord, Lord Brabazon, that right at the outset of my remarks I conceded that, while the Government had been accused by some of a breach of faith—and, indeed, the Law Society sort of conceded that the commitment had been given—they did not introduce what they had implied at least to my honourable friend because they perfectly genuinely felt that they could not overcome the problem of conflict of interest. Indeed, for almost the whole of my remarks I dwelt on the issue of conflict of interest, on which it seems that we shall have to disagree.
Let me come right away to the points made by the noble and learned Lords, Lord Denning and Lord Templeman. It is difficult to have to disagree with two such distinguished lawyers, but their experience must be very different from that of the average purchaser of a small house, with the greatest possible respect to them. The noble and learned Lord, Lord Denning, said that there is normally a need for a separate solicitor. In most cases I go along with that all the way. When there is a vendor and a purchaser in commercial transactions of any kind I should never want to see a solicitor acting for both sides. But to say what he said is totally to misunderstand what happens today in the purchase of houses.
It is the perfectly normal, proper and ethical practice that a building society employs the purchaser's solicitor to prepare the mortgage deed. That is what happens in probably the vast majority of cases. That was conceded by the noble Lord, Lord Morris, who of course disagreed with me for different reasons. But there is no doubt that in that case solicitors act for both sides. As my noble friend Lord Jacques said, they do not act for the vendor and purchaser. That is an entirely different matter. Of course then there should be two separate solicitors. But we are not talking about that. We are talking about whether a building society should be able to act for the purchaser of a house when he takes out a mortgage—to draw up a mortgage deed and the rest.
The noble and learned Lord, Lord Templeman, dwelt upon the independence of solicitors. I was very moved by what he said. I know a lot of good family advisers. They are personal friends and have acted for me. But with the greatest respect to somebody as learned as the noble and learned Lord, the person who undertakes a legal conveyance does not sit at a table and ask, "Do you have a marriage problem? What about your children? How do you feel about this, that and the other?" A solicitor's clerk carries out the conveyancing. I doubt whether for one moment he ever contemplates discussing with the client his family problems. The client would probably not want to discuss them with him. Both noble and learned Lords were talking about something entirely different from what happens in the real world.
The Lord Chancellor: In the light of the noble Lord's reference to my difficulties, which have been acute because of the date on which the debate takes place, I thank him for giving way. Once the terms of the loan are agreed and the terms of the mortgage drawn up, the interests of the purchaser and of the proposed mortgagee are identical. At that stage they are concerned only with whether the vendor of the house,
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or whatever, can convey a good title. That has never been the point and that has never been the difficulty.
The difficulty consists in the fact that, if a person wants to borrow a sum of, say, £80,000, he requires advice, first of all, as to whether his financial circumstances make it appropriate; and it does not matter to the building society, which has a good security on the house, if the purchaser loses it. He has to inquire as to whether a building society, and if so which building society, is the appropriate lender, or whether the bank or his father-in-law would lend money on more favourable terms. It is at that stage that the conflict of interest is liable to exist. If the noble Lord would only concentrate his mind on the point, he might get somewhere.
Lord Barnett: With the greatest respect to the noble and learned Lord, he is attempting to draw us into an area which does not apply in the real world. What happens in practice is not what he would have us believe. Indeed, if he comes to my part of the world, he will not find many people seeking to borrow £80,000 or anything remotely like it.
If we are concerned with good title, it is at least as much in the interests of the building society as it is of the purchaser to ensure that there is a good title. Those who oppose the new clause, through the use of legal language, of which I am innocent, wish to convince me that I should drop the amendment because there would be a conflict of interest if a solicitor acted for both the building society and the borrower. I am not talking about the purchaser and the vendor, as I said, because there there would be separate solicitors—although I have known cases where there have not been; but I do not agree with that. We are talking about a very narrow area. Given the code of practice in the new clause and the Government's desire to extend competition as far as possible, I am surprised that they will not accept the new clause. In those circumstances I have no choice but to advise noble Lords not only on this side of the Committee but on the other side as well to support the new clause.
6.38 p.m.
On Question, Whether the said amendment (No. 7) shall be agreed to?
Their Lordships divided: Contents, 42; Not-Contents, 94.

DIVISION NO.2

CONTENTS

Ardwick, L.

Irving of Dartford, L.

Barnett, L.

Jacques, L.

Birk, B.

John-Mackie, L.

Boston of Faversham, L.

Kaldor, L.

Brockway, L.

Llewelyn-Davies of Hastoe, B.

Carmichael of Kelvingrove, L.

Lockwood, B.

David, B. [Teller.]

Longford, E.

Dean of Beswick, L.

Lovell-Davis, L.

Ennals, L.

Morton of Shuna, L.

Ewart-Biggs, B.

Mulley, L.

Falkender, B.

Nicol, B.

Gallacher, L.

Oram, L.

Graham of Edmonton, L.

Parry, L.

Hatch of Lusby, L.

Pitt of Hampstead, L.

Houghton of Sowerby, L.

Ponsonby of Shulbrede, L.

Howie of Troon, L.

[Teller.]

1081

Ross of Marnock, L.

Turner of Camden, B.

Scanlon, L.

Underhill, L.

Sefton of Garston, L.

Wallace of Coslany, L.

Serota, B.

Wells-Pestell, L.

Stoddart of Swindon, L.

Williams of Elvel, L.

Strabolgi, L.

NOT-CONTENTS

Airedale, L.

Long, V. [Teller.]

Allenby of Megiddo, V.

Lucas of Chilworth, L.

Alport, L.

Lyell, L.

Ampthill, L.

McFadzean, L.

Aylestone, L.

Macleod of Borve, B.

Beloff, L.

McNair, L.

Belstead, L.

Mancroft, L.

Bessborough, E.

Merrivale, L.

Brabazon of Tara, L.

Mersey, V.

Brentford, V.

Morris, L.

Broadbridge, L.

Munster, E.

Brougham and Vaux, L.

Murton of Lindisfarne, L.

Broxbourne, L.

Norfolk, D.

Caithness, E.

Onslow, E.

Cameron of Lochbroom, L.

Pender, L.

Campbell of Alloway, L.

Plummer of

Campbell of Croy, L.

St. Marylebone, L.

Carnock, L.

Portland, D.

Colville of Culross, V.

Rankeillour, L.

Colwyn, L.

Reigate, L.

Craigavon, V.

Renton, L.

Crawshaw of Aintree, L.

Renwick, L.

Davidson, V.

Ridley, V.

Denning, L.

St. John of Bletso, L.

Diamond, L.

Sandford, L.

Dundee, E.

Selkirk, E.

Elliot of Harwood, B.

Shrewsbury, E.

Elton, L.

Shuttleworth, L.

Faithfull, B.

Skelmersdale, L.

Ferrier, L.

Soames, L.

Foot, L.

Strathclyde, L.

Fraser of Kilmorack, L.

Stathcona and

Gardner of Parkes, B.

Mount Royal, L.

Gray of Contin, L.

Sudeley, L.

Grey, E.

Swansea, L.

Hailsham of Saint

Swinfen, L.

Marylebone, L.

Swinton, E. [Teller.]

Halsbury, E.

Templeman, L.

Hanworth, V.

Thorneycroft, L.

Harris of Greenwich, L.

Trenchard, V.

Henley, L.

Trumpington, B.

Hooper, B.

Ullswater, V.

Hylton-Foster, B.

Vaux of Harrowden, L.

Kilmarnock. L.

Vivian, L.

King of Wartnaby, L.

Whitelaw, V.

Lane-Fox, B.

Young, B.

Lawrence, L.

Young of Graffham, L.

Layton, L.

Zouche of Haryngworth, L.

Lindsey of Abingdon, E.

Resolved in the negative, and amendment disagreed to accordingly.
6.45 p.m.
Schedule 1 [The Building Societies Commission]:
Lord Houghton of Sowerby Lord Houghton of Sowerby moved Amendment No. 8:
Page 171, line 15, at end insert
("though not for any period exceeding five years, which may be extended for a further period not exceeding five years").
The noble Lord said: This amendment can soon be disposed of. I am seeking to find out a little more about the conditions of service of the chairman and deputy chairman of the Building Societies Commission. In Schedule 1 to the Bill it says that there shall be an instrument of appointment. Is there no period to that instrument? Is there some standard form here? It is usual to indicate the tenure of office when making a
1082
public appointment of this kind, and whether it can be renewed. If the noble Lord tells me that this is all right, that this is what they usually do, I presume that later on we shall have to ask questions when the appointment is made—on what terms, and for how long?
I thought it not a bad idea to say that the appointment shall be not longer than five years to begin with, to be renewed for another five years, but not to exceed 10 altogether. That seemed reasonable. I am open to persuasion. I shall not spend further time on it. I beg to move.
Lord Brabazon of Tara: It is indeed the intention that the commissioners will have fixed-term appointments, and the period is likely to be in the range of three to five years. We would not therefore want to go as far as does the amendment of the noble Lord in putting in the statute exactly how long they should remain. We should like to retain flexibility so that the commission can retain expertise. It is possible to envisage circumstances in which a commissioner has been appointed originally for a fixed term, and has had his appointment extended for a further period. Then, because of the ill-health of another commissioner, it might be desirable to reappoint him for a further short period. We should like to retain the flexibility as it is. But I can give the information which the noble lord, Lord Houghton, seeks, that the period is likely to be within the range of three to five years. I hope that will satisfy him.
Lord Williams of Elvel: May I ask the Minister for certain clarification of what he has said? Do I understand him to say that the Government will publish a fixed term for the appointment of commissioners which is in the range of three to five years—and no doubt it will be something such as four years—or is he saying that there will be flexibility in the terms that one commissioner may be appointed for three years and another for five years, and that it will be extendable? What exactly is the Minister saying to my noble friend?
Lord Brabazon of Tara: Each individual appointment will be separately negotiated, so to speak, for a term of between three and five years. If I have any further information to give the noble Lord I shall write to him on that point.
Lord Harris of Greenwich: Perhaps the noble Lord will do so. It is very unusual to make public appointments on the basis that he is describing. They are normally for a fixed period. To take an illustration which is not particularly relevant to this area, when people were appointed to the parole board they were appointed for a specific number of years. If Ministers therefter wanted to appoint someone for a longer period then they re-appointed the individual. I find it very unusual to have this degree of uncertainty. I do not want to press the noble Lord today. It is not a matter of critical importance, but perhaps the noble Lord will look into it between now and the Report stage.
Lord Brabazon of Tara: Yes, I shall indeed do so if I cannot give an answer now. It will be a fixed period of between three and five years. Perhaps I may write to the noble Lord, Lord Harris of Greenwich, and let him have a copy of the letter. If I have been in any way unclear in my answer I shall certainly deal with the matter.
Lord Houghton of Sowerby: I take it that the appointment will be for a fixed term of between three and five years. That seems to be quite definite because it has been repeated so many times! For the time being I shall take the noble Lord's answer because I do not want to delay the Committee any longer on a matter of this kind. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Houghton of Sowerby Lord Houghton of Sowerby moved Amendment No. 9:
Page 171, line 37, leave out paragraph 4.
The noble Lord said: I now come to a rather more serious matter. I rise in defence of men and women in the prime of life at the age of 70. My amendment would remove the slur upon them in paragraph 4 of Schedule 1 which says:
"No person who has attained the age of 70 years is eligible to be or to remain a part-time member of the Commission".
The history of the Halifax Building Society shows that the most notable personality in the whole movement was Sir Enoch Hill who served for 35 years and retired voluntarily at the age of 72 amid gratitude and appreciation of his long service and great ability. The elderly board of the Halifax Building Society pioneered the building society movement. Now we are told that no one over the age of 70 may,
"remain a part-time member of the Commission".
As regards building societies, the Bill says that directors over 70 shall be subject to annual election. I have no particular quarrel with that. I remember years ago sitting on a committee on the future of the Civil Service and the late Lord Woolton said that he would put all civil servants over 50 on an annual contract and that would stop them talking about promotion for the sake of how much it would add to their pensions! He would keep them on their toes in their late years. I have no real complaint against putting people on an annual engagement, but I do complain about banning them altogether.
The appointments will be in the hands of the Treasury and they can surely take care of appointing suitable people. Even my noble friend Lord Wilson of Rievaulx said that he was always ready to make room for an older man! I think that we are really quite stupid about age. Where does this 70 years come from? Is it what the doctors say or is it what the Bible says? I had an old uncle who when he reached 70 said, "I've now had my allotted span". He then began to moan about living on borrowed time. I said, "Who've you borrowed it from? You've never owed anybody a penny all your life and now you say that you are living on borrowed time". The idea of three score years and 10 is quite absurd. Surely I can appeal to your Lordships' House of all institutions to defend the right of able bodied people of 70 to do a job of work even on the Building Societies Commission.
I sincerely hope that the Government have not put the two young noble Lords on the Front Bench opposite to try and denounce the right of those able bodied people of 70 to continue in their work. I notice that the noble Lord, Lord Young, has moved away from those young people!
Seriously, I think that this quite unnecessary slur should be removed from the Bill. I need not say any more. I cannot believe that the Committee will endorse this vote of censure upon this House. Here we have the créme de la créme of wisdom and experience among senior citizens. Yet we are asked to sit here and endorse—indeed, to put into an Act of Parliament— that no person after the age of 70 shall be eligible for or to remain in (and that is the unkindest cut of all) the job. It is like cutting him off; as soon as he is on borrowed time, out he goes. No, those who look after these appointments can manage them very well without a prohibition of this kind in the Bill. I sincerely hope that if the Government do not take this paragraph out voluntarily, then all of those over 70 should go into the Lobby against it—and that will ensure that the amendment will be carried!
Lord Brabazon of Tara: I know that I am on touchy ground here. I think that the best I can do is to put the blame on the party opposite, because the Bill as originally drafted did not contain this provision. Indeed, it was only put into the Bill in response to an undertaking given in Committee to the honourable Member for Ipswich, who is a member of the party opposite. I am not allowed to quote verbatim what the honourable Member said, but he implied that Labour Members believe that an age limit must be part of the qualification for being a commissioner. He said that no one had said that beyond some arbitrary age someone has outlived his or her usefulness. He said that it is frequently the case that wisdom and experience go with age and that in public life people of very senior ages make major contributions to public decisions. That certainly is the case in this Chamber. He went on to say that he felt, however, that when one has reached the age of 70 it is time to let a younger person have a go, and I would endorse that particular aspect of what he said. To be fair to those of us below the age of 70, it is perhaps a good idea occasionally to let somebody below that age have a go at these things.
Therefore, if the noble Lord, Lord Houghton, were to call a Division at this moment, I do not know how the Committee would divide on the matter. I think that I might be on the losing side! Nevertheless, I am afraid that I cannot accept the amendment. I think that Members of another place of all parties who approved this measure would not wish me to do so at this moment.
Lord Houghton of Sowerby: I cannot withdraw the amendment. If noble Lords—young and old—feel disposed to keep this paragraph in the Bill, then it is their responsibility and not mine. I will not have it for myself and I do not wish it on anybody else. Youth will have its chance all right; the whole nation is waiting for a little more wisdom among young people because then we may be in better shape all round. I cannot withdraw the amendment, because it is quite unnecessary to put a limitation of this kind in the Bill. If people

1085
making appointments cannot exercise their own judgment and discretion, then I do not think that the law should be there to help them. It should come out of the Bill. I cannot withdraw the amendment. It is up to the Committee.
7 p.m.
On Question, Whether the said amendment (No. 9) shall be agreed to?
Their Lordships divided: Contents, 21; Not-Contents, 57.

DIVISION NO.3>

CONTENTS

Airedale, L.

Irving of Dartford, L.

Brockway, L.

Kaldor, L.

Carmichael of Kelvingrove, L.

Kilmarnock, L.

Carnock. L.

Mulley, L.

Crawshaw of Aintree, L.

Pitt of Hampstead, L.

[Teller.]

Plummer of

Diamond, L.

St. Marylebone, L.

Foot, L.

Rugby, L.

Grey, E.

Strabolgi, L.

Harris of Greenwich, L.

Underhill, L.

Hatch of Lusby, L.

Vickers, B.

Houghton of Sowerby, L.

[Teller.]

NOT-CONTENTS

Allenby of Megiddo, V.

Macleod of Borve, B.

Alport, L.

Maude of Stratford-upon -

Ampthill, L.

Avon, L.

Belstead, L.

Merrivale, L.

Bessborough, E.

Mersey, V.

Brabazon of Tara, L.

Morris, L.

Brougham and Vaux, L.

Mountgarret, V.

Caithness, E.

Murton of Lindisfarne, L.

Cameron of Lochbroom, L.

Onslow, E.

Colville of Culross, V.

Portland, D.

Colwyn, L.

Rankeillour, L.

Craigavon, V.

Reigate, L.

Davidson, V.

Renwick, L.

Denning, L.

Sandford, L.

Elton, L.

Shrewsbury, E.

Ferrier, L.

Shuttleworth, L.

Gardner of Parkes, B.

Skelmersdale, L.

Gray of Contin, L.

Strathclyde, L.

Hailsham of Saint

Strathcona and Mount Royal,

Marylebone, L.

L.

Henley, L.

Swansea, L.

Hooper, B.

Swinton, E. [Teller.]

Hylton-Foster, B.

Trenchard, V.

Lane-Fox, B.

Trumpington, B.

Layton, L.

Ullswater, V.

Lindsey and Abingdon, E.

Vivian, L.

Long, V. [Teller.]

Whitelaw, V.

Lucas of Chilworth, L.

Young, B.

Lyell, L.

Young of Graffham, L.

McFadzean, L.

Zouche of Haryngworth, L.

On Question, amendments agreed to.

Lord Skelmersdale: I think that perhaps we have got as far, if possibly not as fast, as we can on this Bill at the moment. In moving that the House do now resume, I suggest that we do not return to this Bill until at least eight o'clock. I beg to move that the House do now resume.
House resumed.

Lord Chancellor's Salary Order 1986
7.8 p.m.
The Secretary of State for Employment (Lord Young of Graffham)The Secretary of State for Employment (Lord Young of Graffham) rose to move, That the draft order laid before the House on 3rd June be approved. [25th Report from the Joint Committee].
The noble Lord said: My Lords, I beg to move that the draft Lord Chancellor's Salary Order 1986, which was laid before this House on 3rd June, be approved.
This order sets the salary level payable to the Lord Chancellor from 8th July at £79,400 per year compared with the existing level of £77,000 per year. It is needed in order to preserve the link between the Lord Chief Justice's salary and the Lord Chancellor's salary. The origin of this link is the 1983 Top Salaries Review Body's report which recommended that in recognition of the Lord Chancellor's position as head of the Judiciary he should have a salary higher than that paid to the Lord Chief Justice. The Government accepted that recommendation and it has been approved by Parliament.
The Lord Chancellor's lead was set at £2,000 in 1983 and it is proposed to keep it at that figure. In order to maintain the link between the two salaries it is necessary to bring forward to Parliament an order increasing the Lord Chancellor's salary whenever the salary of the Lord Chief Justice is increased. The Lord Chief Justice's salary has been increased from £75,000 to £77,400 from 1st July following the Government's decision on the TSRB's 1986 report. Consequently there is now a need to bring forward an order to increase the Lord Chancellor's salary by the same amount.
Your Lordship will recall that last year's debate on the order aroused considerable interest, not because of any challenge to the order itself but because the House took the opportunity to express its views about the TSRB's overall recommendations. This year I believe we are in a calmer situation, and without further ado I commend the order to your Lordships' House. I beg to move.
Moved, That the draft order laid before the House on 3rd June be approved. [25th Report from the Joint Committee].—(Lord Young of Graffham.)
Lord Barnett: My Lords, I was astonished to see the noble Lord sit down so soon. Normally, when you pay someone £77,400 you are entitled to say a few words. After the little debate I have just had with the noble and learned Lord the Lord Chancellor, I should not wish to stop him getting an increase in salary even if he is not taking it—and I gather he does not. I thank the noble Lord for explaining the link and the reason why this modest little increase is before us in this order.
Unlike the noble Lord, Lord Young, I should like to take the opportunity—and I hope that the Minister will take the opportunity to reply—to say a few words about public sector pay, for the Lord Chancellor's pay must be seen in the context of the consequences for others in the public sector, in the whole of the legal profession and, indeed, on a wider scale. Clearly one cannot criticise the present incumbent because he does not take anything like the amount he is entitled to take

1087
under this order or under previous orders. My noble and learned friend the former Lord Chancellor perhaps might be entitled to feel a little bitter about the present level of salary that the Lord Chancellor is allowed. When my noble and learned friend unfortunately left office in 1979 the salary was £20,000 a year. However fond we are of the present incumbent, I would personally much rather see my own noble and learned friend sitting on the Woolsack again.
The fact is that there are obvious consequences for others in the Lord Chancellor's department and elsewhere in the public sector flowing from the level of pay that is decided in this kind of order. As the noble Lord, Lord Young, said, when we debated this last year in a somewhat different context—the noble Lord said a "less calm atmosphere", though I am not sure I would necessarily say "less calm"—your Lordships kindly agreed to an amendment I moved. Your Lordships supported me in a very calm and rational way, and agreed with what I said in the amendment I put to your Lordships' House. But we were talking then of a 16·6 per cent. increase as opposed to a 3 per cent. increase now. It is a different situation. Nevertheless, it is also a fact that there are many in your Lordships' House, especially those who spoke last year, and outside the House on all sides, who recognise the unfairness of the policy that exists in this country in relation to incomes generally both in the public and private sectors and who believe that it is not the responsibility just of one party or of one Government but that it has existed for a long time.
This year, when this order was debated in another place, a small number voted against it, including one or two from the noble Lord's own party—or, at least, they abstained or spoke against it. They did so because they felt, as some of them made clear in the debate, that it was somehow wrong to be making available for one man £77,400, whereas others were having to make do with considerably less.
The plain fact is that anybody would have to accept, looking at public sector pay, that the policy that exists on public sector pay is a shambles. I want to make it quite clear that all parties have a responsibility in this sphere. Few have been able to find the solution to the shambles in relation to incomes, but the problem is serious. It is easy to simplify it by arguing that it is wrong to give increases to all those in the top salary brackets—which was a view taken by a few on both sides when this was debated in the other place. That, in my view, is a simplistic argument which ignores the real problem.
The heart of the problem is that the high salaries in parts of the private sector—not just at the top end of the private sector, but in the professions and in the City—make it extremely difficult to attract the right kind of people to the public sector initially and to enable movement to take place between the public and private sectors because of this disparity in incomes. For example, when the Government wanted a first-class man to go into the Ministry of Defence to run a very important part of that department, they were obliged to pay a very high salary of some £96,000.I make no criticism of that as such. I gather he is a most able man doing an excellent job, but that is an indication of the problems that we create for
1088
ourselves in this country with the level of pay that we try to impose and the inflexibility that inevitably applies in the public sector.
I have long felt that there is a great need for an interchange between the public and private sectors. We do it on a small scale in this country. Somehow, other countries manage it rather better. For example, in the United States many people are willing and able to come out of the private sector into the government sector to work for a few years and then go back again. We do not manage to do that in this country, and I find it rather sad because we have some excellent people in both the public sector and the private sector with contributions to make on both sides of the divide—and it is a shame it is a divide—which would help in the running of our country.
When the salary increase was debated in another place points were made about the unfairness of paying nearly £80,000 a year to the Lord Chancellor while there were so many low-paid, pensioners, unemployed and so on. We were being told that workers were pricing themselves out of jobs. That may be an understandable view to take, but it ignores the central problem that all Governments face. If we did not give the proper level of salary at the top it would solve nothing. Indeed, it would make the position much worse. When one of my honourable friends in another place said it would be much better to have flat rate increases so that then it would be fairer between the bottom and the top, my mind went back to the first of our pay policies in the last Labour Government, when we had a £6 a week pay increase across the board. Many of the low paid workers in my old constituency then received increases of a size that they have never had in their lives. But we could not continue it for another year, not because the Government did not want to but because it was narrowing differentials, and that was unacceptable to the trade union movement.
That narrowing of differentials is the problem that we create for ourselves all the time in the way we run our public sector pay policy; and no Government have been able on a long term permanent basis to get to grips with what is a most serious and difficult problem. I know the Government recognise that overall pay increases now—certainly not for everybody, but the general level of pay increases—are such as to be building up enormous problems for any economic management in this country.
I realise that this is not the time or the place for a major debate on how we can achieve a sensible incomes policy, but I think it is right that I should refer to it and bring it to the attention of your Lordships, and I hope even to a wider field. I think that the Lord Chancellor's proposed increase in this order simply highlights the nonsense of the way that successive governments have handled pay policy, or, rather, failed to handle pay policy. For myself, I can only hope that one day someone will face up to this most serious problem before the endless cycle of spiral increases in pay continues to such an extent that we ruin the economy that we all want to see improved.
Lord Young of Graffham: My Lords, I am, as ever, grateful to the noble Lord, Lord Barnett, for what I must take on balance to be his welcome of the Lord

1089
Chancellor's Salary Order 1986. Perhaps I may say to him that, by chance, I happen to be an example of one who moved from the private sector to the public sector before I was "translated"—if that is the correct word— to a third state. The noble Lord draws attention to a very real and very serious problem: how do a government manage public sector pay, and, indeed, what, I suppose, do Ministers say to the private sector who appear at times determined to pay what seem to be almost suicidal pay increaes? We live in a changing world, a world where we shall have to recondition ourselves to a different rate of inflation. I suppose that the simple truth is that for the last quarter century we have been used to substantial inflation and we have been used to annual pay rises. I can remember the time when that was not the norm, when we looked only for merit pay increases. Indeed, I recall during the last 10 or 15 years working in other countries where there were no pay increases and they waited until the cost of living increase had gone over 5 per cent. before that would even trigger a discussion on pay.
I suppose that it is a problem on which government have to set an example. In regard to the whole of this year's review board we have seen an endeavour, certainly in relation to the judiciary, the armed forces and the higher Civil Service, to achieve pay increases approximating to the rate of inflation. This is a difficult problem to solve. It is one which we had to solve in a world where, looking at the pay and tax increase, we required only 1·2 per cent. to maintain our living standards and where, in industry, we paid ourselves over 7·5 per cent.—adding more in real increase to labour costs than I suspect we have done in any year since the war.
The solutions are not easy. We have tried pay policies; we have tried exhortation. I suppose that the best and most effective way is to run an economy which keeps inflation down to zero. And the rate of inflation has been going down steadily. I hope very much that all will listen to the words of the noble Lord, Lord Barnett, and will look very carefully before coming to consider pay increases in the future. That is all that the Government can do today. I hope that all in your Lordships' House will look with favour on the draft Lord Chancellor's Salary Order 1986. I beg to move.

Crown Agents (Amendment) Bill
7.23 p.m.
Baroness Young: My Lords, I beg to move this Bill be now read a second time.
This Bill is a short and simple measure, amending the Crown Agents Act 1979. Its effect will be to extend until 1991 the period during which the Secretary of State has power to determine whether, and, if so, to what extent, the Crown Agents are required to pay interest on their commencing capital debt. Under existing legislation the power expires at the end of 1986.
The background to this Bill is as follows. The Crown Agents were founded more than 150 years ago, but it
1090
was not until 1st January 1980, following the Crown Agents Act 1979, that they were established as a statutory public corporation, controlled by a board appointed by the Secretary of State. The new corporation needed working capital, and the Act made provision for a commencing capital debt to be assumed by it. The amount of the debt, which was originally set at £30 million, has now through repayment been reduced to £17·8 million.
The Act requires that this debt be serviced, but Section 17 also empowered the Secretary of State to determine the amount, if any, of the interest paid, for an initial period of five years which would be extended to seven years by means of an order. The order was made and its effect expires on 31st December of the present year.
The Crown Agents paid some interest on the debt in the four years 1980 to 1983. In the latter year the loss of their Brunei business posed a major financial problem. The Board of Crown Agents took a hard look at the future of Crown Agents, both as regards its organisation and its finances. They drew up a comprehensive reorganisation plan, which involved substantial staff reductions and the sale of their headquarters offices in Westminster, followed by removal to Sutton. The Government endorsed these proposals in February 1984, with a view to privatisation in due course. In these circumstances we have agreed that no interest on the capital debt should be paid in 1984, 1985 and 1986.
The Crown Agents have carried out the reorganisation plan efficiently. They have moved their headquarters and reduced staff numbers from 1,200 to about 850. They continue to move towards privatisation, but no timetable has been set; enabling legislation would be required. We therefore need to continue the power to determine the extent to which Crown Agents should pay interest for a further limited period, until 1991. This is effective in Clause 1(a) of this short Bill. Clause 1(b) merely removes the necessity for any further order to be made to extend the power to waive interest, because the matter is fully covered by Clause 1 (a), where the limits are laid down.
I believe it to be to the general advantage that Crown Agents should continue to provide the services which it now provides both to its clients overseas and to this country, since very much of its business involves the export of British goods and services. This Bill will help to enable it to do so and I commend it to your Lordships.
Moved, That the Bill be now read a second time.—(Baroness Young.)
7.27 p.m.
Lord Oram: My Lords, I should like to thank the noble Baroness for explaining the Bill to us. As to its central purpose, there is nothing of a controversial nature, I think, between the two sides of the House. I notice that in another place when they reached the Committee stage they started at 10.30 in the morning and finished one minute later. I rather anticipate that when we reach the further stages in this House we can perhaps be even more expeditious.
We are this evening on the Second Reading and can therefore range somewhat wider in our consideration

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of the Bill. I should like to echo the words towards the end of the speech of the noble Baroness and the words which have been expressed in the other place commending the work that the Crown Agents do throughout the world. If one turns, for instance, to the last two pages of the annual report of the Crown Agents, one sees the great geographical spread and the great variety of activities as well as the very great number of the principals for which the Crown Agents act. One sees, too, earlier in the report the great variety and nature of the projects for which the Crown Agents offer their procurement services—all the way from postage stamps to equipment for power stations.
Clearly, therefore, it is in the interests of a great number of governments and a great proliferation of public and private institutions that this work should be facilitated. The noble Baroness has this evening explained that the financial progress of the organisation suffered a setback when Brunei decided no longer to use the services of the Crown Agents. They had been an important client of the Crown Agents. That, I understand, was, at least in part, the origin of this Bill and of the need to extend to 1991 the Government's power to waive interest on the Crown Agents' debt. We on this side acknowledge that that further facility is necessary.
I think that two more general observations are worth making, briefly. The chairman of the Crown Agents, in his report, pointed to the connection that there is between the business that his organisation achieves and the economic health of the developing countries which are its principals, many of them small and impoverished. It is clear that he would welcome an extended aid programme, which indirectly would bring greater business to the Crown Agents and to the many small firms in this country from which they make purchases on behalf of their clients.
My second observation is that I believe the confidence which so many governments place in the services of the Crown Agents is due in large part to the fact that they are dealing on a government-to-government basis. It is for that reason that we on these Benches view with apprehension the prospect which the noble Baroness has again repeated this evening: namely, the Government's proposal to privatise the Crown Agents. In my view, it will not benefit the organisation—it does not need privatisation—and it may well do it grave harm because of the breakdown in the confidence to which I have already referred.
The Minister for Overseas Development and the noble Baroness this evening have reiterated the Government's intention to privatise the Crown Agents, although we understand from the noble Baroness that no timetable has been set for that operation. I am not surprised, because the Crown Agents have been through a very difficult period. They are still building up their strength and, certainly from the market point of view, are not a prime apple to be picked. But that is for the future. One hopes we shall not get to that stage, but if and when the time does come we on this side will have a full opportunity for debating the matter and firmly resisting it. In the meantime, we are presented in this Bill with a much less provocative and significant proposition: the extension of the powers of the Government to waive
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interest if they think it appropriate. That is a proposition which we on our side can readily support.
7.32 p.m.
Baroness Young: My Lords, I should like to start by thanking the noble Lord, Lord Oram, for his support for the principle of this short, tactical Bill. I think the noble Lord accepts the point the Government have made, that this will be for the benefit of the Crown Agents. I was also glad to hear the tribute he paid to the work of the Crown Agents. I, too, looked at their last report; and what they have done in so many countries of the world is very impressive.
The noble Lord drew attention to a remark of the chairman of the Crown Agents on the connection between the amount of business achieved by British industries and the economic health of developing countries—the point being of course that the better off the developing country is the more likely it is to have more business with the United Kingdom—and to the chairman's statement that they would therefore welcome more aid.
As I think the noble Lord, Lord Oram, knows, there is increased provision for overseas aid, and this means that the real value of the aid programme should be more than maintained at its 1985–86 level, based on current estimates of inflation. It means in fact that aid will have maintained its real value since 1982–83. The planned increases over the 1985–86 level are by £57 million, £ 100 million and £ 140 million respectively in the next three financial years; so that the new total for 1986–87 will be £1,187 million.
The last point the noble Lord made was his concern about privatisation. He has noted the points made by my right honourable friend the Minister for Overseas Development in another place in regard to this Bill. I can do no more than reiterate the point he makes. I cannot anticipate the legislation that would bring about privatisation in due course. It is our intention that the Crown Agents should continue to move towards privatisation, but when we reach that point there would be legislation and of course there would be an opportunity for a full debate on the matter, as one would expect in respect of legislation. With those few remarks, I am very glad that the noble Lord, Lord Oram, has supported the principle of this short but useful Bill.
On Question, Bill read a second time, and committed to a Committee of the Whole House.
Baroness Hooper: My Lords, I beg to move that this House do now adjourn during pleasure until eight o'clock.
[The Sitting was suspended from 7.36 to 8 p.m.]

Building Societies Bill
House again in Committee on Schedule 1.
Lord Houghton of Sowerby Lord Houghton of Sowerby moved Amendment No. 10:
Page 172, leave out line 29.
The noble Lord said: Associated with Amendment No. 10 are Amendments Nos. 11 and 12, and it is tabled for the purpose of elucidation. I am a little confused about the whole of paragraph 11 and also paragraph 12, to which I shall come in a moment. The Minister has an amendment of his own in respect of paragraph 11 (2), to alter the word "orders" to the world "rules", which helps me a little.
What puzzles me is the impression given that the commission has some powers of laying statutory instruments. Am I right about that? Sub-paragraph (2) states:
"The Commission shall not delegate any power it has under this Act to make orders"'—
as it says now, but the Minister proposes to use instead the word "rules"—
"or regulations by statutory instrument".
It may be convenient for me to refer now to Amendment No. 14, which relates to paragraph 12. It states that:
"The Statutory Instruments Act 1946 shall apply to all powers of the Commission of making statutory instruments under this Act as if the Commission were a Minister of the Crown".
That is what puzzles me but probably it can be explained.
I have always understood that statutory instruments had to be laid before Parliament by a Minister. Will the commission be able to lay something on the Table of the House of Commons that will be subject to the negative procedure? I shall be glad if that point can be made clear. I do not want to carry on speaking until the noble Lord, Lord Skelmersdale, finds the answer, but I shall give him a minute. I shall be much obliged if I may hear a few words from the Minister.
Lord Brabazon of Tara: I am grateful for the opportunity given to me by the noble Lord, Lord Houghton, to offer an explanation. It is unusual to give a legislative power to an authority other than a Minister who, as a Member of Parliament, is directly answerable to Parliament. On constitutional grounds it can be argued that it is inappropariate to allow for the power to be exercised other than by the commission. From a policy viewpoint, it is desirable for the commission itself, which is a supervisory body being established under this legislation, to take decisions regarding any power it has to make orders, etc., by statutory instrument rather than allow for delegation. The expertise will be in the collectivity of the commission, and that is where the final authority should rest.
It is possible of course that individual commissioners may be unavailable at particular times; but that is not sufficient reason for removing the statutory requirement that the commission itself only has the power to make orders or regulations. If it proved necessary, the decision to make a particular order could be taken at more than one meeting, with those unable to attend the first attending the second.
The noble Lord's other amendment would remove the reference in brackets in paragraph 11. The words in brackets are necessary to make it clear that the full commission may delegate to a commissioner or commissioners the power on behalf of the commission
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to delegate commission functions; that is, sub-delegation. Without those words the position as to whether such a power would be delegated by authorisation will be uncertain.
There is no question that delegation of particular functions to an individual commissioner or group of commissioners is a necessity, given the range of matters that will fall to be determined by the commission. However, the power of sub-delegation is permitted only in so far as that is provided for in the original delegation by the commission. Thus, if the full commission considered that a matter ought to be dealt with by a particular commissioner and delegated its powers to him alone, the commissioner could not pass that responsibility to a colleague if, for example, he found himelf with a conflicting engagement on a particular day. The full commission would have to issue a fresh authority to the other commissioner. The commission may make and lay statutory instruments, and that is equivalent to a provision in the existing 1962 Act, whereby the chief registrar can do so, in Section 126(1) of that Act.
The noble Lord mentioned also his Amendment No. 14, which would disapply the provisions of the Statutory Instruments Act 1946. The purpose of the amendment is somewhat unclear to us. The Statutory Instruments Act provides for instruments to be printed and sold by the Stationery Office, and its sets out the negative and affirmative resolution procedures. The consequence of the amendment would be that there would be no need to make an instrument available for sale to the public; secondly, that the effect of the various provisions for instruments to be improved or subject to annulment would be made uncertain. I hope that with that explanation the situation will be somewhat clearer to the noble Lord.
Lord Plummer of St. Marylebone: I must say that I am not altogether clear. Can my noble friend say whether or not the commission has the power to delegate the making of orders or regulations by statutory instrument?
Lord Brabazon of Tara: Yes, I thought that I had answered that point. The commission may make and lay statutory instruments under the provisions of the Statutory Instruments Act 1946, which is equivalent to the provision currently in force in respect of the chief registrar under the 1962 Act.
The Earl of Selkirk: May I ask my noble friend whether the statutory instrument is laid by the commission and not by the Treasury? Am I correct in thinking that it is laid before Parliament but that Parliament does not either approve or disapprove of it? I just want to be clear about what precisely is the position of a so-called statutory instrument.
Lord Brabazon of Tara: It is a negative instrument. It would be laid by a Treasury Minister, I gather, but it would be laid on behalf of the commission.
Lord Barnett: I am glad to hear that explanation because I was beginning to be as worried as my noble friend and the noble Lord, that some commissioner acting alone or perhaps with one other, would have

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delegated powers to lay a statutory instrument that would immediately become law. Provided that it is properly understood that the statutory instrument would be laid before Parliament as a negative order, and that it would have to be prayed against, or could be prayed against, then I would not object—just so long as that is absolutely crystal clear.
Lord Brabazon of Tara: Yes, I hope that I have made that clear.
Lord Houghton of Sowerby: We were given the answer we have been waiting for right at the end of the Minister's comments, following the intervention of the noble Earl, Lord Selkirk. The position is now clear that a statutory instrument which is laid before Parliament, under either the negative or the affirmative procedure, will be laid by a Minister. I thought from the text of paragraph 12 that the commission itself had the power to lay an order.
As my noble friend Lord Barnett said, it would be unusual—I have never heard of it—were a person other than a Minister to lay an order on the Table of Parliament and for it to be dealt with according to the procedures on statutory instruments. We could pray against it. In fact, we could ask Her Majesty to annul it. I hope that when we read in Hansard what the Minister said we will all be much clearer about it. The point seemed to be worth exploring, but in the circumstances I beg leave to withdraw the amendment and I hope that I do not have to come back to it again.
Amendment, by leave, withdrawn.
[Amendments Nos. 11 and 12 not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 13:
Page 172, line 35, after ("orders") insert (",rules").
The noble Lord said: This is purely a drafting amendment to clarify that the commission cannot delegate any of the legislative functions given to it under the Bill. I beg to move.
Lord Barnett: I appreciate that this is only a drafting amendment but I hope the Minister will understand that for the rest of us in the Committee—this certainly applies to the Opposition, and I imagine to others—when we see Government amendments of the size and quantity that we have in the case of this Bill (there are nearly 200 Government amendments) it takes us some time to check them to see whether they are drafting amendments.
I realise that this is a large Bill and that even at this late stage there is a need for some Government amendments. However, this is almost as if the Government are seeking to sabotage their own timetable. With nearly 200 amendments and new clauses it is extremely difficult. As the Minister knows, I have no wish to deliberately delay the passage of this Bill. Indeed, I generally welcome the Bill. However, there are no explanatory notes of any kind so we must go through every single amendment to ascertain what it is about.
The Minister says that this is a drafting amendment. I understand that but, with the greatest possible respect to him, this volume of amendments makes a mockery of the functions of the Committee. If we are to perform
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our proper role of scrutinising and revising Bills that come to us from another place—which inevitably come to us, whichever Government is in power, badly drafted, and are bad legislation, because of the political and time pressures—it means that with the number of amendments involved in this case it is an extremely difficult job to do.
I would imagine that we will need to obtain permission to consider tabling manuscript amendments of a probing nature to the Government's own amendments. We do not have time to do anything else. We do not have anybody to help us go through the amendments to decide which are drafting amendments and which are not. Therefore, although I accept that this is a drafting amendment, the Minister cannot expect us to rubber stamp a Bill even though we welcome it generally. I hope that the Minister will consider, before we reach the next stage of the Bill, that we can at least have notes as to what these Government amendments, this huge volume, are all about.
Lord Brabazon of Tara: I certainly accept the points made by the noble Lord, Lord Barnett. I must immediately say that a great many of these amendments are purely drafting amendments. As the Committee are aware, it is a very large Bill and there are many technical matters arising from it. Many other amendments are a result of the continuing process of consultation with interested parties and others arising from commitments made by the Government in another place. There are also a considerable number of amendments resulting from the consolidation of the Northern Ireland companies legislation and of the insolvency legislation which is presently going through Parliament. I believe that about 40 or 50 amendments relate to the Insolvency Bill. There are one or two amendments of substance, and when we reach those we shall debate them fully.
Lord Barnett: I am sure that the noble Lord will understand that without going through the 200 amendments one by one we cannot find out which are drafting amendments, which are minor amendments and which are substantial amendments. That is the problem. It is difficult for us to work in this way.
8.15 p.m.
Lord Brabazon of Tara: My noble friend and I will do our best to give a comprehensive explanation of the amendments as they are dealt with. I hope that we shall be able to give them the consideration they deserve. I certainly take the point made by the noble Lord, Lord Barnett, about the possibility of notes being available before the next stage, and I shall see what I can do. In the meantime, I certainly undertake that during the passage of this Committee stage we shall not try to slip anything through on the nod, so to speak, which could be of substance.
[Amendment No. 14 not moved.]
On Question, Whether Schedule 1, as amended, shall be agreed to?
Lord Houghton of Sowerby: I refer to paragraph 13, page 172, which we have just been dealing with. This

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is about the ombudsman. This paragraph inserts the name of the Building Societies Commission on the list of those offices and departments which are subject to the scrutiny of the Parliamentary Commissioner. I assume that in that one paragraph everything relating to the Parliamentary Commissioner and his rights of intervention in the work of the Building Societies Commission is fully covered.
The question I have is this. Is the Parliamentary Commissioner a person who should have any writ in the Building Societies Commission? It is not a Government department in the true sense of the term. Will he therefore be available to deal with the complaints from members of the building societies? I am not clear as to what the Parliamentary Commissioner is going to do in the Building Societies Commission.
I ask this question because in the Government which introduced the Parliamentary Commissioner I had an awful lot of fussing around in order to find out who would be and who wanted to be left out of the Parliamentary Commissioner's oversight. We tried to lay down some rules as to what the Parliamentary Commissioner should be doing. He is called an ombudsman but is a Parliamentary Commissioner and as such is answerable to a Select Committee of the House of Commons. I believe that in the health service they have a separate person, but, as I understand it, that person is not answerable to the Parliamentary Commissioner.
I wish this could be cleared up because it is an important function that is put at the disposal of another person appointed by the House of Commons and it is not clear to me what he is going to do and who he is going to listen to. "Maladministration" is the key word in the work of the Parliamentary Commissioner: not to put himself in the place of those whose discretion rests with them by statute, and not to interfere with the normal processes of administration and the use of authority, but maladministration. What maladministration will he look into? Is it maladministration of the Building Societies Commission, or maladministration in the building societies themselves?
Lord Brabazon of Tara: It is solely maladministration by the Building Societies Commission that he can look into.
Schedule 1, as amended, agreed to.
Clauses 2 and 3 agreed to.
Clause 4 [Annual and other reports]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 15:
Page 4, line 13, leave out ("section 39") and insert ("sections 39, 41, 42 and 43").
The noble Lord said: I beg to move Amendment No. 15. This clause refers to the annual reports which the commission will make, and our amendment is basically very simple. The Bill as drafted directs the commission to submit a report to Parliament, which shall be published, on the exercise of its powers under Section 39. It seems to us that there are other sections
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under which the commission should report, and those sections are in particular Sections 41, 42 and 43.
Perhaps I may refer the Committee to those particular sections. In fact, they cover some very important matters about which Parliament and the public have a right to be informed. Section 41 deals with the power to direct application to renew authorisation. That is an important power, and the commission's activities under that section should be reported annually. Section 42 deals with the imposition of conditions on current authorisation, which again is an important power, and the exercise of the power should be reported annually by the commission to Parliament. Section 43 deals with one of the most important of all the powers of the commission, which is revocation of authorisation. It seems only logical that if the commission is to report on the exercise of its powers under Section 39, then it should also report on the exercise of its powers under Sections 41, 42 and 43.
The noble Lord may say that this is covered in the Bill, in which case that is fine and there is no particular problem with it. However, it is a point that is worth raising because it is vitally important that Parliament should be informed annually by the commission exactly what it has done under the very important powers that this Bill is giving it. I beg to move.
Lord Brabazon of Tara: Of course it is entirely proper and necessary that decisions not to renew an authorisation under Clause 41 or to revoke authorisation under Clause 43 should be publicised when brought into effect; that is, after conclusion of any appeal proceedings. In fact, the Bill makes provision for placing a record of these events on the public file, and no doubt the commission would include information about such cases in the annual reports and make such other provision as it considers appropriate. There is no need for express statutory reference to this because it is covered by the words in Clause 4(1):
"report on the discharge of its functions".
There is not the same need to establish a formal body of case law in this area as there is in the area under Clause 39, so no further statutory provision is appropriate.
The position is slightly different in relation to Clause 42. Here, there is no provision for a record on the public file and it is not the intention to publicise any conditions that might be imposed, because publication might well adversely affect the protection of investors which the imposition of the conditions was aimed at protecting. Of course it may prove to be the case that the commission would wish to refer in a very general way to any cases involving the imposition of conditions in its annual reports. But in our opinion it would not be appropriate to go further than that. In brief, that is the difference between the Clause 39 determinations and those in Clauses 41 to 43. I hope that with that explanation the noble Lord will feel able to withdraw the amendment.
Lord Williams of Elvel: I am grateful to the noble Lord for his response to this amendment. I should like to make it clear—I hope I make it clear—that I understood exactly what he was saying: that the

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commission would—I think he used the word "would"—wish to report on the exercise of its powers under certain sections—that is, Sections 41 and 43; and I think he said "would no doubt", or words to that effect. If we can have "would no doubt" transformed into "will", that will meet the thrust of the amendment.
On the question of Section 42, it seems to me to be a matter of very great public importance that if there are any conditions imposed on the authorisation of a building society to conduct business, that should be known by Parliament and known by the public at large. I cannot see that the commission need have any problem about that. If it is to be left to the commission to decide whether or not in any particular circumstances it decides on Monday, Tuesday, Wednesday or Thursday that it will reveal this or that restriction, and on Friday it will not reveal it, then that seems to give us some sort of problem.
We are not asking for the commission to publicise immediately but we are asking for a report to be laid before Parliament on the exercise of powers. I am not entirely happy with the Minister's reply and I hope that he will be able to expand it.
Lord Brabazon of Tara: I can expand my reply on Clauses 41 and 43 by saying that instead of saying "no doubt would" I shall say "will", because I went on to say slightly further on that it was covered in Clause 4(1) on the report of the discharge of its functions.
As regards Clause 42, I do not think I can expand any further than I have already done at the moment. I have given the reasons why we do not think that it is necessarily right to publicise any conditions—that is, that it might adversely affect the protection of investors which the imposition of the conditions was aimed at protecting. I think that the noble Lord could possibly envisage circumstances in which that could apply.
Suppose it came to the attention of the commission that matters were not absolutely right with a building society but not sufficiently serious to warrant publica-tion of that fact, and perhaps the building society had undertaken or hoped to be able to put things right shortly, the worst thing that could happen would be that publicity should be given to that matter which could cause a run and the consequences which would result from it. I think that that is the sort of situation to which I am referring and therefore it would be right to leave things as they are. As I said earlier, if the commission so wished, it could refer in a general way to cases involving the imposing of conditions in its annual report, but I think that is the best way to leave it at the moment.
The Earl of Selkirk: Have I understood my noble friend to say that supposing there is a comment on the liquidity of a building society or something of that sort, he would not want this to be mentioned in the report? Is that the point that he is making? In other words, there would be some point at which the building societies were getting near a margin of some sort and he would say, "Please keep your reserves or liquidity up" and he would not want to report that in the annual report. I can understand that. Is that what the noble Lord is saying?
Lord Brabazon of Tara: Yes. That is the sort of point that I am making—to give everyone a chance to put themselves right without the kind of results that publicity could achieve at that particular moment.
Lord Williams of Elvel: I accept the point that there is a question of at what stage one gives publicity to what the commission has imposed on the "noodle" building society. Clearly that must be right. Nevertheless, the annual report of the commission to Parliament is a retrospective document. It is a record of what has happened—the exercise of the commission's powers over the year—which is covered by the annual report.
It does not seem to me to be at all improper, in the hypothetical case that the noble Earl, Lord Selkirk, mentioned, if the commission had to impose certain conditions on the current authorisation and if everything went right after that. There seems to be no problem whatsoever if the commission reported subsequently, probably several months after the event, that it had had to exercise its powers under Section 42—if you like, not even spelling out the problem but saying that it had had to exercise its powers and everything was all right. That does not seem to be a serious constraint. I accept what the noble Lord said about the immediacy of having to publish certain matters if conditions are imposed. I do not accept that there should be any restraint on the commission's retrospective reporting in its annual report to Parliament.
8.30 p.m.
Lord Plummer of St. Marylebone: I urge caution on this point. As I think was said just now, it is easy, as has been seen, for a run on a bank to start. The commission will have to be careful about what it reports in that respect. I shall not go into detail, but I can think of several circumstances where it might prove detrimental to the society concerned without there being good reason.
Lord Williams of Elvel: I accept what the noble Lord, Lord Plummer, says. I think we are arguing at cross-purposes. I am not arguing that the commission should state immediately at any one time what it proposes to do in the way of imposing conditions. I am saying that under Clause 42 the commission has many powers to impose conditions. There should be some mechanism for retrospective reporting—not that a run on a bank or building society will happen tomorrow or happened yesterday. A year later the commission will come forward and say that it imposed certain conditions and restrictions, and that, "The public should know about that, but everything is all right or everything is all wrong". That does not seem to be wholly unfair. It will not affect the building society's current status. It will add a further element of protection for the generality of investors in the building society.
I shall not press the point. I understand that the noble Lord, Lord Brabazon, has his difficulties with it. I shall merely look carefully at what he said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 4 agreed to.
Clause 5 [Establishment, constitution and powers]:
[Amendment No. 16 not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 17:
Page 5, line 25, after ("meetings") insert (", postal ballots").
The noble Lord said: This is genuinely a drafting amendment to include postal ballots in the summary in Clause 5 of the contents of Part III of Schedule 2.
Clause 5, as amended, agreed to.
Schedule 2 [Establishment, incorporation and constitution of building societies]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 18:
Page 174, line 28, at beginning insert ("Subject to subparagraph (2A) below").
The noble Lord said: With the leave of the Committee, 1 shall speak also to Amendments Nos. 19, 20 and 21. These amendments provide for the manner in which Clause 18 and Clause 23 powers are to be covered in the society's memorandum. They clarify the source of powers of a society and ensure that any reduction in its powers is noted. I beg to move.
Lord Williams of Elvel: This is one of the cases where we cannot possibly comment on the amendment because we have not had time to digest the wording. It is complicated wording. I accept the noble Lord's assurance that he will let us have Notes on Clauses in due course. We shall be able to respond accordingly then.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 19:
Page 174, line 30, at end insert—
("(2A) For compliance with sub-paragraph (l)(c) above as respects the powers conferred by section 18 or under section 23, it shall be sufficient—

(a) in the case of section 18, to specify (as the case may be) the fact that the power of investment or support or both the powers of investment and support has or have been adopted in the case of companies, industrial and provident societies, corresponding European bodies and bodies included indesignation orders under that section respectively, specifying, in the case of designated bodies, or descriptions of designated bodies, the body or description of body in relation to which the power or powers is or are exercisable;

(b) in the case of section 23, to specify the power in terms of subsection (1) of that section.").

Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 20:
Page 174, line 31, after ("society") insert (", as read with the provisions of this Act as in force for the time being,").
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 21:
Page 174, line 38, at end insert—
("( ) Where any adoptable power conferred by virtue of an instrument under a provision of this Act ceases, by reason of the amendment or revocation of the instrument, to be available to building societies or building societies of any description, every society affected by the amendment or revocation shall annex to its memorandum a note of the fact that, as from the operative date of the instrument, it no longer has that power and shall send
1102
a copy of the note to the central office which shall keep the copy in the public file of the society.").
Lord Houghton of Sowerby Lord Houghton of Sowerby moved Amendment No. 22:
Page 177, line 19, after ("may") insert ("not").
The noble Lord said: Paragraph 5 of the Schedule, on page 177, states:
"The rules of a building society may allow a person to become a member without holding a share in the society".
I am doubtful about what that means. On Second Reading the Minister said that he hoped to get Notes on Clauses for us. I am not aware that they have come out; I have seen nothing of them. No, I have not had the document that the Minister is holding. That is a great pity because it would have saved me a great deal of time.
Does the provision refer to the new status of what is called the "borrowing member"? If it does, I understand it because I have always thought that every borrower should be a member of the society. Normally, that means he should either be allotted a share or should acquire one. He should be a shareholder, if he thought that he was going to participate in the society's work, and it was agreed that he should. Under the Bill he does. He has a separate category of membership. Particular conditions relate to it, such as matters of transfer of mortgages, conversions and so forth. Will the Minister clear up that point?
My amendment says that the society may not allow a person to become a member without holding a share in the society. The clause clears the decks so that a borrower may become a borrowing member. Surely no one without a share can be called an investing shareholder. Can we have the confusion about membership cleared up? I beg to move.
Lord Brabazon of Tara: In one word, yes; the provision covers the situation of borrowing members. I gather that some societies insist that borrowers should be depositors as well. That is easily overcome by merely putting a pound or something like that into the society. Other societies do not insist that borrowers should have any share in the society. This covers borrowers.
Lord Houghton of Sowerby: I am much obliged for that answer. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 23:
Page 178, line 27, leave out ("94") and insert ("100")
The noble Lord said: With the leave of the Committee I shall speak also to Amendment No. 24. These are technical amendments to extend the provisions on joint shareholders to cover the approval of a conversion proposal. It is clearly appropriate that in the conversion procedure, as in other areas of the Bill, where shareholders have voting and other rights, only the representative joint shareholder among any group of joint shareholders should have those rights. The amendment therefore extends the list of rights applying only to the representative joint shareholder to

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cover the conversion provisions. Amendment No. 24 is a parallel. I beg to move.
Lord Williams of Elvel: I accept that these are technical amendments. We are waiting for the notes which will no doubt expand in greater detail what the noble Lord has said. We must accept the amendment; we have no option. We do not oppose it.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 24:
Page 179, line 22, leave out ("94") and insert ("100")
Lord Houghton of Sowerby Lord Houghton of Sowerby moved Amendment No. 25:
Page 188, line 30, leave out ("ten") and insert ("twenty").
The noble Lord said: This amendment relates to Schedule 2, paragraph 25, on page 188 of the Bill, which deals with the right to demand a poll. Unless I am mistaken, a poll may be demanded by not less than 10 members having the right to vote at a meeting. Is this correct? I put down the figure of 20 thinking that, if this is a numbers game, 10 seems quite small and 20 is just twice that. Do I understand that 10 members can demand a poll? May I ask the Minister if he will reply to this?
Lord Brabazon of Tara: Basically, this is the number of members who, upon joining together, have an absolute right to force a question to be put to a vote at an annual general meeting. This in fact comes straight from the 1962 Act. There is no change.
While I am on this point, may I apologise to the noble Lord, Lord Houghton of Sowerby, for the fact that he did not have the Notes on Clauses. They have been available in the Printed Paper Office for a week. I should perhaps have written to the noble Lord and told him they were available.
Lord Houghton of Sowerby: I did not in fact know that they were in circulation or I would have asked for a copy. I think that the reason I did not was that I thought the Committee stage was beginning so soon after the Second Reading that probably there had been not time to get the very voluminous papers together; but I can assure the noble Lord that I did not receive the Notes on Clauses. I have been gathering together everything concerning building societies and this was not among those papers. These things do happen, but the noble Lord has given me the explanation I sought on this clause. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 26:
Page 189, line 34, leave out ("Act") and insert ("paragraph")
The noble Lord said: I beg to move Amendment No. 26 which is a drafting amendment. Clause 123 provides for different commencement dates for various parts of the Bill and it is therefore appropriate to make this amendment so that paragraph 29(4) refers to the commencement of this particular paragraph concerning borrowing members' resolution. I beg to move.
8.45 p.m.
Lord Houghton of Sowerby Lord Houghton of Sowerby moved Amendment No. 27:
Page 190, line 4, leave out ("on which not less than 20 per cent.").
The noble Lord said: In moving this amendment, I should also like to speak to Amendments Nos. 28, 29, 30 and 31. This concerns the very troublesome question of the conditions under which a building society may decide to convert itself into a public company, creating a special company for the purpose, or electing to join an existing company and not to form a company of its own. There are different conditions for the alternative courses. I will deal with the proposed conversion of a building society into a public company created specially for the purpose.
We are not, I believe, dealing with a matter which will affect very many building societies; but there are several very large ones which may find that even with this Bill and the added flexibility and the extension of the areas of activity that will not be enough to enable them to deal adequately with their enormous resources and their desire for extensive broadening of activities.
Looking at the history of building societies, it probably was a pity that those which are the size of the Halifax and the Abbey National ever came into being. When I hear noble Lords and others talking about building societies keeping their local interests, having friends in the locality and deriving their inspiration from the community in which they live, I believe that that is true of a great many building societies and it is a relationship to be cherished. However, the Halifax, which was the first building society to have branches extending its activities many years ago, has not stopped growing yet. The Abbey National is another example of this, although the Halifax is more identified with a locality than the Abbey National. Both of these societies had some very great men of vision and activity and drive to spur them on and their phenomenal success is the consequence of that.
The result is that at the present time these two largest societies, which are of national significance and supported by national advertising and who grant mortgages throughout the country, have more than enough assets to grant an adequate mortgage to every householder in the Halifax and then start again. We therefore have two building societies with something like from £20 billion to £24 billion in assets. The Nationwide comes third in that it is half the size of the two giants, and after that we come to the Leeds and the Woolwich which are only a quarter of the size of the two largest societies. Following those we have 11 societies which have from between £ 1 billion and £5 billion in assets. The approximate result of this is that 16 building societies have assets of £1 billion or more and its is in that area that we should think about conversion. The 140 societies which are below the first 16 have assets ranging from £1 billion downwards to £300,000, with a very small tail at the end, so we are not talking about matters which one would expect to affect a large number of building societies. However, it could affect very dramatically indeed some of the larger building societies who want to do a great deal more than the limitations of this Bill provide for.
All this has aroused a certain ideological controversy. In another place this matter was dealt with at great length at different times, and finally at Report stage a few weeks ago we saw two schools of thought emerging. There were those who were probably connected with the larger building societies or who were encouraged by them and who were in favour of reasonable conditions upon which a building society could convert into a limited company. On the other hand, there were those (mostly on the Opposition Benches in another place) who were rather against giving such facilities to building societies to enable them to desert their history and their heritage and to go into the big world of finance. At Report stage in another place there was still a tussle even on the modified proposals that are in the Bill at the moment between those wanting more room and those wanting less room for conversion to public companies. So the proposals in the Bill are there under considerable pressure of opinion and compromise. I understand that the building societies that were fairly strong in wanting better facilities to convert are reconciled to what is in the Bill. At any rate, their great anxiety is to get the Bill through and not to delay its passage by needless controversy in your Lordships' House.
Nevertheless, there are important considerations at stake. One is the doctrine of authority. That is my own definition for it. When an appeal is made to the final authority in any institution—a trade union, a learned society, a building society, a county council or the electorate in a parliamentary election—no condition should be laid down to frustrate reaching a conclusion. I feel strongly that this should be so; otherwise, you are playing ducks and drakes with the final authority. The final authority is the voice that you want to hear and, having heard it, say, "That is it".
A trade union ballot occupying the headlines yesterday and today has been that for a new general secretary of the Civil Service clerical union. It was a low poll and a narrow majority. But no one questions the authority of the decision, unless there is something wrong in the way it was reached—corruption, irregularity or whatever. If it is clean, that is the voice. And as Winston Churchill often said in the House of Commons, "In this place one vote is enough".
Here we have a proposition that in order for a building society to convert into a public company it must first pass a special resolution—this is common form in societies—which requires those who are voting to vote a certain way in respect of two-thirds of the members in order to make it effective. Following upon that there can be a poll. It is the poll that is in question there, not the conditions of the special resolution. On a special resolution members of the society who cannot get to the meeting can send proxies. There is no criticism to make of the conditions in the Bill for the reaching of decisions on a special resolution.
But when it goes to the poll—this is where the final authority is—the special resolution has to be passed on the ballot with at least 20 per cent. of those entitled to vote voting. So this is a ballot taken on a condition that a certain proportion of those entitled to vote in the ballot do vote. This means therefore that the decision may not be taken by those who vote but by those who
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do not. That involves another very bad principle. You do not reach a decision by voting; you reach it by staying at home, or, in the case of the postal ballot, by throwing the ballot paper in the waster paper basket. This is not the way, constitutionally speaking, that we settle things in this country.
On Second Reading the noble Lord the Minister said something about the Scottish devolution Bill. It was very late in his speech. It was also getting late in the day. I allowed it to pass. But those of us who remember the episode very clearly will recall that the Labour Government of the day did not stipulate, or wish to stipulate, any condition of this kind in the referendum on Scottish devolution. But some Members from both sides of the House, led by a certain Member, Mr. George Cunningham—
Lord Ross of Marnock: No longer a Member.
Lord Houghton of Sowerby:—erected a stratagem whereby in the last 40 minutes before the gullotine fell they moved a new clause which instructed the then Secretary of State for Scotland (who is, I think, sitting near me now) to require an order for the repeal of the Act unless at least 40 per cent. of the electorate—not just those voting but 40 per cent. of the electorate—voted "Yes" in the referendum. That new clause passed just as the chopper was about to fall. It was passed by 168 votes to 142. It was an excrescence on the whole process envisaged for the devolution legislation. I deal with it only because the noble Lord the Minister evidently had it in mind that it was a suitable precedent to quote if anyone referred to it in the debate on Second Reading. I have therefore given the explanation. It was never intended and it should never have been done from a constitutional point of view. There may have been other remedies if the vote was not satisfactory. But we went into the Common Market on a referendum with no such conditions. The fate, the destiny, of the nation was decided by that means.
I take the view that a condition requiring that 20 per cent. of those eligible to vote shall vote or the special resolution is ineffective is an unsatisfactory condition and should not be included. The Building Societies Association has issued numerous briefs to us on the Bill. These have been very useful. I must say that the association does its work extraordinarily well. Every single one of those briefs, in dealing with the conversion problem, has said that the conditions laid down are so harsh and so stiff that it is unlikely that they could be complied with to make any conversion effective. Certainly this could not be done in the case of conversion to an existing company because the conditions are stiffer still. One can understand that.
The fear is that someone may come along and buy up a building society. The greatest fear, of course, is that this will be done by foreign banks and other foreign money. I can quite understand that we do not want a picking of our building societies all over the country by vested financial interests who might come along and get the conversion procedure through with little difficulty. If a financial inducement could be offered to members to vote for the conversion, there would be little difficulty in getting 20 per cent. But the Bill prevents such inducement being offered. The most

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that can be offered on conversion is a possible bonus two years afterwards in respect of which conditions are laid down.
In the case of conversion to an existing company, there are some complicated conditions about the process on what amounts to liquidation of the building society in order to convert itself and hand itself over to another company. But I do not want to go into the complications of the different methods. I want to deal with the principle of the matter, because this is what really concerns me.
Are we justified in creating conditions which are alien to our concept of the operation of democracy in this country? Are we entitled to create, exceptionally, conditions relating to building societies in order to stop them from taking the course which quite legitimately they may wish to take? The noble Lord, Lord Campbell of Croy, referred at Second Reading to a ballot on a merger with which he was concerned in a building society. They had a 10 per cent. vote, which seems low, but we have to consider the nature of a very large proportion of the investing members in building societies and of a very large proportion of borrowing members. When you have nothing to offer them, when it is one man one vote, and in the case of borrowers at the present time no vote at all, how can you maintain any interest in the democratic process?
9 p.m.
Lord Campbell of Croy: I am grateful to the noble Lord for giving way. I was in fact supporting his point about how high a threshold of 20 per cent. is, because in the latest merger, which came into effect in October, I think that 2 million people were able to use proxies by post. Ten per cent. was about the number who voted and that is more or less what was optimistically expected. Incidentally, may I point out that in giving the sizes of societies earlier in his speech, the noble Lord overlooked that merger which has resulted in a different order of size.
Lord Houghton of Sowerby: I am sorry about that. I feel that I am entitled to make this speech, because it is an important question of principle in our affairs. I shall be told that the Building Societies Commission has power, as it has, to vary the percentage, but one wonders when the Building Societies Commission may consider varying it. One thing that is certain is that if a building society seeks to convert and goes through the process and then, in the end, fails to get the 20 per cent. vote to give effect to it, its morale will be seriously harmed, its reputation may be damaged, it may appear to be a huge liner which is rudderless and rocking about on the sea. It will not do anybody any good and will be a thoroughly unpleasant experience. So I do not think that it is any excuse to say "Ah, but the 20 per cent. can be varied, subject to Treasury consent, by the Building Societies Commission".
My final point is that if those who put this condition there firmly believe, as the Building Societies Association apparently does, that it is virtually impossible to fulfil, then it is humbug to put it in at all. I see no point in putting conditions in the statute law which look to be feasible but which in fact would probably be quite ineffective. Already the rules of building societies read rather like the constitution of
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the Soviet Union. It all looks nice and pretty in the rule book, but when you come to want to use your democratic rights you see how many you have got.
So I quite understand when the leadership of the Halifax Building Society ask, "Have you tried democracy among 8 million members of the society scattered all over the world?" To be honest, I have not. But then why pretend that we have these rights? This is why some building societies may feel that the only thing for them to do is to go public and have an entirely different format and wider opportunities. It is grossly unfair to stick to conditions which are practically useless in the hands of those who may wish to use them.
I am sorry to have detained the Committee for so long at this hour. In offering my apologies, I can only say that I think the time we are spending on Statements in this House, in the middle of important debates which are on the Order Paper as the business of the day, is becoming quite excessive. There were 55 minutes taken today on the Peacock Report, and the other day there were three Statements which took one hour and forty minutes out of the business of the day. But there is no Member sitting on the Front Bench opposite who can protect the business of the House—
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): Order!
Lord Houghton of Sowerby: I am raising a point of order, and I think I am entitled to do that.
Lord Belstead: No.
Lord Strabolgi: Why not?
Lord Houghton of Sowerby: If the noble Lord wants to shut me up, he had better try.
Lord Campbell of Croy: If the noble Lord will give way, perhaps I may say, as I was here at the time, that it was a Member on the Front Bench who eventually brought the debate on the Statement to an end when several Members on the opposite side were still getting up.
Lord Houghton of Sowerby: I am very grateful to the noble Lord, Lord Skelmersdale, for his great courage on that occasion, but it was half an hour too late.
I conclude, therefore, by saying that the Bill will surely have to go through the test of experience and the societies themselves will have to do the same. But I sincerely hope that we are not going to find this venture into the field of wider opportunity and activity giving rise to some very big problems of where the larger societies are to go in order to accomplish their legitimate ambitions. We are in a very restive state of financial activity throughout the world, as well as in this country. There is a new industry in financial transactions. The money that is now being made in this country is being made out of money. There is more money to be made out of money than there is to be made out of industry. It is money that will attract people who have it; it will not be industry.

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We should also bear in mind that the money is being made out of those who accept deposits from people and who hold them long enough to make use of them without paying interest to those who have deposited the money. Profits come out of transactions in that way. My banker friend has opened my eyes. I did not know that such a world existed. Why go to gambling casinos when you can go to the City? That will be the world in which the new building societies will operate.
I have said enough, so I shall sit down. I beg to move my amendment.
Viscount Ridley: I do not know what the noble Lord wants, after listening to him for 25 minutes with great patience, unless it be to torpedo the Bill, which I suspect he has effectively done. If that is his aim, I congratulate him, but I do not think that it is the desire of the Committee that we should stray so far from the point. As I am the first to speak on the amendment, let me say that I think that the conditions laid down in the Bill are correct. It should not be too easy to become a plc. It should be difficult; and it will be very difficult to get 20 per cent. of those eligible to vote. I hope very much that the Government will resist the amendment and try as hard as they can to get the Bill through.
Lord Campbell of Croy: As the noble Lord, Lord Houghton, mentioned me, let me add to what he kindly enabled me to say during an intervention. Although the threshold is high—and that seemed to be generally agreed in another place—there is the provision in paragraph 6, lower down in Schedule 2, which enables the percentage to be changed by a statutory instrument, subject to decisions of both Houses of Parliament. I hope that my noble friend on the Front Bench will point out that that means that in changing circumstances in the future the threshold could be lowered if it seemed to be the right thing to do then.
Lord Brabazon of Tara: I accept that the subject of conversion to public company status is an extremely important part of the Bill. We shall be returning to that, no doubt, in due course when we reach the main clause which it involves, which the noble Lord, Lord Barnett, has given notice to oppose.
The amendment would take away what the Government consider to be a crucial part of the machinery of conversion to company status. We consider that it is not enough for a three-quarters majority to be obtained on a special resolution, no matter how few members take part. It is essential that the poll should be a substantial one, for this is a substantial step that the building society would wish to take.
There are several reasons for that. First, conversion to company status would be a major and fundamental step for a society to take. It is right and proper that it should be allowed only if a sufficient proportion of the members assent. Secondly, it serves an important prudential purpose. Those members who express positive support for a conversion proposal by voting in its favour will be all the more likely to stay with the society after it becomes a company, both as customers and perhaps as shareholders. It is important for the
1110
company in its early days to be able to rely upon the continued support of its former members. But there is also a wider public interest. Building societies collectively play an important part in our national life, as many noble Lords reminded us on Second Reading and, indeed, again in Committee today. I believe that the public interest requires that they should not lightly be able to give up their present mutual status, but should do so only if substantial levels of membership support are forthcoming.
My noble friend Lord Campbell of Croy pointed out the paragraph in the schedule which allows those amounts to be altered by statutory instrument. No doubt if at some time in the future that proved to be necessary, that step could be taken. They are difficult hurdles to overcome, but we do not believe that they are impossible. For the reasons that I have given it may be an onerous task, but it should not be impossible. I think that we have the right balance. Similarly, on the second leg of the amendment, on the merger proposals, I think that we have achieved the right balance, and I cannot accept the amendment.
Lord Houghtonof Sowerby: I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 28 to 31 not moved.]
Lord Houghton of Sowerby Lord Houghton of Sowerby had given notice of his intention to move Amendment No. 32:
Page 195, line 17, leave out ("£100") and insert ("£1000").
The noble Lord said: I shall not move Amendments Nos. 32 or 33. With the leave of the Committee, I shall reserve them for a later stage in the Bill. I am sure that the Committee is getting weary of me, and I am certainly weary of the Committee.
[Amendments Nos. 32 and 33 not moved.]
Schedule 2, as amended, agreed to.
Clause 6 [Power to hold land etc. for purposes of its business]:
Lord Barnett Lord Barnett moved Amendment No. 34:
Page 5, line 41, after ("may") insert (", after consultation with the Commission,").
The noble Lord said: I shall try not to weary the Committee. This is an important part of the Bill relating to premises. I have no doubt that Members on all sides of the Committee will share my concern about the number of premises in high streets being used by building societies. The number seems to have grown in recent years. I have no statistical evidence. Indeed, the Building Societies Association says that the number has been decreasing. If they say this, I suppose that it must be true. Maybe it is decreasing in the sense that it is not increasing as fast as before.
I could not think of an amendment that would sensibly deal with this problem, for the fairly obvious reason that it would be unfair in terms of competition to restrict the right of one building society to open another shop in a high street, or wherever, if it was seeking to expand in a particular town where it did not have a shop. I am bound to say that when one goes to comparatively small towns one sees so many building

1111
societies to the exclusion of almost any other kind of shop. It does not make the high street look a more attractive place.
The only kind of amendment that I could think of was to add the words that I am now moving in Amendment No. 34 which provides that the building society should have to consult the commission. I recognise that that is not an ideal solution. I accept that when a building society wants to take additional premises—whether it be another shop or other premises for headquarters somewhere—it does not want the delay of further consultation. But I want to bring to the attention of noble Lords the feeling of many people who are unhappy about the number of building society premises in this country and the extent to which all these premises are advancing the cause of the building society movement.
I do not pretend for one moment that the amendment I am moving is ideal. If the Minister agrees with my worry and concern then with all the advantages of the huge department he has behind him, perhaps he will come up with a better amendment. I beg to move.
9.15 p.m.
Lord Campbell of Croy: I sympathise with what the noble Lord, Lord Barnett, has said. I declare an interest, being a director of one of the large building societies. I felt exactly the same when I saw what was happening in Scotland in the towns and cities there. So many new branches seemed to be appearing—I am talking about five or 10 years ago. But when one looked into it one found that much of the retail investment was coming in through those branches, off the street. A service was being provided for the ordinary citizen or housewife who appreciated being able to go into a building society to do business over the counter in a way which building societies could afford. Financially it was absolutely justified, and it was helping the citizen on the street. But the multiplication of these branches seemed very strange. However, at least they were able to pay the rates. Some of the shops were having to close down because they could not pay the rates, but the building societies were doing so well with these branches and the use that was being made of them that they could afford to be there. My society has made a small change in this. As a result of a merger some premises will not have to be used in the future.
Lord Brabazon of Tara: I am grateful to the noble Lord for raising this matter. It is one that has caused concern over the country as a whole and possibly in certain high streets—that every second shop seems to be a building society. But I think that my noble friend Lord Campbell of Croy has to some extent answered that question. I can confirm that the huge growth of the 1970s in the number of branches has now slowed down. Perhaps it will not go any further now that there is greater competition in the market and costs will have to be contained. However, I cannot accept this amendment which would require the commission to vet every application by a building society to open a branch. I think that that would be a very onerous task on the commission. I am sure that we want to see the commission not over-staffed but adequately staffed for
1112
the very important role it has. I suggest that to give it this further task would be to go a little beyond that.
I will say this. I shall draw the remarks of the noble Lord to the attention of the Secretary of State for the Environment who is responsible for planning laws. I gather that these kind of matters can come under the change of use regulations. It will probably be a local matter rather than one for the Secretary of State. Local councils can probably have some input in that. But that is as far as I can go.
Lord Barnett: I think that the Minister has probably gone too far anyway. He is quite right—it is a local planning permission matter; but it could go to the Secretary of State if whoever has been refused planning permission wants to appeal. That is my understanding.
However, as I made quite clear, it is the principle that I wanted the Committee to discuss because this is an important matter. I recognise exactly what the Minister has been saying about why he cannot accept the amendment as it now stands. As I have said, I am not sure whether or not he has already gone too far, but I shall not hold him to it. Building societies may begin to feel that there are some instructions coming down from on high that local authorities should refuse to give planning permission for new building society pemises. It may be a bit counterproductive with the present Secretary of State giving instructions to some local authorities because they may feel all the more that they should grant permission. However, I am assuming that the noble Lord had not consulted his right honourable friend when he made that remark.
Lord Brabazon of Tara: Before the noble Lord decides what to do with the amendment, perhaps I may retract a little of what I said. I withdraw the offer to bring the matter to the attention of my right honourable friend the Secretary of State. Perhaps the noble Lord woud like to refer particular cases to his own local authority where he feels that that is applicable.
Lord Barnett: I can imagine what the noble Lord's right honourable friend would have said. If the Committee thinks that we are sitting late, I point out that when I was taking Finance Bills through the other place the noble Lord's right honourable friend kept me up night after night until 8 o'clock the following morning. So if noble Lords think that they are being wearied tonight, it is as nothing to what the noble Lord's right honourable friend did to me. Indeed, as will be quite clear, I am not seeking to keep anybody up tonight. However, in the light of what has been said—
The Earl of Selkirk: The noble Lord rather suggests that building societies have offices for fun, for amusement. If the noble Lord examines the situation—and I have looked at this matter over a large number of years—he will find that every building society will say that each office is worthwhile. If anyone knows enough to deny that, then let him say so.
It is not merely a matter of simply putting offices somewhere for the fun of having their name in that

1113
place or purely for the purposes of advertising. That is not the case. I take the opposite line. One of the strengths of the building societies is their diversification throughout the country for the convenience of their members and their depositors. They do not simply sit in London and get their money from the general market there. There is a great deal to be said for having these offices which are of great convenience to the public.
Lord Barnett: I have no wish to delay the Committee, but if one took the noble Earl's remarks to their logical conclusion every shop on every high street would be a building society and I am not sure where we would get to then. However, I do not wish to pursue the subject. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 35 not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 36:
Page 6, line 19, leave out from ("that") to ("shall") in line 22 and insert ("no part of the premises comes to be or, as the case may be, is any longer occupied for the conduct of the business of the society or a subsidiary or associated body").
The noble Lord said: I beg to move Amendment No. 36. This is a purely drafting amendment to remove any doubt about the intention of the provision.
Clause 6, as amended, agreed to.
Clause 7 [Power to raise funds and borrow money and limit on non- retail funds and borrowing]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 37:
Page 6, line 35, at end insert ("or (c) raise funds by the issue of debt instruments.")
The noble Lord said: I beg to move Amendment No. 37, and it may be for the convenience of the Committee if I speak also to Amendments Nos. 38, 39 and 40. This brings us back to a discussion which we had earlier today about the relationship between retail deposits of building societies and the wholesale market which is ready, and I think fairly willing, for building societies' use.
There are a number of slightly technical points that I should like to go through. However, essentially the thrust of these amendments is to give greater power to building societies to borrow in the wholesale market to complement—as we have established that they are primarily going to raise funds from their members—their faculty to raise money from their members.
I should like to spend a moment on Amendment No. 37. This may be an unnecessary point, but it is a clarifying amendment or, if you like, a probing amendment. The building societies should be allowed to raise funds by the issue of debt instruments. Amendment No. 38 refers to instruments which may not be transferable, and by that I mean private placements rather than public issues. One would not wish the building societies to be constricted in going to the private market and making a private placement of a debt instrument that is not in fact transferable.
Amendment No. 39 is again designed to make sure that there is greater leeway. I understand that the Bill, as drafted, allows greater leeway to be given by order of the Commission with the consent of the Treasury. However, it seems to us—and 1 am glad to see that the Building Societies Association is sympathetic to this—that the 40 per cent. limit should be one which is available immediately rather than being 20 per cent. subject to Treasury adjustment as necessary. Finally, Amendment No. 40 says that the 40 per cent. rule should not necessarily stand. It does not seem to us to be a condition of sensible and prudent building society management that they should not raise on the wholesale market more than 40 per cent. of their total funds.
I recognise that to a certain extent we are going over some of the ground covered earlier; but I believe that these amendments would give the building societies the flexibility we were trying to introduce earlier. The noble Lord, Lord Brabazon, in his reply to my earlier points, referred to the amendments that were coming up under this clause. These are the amendments, and I hope that the Government will see fit to accept them. I beg to move.
Lord Campbell of Croy: Perhaps I may say a word about this, because the noble Lord referred to me when this came up earlier this afternoon. The building societies moved into the wholesale market about five or six years ago, and my society was the first one. It has been controlled and restricted by the chief registrar whose policy, certainly up-to-date, has been less than 20 per cent. Therefore, 20 per cent. being put into the Bill seems to be following present prudential policy, but also giving further scope.
Speaking as someone in the movement, I think that we would like to have a higher limit, and in future we might want to go to more than 20 per cent. On the other hand, I see that building societies, being mutual institutions, are still expected to raise most of the funds on the retail side. We were talking about that just now and how much normally comes in from members throughout the country through the branch offices.
I sympathise with what the noble Lord has said. Certainly building societies would like to have the flexibility, but 40 per cent. seems to me higher than we would need at the moment in the building society movement. However, we would hope that if 20 per cent. seemed a bit restricted in the future, it would be possible for it to be lifted.
Viscount Ridley: Would not 30 per cent., or even 33⅓ per cent., meet the objections of everybody?
Lord Williams of Elvel: I am grateful to the noble Lord, Lord Campbell of Croy, for his intervention, because this is a point about which we had an exchange at Second Reading and we have had earlier debates on this matter. I think that there is a philosophical point, and it is something of a difference of opinion between myself and the noble Lord. Lord Campbell of Croy, on the future of building societies, looking over a 10 to 15 year span. My view is that the building societies—and this relates to the debate that has just taken place on the question of premises—will no longer be able to sustain the retail thrust that they

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have engaged in over the past few years, and that they will be more and more obliged to have recourse to sources of funds which are not from the retail side, or not from their members.
I believe that the format that a building society in, say, the year 2,000 will be taking will not necessarily be one of a number of retail outlets in the high street but will be much more like the German mortgage banks—which indeed we actually set up after the war—where there is access to the wholesale market, and the maturity of the borrowings corresponds more or less to the maturity of the loans that are made. I think building societies will have to move in that direction. Whether I am right or wrong, I do not wish to restrict the building societies if I am right.
This is the point I am trying to make, and a point I have made on a number of occasions. If it is right that building societies will have to move more and more into the wholesale market because of the competition for savings, then it is right on the face of the Bill to introduce the flexibility that allows building societies to do so. If it is right, as my noble friend Lord Barnett was saying, that retail outlets will perhaps become redundant in the same way as the retail outlets of banks have become redundant—with banks having to close down branches in the High Street and going more and more into the wholesale market for their funds—then it is right not to restrict building societies. That is the thrust of the amendment.
Lord Brabazon of Tara: I shall deal briefly with the first two amendments, Amendments Nos. 37 and 38. I can give the noble Lord an assurance that Amendment No. 37 is not necessary and that debt instruments would be covered by borrowing money in Clause 7(1)(b).
Regarding the kind of loans he talked about in Amendment No. 38, private placements, I think that these will cover any non-transferable wholesale instruments that societies might consider at the present time. Furthermore, there exists in subsection (9) the power to designate further instruments as wholesale for these purposes. If the noble Lord can think of any other kind of issue which might not be covered I should be grateful to hear and we should be interested to consider that.
On the more fundamental issue of the 20 per cent. and the 40 per cent. I find myself somewhat puzzled standing here. The noble Lord said that it seems to him that it would be a good idea to raise this to 40 per cent. My honourable friend the Economic Secretary in another place spent a great deal of time arguing with honourable Members from the Labour Party who sought to reduce these numbers. I find myself in the curious position of occupying the middle ground between noble Lords in the Labour Party here and honourable Members in another place.
Lord Williams of Elvel: As the noble Lords knows, we are a party of very rich contrasts. We can adopt
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different positions according to different requirements at different times. I hope the noble Lord will accept that.
Lord Brabazon of Tara: I am pleased to know about that flexibility and I hope that his honourable friends down the other end accept that same view.
We cannot accept this amendment. The building societies have gained experience in recent years with some notably successful forays into the wholesale markets. I think I am right in saying without checking that some societies have up to 10 per cent. of their money in wholesale funds at the moment, but we still think that there is a need for considerable caution. Raising funds on the money markets involves very different types of risks to raising it from ordinary depositors. Indeed, the wholesale markets can and have been much more fickle than the man in the street. I only give the noble Lord the example of the Continental Illinois bank in the States where they discovered recently to their cost what happened when wholesale depositors lost confidence.
We therefore believe that 20 per cent. is the right reasonable initial limit for societies. As the noble Lord and my noble friend Lord Campbell of Croy have mentioned, this could be raised to 40 per cent. if it was felt appropriate and consistent with building societies continuing to operate under their own legislation and in a form distinct from banks. Of course they can go a stage further than that and become plcs if they wish; but that is another debate again.
Lord Williams of Elvel: I am grateful to the noble Lord for his response. I understand—and I am grateful to him for the clarification—that Amendments Nos. 37 and 38 are redundant because their substance is covered under the Bill. If I read the Bill again and discover other methods of financing which are not covered, I shall certainly write to the noble Lord.
I think that we have had a debate on this topic; in fact, we have had two debates on it. I hope that the Committee recognises the strength of what I feel about the future of building societies, but I shall not pursue it at this late stage and therefore I beg leave to withdraw this amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 38 to 40 not moved.]
Clause 7 agreed to.
Clause 8 [Proportion of liabilities to be in form of shares]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 41:
Page 10, line 42, after ("or") insert ("rules under subsection").
The noble Lord said: I beg to move Amendment No. 41. This is genuinely a purely drafting amendment. I beg to move.
9.40 p.m.
On Question, Whether Clause 8, as amended, shall stand part of the Bill?
Lord Barnett: With the best will in the world, and much as one wants to make progress as fast as possible, there are certain parts of the Bill that need examination. It is bad enough being glared at by one's own Chief Whip, but to be glared at by the Government Chief Whip can be counterproductive. We in this Committee have some function to examine Bills. I am sorry, but we have a Bill of some 273 pages; and nearly 200 amendments have been put down by the Government. I have not in any way sought, as anybody who has been present in this debate will know, to delay this Bill. But we have a function, we have a role, to examine the Bill. Being glared at by the Government Chief Whip does not help us. Does the noble Lord wish to intervene? No? Then I shall continue.
Clause 8(1), to put it mildly, is somewhat unclear. If I read it, it will be clear why it is unclear. It reads:
"Subject to subsection (2) below, a building society shall secure that the amount of the principal of, and interest payable on, sums deposited with the society does not at any time exceed 50 per cent. of the aggregate of that amount and the principal value of, and interest payable on, shares in the society".
Perhaps the Minister can explain it.
Lord Brabazon of Tara: I can do little better than read out what it says in the Notes on Clauses, which I think makes the situation fairly clear.
"Clause 8 provides that at least 50 per cent. of a society's liabilities by way of shares, deposits and loans shall be in the form of shares. This provision replaces Section 39(2) of the 1962 Act, which provides that a society's total borrowings shall not exceed two-thirds of its mortgage assets, and also the provision in paragraph 2 of the Schedule to the Building Societies (Designation for Trustee Investment) Regulations 1972 that shares must account for at least 50 per cent. of liabilities if a society is to enjoy trustee status".
I hope that with that explanation the noble Lord will find the subsection a little clearer. I must say that I did not find any particular difficulty with it.
Clause 8, as amended, agreed to.
Clause 9 [Initial authorisation to raise funds and borrow money]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 42 and 43:
Page 12, line 3, at end insert—
("( ) if those matters are or include the matters specified in paragraphs (a) and (b), refuse to grant authorisation;").
Page 12, line 4. after ("(a)") insert ("in any other case,").
The noble Lord said: I beg to move Amendments Nos. 42 and 43. With them, I shall take Amendments Nos. 116 and 117. These are technical amendments to ensure that the provisions for authorisation and reauthorisation conform to the letter with the Community obligation under the first Council directive on credit institutions.
Clause 9, as amended, agreed to.
Clause 10 [Advances secured on land]:
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 44:
Page 14, line 11, after ("estate") insert ("or, as provided under subsection (6) below, an equitable interest").
The noble Lord said: I beg to move Amendment No. 44, and I shall speak also to Amendments Nos. 45, 46, 47, 48, 49, 50, 61 and 243. For the avoidance of doubt and the information of noble Lords opposite, I should say that the substantive amendment of this large block is Amendment No. 49. At present, Clause 10(6) allows a society to lend on equitable interest within class 1 or class 2 in addition —and this is the important point—to a loan on freehold or leasehold estate. This is to provide for shared ownership schemes where the tenant in effect owns part of the property and rents the remainder.
This amendment replaces that with a general order-making power for the commission to enable societies to lend on equitable interest in classes 1 or 2. The order could, for example, prescribe loans to builders who are parties to building-under-licence agreements under Sections 32 and 33 of the Housing Act 1985. Societies have been keen to see scope in the Bill for loans on such equitable interest to count as advances secured on land.
The amendment also makes it clear that the commission's order-making power includes the power to lay down how Clause 17(10) of the Bill is to operate. That subsection, to which a consequential amendment (No. 61) is proposed, provides at present for societies with less than £100 million of commercial assets to lend on equitable interest in certain cases, particularly shared ownership schemes. Until any orders were made, by virtue of Amendment No. 243, societies would be able to lend on equitable interest for shared ownership schemes in just the way that Clause 10(6) of the Bill currently envisages. The first part of that amendment repeats the substance of what is presently Clause 10(6), but it is moved to Schedule 20 since it would now be a transitional provision, falling away as soon as the commission used its order-making power. With those exceptions all the other amendments in this group are genuinely drafting or consequential amendments. I beg to move Amendment No. 44.
Lord Williams of Elvel: Perhaps I may speak to Amendment No. 49, if the noble Lord is going to move the amendments separately. I tried to follow the noble Lord, Lord Skelmersdale, in what he was saying about Amendment No. 49, which is the substantive amendment. I am not sure that I fully followed him, but no doubt I shall be able to read tomorrow in Hansard exactly what he said; and if there are any problems, we will come back at a later stage.
There is, however, one substantive problem on No. 49, and that concerns housing trusts which exist in Northern Ireland; and some of them are sponsored by building societies here. They will be expected to become wholly-owned subsidiaries once the new legislation allows. For instance, the Nationwide Housing Trust Limited in Northern Ireland is

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sponsored by the Nationwide Building Society. That company is involved in a wide range of development schemes, primarily aimed at the provision of what might be termed "social lending". One has to accept that as a possibly desirable expression in the context of Northern Ireland, and it includes sheltered housing for the aged and cost-sale developments in partnership with local authorities, usually for sale to local authority nominees.
Under existing law a building society can make a loan to a company such as the Nationwide Housing Trust Limited on the sole security of a contract to develop and purchase a site, which is the equitable interest. Housing thus financed is then sold off to ultimate purchasers without the need for the developer itself to have completed its own purchase of the land. Neither under the Bill as brought from another place nor under Amendment No. 49 will building societies, in the absence of an order satisfying this type of transaction, be able any more to lend on the security only of a development land purchase contract from a local authority in this way.
What we are therefore seeking is an assurance from the Minister that an order will be made specifically to allow this important category of social lending to be continued, and that would enable such schemes in partnership with local authorities to continue. We should like to have that assurance from the Minister if he would be kind enough to give it.
Lord Skelmersdale: The noble Lord could not have been more accurate or more succinct had he spoken from this Dispatch Box. The answers are: yes, yes and yes.
Lord Skelmersdale Lord Skelmersdale moved Amendments Nos. 45 to 49:
Page 14, line 19, after ("estate") insert ("or equitable interest").
Page 14, line 26, after ("is") insert ("or is").
Page 14, line 27, after ("by") insert ("that security or, as the case may be,").
Page 14, line 30, after ("constitutes") insert ("or will constitute").
Page 15, line 6, leave out from ("Ireland") to end of line 11 and insert:
("if the equitable interest is an equitable interest in land of a description and is created in circumstances prescribed in an order made by the Commission with the consent of the Treasury under this subsection and any conditions prescribed in the order are complied with.
( ) Any powers conferred on building societies by an order under subsection (6) above may be conferred on building societies of a description specified in the order or all building societies other than those of a description so specified.
( ) The power to make an order under subsection (6) above includes power—

(a) to prescribe the circumstances in which the power conferred by section 17(10) on building societies of the description specified therein is to be available to them; and

(b) to make such incidental, supplementary' and transitional provision as the Commission considers necessary or expedient.

( ) An instrument containing an order under subsection (6) above shall be subject to annulment in pursuance of a resolution of either House of Parliament.").
9.45 p.m.
On Question, Whether Clause 10, as amended, shall stand part of the Bill?
Lord Williams of Elvel: Perhaps I may ask the Minister to comment briefly on a matter that I raised on Second Reading concerning what I called, much to the objection of some noble Lords, securitised mortgages. We are talking here about advances made by building societies. Our concern is that advances may be in the form that will allow them to be tradeable. If that is not the case, and if the Bill as drafted and as enacted prohibits or inhibits such action, then I shall be perfectly happy with a ministerial assurance that that is so. However, if the Bill does not, then it raises a whole host of questions as to the circumstances in which such advances might be sold on to a third party and under what conditions that might be done. I shall be grateful if the Minister will give the Committee an indication of what the Bill says on that topic.
Lord Skelmersdale: Clause 10 should be read with Clause 11, which we have not yet reached, but I can say for the moment that the Department of the Environment and the Treasury are currently discussing the particular matter that the noble Lord has just raised with the building societies following the initiative of my honourable friend the Minister for Housing.
The intention is to devise in due course a code of guidance; but we have not gone that far as yet, and we shall not do so until the discussions are much nearer to completion.
Lord Williams of Elvel: Can the noble Lord give the Committee a rough timetable as to when those discussions will be brought to fruition? It is, as he will be aware, a matter of enormous importance not only in the context of what building societies can do with their assets but also to the public. It would be unwise for the Committee to consider this Bill as complete until we have received some response to the outcome of the discussions.
Lord Skelmersdale: As I have said, the discussions are in the process of happening. I am not able this evening, standing at this Dispatch Box, to give a date for the outcome of those discussions, but I shall make sure, following the noble Lord's request, that they are conducted as speedily as possible.
Clause 11 agreed to.
Clause 12 [Class 1 and class 2 advances: supplementary provisions]:
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 50:
Page 19, line 5, leave out subsection (5). On Question, amendment agreed to.
Clause 12, as amended, agreed to.
Clause 13 [Security for advances: valuation and supplementary and related provisions]:
Lord Campbell of Croy Lord Campbell of Croy moved Amendment No. 50A:
Page 21, line 7, leave out ("or saleability").
Lord Campbell of Croy: At the request of my noble friend Lord Kinnoull, I beg to move Amendment No. 50A standing in his name on the supplementary list. I understand that it makes a technical change to the Bill that has been agreed in discussions between the Royal Institution of Chartered Surveyors and the Government. 1 beg to move.
Lord Skelmersdale: I am glad to be as amenable to my noble friend Lord Kinnoull, and now to my noble friend Lord Campbell of Croy, as my noble friend Lord Brabazon was at the beginning of these proceedings. We are nothing if not even handed at this Dispatch Box this evening. Following representations from the profession, we accept that it is unrealistic to accept saleability as a concept that the valuer's expertise should cover. Therefore, I am very pleased to accept the amendment.
Clause 13, as amended, agreed to.
Schedule 4 agreed to.
Clause 14 [Power to make advances secured on land overseas]:
Lord Barnett Lord Barnett moved Amendment No. 51:
Page 22, line 43, leave out ("class 1 advances or").
The noble Lord said: I am not sure that the amendment means what I intended and I shall therefore tell the Committee what it is I did intend. I was confused by some notes from the Building Societies Association. The notes said that my amendment is to remove the requirement that where a society makes loans outside the UK, if they would be classified as class 2 loans, they should be so classified for the asset categories.
The amendment would certainly give societies more flexibility, although the amounts of such lending is likely to be very small. However, it would not seem logical to allow a society to lend, say, to the Channel Islands for rented property within class 1 while similar lending in the United Kingdom would be in class 2.
The purpose underlying my amendment was some concern about overseas lending in relation to the total lending of a building society. I should have thought that the whole Committee would be concerned to ensure that the main function of a building society in the United Kingdom should be what it always has been; namely, to use the bulk of its funds and its efforts to furthering the wellbeing of housing in the UK. If my amendment does not do what I was expecting it to do, perhaps the Minister will tell me. It is, in a sense, a probing amendment to enable me to express my concern that there should not be too great an amount of lending overseas. If the noble Lord agrees with me and shares my concern and can find a better way of wording an amendment, I shall be glad to hear from him. I beg to move.
Lord Skelmersdale: Before the noble Lord concludes, is he also speaking to Amendment No. 52?
Lord Barnett: Yes.
Lord Skelmersdale: The Government have indicated that the present intention is to make an early order under this clause to allow lending direct in the Channel Islands, Isle of Man and Gibraltar. But they have no intention at present to make an early order in respect of other countries—the noble Lord may be thinking, for example, of farm houses in France, or wherever.
I think it would be wrong in either case to deprive the authority making the order—likely in the first instance to be the commission—from allowing some loans to count in class 1. A society operating in the Channel Islands should surely not be restricted in its lending there by having to count it wholly towards the class 2 limit, even when the loans otherwise meet the criteria for class 1, as defined in Clause 11(2) and (4)—which I mentioned in error earlier on another amendment. If it is decided to allow societies to operate in other EC countries, it would be wrong if the Bill prevented a similar categorisation of the assets there as apply in the United Kingdom.
There is, of course, scope in the order-making power for the authority to ensure that the security required for a loan overseas to count in class 1 is comparable to what is required domestically. But, given that, I think it would be wrong to prevent the authority from allowing class 1 loans overseas once the order-making powers had been used.
As regards Amendment No. 52, where it occurs, for example, in Clause 15(7) and Clause 17(10) it is first provided for the assets to be of a certain class and then for them to count towards the relevant asset limits. Clause 14(l)(c) and (3) are therefore structured in a way consistent with these other similar provisions which I trust the Committee will agree is the right and proper way for societies' asset holdings to be structured. Their primary function—and we know how extraordinarily successful they have been over the years—is to lend to individual borrowers with the loans secured on land. I fail to see why it should be any different with overseas loans. I have perhaps gone slightly wider than the interpretation that the noble Lord put on his own amendment but, after all, he asked to leave out subsection (3).
Lord Barnett: I am obliged to the noble Lord the Minister. As he appreciates, the problem is that it is a complex Bill and with complex legislation it is very easy for someone without assistance to make mistakes in the drafting of amendments. I thank the noble Lord for his reply and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 52 not moved.]
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 53:
Page 23, line 30, at end insert—
("( ) An order under this section made as regards any of the relevant British overseas territories may make all or any of the

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powers conferred thereby exercisable by building societies without the need for adoption; but, in the absence of such a provision, any power conferred under this section must, in order to be exercisable by a building society, be adopted by the society.")
The noble Lord said: I beg to move Amendment No. 53. It is a general principle in this Bill that before a society takes on a major new power it should seek the approval of its members through the process of adoption under Schedule 2. That should clearly apply to a society which issued to lend overseas following an order under this clause, just as it does to the other new powers in the Bill. The amendment therefore provides for that, and I beg to move.
Lord Williams of Elvel: Perhaps I may raise a point for clarification, because this is the first time that we have really had a look at these amendments. The amendment says:
"in the absence of such a provision, any power conferred under this section must, in order to be exercisable by a building society, be adopted by the society".
Does that mean exactly what the noble Lord has been saying, that it is to be adopted in the absence of the provision in the order? I do not quite understand. Maybe I misunderstood what he was saying.
Lord Skelmersdale: The noble Lord is very quick. I was trying to save a little of the Committee's time. I should have added that a partial exception is given in the case of the Channel Islands, Isle of Man and Gibraltar, which we discussed in the last series of amendments. The commission, which would make any enabling order for these territories, would be given discretion to disapply the adoption requirement in these cases. This is because the Government regard lending in these territories simply as an extension of the power to lend on United Kingdom land and not as a new departure in itself. The detail has been delegated to a statutory instrument purely because there are complicated technical issues to be sorted out; there is no need on that account to make the power an adoptable one. I hope that that explanation will help the noble Lord.
Lord Williams of Elvel: I am most grateful to the noble Lord for reading out the rest of his brief on this amendment. I shall have to look at Hansard and see what all this means and perhaps come back at a later stage. I am sure that it is perfectly all right. I have no reason to think that it is not.
Clause 14, as amended, agreed to.
Clause 15 [Loans for mobile homes]:
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 54:
Page 24, line 15, after ("by"), insert ("—(a)").
The noble Lord said: I beg to move Amendment No. 54, and I should like also to speak to Amendments Nos. 55, 56, 57, 59 and 246. These are geographical drafting amendments to make it clear that money may be advanced on mobile homes whether they are situated in England and Wales, as the Bill currently
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provides, or in Scotland or Northern Ireland, which I think is only fair. I beg to move.
Lord Skelmersdale Lord Skelmersdale moved Amendments Nos. 55 to 57:
Page 24, line 16, after ("home") insert ("situated in England and Wales").
Page 24, line 16, at end insert ("; or (b) in the case of a mobile home situated in Scotland, such security as the Commission may, with the consent of the Treasury, prescribe by order in a statutory instrument").
Page 24, line 30, after ("home") insert ("or, as the case may be, no other security prescribed under subsection (2)(b) above").
The noble Lord said: I beg to move these amendments en bloc.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 58:
Page 25, line 3, at end insert—
("( ) Joint borrowers under this section shall be treated, for the purpose of the limit on loans under this section, as a single individual and any sums outstanding in respect of loans made under this section or section 16 by the society to any one of the joint borrowers is to be taken into account in determining the balance available for any further loan to him or to him and any joint borrower with him.").
The noble Lord said: The Committee may be surprised to hear that the limits on loans of £ 10,000 and £5,000 on non-mortgage loans under Clauses 15 and 16 respectively apply to loans "to any one individual" (in Clauses 15(6) and 16(7)) but not to joint borrowers. This is clearly a lacuna in the Bill that needs to be filled, and Amendments Nos. 58 and 60 do just that. I beg to move.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 59:
Page 25, line 25, leave out ("subsection") and insert ("subsections (2)(b) or ").
The noble Lord said: I spoke to this amendment with Amendment No. 54. I beg to move.
Clause 15, as amended, agreed to.
Clause 16 [Power to lend to individuals otherwise than by class 1 or class 2 advances]:
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 60:
Page 26, line 40, at end insert—
("( ) Joint borrowers under this section shall be treated, for the purpose of the limit on loans under this section, as a single individual and any sums outstanding in respect of loans made under this section or section 15 by the society to any one of the joint borrowers is to be taken into account in determining the balance available for any further loan to him or to him and any joint borrower with him.").
The noble Lord said: I spoke to this amendment with Amendment No. 58. I beg to move.
Clause 16, as amended, agreed to.
Clause 17 [Power to hold and develop land as commercial asset]:
10 p.m.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 61:
Page 29, line 3, leave out from ("advances") to ("section") in line 4 and insert ("on the security of equitable interests in the land in the circumstances authorised by an order under").
The noble Lord said: I believe that this amendment was spoken to with Amendment No. 44. I beg to move.
Clause 17, as amended, agreed to.
Clause 18 [Power to invest in subsidiaries and other associated bodies]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 62:
Page 31, line 27, leave out ("investment powers") and insert ("powers to invest in or support").
The noble Lord said: This is a drafting amendment to make it clear that the provisions of subsection (11) relate to Clause 18 as a whole.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 63:
Page 32, line 13, leave out ("Act (Northern Ireland) 1960") and insert ("(Northern Ireland) Order 1986").
The noble Lord said: With this it will be convenient to speak also to Amendments Nos. 131, 146, 148, 149, 150, 152, 208, 210, 216, 217, 219, 220, 221, 234, 235, 237, 240 and 242. These, as will be apparent from the wording of the first amendment, take account of the Northern Ireland Companies (Consolidation) Order 1986. I beg to move.
Clause 18, as amended, agreed to.
Clauses 19 and 20 agreed to.
Clause 21 [Liquid assets]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 64:
Page 36, leave out lines 8 and 9.
The noble Lord said: This is a probing amendment designed to discover why in the Bill as drafted there needs to be a limit upon the extent to which a building society can stay liquid. As far as I can see, there is no limitation on banks, commercial companies and other organisations staying liquid. I find it difficult to understand why building societies are not to be allowed to hold cash in large amounts in the same way as any other commercial organisation.
My second question is: why 33⅓ per cent.? Why not 20 per cent., 40 per cent., or any other percentage that the noble Lord wishes to pull out of the air? The amendment is designed to obtain a response from the Minister as to why it is there and what the motives are behind restricting the liquidity of building societies. I beg to move.
Lord Brabazon of Tara: The reason for the limit of 33⅓ per cent. of total assets is to ensure that societies apply the bulk of their funds for the purposes of the legislation; that is, to the building societies, not banks
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or commercial companies. Without such a provision a society might be able to raise funds merely to invest them in liquid form that would be contrary to the primary purpose of a society and likely to prove a less financially stable mode of operation than lending on security of mortgage. The limit in effect prevents them from becoming a different type of financial institution, perhaps a money fund, through the back door.
It is possible to envisage circumstances, such as the setting up of a new society, where it could be appropriate to provide for a limit different from the 33⅓ per cent. for a society for a specified period. That is covered under subsection (6).
Why 33⅓ per cent. rather than 20 per cent. or whatever the noble Lord mentioned? The proposal was in the Green Paper in July 1984. It has been generally accepted. I accept that it is a matter of judgment, but after considerable consultation we have arrived at that figure.
Lord Williams of Elvel: I am grateful to the noble Lord for that response. I understand that building societies are not meant to be money funds or anything else other than building societies; but I still have a problem about this. What happens if involuntarily a building society finds itself in a position where its liquid assets are 33·5 per cent. of the total balance sheet? It may be that they can do nothing about this and it simply happens because the timing of loans has gone wrong or it may have been engaged in a money market operation or have raised wholesale funds and has to keep those funds in cash balances. It seems rather extraordinary to put a limitation of such a precise amount without apparently having any way of granting exceptions to building societies who may find themselves temporarily in breach of this regulation. Perhaps the noble Lord the Minister can help me.
Lord Brabazon of Tara: I mentioned in my earlier remarks that subsection (6) allows the commission at any time, by notice to a building society, to direct that the limit in force under the section shall not, subject to any conditions specified in the notice, apply to the society during such period as the commission specifies. That may be part of the answer the noble Lord looks for. I doubt if it is the whole answer. The commission does have some discretion, as I have said. Perhaps I may write to the noble Lord throwing further light on this.
Lord Williams of Elvel: I am most grateful to the noble Lord. He is right in saying that it is only part of the answer. These things happen very suddenly and the commission may not be in a position to grant that sort of notice. If he can write to me shedding further light on this aspect, I should be most grateful. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 21 agreed to.
Clause 22 [Obligation to meet liabilities of associated bodies]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 65:
Page 37, line 26, after ("society") insert ("then, subject to subsection (1A) below,").
The noble Lord said: In moving Amendment No. 65 I should like to speak also to Amendment No. 66. These amendments make it clear that a society's statutory obligation to stand behind its associates does not extend to repaying debts owed by the associate to one of its other members. At Committee stage in another place the question was raised of the extent of the statutory obligation to stand behind a subsidiary or other associate. The Law Society have also suggested that the clause as it now stands could require a society to underwrite not only those who deal with its associates but also any minority shareholders. The Government have now had the opportunity to consider the point more fully. It would clearly be wrong if a society was obliged, for example, to repay a business partner for a loan he had made to the associate body, or indeed to protect his investment in the venture. That would in effect make a venture where a society was a majority shareholder risk free for its partners. The first amendment makes it clear that the statutory obligation does not extend that far. The second amendment is consequential upon that. I beg to move.
Lord Williams of Elvel: I understand the thrust of these amendments, and there is no particular problem although I should like to have a look in Hansard tomorrow and see what the noble Lord has said. However, on this general point on the obligation of building societies to associated bodies, can I briefly raise the question of protection of third parties dealing with building societies in good faith, whether they are associated bodies or members of associated bodies or dealing with associated bodies, when those transactions are ultra vires. In the Companies Act in Section 35 there is a very clear indemnity against people who are caught when an ultra vires transaction is entered into by a company. That is in the companies legislation and I take the opportunity of raising this. The noble Lord may wish to come back at a later stage and I do not wish to press it now but merely to put the matter on record. There is no provision, so far as I understand it, in this Bill for protection of those who are caught by ultra vires transactions, be they associated bodies or any other third party.
Lord Brabazon of Tara: I am grateful to the noble Lord for raising the point. It is not one which I had considered before. If I may, I shall look into what the noble Lord has said and write to him before the next stage.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 66:
Page 37, line 29, at end insert—
("(1A) The obligation so imposed does not extend to the liabilities of the associated body to its members other than the building society with which it is associated.").
Clause 22, as amended, agreed to.
Clause 23 [Power to hedge]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 67:
Page 37, line 35, after ("description") insert ("and of a non-speculative nature").
The noble Lord said: This is a particularly important amendment. It refers to a point that I raised on Second Reading—the ability of building societies under the new dispensation, if I may so describe it, to hedge their position either in foreign currencies, in interest rates or in other factors. I understand fully that building societies, if they are to provide the sort of services in the retail market and in the high street that a number of noble Lords wish them to perform, such as selling foreign currency for travel purposes, travellers' cheques or whatever, will have to cover forward when they make that transaction at the retail level.
The problem arises when large societies may feel that transactions—if I may talk, for the moment, about foreign currencies—in which they are engaged, even for individuals, are such as to require the services of a foreign exchange dealer. The societies may feel that the foreign exchange dealer—this is, by definition, how you make money on foreign exchange dealing—will start mismatching the currency transactions and the maturity of the currency transactions.
The same is true of interest rates. If you start allowing building societies to go into the financial futures market to hedge their interest rate obligations, there is a danger that they will start to hire some high-priced dealer and some high-priced American bank and that they will go in not just to cover some specific liability that they may have in doing business for individuals but that they will be doing business in their own right in the way that banks and other financial organisations do. This would seem to us to be an extremely dangerous development. It is something to which the Government may wish to pay attention.
I recognise that it is necessary to give building societies the ability to cover their forward positions. I start getting worried, however, when we begin to use the word "hedge" and phrases such as,
"reducing the risk of loss arising from changes in interest rates, currency rates or other factors".
I seek an assurance from the Minister that the intention that will be translated into executive action by the commission is that building societies should not attempt to become major players in the currency and the futures markets. That is the thrust of the amendment. I beg to move.
Lord Brabazon of Tara: Yes, I agree with everything that the noble Lord, Lord Williams, has said. We believe, however, that this is covered by use of the words,
"for the purpose of reducing the risk of loss arising from changes of interest rates".
The purpose of reducing the risk of loss means that building societies are given no power to use such instruments to seek profits but only to reduce the risk of loss. In other words, they are allowed to go in for hedging operations but not for speculation. Perhaps the noble Lord—
Lord Williams of Elvel: I am sorry, but here I must part company with the Minister. If you hedge for the avoidance of risk of loss, you hedge to make a profit. There is no difference in practice between the two. I do not understand how this wording covers the point that I was making. Perhaps the noble Lord, Lord Plummer, who has great experience, can help. I do not agree with the Minister.
Lord Brabazon of Tara: If the noble Lord had allowed me to finish the paragraph perhaps I could have provided a little more clarification. We believe that these words cover the point he raises. The commission may specify the conditions under which such contracts may be used and these could include any further restrictions that may be appropriate. Therefore, I think that the commission will be keeping a very close eye on the way in which these operations are conducted. I have a difficulty with the noble Lord's amendment, in that it might be difficult to operate in practice, since it requires the use of contracts which are of a non-speculative nature. That may, in practice, prove difficult, since any investment, of its very nature, carries some degree of risk, however slight, so that it could rule out virtually all the types of contract that we have in mind in this clause.
As I said at the beginning, I take seriously the noble Lord's concerns and I believe that we cover them by the use of the words I have described. I would also say that I have difficulty with the words which the noble Lord has described. I hope he will be satisfied with the explanation I have given. In the meantime, I will look again at this. I think that our intention is the same and I will see whether there is any possible improvement that could be made. But at the moment I am satisfied with the way it stands.
Lord Plummer of St. Marylebone: Perhaps consultation with Sporting Life might help.
10.15 p.m.
Lord Williams of Elvel: I am most grateful to the noble Lord and to the noble Lord, Lord Plummer, for his intervention, which was very well taken.
I think the noble Lord recognises the problem and is very sympathetic to it, and I am very grateful for that. I am afraid that I have to take issue with his view that the words in the Bill, as at present, satisfy what I am trying to do. I have no pride of authorship in the amendment. Indeed, my noble friend Lord Barnett and I spent a few minutes trying to find something better. It was simply devised to try to make the point we were wanting to make. If the noble Lord could go a little further and say that the commission not only has the power and will look at this but will take steps to ensure that transactions which are entered into on hedging are carefully controlled, then I would be perfectly satisfied and would be very happy to withdraw the amendment.
Lord Brabazon of Tara: At the moment, I do not think I can go much further than what I in fact said: that the commission may specify the conditions under which such contracts may be used, and these could
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include any further restrictions which might be appropriate. I think that would be sufficient to cover the point.
Lord Williams of Elvel: I note what the noble Lord said. I understand that it is perhaps not fair to ask him to be more specific at this point and at this stage of the Bill. I hope very much that we may be able to make a little more progress on this, which I think is an extremely important problem, as I believe the noble Lord recognises. But in the light of what he has said, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 68:
Page 38, line 5, after ("regulate") insert (", or provide for the regulation of,").
The noble Lord said: I beg to move Amendment No. 68 and, at the same time, will speak to Amendment No. 69. These are technical amendments to enable the commission's order specifying hedging contracts to be permissible to societies to prescribe the names of persons or descriptions of persons with whom societies can enter into such a contract.
It may be useful, for instance, in allowing societies to enter into interest rate swaps, for the commission to be able to prescribe permissible counterparties or, in the case of financial futures, to specify which Exchange societies may trade in. These amendments give the commission that power. I beg to move.
Lord Williams of Elvel: May I just say I am very pleased that the Government are introducing these amendments, because it is an important part of the armoury of the commission, particularly when you get interest rate swaps in futures, because these are dangerous areas. So I certainly welcome these amendments.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 69:
Page 38, line 5, after ("which") insert (", the persons or descriptions of persons with whom,").
Clause 23, as amended, agreed to.
[Amendment No. 70 not moved.]
Clause 24 agreed to.
Schedule 5 [The Building Societies Investor Protection Board]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 71:
Page 205, line 28, leave out ("notice to the Treasury") and insert ("giving to the Treasury a signed notice stating that he resigns from that office.")
The noble Lord said: In moving Amendment No. 71, with the leave of the Committee I should like also to speak to Amendments Nos. 73, 74, 75, 77, 78, 79, 80, 81, 82, 83, 84, 86 and 87. The amendments in this group all make minor technical changes to the investor protection scheme. If there are any detailed points on them, I shall certainly be happy to deal with them when we reach the amendment concerned.
As the Committee will be aware, the scheme is modelled on that in the Banking Act 1979. Most of the

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amendments reflect points where it is proposed to modify the Banking Act scheme (for example, on client accounts; Amendments Nos. 81 to 83) or to reflect the differing structure of building society shares and deposits (for example, Amendment No. 75, dealing with people who have both deposits with and shares in the society). Amendment No. 78 exempts CDs and other negotiable instruments from the coverage of the scheme. Wholesale instruments issued by building societies are cushioned by the very high proportion of funds raised in the form of shares in a way which such instruments issued by banks are not. With that explanation of the amendments, I beg to move.
Schedule 5, as amended, agreed to.
Clause 25 agreed to.
Clause 26 [Power to levy contributions and to borrow money in event of insolvency]:
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 72:
Page 40, line 30, leave out from beginning to ("(effect") in line 31 and insert ("section 95 of the Insolvency Act 1986 or Article 541 of the Companies (Northern Ireland) Order 1986").
The noble Lord said: It may be for the convenience of the Committee if I speak also to Amendments Nos. 85, 109, 195 to 202 inclusive, 212, 222, 226 and 227. Some Members of the Committee may remember a song sung by Maurice Chevalier in which the chorus went "C'est formidable", and so is the enormous list of amendments, comprising something like nine-and-a-half pages of the Marshalled List. I am glad to say that they are almost totally technical, stemming from the consolidation of the Insolvency Act 1985 and the relevant provisions of the Companies Act 1985, which has already been before your Lordships' House. In addition, the Northern Ireland companies legislation, as my noble friend Lord Brabazon said earlier this afternoon, is currently being consolidated.
The three new clauses replacing Clause 90 and the replacement Schedule 15 are essentially therefore a translation of the existing provisions in terms of those consolidation measures. The other amendments are consequential and tidying up or drafting. I should, however, say a word about the wholesale replacement of Schedule 15. The existing Schedule 15 adapts the provisions relating to the winding up of companies in Part XX of the Companies Act 1985, Part II of the Insolvency Act 1985 and corresponding provisions in Northern Ireland company law so as to apply in relation to building societies. However, winding-up provisions of the two 1986 Acts are now being consolidated in the Insolvency Bill, which has already been, as I said just a minute ago, before your Lordships' House, and the companies legislation relating to Northern Ireland is currently being consolidated in these provisions and those of the Companies (Northern Ireland) Order 1986.
The extent of the consolidation is such that it would not have been practicable to proceed by amendment to the existing schedule. It would have taken many hundreds of amendments to translate references to particular parts and sections of the insolvency and
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companies legislation and corresponding references to the Bill, whose structure is quite different. Such a forest of amendments would have been even more impossible to follow than these. The Committee can take that from me. I had a look at them originally, and I know that it is true.
It was decided that complete replacement of the schedule was the only practical option. If any noble Lord has a particular query, I shall do my best to answer it now. If not, perhaps any questions may be conducted by correspondence. I beg to move.
Lord Williams of Elvel: I understand that we are promised notes on these new amendments and I think that we must wait for those notes at a later stage of the Bill. In the meantime, I congratulate the noble Lord on having read through the schedule.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 73 and 74:
Page 40, line 40, leave out ("authorised").
Page 40, line 41, after ("society)") insert ("authorised on the date of the insolvency").
The noble Lord said: I have spoken to Amendments Nos. 73 and 74 with Amendment No. 71. With the leave of the Members of the Committee, I beg to move Amendments 73 and 74 together.
Clause 26, as amended, agreed to.
Clause 27 [Payments to investors]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 75:
Page 43, line 23, leave out from first ("has") to end of line and insert ("a deposit with, or a share").
The noble Lord said: This amendment was spoken to with Amendment No. 71.I beg to move.
Lord Strabolgi Lord Strabolgi moved Amendment No. 76:
Page 43, line 26, leave out ("£10,000") and insert ("£30,000").
The noble Lord said: I beg to move Amendment No. 76, standing in my name and in the name of my noble friend Lord Williams of Elvel. I should point out that there is a printers' mistake—a misprint—in the amendment as it appears on the Marshalled List. The second figure should read "£30,000".
The purpose of my amendment is to increase the level of protection to depositors from 90 per cent. of £10,000 to 90 per cent. of £30,000. This in our view is an important matter which I raised briefly on Second Reading. The noble Lord, Lord Brabazon, in his reply said that the sum of £ 10,000 is the same as that applied in the 1979 Banking Act. This may well be so, although I do not understand why this should be on the basis of the banks' existing scheme which was instituted in 1979. If the banks' scheme had been index-linked the figure surely would be nearer approximately £18,000 today. I understand that anyway the banks' scheme is to be reviewed soon.
The present voluntary scheme operated by the building societies is openended, although it is fair to say that when the scheme was first set up the total allowed for individual deposits was £30,000. Since then the Government have removed the limit altogether, a decision, I may say, which I support. However, this makes the amount of £9,000 even more unrealistic. The Government are trying to take two opposing courses, in my view. On the one hand, they lift the limit on investors and encourage small investors, rightly, to deposit with building societies. On the other hand, they limit the amount of compensation to what is surely a derisory figure.
No one likes losing money, but for a small investor, say with less than £40,000 of savings to lose, such a large proportion would surely be a calamity. Any sum less than, say, £50,000 is considered today to be too small for a Stock Exchange portfolio. There is not enough hedge if there is a slump. Indeed, any stockbroker will tell one that unofficially. Small investors are usually advised, unofficially, to seek other outlets, particularly building societies. That is why, in my submission, we need an adequate scheme.
I accept that it is not possible to have a statutory scheme that is openended. That is why I have put down the figure of £30,000 as a compromise which I hope will be acceptable to the Government. This figure is more or less in line with the compensation scheme proposed in the Financial Services Bill, which I believe is likely to give 90 per cent. protection up to a maximum of £30,000.I may say that my amendment is supported by the Consumers Association. It would have liked the figure to be rather more but it supports my amendment. It is also supported by the Building Societies Association, which has indicated that it would prefer a more generous level of protection than the £9,000 at present in the Bill. I hope therefore that my amendment will prove acceptable to the Government. I beg to move.
Lord Williams of Elvel: I should like to support the amendment moved by my noble friend Lord Strabolgi.
10.30 p.m.
Lord Brabazon of Tara: As the noble Lord, Lord Strabolgi, pointed out, the limit of £10,000 provides consistency with the comparable scheme for banks and licensed deposit takers under the Banking Act 1979. It also ensures that statutory investor protection is not set at an unduly generous level which removes an important discipline from investors and building society managements.
However, there are some particular points relating to the £ 10,000 limit. Its intention is to concentrate the protection under the scheme on small investors. We also need to ensure that the potential costs of the scheme—which of course fall to other building societies—should not be excessive. The amendment would have two effects. First, it could increase the potential costs of the scheme quite considerably. I would remind the Committee that that cost must ultimately be borne by members of building societies at large. But, secondly, it would greatly increase the level of protection available to larger and generally more sophisticated investors. These are the people
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who are best placed to judge the prudence of different investments, and are least in need of statutory protection. On the Building Societies Association's figures, only 4 per cent. of building society accounts exceed £10,000.
The noble Lord quoted the £30,000 maximum compensation which is proposed for the securities and investment board, under the financial services legislation. I must say to the noble Lord that these two schemes deal with slightly different situations. So long as an investment business conforms fully to the rules regarding the keeping of money in client accounts, the investor's money should be safe if the business became insolvent. While an insolvent business may have cut corners on the client account rules, they provide an extra layer of protection which is not available for building societies. And it needs to be remembered that the proposed limit for the SIB scheme is not prescribed in the Financial Services Bill. It is similarly open to the building societies, if they so wish, to go beyond the £10,000 figure here by setting up voluntary arrangements under Clause 31.
As I have explained, the Government regard the Banking Act scheme as a much closer analogy to the financial services scheme. If the figure for banks were reconsidered—although the White Paper on banking supervision last year proposed that the maximum should remain at £10,000 for now—the Bill provides powers to make a parallel change for building societies, and obviously that could be brought into effect. I am afraid that I cannot accept the noble Lord's amendment. We believe that £10,000 is the right amount for the reasons that I have given. I cannot accept the amendment.
Lord Williams of Elvel: Will the noble Lord elaborate on two points that he has made? First, he said that the protection was not in the Financial Services Bill as at present drafted and as it will come to your Lordships' House. Is there no provision in the re-writing of the Bill that I understand is at present taking place, for putting it in the Bill or in one of the schedules?
Secondly, can the noble Lord be a little firmer when he says that there is provision in this Bill for upping the ante, if I may put it like that? If the banking supervision legislation ups the ante in the banks, can the noble Lord go a little further and say that those provisions would be activated? If the banking supervision legislation provided for a higher figure, would the Government ensure that that higher figure was in the building societies' legislation?
Lord Brabazon of Tara: As regards the noble Lord's second point, I am able to say that if the Banking Act figure were changed, we would bring forward the necessary statutory instrument under that Act to put up the figure.
To clarify the point about the Financial Services Bill, it will not be prescribed in the Financial Services Bill as it stands at the moment; but that is perhaps a matter to which we could return when we come to that Bill.
Lord Strabolgi: I am grateful to the noble Lord, Lord Brabazon of Tara, for his explanation of the reasons why the Government do not wish to accept my amendment. The problem is: what is a small investor? I did not hear the percentage that the noble Lord gave of investors who had £10,000 or more in building societies, but I think it was fairly small. I happen to know that in my own building society over 60 per cent. of the investors have much more than this sum. This is particularly so in the smaller societies.
The trouble is that the Government are trying to equate this sum with a Bill of seven years ago. We are now legislating for some years ahead, and yet they are tying it down to a Bill in 1979. In other words, as I suspected, I do not think that this scheme has very much depth to it or very much value. Its purpose is largely cosmetic, as I said on Second Reading. It should really be called the part Protection of Investors Scheme, because it does not give full protection. And what is a small investor to do if he has not enough capital for the Stock Exchange, for reasons I gave earlier? If he puts it into a building society he is only going to get a small proportion back.
The only hope for the future is the next subsection, where, as the noble Lord said, the Treasury can by statutory instrument increase the sum to something which is rather more realistic. I hope that they will give this their attention at the earliest possible opportunity after the Bill becomes an Act. In the meantime, I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 77 to 80:
Page 43, line 44, leave out ("and").
Page 44, line 4 at end insert—
(", and
(c) any deposit which is evidenced by a certificate of deposit or other negotiable instrument.")
Page 44, line 4, at end insert—
("( ) In determining what is the protected investment of an investor, no account shall be taken of any liability unless proof of the debt or claim which gives rise to it has been lodged with the liquidator of the society.")
Page 44, line 22, leave out from beginning to ("shall") in line 23 and insert ("investments held by trustees or jointly or on clients' account,").
The noble Lord said: I spoke to Amendment No. 77 with Amendment No. 71, as I did with Nos. 78, 79 and 80.I beg to move all four en bloc.
Clause 27, as amended, agreed to.
Schedule 6 [Insolvency payments: trusts and joint holdings]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 81 to 83:
Page 206, line 38, after ("JOINT") insert ("OR CLIENT ACCOUNT").
Page 207, line 34, at end insert—
("4A. Where an investment is made by a person whose business is the provision of professional services with money held to the account of clients of his, each of them shall be treated as having a separate investment of an amount equal to so much of the amount of the investment as represents money held to his account as a client.").
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Page 207, line 43, at end insert ("or,
(d) that paragraph 4A above applies to an investment,").
The noble Lord said: Again, I spoke to Amendments Nos. 81, 82 and 83 with Amendment No. 71. With the leave of the Committee, I beg leave to move them en bloc.
Schedule 6, as amended, agreed to.
Clause 28 [Liability of insolvent society in respect of payments by Board]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 84 and 85:
Page 45, line 18, at end insert—
("(2A) Where the society's liability to the investor is referable to both shares and deposits, the amount equal to the insolvency payment to him shall, for the purposes of subsection (2)(b) above, be first applied in reduction of the liability referable to his shares then, if that amount exceeds that liability, in reduction of the liability referable to his deposits.")
Page 46, leave out lines 34 to 36 and insert—
("411 of the Insolvency Act 1986, and
(b) for Northern Ireland, under Article 613 of the Companies (Northern Ireland) Order 1986;").
The noble Lord said: I have spoken to Amendments Nos. 84 and 85 at an earlier stage. I beg leave to move these two together.
Clause 28, as amended, agreed to.
Clause 29 [Repayments in respect of contributions]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 86 and 87:
Page 47, line 35, after ("are") insert ("more than").
Page 47, line 37, leave out ("any") and insert ("the").
The noble Lord said: I have spoken to Amendments Nos. 86 and 87 with Amendment No. 71.I beg to move these two together.
Clause 29, as amended, agreed to.
Clauses 30 to 32 agreed to.
Schedule 7 agreed to.
Clause 33 agreed to.
Clause 34 [Powers to provide financial services or services relating to land]:
Lord Barnett Lord Barnett moved Amendment No. 88:
Page 50, line 40, leave out subsection (2).
The noble Lord said: I beg to move Amendment No. 88 standing in the names of my noble friend Lord Williams of Elvel and myself. It is effectively a probing amendment to see why it is necessary to have this order. In the helpful briefing notes we have had from the Building Societies Association they give a number of reasons why the subsection is necessary. I would be interested to know whether they coincide with the Government's view. I beg to move.
The Deputy Chairman of Committees (Lord Ampthill): I remind the Committee that if Amendment No. 88 is agreed to, I cannot call Amendment No. 89.
Lord Brabazon of Tara: I have not read that particu-lar part of the building societies brief; so we shall see whether it does. Briefly I can say that this merely provides the power to bring new provisions forward for the services which societies may wish to carry out. I could give one example—the provision of personal pensions within the meaning of the Social Security Bill. That could be one service which the building societies might wish to be allowed to take part in in the future. A second example might be investment business. I can say here that we intend to bring forward an amendment at the next stage of the Bill to provide for building societies to be able to do personal equity plans. Those are two examples of the sort of functions which we might wish to have included.
Lord Williams of Elvel: When shall we have a sight of this amendment allowing building societies to deal in personal equity plans, so that we can study it?
Lord Brabazon of Tara: As soon as possible.
Lord Barnett: It makes it very difficult for your Lordships, as I am sure you will appreciate, but I hope the Minister will be able to let us have a note of it. When he says "as soon as possible" I hope it will be in good time for us to check it before the next stage of the Bill. With that assurance, which I assume is there, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 89:
Page 50, line 40, leave out ("Treasury") and insert ("appropriate authority").
The noble Lord said: In moving Amendment No. 89 I shall speak at the same time to Amendments Nos. 90, 96, 97, 98, 99 and 100. These are amendments to amend the powers in Clause 34 to vary the Schedule 8 services that societies can provide. The power to change Part I of the schedule, which lists the services that societies may offer, would stay with the Treasury subject to the affirmative resolution procedure. The commission would, however, have the power to vary the other parts of the schedule subject to the negative resolution procedure. With that explanation I beg to move.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 90:
Page 51, line 4, leave out ("Treasury") and insert ("authority making the order").
The noble Lord said: I have already spoken to this amendment. I beg to move.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 91 to 95:s
Page 51, line 12, after ("subsidiary") insert ("or other associated body").
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Page 51, line 13, after ("subsidiary") insert ("or other associated body").
Page 51, line 13, after ("shares") insert ("or corresponding membership rights").
Page 51, line 13, after ("by") insert ("or which is linked by resolution to").
Page 51, line 16, after ("subsidiary") insert ("or other associated body").
The noble Lord said: With the leave of the Committee I shall move Amendments Nos. 91 to 95. The amendments allow for services provided by societies under Schedule 8 in future through other associated bodies as well as through subsidiaries as the Bill at present provides. As the Bill stands, societies can, for example, have estate agents as subsidiaries where the equity stake is more than 50 per cent., but could not have an associated estate agent if their stake was less. What these amendments will do is to give scope for powers under Schedule 8 to be made available to other associates as well as subsidiaries. They will not actually make any powers available to a society's other associates. I hope the Committee will agree that it is sensible to provide this flexibility. I beg to move the amendments en bloc.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 96 to 100:
Page 51, line 25, leave out ("Treasury") and insert ("authority making the order").
Page 51, line 27, at end insert—
("( ) The "appropriate authority" for the purpose of exercising the powers conferred by this section is the Treasury as regards any variation of Part I of Schedule 8 with or without other provision and the Commission in any other case.").
Page 51, line 29, leave out ("but") and insert ("and—
(a) in the case of an order varying Part I of Schedule 8 with or without other provision,")
Page 51, line 31, at end insert ("and
(b) in the case of any other order, the instrument containing it shall be subject to annulment in pursuance of a resolution of either House of Parliament.").
Page 51, line 33, leave out ("Treasury") and insert ("authority making the order").
The noble Lord said: I spoke to Amendments Nos. 97 to 100 at an earlier stage with Amendment No. 89. With the leave of the Committee I beg to move the amendments en bloc.
Lord Williams of Elvel: I am sorry to interrupt the noble Lord. Will he assure us that in Amendment No. 96 we are under the same principle that he announced when we were discussing the amendment moved by my noble friend Lord Houghton—that the authority making the order would place this order before Parliament through a Treasury Minister?
Lord Brabazon of Tara: Yes, I can give that assurance.
10.45 p.m.
On Question, Whether Clause 34, as amended, shall stand part of the Bill?
Lord Morris: My Lords, before we leave Clause 34, I should like to raise a very simple point. As we are

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well aware, Clause 34 empowers the building societies to provide a whole series of services. Among these services is arranging for the provision of insurance of any description. In the course of the Second Reading debate, (in col. 1229 of Hansard) my noble friend Lord Brabazon of Tara stated:
"We do not believe that the Bill would tend to diminish the role of small, independent professionals or that they will all have to become employees of building societies."
In addition, he said:
"In the Government's view the small business will continue to be able to offer a distinctive specialist service. It will be able to respond [that is. the small business] to competition from building societies; and although evolution of their markets is inevitable. I believe that they will continue to thrive."
I question that at this stage of the Bill because I think it is the right place to do it; because the dominance of the building societies in the market place is something that Her Majesty's Government themselves had admitted on numerous occasions. I went to the trouble of looking at the Government's position in the discussion on this issue in the Standing Committee stage in the House of Commons. Sir George Young said (at col. 244 of the Official Report of Standing Committee A on 6th February last):
"With the easy accessibility of their branches and the public esteem that they enjoy, the societies are well placed to bring share ownership within the reach of a much wider range of people".
This of course was on a specific issue of the provision of a specific service. On another occasion, he made it quite clear (at col. 263 of the same report):
"collectively, the building societies have a dominant position in the provision of first mortgages".
Later, in the same column, he said that Her Majesty's Government,
"recognise the unique position of the building societies".
I have had a lot of representations from insurance brokers—not agents, but brokers—who genuinely broke the service to the benefit of the public at large. They have no concerns whatsoever with regard to competition on the broking in the public interest of insurance services. What they are deeply concerned about is the position of the building societies at present who hold themselves out to be insurance brokers when so many of them are members of BIBA (the British Institute of Brokers' Association), and when in fact they are not fundamentally brokers at all. All that they are really acting for are one, two, three or four agents. It is this position I am concerned about.
The brokers' role is very simple. They are the buffer between the public (whom they are meant to be serving) and the markets available to benefit the public. The building societies—and indeed the banks—do not do that. They have a cosy relationship with certain—maybe two, three or four—of the large insurance companies.
Members of the public enter the office of the mortgage company—and I am talking about the real world and not the world that the Bill envisages. They are given the opportunity of taking advantage of the insurance services of the company with which the society is linked. The society contacts that insurance company and says, "We have a client who wishes to see one of your representatives". That is not broking. That is agency work.
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I am concerned about the small man. I am concerned very much about this. I have given notice to my noble friend to give substance to the fundamental premise that he made at Second Reading and I am taking this opportunity to ask him to do just that.
Lord Brabazon of Tara: I understand my noble friend's concern about small professional practices but, as I said during the Second Reading debate, I am sure that many will adapt to the new competition and thrive on it. We should not assume too readily that building societies will try to use their new powers in a monopolistic fashion, such as my noble friend seems to suggest. After all, first, they will not have the market share and strength in these new services to do so. Secondly, in general they will need to look to the new services as a means of generating profit in order to stay competitive in the mortgage and savings markets. There is a great threat of competition in that market at the moment.
Regarding the insurance broking activities, I am quite sure that if they have only a cosy relationship with two or three insurance companies, as my noble friend suggests, they should go further than that if they are going to act properly as insurances brokers and look further afield. I am sure that if their customers find they are not doing that, they will very soon lose their customers.
Lord Morris: I have listened to what my noble friend says, but it has a certain paucity about it. I do not wish to go further on the point at this late hour, and no doubt I shall dream up some opportunity of returning to this subject at Report stage. At this stage I shall say nothing more.
Clause 34, as amended, agreed to.
Schedule 8 (Powers to provide services]:
Lord Morris Lord Morris had given notice of his intention to move Amendment No. 101:
Page 209, leave out line 29.
The noble Lord said: I have considered the placing of this amendment at this particular place in Schedule 8 and I think it is wrong. It would be far better, because of the issues involved, if this point were taken up in the course of discussions on Schedule 21.
[Amendment No. 101 not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 102 to 104:
Page 210, line 42, at end insert—
(" . For the power to provide estate agency services to be available to the subsidiary of a building society, the following conditions must be fulfilled as regards the subsidiary and its business, that is to say—

(a) the subsidiary must have been formed in one of the following countries or territories, that is to say, the United Kingdom, a relevant British overseas territory or another member State and the principal business of the society must, at the time the society forms or acquires the subsidiary, be conducted in that country or territory;

(b) 40 per cent. or more of its total income in any financial year (wherever arising) must be derived from estate agency work done in countries or territories in which the society, at any time in that year, carried on the business of making advances secured on land; and

1141

(c) its business must not include the lending of money, secured or unsecured, on its own account or the provision of any service which is a financial service for the purposes of this Schedule other than one which is for the time being specified in Part I of this Schedule.").

Page 212, line 23 at end insert—
(" "estate agency work" has the same meaning as in the Estate Agents Act 1979;").
Page 212, line 43, after ("1979") insert—
(" "relevant British overseas territory" means any of the Channel Islands, the Isle of Man and Gibraltar,").
The noble Lord said: With the leave of the Committee, I shall move these amendments together. They are detailed amendments to specify the conditions on which a building society's subsidiary may offer estate agency services. The present power in the Bill is for societies to offer estate agency services through subsidiaries. The Building Societies Association has represented to the Government that the term "estate agency services" could unduly restrict the range of estate agency businesses a society could acquire. I hope, with that explanation, that your Lordships will agree to these amendments.
Schedule 8, as amended, agreed to.
Lord Denham: I beg to move that this House do now resume.
Viscount Ridley: Before we take that Motion, may I ask my noble friend whether the failure to complete the Committee stage of this Bill tonight means that the Bill will probably not receive Royal Assent before the Summer Recess? I think that building societies will desperately want to know what the situation is.
Lord Denham: All I can say to my noble friend is that Her Majesty's Government are aware of this wish. We very much wanted to complete this Committee stage tonight. We are sitting at eleven o'clock tomorrow. I understand that the next amendment could take rather more than six minutes, and therefore this seemed to be the right stage at which to finish. But of course we are in the hands of your Lordships. I believe it would be right that we should get this Bill through before the Summer Recess if we possibly can; but it depends entirely on whether the time is available and at this stage in any session it is very difficult to find an extra day.
Lord Plummer of St. Marylebone: I think it should be fully realised that if time is not made for this, it will severely restrict the ability of building societies to compete in the market. This is a serious consequence for those of us who are at the sharp end of earning our living, and I think we must really appeal for further time to see this Bill through. There are a great number of people moving into the mortgage market, and if the building societies are unable to have the powers this Bill would give, it will tie their hands behind their backs.
Viscount Whitelaw: My noble friend the Chief Whip has explained the position. I note my noble friends' comments, but I have a duty to the House. My duty to the House is to make sure that when legislation comes
1142
forward it is properly discussed and properly considered. I have to fulfil that duty and of course I shall fulfil it.
If it is possible to combine those two duties and to succeed, that is my dearest wish. I can only say to the Committee that the fact that I have come here specifically to find out how the Bill has progressed tonight, and to do everything that I can to further this legislation, is evidence that I want to do all those things. However, I must be in the hands of the Committee and I must protect the Committee when a very large number of amendments—and that must be faced—have been put down. We shall do our best; that is all I can possibly say.
Lord Barnett: I thank the noble Viscount the Leader of the House for his comments. As he and everybody else who has been involved today knows, we have not in any way sought to delay the Bill. Indeed, we welcome the Bill, and if it is at all possible then we should like to get it on the statute book before the House rises for the Recess. However, as I have said before, it was not only us who put down amendments. The Government themselves have put down nearly 200 amendments. In fairness, if we do not have a role to play in examining a Bill of this size, then we in this place do not have a role at all. I hope that the Government will be able to find the time to get the Bill through. I entirely take the point of the noble Lord. Lord Plummer, and I hope we can still achieve what is required. Certainly we shall not do anything to delay the Bill.
House resumed.

West Glamorgan Bill [H.L.]
Bill recommitted to the Unopposed Bill Committee to whom it was first committed.
House adjourned at three minutes before eleven o'clock.

  RIOTS AT BRIXTON AND TOTTENHAM: REPORT
  RIOTS AT BRIXTON AND TOTTENHAM: REPORT
  HELSINKI FINAL ACT: IMPLEMENTATION BY THE EAST
  HELSINKI FINAL ACT: IMPLEMENTATION BY THE EAST
  MIDDLE POINT, FALMOUTH: SITING OF SEWAGE OUTFALL
  MIDDLE POINT, FALMOUTH: SITING OF SEWAGE OUTFALL
  HAMPTON COURT PALACE FIRE: REPORT
  HAMPTON COURT PALACE FIRE: REPORT
  WATER AUTHORITIES: PRIVATISATION
  WATER AUTHORITIES: PRIVATISATION
  CHARING CROSS ROAD: TRAFFIC MEASURES
  CHARING CROSS ROAD: TRAFFIC MEASURES

  ROYAL INFIRMARY, WORCESTER: SECRETARIAL POST
  The Countess of Mar
  asked Her Majesty's Government:

  Whether they will state the reason for the withdrawal by the Unit Management Group at the General Hospital, Birmingham, of a secretarial presence at the Oncology/Radiotherapy Clinic at the Royal Infirmary, Worcester.

  The Parliamentary Under-Secretary of State, Department of Health and Social Security (Baroness Trumpington)
  I understand that Central Birmingham Health Authority has decided to continue to fund this secretarial post. During the next twelve months it will however be considering whether a more appropriate method of funding secretarial posts in outlying clinics like Worcester can be found.